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, 2019

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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

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. o

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	SSFN	The Nasdaq Stock Market LLC

The number of shares outstanding, net of treasury stock, of the Registrant’s Common Stock, no par value, as of May 7, 2019 was 8,712,023.

Stewardship Financial Corporation 

INDEX

	PAGE
	NUMBER
PART I  -  FINANCIAL INFORMATION
ITEM 1  -  FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition at March 31, 2019 (Unaudited) and December 31, 2018	1
Consolidated Statements of Income for the Three Months ended March 31, 2019 and 2018 (Unaudited)	2
Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2019 and 2018 (Unaudited)	3
Consolidated Statement of Changes in Shareholders’ Equity for the Three Months ended March 31, 2019 and 2018 (Unaudited)	4
Consolidated Statements of Cash Flows for the Three Months ended March 31, 2019 and 2018 (Unaudited)	5
Notes to Consolidated Financial Statements (Unaudited)	7
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40
ITEM 4 - CONTROLS AND PROCEDURES	40
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION	41
ITEM 6 - EXHIBITS	41
SIGNATURES	42
EXHIBIT INDEX	43

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Stewardship Financial Corporation and Subsidiary

Consolidated Statements of Financial Condition

	March 31, 2019			December 31, 2018
	(Unaudited)
	(Dollars in thousands)
Assets
Cash and due from banks	$	12,836		$	16,340
Other interest-earning assets	321			483
Cash and cash equivalents	13,157			16,823
Securities available-for-sale	102,519			108,811
Securities held-to-maturity; estimated fair value of $61,110 (at March 31, 2019) and $60,997 (at December 31, 2018)	61,586			62,308
Other equity investments, at fair value	1,670			1,648
Federal Home Loan Bank of New York stock, at cost	3,922			3,965
Loans, net of allowance for loan losses of $8,018 (at March 31, 2019) and $7,926 (at December 31, 2018)	738,703			725,404
Premises and equipment, net	7,262			7,007
Accrued interest receivable	2,718			2,696
Right of use asset	3,092			—
Bank owned life insurance	21,771			21,636
Other assets	4,730			5,332
Total assets	$	961,130		$	955,630
Liabilities and Shareholders' equity
Liabilities
Deposits:
Noninterest-bearing	$	176,356		$	174,717
Interest-bearing	607,260			607,374
Total deposits	783,616			782,091
Federal Home Loan Bank of New York advances	63,900			65,700
Subordinated Debentures and Subordinated Notes	23,398			23,382
Lease liability	3,217			—
Accrued interest payable	1,369			1,106
Accrued expenses and other liabilities	3,339			3,201
Total liabilities	878,839			875,480
Shareholders' equity
Common stock, no par value: 20,000,000 shares authorized at March 31, 2019 and December 31, 2018; 8,712,023 and 8,680,388 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	61,321			61,030
Retained earnings	22,160			21,056
Accumulated other comprehensive loss, net	(1,190		)	(1,936		)
Total Shareholders' equity	82,291			80,150
Total liabilities and Shareholders' equity	$	961,130		$	955,630

See accompanying notes to unaudited consolidated financial statements.

1

Stewardship Financial Corporation and Subsidiary

Consolidated Statements of Income

(Unaudited)

	Three Months Ended
	March 31,
	2019		2018
	(Dollars in thousands, except per share amounts)
Interest income:
Loans	$	8,238	$	7,518
Securities held-to-maturity:
Taxable	375		250
Nontaxable	19		33
Securities available-for-sale:
Taxable	671		593
Nontaxable	14		14
Other equity investments	12		25
FHLB dividends	60		64
Other interest-earning assets	12		42
Total interest income	9,401		8,539
Interest expense:
Deposits	1,708		1,065
FHLB-NY Borrowings	316		259
Subordinated Debentures and Subordinated Notes	393		392
Total interest expense	2,417		1,716
Net interest income before provision for loan losses	6,984		6,823
Provision for loan losses	65		(335		)
Net interest income after provision for loan losses	6,919		7,158
Noninterest income:
Fees and service charges	562		507
Bank owned life insurance	135		138
Gain on calls and sales of securities, net	2		6
Gain on sales of mortgage loans	25		22
Gain on sales of SBA loans	41		—
Gain (loss) on equity investments	22		(74		)
Miscellaneous	119		126
Total noninterest income	906		725
Noninterest expenses:
Salaries and employee benefits	3,137		3,109
Occupancy, net	449		442
Equipment	205		181
Data processing	503		484
Advertising	183		157
FDIC insurance premium	64		64
Charitable contributions	195		180
Bank-card related services	131		127
Miscellaneous	725		684
Total noninterest expenses	5,592		5,428
Income before income tax expense	2,233		2,455
Income tax expense	586		647
Net income	$	1,647	$	1,808
Basic and diluted earnings per common share	$	0.19	$	0.21
Weighted average number of basic and diluted common shares outstanding	8,687,969		8,658,506

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,
	2019			2018
	(In thousands)
Net income	$	1,647		$	1,808
Other comprehensive income (loss), net of tax:
Change in unrealized holding gains (losses) on securities available-for-sale during the period	962			(993		)
Reclassification adjustment for securities available-for-sale gains in net income	(1		)	(4		)
Accretion of loss on securities reclassified to held-to-maturity	2			9
Change in fair value of interest rate swap in a cash flow hedging relationship	(219		)	158
Reclassification adjustment for interest rate swap interest expense in net income	2			9
Total other comprehensive income (loss)	746			(821		)
Total comprehensive income	$	2,393		$	987

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, 2019
	Common Stock					Retained			Accumulated Other Comprehen-sive
	Shares		Amount			Earnings			Loss			Total
	(Dollars in thousands, except per share amounts)
Balance -- December 31, 2018	8,680,388		$	61,030		$	21,056		$	(1,936	)	$	80,150
Cash dividends declared on common stock	—		—			(260		)	—			(260		)
Payment of discount on dividend reinvestment plan	—		(1		)	—			—			(1		)
Common stock issued under dividend reinvestment plan	2,475		21			—			—			21
Common stock issued under stock plans	1,593		14			—			—			14
Issuance of restricted stock	36,415		340			(340		)	—			—
Compensation expense on restricted stock	—		—			57			—			57
Restricted stock forfeited	(8,848	)	(83		)	—			—			(83		)
Net income	—		—			1,647			—			1,647
Other comprehensive income	—		—			—			746			746
Balance -- March 31, 2019	8,712,023		$	61,321		$	22,160		$	(1,190	)	$	82,291

	Three Months Ended March 31, 2018
	Common Stock					Retained			Accumulated Other Comprehen-sive
	Shares		Amount			Earnings			Loss			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		)	—			—
Compensation expense on restricted stock	—		—			48			—			48
Restricted stock forfeited	(9,835	)	(105		)							(105		)
Net income	—		—			1,808			—			1,808
Other comprehensive loss	—		—			—			(821		)	(821		)
Balance -- Reclassification due to adoption of ASU 2016-01	—		—			(163		)	163			—
Balance -- March 31, 2018	8,674,890		$	60,975		$	15,439		$	(2,042	)	$	74,372

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,
	2019			2018
	(In thousands)
Cash flows from operating activities:
Net income	$	1,647		$	1,808
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization of premises and equipment	139			111
Amortization of premiums and accretion of discounts, net	105			132
Compensation expense on restricted stock, net of forfeitures	57			47
Amortization of subordinated debenture issuance costs	16			16
Accretion of deferred loan fees	41			26
Fair value adjustment for equity security	(22		)	74
Provision for loan losses	65			(335		)
Originations of mortgage loans held-for-sale	(985		)	(847		)
Proceeds from sale of mortgage loans	1,010			1,239
Gain on sales of mortgage loans	(25		)	(22		)
Gain on sale of SBA loans	(41		)	—
Gain on calls and sales of securities	(2		)	(6		)
Deferred income tax expense (benefit)	(766		)	134
(Increase) decrease in accrued interest receivable	(22		)	128
Increase (decrease) in accrued interest payable	263			(451		)
Earnings on bank owned life insurance	(135		)	(138		)
(Increase) decrease in other assets	984			(173		)
Increase in other liabilities	47			452
Net cash provided by operating activities	2,376			2,195
Cash flows from investing activities:
Purchase of securities available-for-sale	—			(4,016		)
Proceeds from maturities and principal repayments on securities available-for-sale	3,381			4,359
Proceeds from sales and calls on securities available-for-sale	4,170			1,006
Purchase of securities held-to-maturity	(1,468		)	(1,493		)
Proceeds from maturities and principal repayments on securities held-to-maturity	1,069			1,741
Proceeds from calls on securities held-to-maturity	1,105			280
Purchase of equity securities	—			(24		)
Purchase of FHLB-NY stock	(2,902		)	(756		)
Redemption of FHLB-NY stock	2,945			1,432
Net (increase) decrease in loans	(13,364		)	3,594
Additions to premises and equipment	(394		)	(200		)
Net cash proved by (used in) investing activities	(5,458		)	5,923
Cash flows from financing activities:
Net increase in noninterest-bearing deposits	1,639			5,711
Net increase (decrease) in interest-bearing deposits	(114		)	2,406
Net increase (decrease) in long term borrowings	5,000			(15,000		)
Net decrease in short-term borrowings	(6,800		)	—

5

Stewardship Financial Corporation and Subsidiary Consolidated Statements of Cash Flows, continued (Unaudited)
	Three Months Ended
	March 31,
	2019			2018
	(In thousands)
Cash flows from financing activities:
Cash dividends paid on common stock	(260		)	(260		)
Payment of discount on dividend reinvestment plan	(1		)	(1		)
Taxes paid related to net share settlement of restricted stock	(83		)	(104		)
Issuance of common stock for cash	35			38
Net cash used in financing activities	(584		)	(7,210		)
Net increase (decrease) in cash and cash equivalents	(3,666		)	908
Cash and cash equivalents - beginning	16,823			21,270
Cash and cash equivalents - ending	$	13,157		$	22,178

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	2,154	$	2,166
Cash paid during the period for income taxes	$	14	$	—

See accompanying notes to unaudited consolidated financial statements.  

6

Stewardship Financial Corporation and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2019

(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, 2018, filed with the SEC on March 15, 2019.

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, 2019 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 from those estimates and assumptions.

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 February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 was permitted. Subsequently, the FASB issued the following standards related to ASU 2016-02: ASU 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments" ASU 2018-1, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842;" ASU 2018-10, "Codification Improvements to Topic 842,

7

Leases" ASU 2018-11, "Leases (Topic 842): Targeted Improvements" and ASU 2019-01, "Leases (Topic 842): Codification Improvements". The Corporation adopted the modified retrospective approach under ASU 2018-11. The Corporation's adoption of the modified retrospective approach under ASU 2018-11 on January 1, 2019 resulted in the recording of a $3.4 million lease liability with a corresponding right of use asset on the Consolidated Statements of Financial Condition.

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 ASU 2016-13. The adoption of 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. As of March 31, 2019, the Corporation has evaluated available historical data, identified the expected loan pools, put in place preliminary shadow accounting and is currently continuing to review assumptions and sample forecasts.

In March 2017, the FASB issued ASU 2017-08, "Premium Amortization on Purchased Callable Debt Securities (Subtopic 310-20)." The update shortens the amortization period for premiums on purchased callable debt securities to the earliest call date. The amendment will apply only to callable debt securities with explicit, noncontingent call features that are callable at fixed prices and on preset dates, apply to all premiums on callable debt securities, regardless of how they were generated, and require companies to reset the effective yield using the payment terms of the debt security if the call option is not exercised on the earliest call date. ASU 2017-08 does not require an accounting change for securities held at a discount. The discount continues to be amortized to maturity and does not apply when the investor has already incorporated prepayments into the calculation of its effective yield under other GAAP. The amendments in ASU 2017-08 are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. As the Corporation already amortizes these premiums to the call date, the adoption of this ASU on January 1, 2019 did not have any impact on the Corporation's consolidated financial statements.

8

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, 2019
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. government-sponsored agencies	$	21,744	$	9	$	(284	)	$	21,469
Obligations of state and political subdivisions	3,202		1		(17		)	3,186
Mortgage-backed securities	61,249		138		(845		)	60,542
Asset-backed securities (a)	4,201		3		(13		)	4,191
Corporate debt (b)	13,351		31		(251		)	13,131
Total available-for-sale securities	$	103,747	$	182	$	(1,410	)	$	102,519

	December 31, 2018
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. government-sponsored agencies	$	26,232	$	15	$	(498	)	$	25,749
Obligations of state and political subdivisions	3,205		—		(84		)	3,121
Mortgage-backed securities	63,659		68		(1,564		)	62,163
Asset-backed securities (a)	4,916		6		—			4,922
Corporate debt (b)	13,369		48		(561		)	12,856
Total available-for-sale securities	$	111,381	$	137	$	(2,707	)	$	108,811

(a) Collateralized by student loans.

(b) Corporate debt securities are primarily in financial institutions.

Cash proceeds realized from sales and calls of securities available-for-sale for the three months ended March 31, 2019 were $4,170,000. Cash proceeds realized from sales and calls of securities available-for-sale for the three months ended March 31, 2018 were $1,006,000. There were gross gains totaling $2,000 and no gross losses realized on sales or calls during the three months ended March 31, 2019. There were gross gains totaling $6,000 and no gross losses realized on sales or calls during the three months ended March 31, 2018.

9

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, 2019
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. Treasury	$	1,000	$	—	$	(10	)	$	990
U.S. government-sponsored agencies	34,564		33		(453		)	34,144
Obligations of state and political subdivisions	2,031		13		(20		)	2,024
Mortgage-backed securities	23,991		133		(172		)	23,952
Total held-to-maturity securities	$	61,586	$	179	$	(655	)	$	61,110

	December 31, 2018
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. Treasury	$	999	$	—	$	(14	)	$	985
U.S. government-sponsored agencies	35,565		20		(976		)	34,609
Obligations of state and political subdivisions	2,358		14		(27		)	2,345
Mortgage-backed securities	23,386		47		(375		)	23,058
Total held-to-maturity securities	$	62,308	$	81	$	(1,392	)	$	60,997

Cash proceeds realized from calls of securities held-to-maturity for the three months ended March 31, 2019 were $1,105,000. Cash proceeds realized from calls of securities held-to-maturity for the three months ended March 31, 2018 were $280,000. There were no gross gains and no gross losses realized on calls during the three months ended March 31, 2019 and March 31, 2018.

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.

10

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, 2019
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale
Within one year	$	1,635	$	1,626
After one year, but within five years	11,728		11,610
After five years, but within ten years	20,708		20,465
After ten years	4,226		4,085
Mortgage-backed securities	61,249		60,542
Asset-backed securities	4,201		4,191
Total	$	103,747	$	102,519
Held-to-maturity
Within one year	$	1,655	$	1,650
After one year, but within five years	17,065		16,928
After five years, but within ten years	18,389		18,114
After ten years	486		466
Mortgage-backed securities	23,991		23,952
Total	$	61,586	$	61,110

The following tables summarize the fair value and unrealized losses of those investment securities which reported an unrealized loss at March 31, 2019 and December 31, 2018, and if the unrealized loss position was continuous for the twelve months prior to March 31, 2019 and December 31, 2018.

Available-for-sale
March 31, 2019	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	$	—	$	—		$	15,414	$	(284	)	$	15,414	$	(284	)
Obligations of state and political subdivisions	—		—			2,201		(17		)	2,201		(17		)
Mortgage-backed securities	158		—			46,607		(845		)	46,765		(845		)
Asset-backed securities	2,769		(13		)	—		—			2,769		(13		)
Corporate debt	—		—			9,101		(251		)	9,101		(251		)
Total temporarily impaired securities	$	2,927	$	(13	)	$	73,323	$	(1,397	)	$	76,250	$	(1,410	)

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Available-for-sale
December 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	$	—	$	—		$	17,432	$	(498	)	$	17,432	$	(498	)
Obligations of state and political subdivisions	—		—			3,121		(84		)	3,121		(84		)
Mortgage-backed securities	4,177		(19		)	47,479		(1,545		)	51,656		(1,564		)
Asset-backed securities	2,892		—			—		—			2,892		—
Corporate debt	—		—			8,808		(561		)	8,808		(561		)
Total temporarily impaired securities	$	7,069	$	(19	)	$	76,840	$	(2,688	)	$	83,909	$	(2,707	)

Held-to-maturity
March 31, 2019	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	$	—	$	—		$	990	$	(10	)	$	990	$	(10	)
U.S. government- sponsored agencies	497		(2		)	25,442		(451		)	25,939		(453		)
Obligations of state and political subdivisions	—		—			466		(20		)	466		(20		)
Mortgage-backed securities	1,460		(3		)	13,778		(169		)	15,238		(172		)
Total temporarily impaired securities	$	1,957	$	(5	)	$	40,676	$	(650	)	$	42,633	$	(655	)

Held-to-maturity
December 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	$	—	$	—		$	985	$	(14	)	$	985	$	(14	)
U.S. government- sponsored agencies	2,496		(9		)	24,595		(967		)	27,091		(976		)
Obligations of state and political subdivisions	—		—			461		(27		)	461		(27		)
Mortgage-backed securities	5,885		(67		)	11,081		(308		)	16,966		(375		)
Total temporarily impaired securities	$	8,381	$	(76	)	$	37,122	$	(1,316	)	$	45,503	$	(1,392	)

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Other-Than-Temporary Impairment

At March 31, 2019, there were available-for-sale investments comprising nineteen U.S. government-sponsored agency securities, five obligations of state and political subdivision securities, seventy-three mortgage-backed securities, and nine corporate debt securities in a continuous loss position for twelve months or longer. At March 31, 2019, there were held-to-maturity investments comprising one U.S. Treasury security, twenty-six U.S. government-sponsored agency securities, one obligation of state and political subdivision security, and thirty-two 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, 2019 and December 31, 2018 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.

Management does not intend to sell securities in an unrealized loss position and it is not more likely than not that the Corporation 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, 2019 and December 31, 2018, respectively, the loan portfolio consisted of the following:

	March 31, 2019		December 31, 2018
	(In thousands)
Commercial:
Secured by real estate	$	30,351	$	28,790
Other	75,458		64,965
Commercial real estate	504,961		504,522
Commercial construction	11,225		9,787
Residential real estate	81,215		82,491
Consumer:
Secured by real estate	36,919		36,120
Other	476		455
Government Guaranteed Loans - guaranteed portion	6,492		6,559
Other	82		98
Total gross loans	747,179		733,787
Less: Deferred loan costs, net	458		457
Allowance for loan losses	8,018		7,926
	8,476		8,383
Loans, net	$	738,703	$	725,404

Included in Commercial - Other and Commercial real estate at March 31, 2019 were $167,000 and $$3,589,000, respectively, of Small Business Administration ("SBA") loans for which the guaranteed portions have been sold.

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In addition to the origination of SBA loans, prior to 2017, the Corporation purchased the guaranteed portion of several Government Guaranteed loans. These loans are listed separately in the table above. Due to the guarantee of the principal amount of these loans, no allowance for loan losses is established for these loans.

Excluded from the table above are $15.5 million and $14.3 million of unpaid principal balances of loans serviced for others at March 31, 2019 and December 31, 2018.

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

	Three Months Ended March 31, 2019
	Balance, beginning of period		Provision charged to operations			Loans charged off		Recoveries of loans charged off		Balance, end of period
	(In thousands)
Commercial	$	2,703	$	251		$	—	$	12	$	2,966
Commercial real estate	4,947		(209		)	—		15		4,753
Commercial construction	131		19			—		—		150
Residential real estate	65		11			—		—		76
Consumer	68		(7		)	—		—		61
Other loans	1		—			—		—		1
Unallocated	11		—			—		—		11
Total	$	7,926	$	65		$	—	$	27	$	8,018

	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

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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, 2019 and December 31, 2018.

	March 31, 2019
	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	$	97	$	605	$	—	$	—	$	—	$	—	$	—	$	—	$	702
Collectively evaluated for impairment	2,869		4,148		150		76		61		—		1		11		7,316
Total ending allowance balance	$	2,966	$	4,753	$	150	$	76	$	61	$	—	$	1	$	11	$	8,018
Loans:
Loans individually evaluated for impairment	$	627	$	6,182	$	—	$	558	$	—	$	—	$	—	$	—	$	7,367
Loans collectively evaluated for impairment	105,182		498,779		11,225		80,657		37,395		6,492		82		—		739,812
Total ending loan balance	$	105,809	$	504,961	$	11,225	$	81,215	$	37,395	$	6,492	$	82	$	—	$	747,179

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	December 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	$	88	$	561	$	—	$	—	$	—	$	—	$	—	$	—	$	649
Collectively evaluated for impairment	2,615		4,386		131		65		68		—		1		11		7,277
Total ending allowance balance	$	2,703	$	4,947	$	131	$	65	$	68	$	—	$	1	$	11	$	7,926
Loans:
Loans individually evaluated for impairment	$	633	$	6,079	$	—	$	576	$	—	$	—	$	—	$	—	$	7,288
Loans collectively evaluated for impairment	93,122		498,443		9,787		81,915		36,575		6,559		98		—		726,499
Total ending loan balance	$	93,755	$	504,522	$	9,787	$	82,491	$	36,575	$	6,559	$	98	$	—	$	733,787

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

	March 31, 2019		December 31, 2018
	(In thousands)
Commercial:
Secured by real estate	$	396	$	394
Commercial real estate	822		574
Residential real estate	558		576
Total nonaccrual loans	$	1,776	$	1,544

At March 31, 2019 and December 31, 2018, there were no loans that were past due 90 days and still accruing.

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

	At March 31, 2019
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	421	$	414
Commercial real estate	3,288		2,959
Residential Real Estate	579		558
	4,288		3,931
With an allowance recorded:
Commercial:
Secured by real estate	93		93		$	93
Other	120		120		4
Commercial real estate	3,223		3,223		605
	3,436		3,436		702
Total:
Commercial:
Secured by real estate	514		507		93
Other	120		120		4
Commercial real estate	6,511		6,182		605
Residential Real Estate	579		558		—
	$	7,724	$	7,367	$	702

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	At December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	447	$	416
Commercial real estate	3,329		3,001
Residential real estate	587		576
	4,363		3,993
With an allowance recorded:
Commercial:
Secured by real estate	95		95		$	83
Other	122		122		5
Commercial real estate	3,078		3,078		561
	3,295		3,295		649
Total:
Commercial:
Secured by real estate	542		511		83
Other	122		122		5
Commercial real estate	6,407		6,079		561
Residential real estate	587		576		—
	$	7,658	$	7,288	$	649

	Three Months Ended March 31,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	415	$	—	$	386	$	4
Commercial real estate	2,980		33		3,108		26
Residential Real Estate	567		—		292		—
Consumer:
Secured by real estate	—		—		54		—
Total	3,962		33		3,840		30
With an allowance recorded:
Commercial:
Secured by real estate	94		1		16		—
Other	121		2		127		2
Commercial real estate	3,151		40		3,108		40
	3,366		43		3,251		42
Total	$	7,328	$	76	$	7,091	$	72

During the three months endedMarch 31, 2019 and 2018, no interest income was recognized on a cash basis.

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The following table presents the aging of the recorded investment in past due loans by class of loans as of March 31, 2019 and December 31, 2018. Nonaccrual loans are included in the disclosure by payment status.

	March 31, 2019
	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	$	—	$	34	$	396	$	430	$	29,921	$	30,351
Other	—		—		—		—		75,458		75,458
Commercial real estate	255		—		509		764		504,197		504,961
Commercial construction	—		—		—		—		11,225		11,225
Residential real estate	36		649		—		685		80,530		81,215
Consumer:
Secured by real estate	—		—		—		—		36,919		36,919
Other	—		—		—		—		476		476
Government Guaranteed	—		—		—		—		6,492		6,492
Other	—		—		—		—		82		82
Total	$	291	$	683	$	905	$	1,879	$	745,300	$	747,179

	December 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	$	—	$	—	$	394	$	394	$	28,396	$	28,790
Other	6		—		—		6		64,959		64,965
Commercial real estate	2,155		—		509		2,664		501,858		504,522
Commercial construction	—		—		—		—		9,787		9,787
Residential real estate	112		42		308		462		82,029		82,491
Consumer:
Secured by real estate	—		—		—		—		36,120		36,120
Other	1		—		—		1		454		455
Government Guaranteed	—		—		—		—		6,559		6,559
Other	—		—		—		—		98		98
Total	$	2,274	$	42	$	1,211	$	3,527	$	730,260	$	733,787

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, 2019 and December 31, 2018, the Corporation had $6.2 million and $6.3 million, respectively, of loans whose terms have been modified in troubled debt restructurings. Of these loans, $5.6 million and $5.7 million had demonstrated a reasonable period of performance in accordance with their new terms at March 31, 2019 and December 31, 2018, respectively and are, therefore, accruing loans. The remaining troubled debt restructurings are reported as nonaccrual loans. Specific reserves of $636,000 and $649,000 have been recorded for the troubled debt

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restructurings at March 31, 2019 and December 31, 2018, respectively, and are included in the table above. As of March 31, 2019 and December 31, 2018, 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, 2019 or March 31, 2018.

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, 2019 and December 31, 2018, and based on the most recent analysis performed at those times, the risk category of loans by class is as follows:

	March 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	28,875	$	320	$	1,156	$	—	$	—	$	30,351
Other	74,053		120		1,285		—		—		75,458
Commercial real estate	495,866		2,129		6,966		—		—		504,961
Commercial construction	11,225		—		—		—		—		11,225
Government Guaranteed Loans - guaranteed portion	6,492		—		—		—		—		6,492
Total	$	616,511	$	2,569	$	9,407	$	—	$	—	$	628,487

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	December 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	26,879	$	1,234	$	677	$	—	$	—	$	28,790
Other	63,438		181		1,346		—		—		64,965
Commercial real estate	490,661		7,086		6,775		—		—		504,522
Commercial construction	9,787		—		—		—		—		9,787
Government Guaranteed Loans - guaranteed portion	6,559		—		—		—		—		6,559
Total	$	597,324	$	8,501	$	8,798	$	—	$	—	$	614,623

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, 2019 and December 31, 2018.

	March 31, 2019
	Current		30+ Days Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	79,972	$	1,243	$	81,215
Consumer:
Secured by real estate	36,919		—		36,919
Other	476		—		476
Total	$	117,367	$	1,243	$	118,610

	December 31, 2018
	Current		30+ Days Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	81,761	$	730	$	82,491
Consumer:
Secured by real estate	36,120		—		36,120
Other	454		1		455
Total	$	118,335	$	731	$	119,066

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.

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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, 2019
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	21,469	$	—	$	21,469	$	—
Obligations of state and political subdivisions	3,186		—		3,186		—
Mortgage-backed securities	60,542		—		60,542		—
Asset-backed securities	4,191		—		4,191		—
Corporate debt	13,131		—		13,131		—
Total available-for-sale securities	$	102,519	$	—	$	102,519	$	—
Other equity investments	$	1,670	$	1,610	$	60	$	—
Interest rate swap	$	—	$	—	$	—	$	—
Liabilities:
Interest rate swap	$	417	$	—	$	417	$	—

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			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, 2018
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	25,749	$	—	$	25,749	$	—
Obligations of state and political subdivisions	3,121		—		3,121		—
Mortgage-backed securities	62,163		—		62,163		—
Asset-backed securities	4,922		—		4,922		—
Corporate debt	12,856		—		12,856		—
Total available-for-sale securities	$	108,811	$	—	$	108,811	$	—
Other equity investments	$	1,648	$	1,588	$	60	$	—
Interest rate swap	$	134	$	—	$	134	$	—
Liabilities:
Interest rate swap	$	246	$	—	$	246	$	—

There were no transfers of assets between Level 1 and Level 2 during the three months ended March 31, 2019 or during the year ended December 31, 2018. There were no changes to the valuation techniques for fair value measurements as of March 31, 2019 and December 31, 2018.

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.

Other equity investments primarily represent a Community Reinvestment Act (CRA) mutual fund investment.

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).

23

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-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, 2019
	(In thousands)
Assets:
Impaired loans
Commercial real estate	$	88	$	—	$	—	$	88
Total assets	$	88	$	—	$	—	$	88

			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, 2018
	(In thousands)
Assets:
Impaired loans
Commercial:
Secured by real estate	$	301	$	—	$	—	$	301
Residential real estate	308		—		—		308
Total assets	$	609	$	—	$	—	$	609

Collateral-dependent impaired loans measured for impairment using fair value of the collateral had a recorded investment value of $154,000, resulting in an increase in the allowance for loan losses of $66,000 for the three months ended March 31, 2019.

Collateral-dependent impaired loans measured for impairment using the fair value of the collateral had a recorded investment value of $692,000, resulting in an increase of the allowance for loan losses of $83,000 for the year ended December 31, 2018.

There was no OREO at March 31, 2019 or December 31, 2018.

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

24

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, the significant unobservable inputs used in the fair value measurements were as follows:

March 31, 2019
	Fair				Weighted
Assets	Value		Valuation Technique	Unobservable Inputs	Average
(Dollars in thousands)
Impaired loans	$	88	Comparable real estate sales and / or the income approach.	Adjustments for differences between comparable sales and income data available.	5%
				Estimated selling costs.	7%

December 31, 2018
	Fair				Weighted
Assets	Value		Valuation Technique	Unobservable Inputs	Average
(Dollars in thousands)
Impaired loans	$	609	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)
	March 31, 2019
	(In thousands)
Financial assets:
Cash and cash equivalents	$	13,157	$	13,157	$	—	$	—
Securities available-for-sale	102,519		—		102,519		—
Securities held-to-maturity	61,586		—		61,110		—
Other equity investments	1,670		1,610		60		—
FHLB-NY stock	3,922		N/A		N/A		N/A
Loans, net	738,703		—		—		716,689
Interest rate swap	—		—		—		—
Financial liabilities:
Deposits	783,616		580,351		202,551		—
FHLB-NY advances	63,900		—		63,977		—
Subordinated Debentures and Subordinated Notes	23,398		—		—		23,480
Interest rate swap	417		—		417		—

			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, 2018
	(In thousands)
Financial assets:
Cash and cash equivalents	$	16,823	$	16,823	$	—	$	—
Securities available-for-sale	108,811		—		108,811		—
Securities held-to-maturity	62,308		—		60,997		—
Other equity investments	1,648		1,588		60		—
FHLB-NY stock	3,965		N/A		N/A		N/A
Loans, net	725,404		—		—		704,273
Interest rate swap	134		—		134		—
Financial liabilities:
Deposits	782,091		578,460		201,846		—
FHLB-NY advances	65,700		—		65,477		—
Subordinated Debentures and Subordinated Notes	23,382		—		—		23,441
Interest rate swap	246		—		246		—

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 is based on an exit price model taking into account inputs such as probability of default and loss given default assumptions.

Commitments to extend credit – The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. At March 31, 2019 and December 31, 2018, the fair value of such commitments were not material.

Limitations

The preceding fair value estimates were made at March 31, 2019 and December 31, 2018 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, 2019 and December 31, 2018, 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,
	2019		2018
	(Dollars in thousands)
Net income	$	1,647	$	1,808
Weighted average common shares outstanding - basic	8,687,969		8,658,506
Effect of dilutive securities - stock options	N/A		N/A
Weighted average common shares outstanding - diluted	8,687,969		8,658,506
Basic earnings per common share	$	0.19	$	0.21
Diluted earnings per common share	$	0.19	$	0.21

There were no stock options to purchase shares of common stock for the three months ended March 31, 2019 and 2018.

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Note 6. Accumulated Other Comprehensive Income

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

	Three Months Ended March 31,
	2019									2018
	Gross			Tax Effect			Net			Gross			Tax Effect			Net
	(In thousands)
Other comprehensive income (loss):
Change in unrealized holding gains (losses) on securities available-for-sale	$	1,344		$	(382	)	$	962		$	(1,344	)	$	351		$	(993	)
Reclassification adjustment for gains in net income	(2		)	1			(1		)	(6		)	2			(4		)
Accretion of loss on securities reclassified to held-to-maturity	3			(1		)	2			12			(3		)	9
Change in fair value of interest rate swap	(308		)	89			(219		)	220			(62		)	158
Reclassification adjustment for interest rate swap interest expense in net income	3			(1		)	2			12			(3		)	9
Total other comprehensive income (loss)	$	1,040		$	(294	)	$	746		$	(1,106	)	$	285		$	(821	)

The following tables present the after-tax changes in the balances of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2019 and 2018.

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	Three Months Ended March 31, 2019
	Components of Accumulated Other Comprehensive Income (Loss)									Total
	Unrealized Gains / (Losses) on Available-for-Sale Securities			Loss on Securities Reclassified from Available-for-Sale to Held-to-Maturity			Unrealized Gains / (Losses) on Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2018	$	(1,821	)	$	(38	)	$	(77	)	$	(1,936	)
Other comprehensive income (loss) before reclassifications	962			2			(219		)	745
Amounts reclassified from other comprehensive income (loss)	(1		)	—			2			1
Other comprehensive income (loss)	961			2			(217		)	746
Balance at March 31, 2019	$	(860	)	$	(36	)	$	(294	)	$	(1,190	)

	Three Months Ended March 31, 2018
	Components of Accumulated Other Comprehensive Income (Loss)									Total
	Unrealized Gains / (Losses) on Available-for-Sale Securities			Loss on Securities Reclassified from Available-for-Sale to Held-to-Maturity			Unrealized Gains / (Losses) on Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2017	$	(1,303	)	$	(60	)	$	(21	)	$	(1,384	)
Other comprehensive income (loss) before reclassifications	(993		)	9			158			(826		)
Amounts reclassified from other comprehensive income (loss)	(4		)	—			9			5
Other comprehensive income (loss)	(997		)	9			167			(821		)
Reclassification due to the adoption of ASU No. 2016-01	163			—			—			163
Balance at March 31, 2018	$	(2,137	)	$	(51	)	$	146		$	(2,042	)

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, 2019 and 2018.

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	Three Months Ended						Income
Components of Accumulated Other	March 31,						Statement
Comprehensive Income (Loss)	2019			2018			Line Item
	(In thousands)
Unrealized gains on securities available-for-sale, before tax	$	2		$	6		Gains on securities transactions, net
Tax effect	(1		)	(2		)
Total, net of tax	1			4
Unrealized losses on derivatives before tax	(3		)	(12		)	Interest expense on derivatives
Tax effect	1			3
Total, net of tax	(2		)	(9		)
Total reclassifications, net of tax	$	(1	)	$	(5	)

Note 7. Leases

The Corporation leases eight branch offices. In addition, the Corporation has 12 leases for equipment, which are primarily copiers, and one automobile lease. Four of the branch office leases have options to renew. The exercise of lease renewal options is at our sole discretion; therefore, are not included in the right of use (ROU) asset nor the Lease Liability as they are not reasonably certain of exercise. As a practical expedient, the ROU asset and Lease Liability exclude short-term leases.

As the leases do not provide an implicit rate, use of an incremental borrowing rate was based on the information available at the lease commencement date in determining the present value of the lease payments. The Corporation’s weighted average incremental borrowing rate used in the calculation of the ROU asset and Lease Liability was estimated at 3%.

The following table presents a maturity analysis of the operating lease liability at March 31, 2019, in thousands:

	Maturities of  Lease Liabilities
	(In thousands)
Nine months ended December 31, 2019	$	529
Year ended December 31, 2020	646
Year ended December 31, 2021	489
Year ended December 31, 2022	474
Thereafter	1,079
Lease Liability March 31, 2019	$	3,217

The weighted-average remaining lease term is 5.5 years.

Total lease costs for the three months ended March 31, 2019 was $240,000 consisting of $199,000 related to fixed rent expense, $32,000 related to variable rent expense and $19,000 related to short-term leases offset by $9,000 of sublease income. Variable lease expense consists primarily of expense paid to maintain common areas. Lease costs included in Occupancy expense totaled $213,000 and another $27,000 was included in Equipment expense.

Rent paid under operating leases was $193,000 for the three months ended March 31, 2019.

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The following table presents future minimum rental payments as of March 31, 2019:

Expires  March 31,	Minimum  Rent
	(In thousands)
2020	$	773
2021	639
2022	527
2023	470
2024	383
Thereafter	584
	$	3,376

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, 2018, included in the Corporation’s 2018 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 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

31

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 increased $5.5 million to $961.1 million at March 31, 2019 from $955.6 million at December 31, 2018. Cash and cash equivalents decreased $3.7 million to $13.2 million as funds were invested in loans. Total securities (including available-for-sale, held-to-maturity, other equity investments and FHLBNY stock) decreased $7.0 million to $169.7 million due to calls and normal amortization. Net loans increased $13.3 million to $738.7 million at March 31, 2019 compared to $725.4 million at December 31, 2018. During the first three months of 2018, new loan originations were partially offset by loan payoffs and normal principal amortization. In connection with the adoption of ASU 2016-02 on January 1, 2019, the Corporation recorded a $3.4 million right of use asset.

Deposits totaled $783.6 million at March 31, 2019 compared to $782.1 million at December 31, 2018. The opening of new accounts was offset by deposit outflows. FHLB of NY advances decreased slightly to $63.9 million at March 31, 2019 compared to $65.7 million at December 31, 2018.

Results of Operations

General

The Corporation reported net income of $1.6 million, or $0.19 basic and diluted earnings per common share, for the three months ended March 31, 2019 compared to net income of $1.8 million, or $0.21 basic and diluted earnings per share, for the three months ended March 31, 2018.

Net Interest Income

Net interest income, on a tax equivalent basis, for the three months ended March 31, 2019 was $7.0 million compared to $6.8 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, 2019 was 2.77% and 3.12%, respectively, compared to 2.90% and 3.15% for the three months ended March 31, 2018.

The following tables reflect the components of the Corporation’s net interest income for the three months ended March 31, 2019 and 2018 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,
	2019								2018
	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)	$	734,882		$	8,242		4.55	%	$	705,520		$	7,523		4.32	%
Taxable investment securities (1)	168,621			1,118			2.69		158,424			932			2.38
Tax-exempt investment securities (1) (2)	5,390			39			2.93		6,917			57			3.34
Other interest-earning assets	1,350			12			3.60		10,011			42			1.70
Total interest-earning assets	910,243			9,411			4.19		880,872			8,554			3.94
Non-interest-earning assets:
Allowance for loan losses	(7,995		)						(8,784		)
Other assets	49,048								47,598
Total assets	$	951,296							$	919,686
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	326,179		$	790		0.98	%	$	293,136		$	327		0.45	%
Savings deposits	80,227			20			0.10		85,810			22			0.10
Time deposits	200,957			898			1.81		204,538			716			1.42
FHLB-NY borrowing	60,077			316			2.13		60,408			259			1.74
Subordinated debentures and subordinated notes	23,390			393			6.81		23,325			392			6.82
Total interest-bearing liabilities	690,830			2,417			1.42		667,217			1,716			1.04
Non-interest-bearing liabilities:
Demand deposits	174,561								174,385
Other liabilities	4,694								4,158
Stockholders' equity	81,211								73,926
Total liabilities and stockholders' equity	$	951,296							$	919,686
Net interest income (taxable equivalent basis)				6,994								6,838
Tax equivalent adjustment				(10		)						(15		)
Net interest income				$	6,984							$	6,823
Net interest spread (taxable equivalent basis)							2.77	%							2.90	%
Net yield on interest-earning assets (taxable equivalent basis) (3)							3.12	%							3.15	%

(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, 2019, total interest income, on a tax equivalent basis, was $9.4 million compared to $8.6 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 $29.4 million for the three months ended March 31, 2019 compared to the prior year period. The change in average interest-earning assets primarily reflects an increase in average loans from the comparable prior year period. Average loans increased $29.4 million for the three months ended March 31, 2019 when compared to the prior year average. The three months ended March 31, 2019 included approximately $116,000 of interest recoveries and prepayment premiums on loan payoffs compared to $108,000 for the same prior year period. The average rate earned on interest-earning assets was 4.19% for the three months ended March 31, 2019, compared to an average rate of 3.94% for the three months ended March 31, 2018.

Interest expense increased $701,000 for the three months ended March 31, 2019, compared to the same period for 2018. The average balance of interest-bearing deposits increased $23.9 million for the three months ended March 31, 2019 from the comparable 2018 period. The cost for total interest-bearing liabilities was 1.42% for the three months ended March 31, 2019, compared to 1.04% for the three months ended March 31, 2018.

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, 2019, the Corporation recorded a loan loss provision of $65,000 compared to a negative loan loss provision of $335,000 for the three months ended March 31, 2018. The loan loss provision in the current year period generally reflects growth in the loan portfolio. Offsetting the impact of loan growth, net recoveries of previously charged off loan balances were $27,000 for the three months ended March 31, 2019. In addition, the loan loss provision also reflects the continued improvement in the economic conditions and overall real estate climate in the primary business markets in which the Corporation operates.

Nonperforming loans were $1.8 million at March 31, 2019, or 0.24% of total gross loans, which was fairly consistent with $1.5 million of nonperforming loans, or 0.21% of total gross loans, at December 31, 2018.

The allowance for loan losses was $8.0 million, or 1.07% of total gross loans, as of March 31, 2019 compared to $7.9 million, or 1.08% of total gross loans, as of December 31, 2018. The allowance for loan losses related to impaired loans increased slightly from $649,000 at December 31, 2018 to $702,000 at March 31, 2019. There were no charged off loans during the three months ended March 31, 2019 compared to charge-offs of $30,000 for the three months ended March 31, 2018. During the three months ended March 31, 2019, the Corporation recovered $27,000 of previously charged-off loans compared to $48,000 during the same period in 2018.

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 $906,000 for the three months ended March 31, 2019 compared to $725,000 for the comparable prior year three-month period. For the current year three month period, the Corporation recorded $562,000 of fees and service charges as compared to $507,000 reported for the three months ended March 31, 2018. The most significant component of the improvement was higher overdraft fee income as a result of a fee increase instituted in September 2018. The three months ended March 31, 2019 reflect $41,000 of gains from the sale of the guaranteed portion of newly originated Small Business Administration ("SBA") loans. The three months ended March 31, 2019 also included a favorable $22,000 mark to market adjustment of a CRA investment which is classified as an equity

34

security. For the three months ended March 31, 2018, the mark to market adjustment of the CRA investment was a negative $74,000.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2019 was $5.6 million compared to $5.4 million for the same prior year period. As the balance sheet continues to grow, the Corporation will continue to appropriately manage expenses.

Income Tax Expense

Income tax expense totaled $586,000 for the three months ended March 31, 2019 representing an effective tax rate of 26.2%. For the three months ended March 31, 2018, income tax expense totaled $647,000 equating to an effective tax rate of 26.4%.

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, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	(Dollars in thousands)
Nonaccrual loans (1)	$	1,776		$	1,544		$	1,271		$	1,283
Loans past due 90 days or more and accruing (2)	—			—			—			—
Total nonperforming loans / assets	$	1,776		$	1,544		$	1,271		$	1,283
Allowance for loan losses	$	8,018		$	7,926		$	7,904		$	8,353
Nonperforming loans to total gross loans	0.17		%	0.21		%	0.17		%	0.18		%
Nonperforming assets to total assets	0.13		%	0.16		%	0.13		%	0.14		%
Allowance for loan losses to total gross loans	1.07		%	1.08		%	1.08		%	1.16		%

(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 loans 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 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.

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At March 31, 2019, the balance of nonaccrual loans were comprised of eight loans, compared to six loans at December 31, 2018. Nonaccrual loans increased $232,000 to $1,776,000 compared to $1,544,000 at December 31, 2018 primarily due to the addition of one new nonaccrual loan partially offset by a loan returning to accruing status and the payoff of another loan.

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, 2019 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, 2019, the level of loans past due 30-89 days was $719,000, comprised of three loans, compared to $2,251,000 at December 31, 2018. 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, 2019 the Corporation recorded net recoveries of $27,000 compared to net recoveries of $18,000 for the three months ended March 31, 2018. 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.

At March 31, 2019 and December 31, 2018, the Corporation had $6.2 million and $6.3 million, respectively, of loans the terms of which have been modified in troubled debt restructurings. Of these loans, $5.6 million and $5.7 million were performing in accordance with their new terms at March 31, 2019 and December 31, 2018, respectively. The

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remaining troubled debt restructurings are reported as nonaccrual loans. Specific reserves of $636,000 and $649,000 have been allocated for the troubled debt restructurings at March 31, 2019 and December 31, 2018, respectively.

As of March 31, 2019, there were $6.1 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).

The Economic Growth, Regulatory and Consumer Protection Act (the “Economic Growth Act”), enacted by Congress in May 2018, modifies or removes certain post-financial crisis financial reform rules and regulations. Section 201 of the Economic Growth Act requires federal banking agencies to develop a “community bank leverage ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under prompt corrective action rules. The federal banking agencies may consider an institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The minimum capital for the new community bank leverage ratio must be set at not less than 8% and not more than 10%. A financial institution can elect to be subject to this new definition. The Economic Growth Act requires the federal banking agencies to consult with state banking regulators and notify the applicable state banking regulator of any qualifying community bank that exceeds or no longer exceeds the community bank leverage ratio. Federal banking regulators have issued a notice of proposed rulemaking that would establish the community bank leverage ratio as greater than 9%.

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 revised 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) established a new common equity Tier 1 Capital (“CET1”) to risk-weighted assets ratio minimum of 4.5% of risk-weighted assets, (b) raised the minimum Tier 1 Capital to risk-based assets requirement (“Tier 1 Capital Ratio) from 4% to 6% of risk-weighted assets and (c) assigned a higher risk weight of

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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. 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 and was phased in annually through January 1, 2019, when the full capital conservation buffer requirement of 2.50% become effective. At March 31, 2019, the Bank's actual capital conservation buffer was 5.46%.

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 ("HVCRE") loan exposures are assigned to the 150% category: however, Section 214 of the Economic Growth Act prohibits federal banking agencies from requiring the financial institution to assign heightened risk weights to HVCRE loans unless the loan is related to real estate acquisition, development and construction (“HVCRE ADC”). Under the Basel III capital rules, HVCRE ADC loans are assigned a higher risk weight than other commercial real estate loans. 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 to provide that Basel III capital rules and reporting requirements will not apply to small bank holding companies (“SBHC”) that have total consolidated assets of less than $1 billion. The Economic Growth Act increased the threshold for the exception from $1.0 billion in consolidated assets to $3.0 billion in consolidated assets. As a result of the revised Small Bank Holding Company Policy Statement, Basel III capital rules and reporting requirements do not apply to a SBHC, such as the Corporation, that has total consolidated assets of less than $3 billion unless otherwise advised by the FRB. 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.

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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, 2019, the Corporation and the Bank exceeded all regulatory capital requirements as follows:

	Actual		Required for Capital Adequacy Purposes		To Be Well Capitalized Under Prompt Corrective Action Regulations
Tier 1 Leverage ratio
Corporation	9.48	%	4.00	%	N/A
Bank	10.64	%	4.00	%	5.00	%
Risk-based capital
Common Equity Tier 1
Corporation	N/A		N/A		N/A
Bank	12.47	%	4.50	%	6.50	%
Tier 1
Corporation	11.29	%	4.00	%	N/A
Bank	12.47	%	6.00	%	8.00	%
Total
Corporation	14.31	%	8.00	%	N/A
Bank	13.46	%	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 decreased $3.7 million during the first three months of 2019. Net operating activities provided $2.4 million while investing and financing activities used $5.5 million and $583,000, respectively.

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.

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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 17, 2019, 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, 2019. The dividend is to be paid on May 15, 2019.

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

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, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II -- Other Information

Item 5. Other Information

On May 9, 2019, the board of directors of the Corporation approved an amendment of the Corporation’s

Amended and Restated By-Laws (as amended, the “Amended By-Laws”), effective immediately, to include a new

Section 7.7 captioned “Forum Selection.” The new Section 7.7 provides for the designation of the United States

District Court for the District of New Jersey (or in the event that such court lacks jurisdiction to hear such action, a

Superior Court of the State of New Jersey) as the sole and exclusive forum for certain types of litigation unless the

Corporation consents in writing to the selection of an alternative forum. The foregoing description of the Amended

By-Laws is not complete and is qualified in its entirety by reference to the complete text of the Amended By-Laws,

a copy of which is filed as Exhibit 3.1 to this Quarterly Report on Form 10-Q and incorporated by reference herein.

 Item 6. Exhibits

See Exhibit Index following this report.

_____________________________________________________________

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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 10, 2019	By:	/s/ Paul Van Ostenbridge
		Paul Van Ostenbridge
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: May 10, 2019	By:	/s/ Claire M. Chadwick
		Claire M. Chadwick
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Description of Exhibits
3.1	Amended and Restated By-Laws of Stewardship Financial Corporation as amended on May 9, 2019
10.6	Change in Control Severance Agreement dated November 12, 2013 between the Corporation and Paul Van Ostenbridge, as amended by Acknowledgement and Consent dated March 14, 2019 (1)
10.7	Change in Control Severance Agreement dated November 12, 2013 between the Corporation and Claire M. Chadwick, as amended by Acknowledgement and Consent dated March 14, 2019 (2)
10.8	Change in Control Severance Agreement dated March 21, 2017 between the Corporation and William S. Clement, as amended by Acknowledgement and Consent dated March 14, 2019 (3)
10.9	Change in Control Severance Agreement dated March 21, 2017 between the Corporation and Julie E. Holland, as amended by Acknowledgement and Consent dated March 14, 2019 (4)
10.10	Change in Control Severance Agreement dated March 21, 2017 between the Corporation and James H. Shields, as amended by Acknowledgement and Consent dated March 14, 2019 (5)
10.11	Change in Control Severance Agreement dated March 21, 2017 between the Corporation and Gail K. Tilstra, as amended by Acknowledgement and Consent dated March 14, 2019 (6)
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, 2019, 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 text(7)

__________________________________________

(1) Incorporated by reference from Exhibit 10.6 to the Corporation’s Annual Report on Form 10-K filed March 15, 2019.

(2) Incorporated by reference from Exhibit 10.7 to the Corporation’s Annual Report on Form 10-K filed March 15, 2019.

(3) Incorporated by reference from Exhibit 10.8 to the Corporation’s Annual Report on Form 10-K filed March 15, 2019.

(4) Incorporated by reference from Exhibit 10.9 to the Corporation’s Annual Report on Form 10-K filed March 15, 2019.

(5) Incorporated by reference from Exhibit 10.10 to the Corporation’s Annual Report on Form 10-K filed March 15, 2019.

(6) Incorporated by reference from Exhibit 10.11 to the Corporation’s Annual Report on Form 10-K filed March 15, 2019.

(7) 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.

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EX-3.1

STEWARDSHIP FINANCIAL CORPORATION

AMENDED AND RESTATED BY-LAWS

(Adopted by Resolution of the Board of Directors as of March 27, 2012
and further amended by resolution adopted as of May 9, 2019)

ARTICLE I

LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS

SECTION 1.1 These By-Laws of Stewardship Financial Corporation (the “Corporation”) are subject to the certificate of incorporation of the Corporation. In these By-Laws, references to “law,” the “Certificate of Incorporation” and the “By-Laws” shall mean the laws of the State of New Jersey and any other applicable laws governing the operations of the Corporation as from time to time in effect, the provisions of the Certificate of Incorporation of the Corporation, as amended and restated from time to time (the “Certificate of Incorporation”), and the provisions of these By-Laws as from time to time in effect.

ARTICLE II

SHAREHOLDERS

SECTION 2.1. ANNUAL MEETING: Except as may otherwise be provided for specifically by law, an annual meeting of the shareholders of the Corporation, for the purpose of electing directors of the Corporation to serve during the ensuing year and until their respective successors are elected and qualified and to act upon such other business properly before the meeting, shall be held in each year, on the date and at the time and place, as shall be fixed from time to time by the Corporation’s board of directors (the “Board”).

SECTION 2.2. SPECIAL MEETINGS:

(a)    General. Special meetings of the shareholders may be called at any time by the Board, the Chairman of the Board, the President or the Chief Executive Officer. Subject to Subsection (b) of this Section 2.2, a special meeting of the shareholders shall also be called by the Secretary of the Corporation to act on any matter that may properly be considered at a meeting of shareholders upon the written request of the holders of not less than a majority of all the votes entitled to be cast on the action proposed to be taken at such meeting. Subject to Subsection (b) of this Section 2.2, any special meeting shall be held at such place, date and time as may be designated by the Board, the Chairman of the Board, the President or the Chief Executive Officer, whoever shall have called the meeting. In fixing a date for any special meeting, the Board, the Chairman of the Board, the President or the Chief Executive Officer may consider such factors as he, she or it deems relevant, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the Board to call an annual meeting or a special meeting. Business transacted at all special meetings shall be confined to the purpose or purposes set forth in the notice thereof. Business transacted at a special meeting requested by shareholders shall be limited to the matters described in the Record Date Request Notice (as defined below); provided, however, that nothing herein shall prohibit the Board from submitting matters to the shareholders at any special meeting requested by shareholders.

(b)    Shareholder-Requested Special Meetings. (1) Any shareholder of record seeking to have shareholders request a special meeting shall, by sending written notice to the Secretary (the “Record Date

Request Notice”), request that the Board fix a record date to determine the shareholders entitled to request a special meeting (the “Request Record Date”). The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more shareholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of signature of each such shareholder (or such agent) and shall set forth all information relating to each such shareholder and each matter proposed to be acted on at the meeting that would be required to be disclosed in connection with the solicitation of proxies for election of directors in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such a solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder. Upon receiving the Record Date Request Notice, the Board may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten (10) days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board. If the Board, within ten (10) days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth (10^th) day after the first date on which the Record Date Request Notice is received by the Secretary.

(2)    In order for any shareholder to request a special meeting to act on any matter that may properly be considered at a meeting of shareholders, one or more written requests for a special meeting (collectively, the “Special Meeting Request”) signed by shareholders of record (or their agents duly authorized in a writing accompanying the request) as of the Request Record Date entitled to cast not less than a majority of all of the votes entitled to be cast on such matter at such meeting (the “Special Meeting Percentage”) shall be delivered to the Secretary. In addition, the Special Meeting Request shall (i) set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the Secretary), (ii) bear the date of signature of each such shareholder (or such agent) signing the Special Meeting Request, (iii) set forth (A) the name and address, as they appear in the Corporation’s books, of each shareholder signing such request (or on whose behalf the Special Meeting Request is signed), (B) the class, series and number of all shares of stock of the Corporation which are owned (beneficially or of record) by each such shareholder and (C) the nominee holder for, and number of, shares of stock of the Corporation owned beneficially but not of record by such shareholder and (iv) be received by the Secretary within sixty (60) days after the Request Record Date. Any requesting shareholder (or agent duly authorized in a writing accompanying the revocation of the Special Meeting Request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the Secretary.

(3)    The Secretary shall inform the requesting shareholders of the reasonably estimated cost of preparing and mailing or delivering the notice of the meeting (including the Corporation’s proxy materials). The Secretary shall not be required to call a special meeting upon shareholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (2) of this Subsection 2.2(b), the Secretary receives payment of such reasonably estimated cost prior to the preparation and mailing or delivery of such notice of the meeting.

(4)    In the case of any special meeting called by the Secretary upon the request of shareholders (a “Shareholder-Requested Meeting”), such meeting shall be held at such place, date and time as may be designated by the Board; provided, however, that the date of any Shareholder-Requested Meeting shall be not more than ninety (90) days after the record date for such meeting (the “Meeting Record Date”); and provided further that if the Board fails to designate, within ten (10) days after the date that a valid Special

Meeting Request is actually received by the Secretary (the “Delivery Date”), a date and time for a Shareholder-Requested Meeting, then such meeting shall be held at 2:00 p.m. local time on the ninetieth (90^th) day after the Meeting Record Date or, if such ninetieth (90^th) day is not a Business Day (as defined below), on the first preceding Business Day; and provided further that in the event that the Board fails to designate a place for a Shareholder-Requested Meeting within ten (10) days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In the case of any Shareholder-Requested Meeting, if the Board fails to fix a Meeting Record Date that is a date within thirty (30) days after the Delivery Date, then the close of business on the thirtieth (30^th) day after the Delivery Date shall be the Meeting Record Date. The Board may revoke the notice for any Shareholder-Requested Meeting in the event that the requesting shareholders fail to comply with the provisions of paragraph (3) of this Subsection 2.2(b).

(5)    If written revocations of the Special Meeting Request have been delivered to the Secretary and the result is that shareholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting to the Secretary: (i) if the notice of meeting has not already been given, the Secretary shall refrain from giving the notice of the meeting and send to all requesting shareholders who have not revoked such requests written notice of any revocation of a request for a special meeting on the matter, or (ii) if the notice of meeting has been given and if the Secretary first sends to all requesting shareholders who have not revoked requests for a special meeting on the matter written notice of any revocation of a request for the special meeting and written notice of the Corporation’s intention to revoke the notice of the meeting or for the chairman of the meeting to adjourn the meeting without action on the matter, (A) the Secretary may revoke the notice of the meeting at any time before ten (10) days before the commencement of the meeting or (B) the chairman of the meeting may call the meeting to order and adjourn the meeting without acting on the matter. Any request for a special meeting received after a revocation by the Secretary of a notice of a meeting shall be considered a request for a new special meeting.

(6)    For purposes of these By-Laws, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New Jersey are authorized or obligated by law or executive order to close.

SECTION 2.3. NOTICE OF MEETINGS: Except as otherwise provided by law, written notice of the date, time, place and purpose or purposes of every meeting of shareholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by regular mail, to each shareholder entitled to vote at the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, with postage prepaid, addressed to the shareholder at the shareholder’s address as it appears on the stock records of the Corporation, or at the shareholder’s last known address. As to any adjourned session of any meeting of shareholders, notice of the adjourned meeting need not be given if the date, time and place thereof are announced at the meeting at which the adjournment was taken except that if after the adjournment a new record date is set for the adjourned session, notice of any such adjourned session of the meeting shall be given in the manner heretofore described. Notice of any meeting of shareholders shall be deemed waived by a shareholder who attends the meeting without protesting prior to the conclusion of the meeting the lack of notice thereof. Notice need not be given to any shareholder who submits, either before or after the meeting, a signed waiver of notice. Neither the business to be transacted at, nor the purpose of, any meeting of shareholders or any adjourned session thereof need be specified in any written waiver of notice.

SECTION 2.4. ADVANCE NOTICE OF SHAREHOLDER NOMINEES FOR DIRECTOR AND OTHER SHAREHOLDER PROPOSALS: In addition to any other requirements under the By-Laws, the

Certificate of Incorporation or applicable law, only matters properly brought before any annual or special meeting of shareholders of the Corporation in compliance with the procedures set forth in this Section shall be considered at such meeting. For any matter to be properly brought before any meeting of shareholders, the matter must be specified in the notice of meeting given by or at the direction of the Board (or any duly authorized committee thereof), otherwise properly brought before the meeting by or at the direction of the Board (or any duly authorized committee thereof) or otherwise properly brought before the meeting by a shareholder of the Corporation in compliance with the procedures set forth in this Section.

(a)    A shareholder desiring to bring a proposal before an annual meeting of shareholders (other than to nominate a director of the Corporation) shall deliver timely to the Secretary of the Corporation the following: (i) a request for inclusion of the proposal in the notice of meeting, (ii) the text of the proposal the shareholder intends to present at the meeting and a brief explanation of why the shareholder favors the proposal, (iii) the name and address of the shareholder and all persons or entities acting in concert with the shareholder, (iv) the class, series and number of all shares of stock of the Corporation which are owned (beneficially and of record) by such shareholder, together with evidence reasonably satisfactory to the Secretary of such ownership, (v) any material interest of the shareholder (other than as a shareholder) in the proposal and (vi) a representation that such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. To be timely, a shareholder’s notice to the Secretary pursuant to this Subsection (a) must be delivered or mailed and received at the principal executive officers of the Corporation, not less than one hundred twenty (120) days nor more than one hundred fifty (150) days prior to the anniversary date of the immediately preceding annual meeting; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be so received by the later of the close of business on (i) the one hundred twentieth (120^th) day prior to the annual meeting date or (ii) the tenth (10^th) day following the date that the annual meeting date is first publicly disclosed, whichever first occurs.

(b)    Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations for the election of directors may be made by the Board, by a committee appointed by the Board or by any shareholder who is a shareholder of record on the date of the giving of the notice provided for in this Section and on the record date for the determination of shareholders entitled to vote at such meeting. Any shareholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a shareholders’ meeting only if written notice of such shareholder’s intent to make such nomination or nominations has been given timely to the Secretary of the Corporation.

(c) To be timely, a shareholder’s written notice to the Secretary pursuant to Subsection (b) of this Section 2.4 must be delivered or mailed and received at the principal executive officers of the Corporation, (i) with respect to an election of directors to be held at an annual meeting of shareholders, not less than one hundred twenty (120) days nor more than one hundred fifty (150) days prior to the anniversary date of the immediately preceding annual meeting; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be so received by the later of the close of business on (A) the one hundred twentieth (120^th) day prior to the annual meeting date or (B) the tenth (10^th) day following the date that the annual meeting date is first publicly disclosed, whichever first occurs and (ii) with respect to an election to be held at a special

meeting of shareholders for the election of directors, no later than the close of business on the tenth (10^th) day following the date on which notice of such meeting is first publicly disclosed.

(d)    To be in proper written form, a shareholder’s notice to the Secretary pursuant to Subsection (b) of this Section 2.4 must set forth (i) as to each person the shareholder proposes to nominate for election as a director, (A) the name, age, business address and residence address of the person, (B) the business experience during the past five years of such person, including his or her principal occupation or employment during such period, the name and principal business of any corporation or other organization in which such occupations and employment were carried on, and such other information as to the nature of his or her responsibilities and level of professional competence as may be sufficient to permit assessment of his or her prior business experience, (C) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A (or any successor provision) under the Exchange Act, and the rules and regulations promulgated thereunder; and (ii) as to the shareholder giving the notice, (A) the name and address of such shareholder and of all persons or entities acting in concert with the shareholder, (B) the name and address of such shareholder as they appear on the Corporation’s books (if they so appear), (C) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such shareholder, together with evidence reasonably satisfactory to the Secretary of such beneficial ownership, (D) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such shareholder, (E) a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (F) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A (or any successor provision) under the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

(e)    A shareholder who does not comply with the foregoing procedures may be precluded from nominating a candidate for election as a director at a meeting of shareholders. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman of the meeting shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

SECTION 2.5. PROXIES: Every shareholder may authorize another person or persons to act for him by proxy in all matters in which a shareholder is entitled to participate, whether by waiving notice of any meeting, objecting to or voting or participating at a meeting, or expressing consent or dissent without a meeting. Shareholders may vote at any meeting by proxy. Every proxy shall be in writing, dated and signed by the shareholder or by his attorney-in-fact. No proxy shall be voted or acted upon after eleven months from its date unless such proxy provides for a longer period. granting the same. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. The authorization of a proxy may, but need not be limited to, specified action; provided, however, that if a proxy limits its authorization to a meeting or meetings of shareholders unless otherwise specifically provided such proxy shall

entitle the holder thereof to vote at any adjourned session but shall not be valid after the final adjournment thereof.

SECTION 2.6. QUORUM: Except where a larger quorum is required by law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of the holders of at least a majority of the total number of shares entitled to vote shall constitute a quorum at such meeting. No business shall be transacted in the absence of a quorum; less than a quorum may adjourn any meeting from time to time, and the meeting so adjourned may be held without further notice.

SECTION 2.7. VOTING: Except as may otherwise be required by law or by the Certificate of Incorporation, each shareholder of record of any class or series of capital stock of the Corporation shall be entitled at each meeting of shareholders to one vote for every share of capital stock standing in such shareholder’s name as of the record date (as determined in accordance with Section 2.8) and entitling the shareholder to so vote. Except as otherwise provided by law or by the Certificate of Incorporation, any corporate action to be taken by a vote of the shareholders, other than the election of directors, shall be authorized by not less than a majority of the votes cast at a meeting by the shareholders entitled to vote thereon who are present in person or represented by proxy, and where a separate vote by class is required, a majority of the votes cast by the shareholders of such class who are present in person or represented by proxy shall be the act of such class. A candidate shall be elected upon receiving the vote of a plurality of votes cast at the meeting. Unless required by applicable law or determined by the chairman of the meeting to be advisable, the vote on any matter, including the election of directors, need not be by written ballot. In the case of a vote by written ballot, each ballot shall be signed by the shareholder voting, or by such shareholder’s proxy.

SECTION 2.8. VOTING RIGHTS: The persons entitled to receive notice of and to vote at any shareholders' meeting shall be determined from the records of the Corporation on the date of mailing of the notice or on such other date not more than sixty (60) nor less than ten (10) days before such meeting as shall be fixed in advance by the Board as the record date.

SECTION 2.9. CONDUCT OF MEETINGS: At each meeting of the shareholders, the Chairman of the Board, if any, or, in his absence, the President, shall act as chairman of the meeting. The Secretary or, in his absence, any person appointed by the chairman of the meeting, shall act as secretary of the meeting and shall keep the minutes thereof. The order of business at all meetings of the shareholders shall be as determined by the chairman of the meeting.

ARTICLE III

DIRECTORS

SECTION 3.1. NUMBER AND QUALIFICATIONS OF DIRECTORS: The Board shall consist of not less than five nor more than fifteen directors, each of whom shall hold office until his or her successor shall have been duly elected and shall have qualified, or until he or she sooner dies, resigns or is removed from the Board. The number of directors shall be determined by a resolution adopted by a majority of the directors then in office. A majority of the members of the Board shall be “independent directors” within the meaning of the rules of The Nasdaq Stock Market, Inc. A director of the Corporation shall at all times meet all statutory and regulatory qualifications for a director of a publicly held bank holding company.

SECTION 3.2. POWERS OF BOARD: Subject only to the limitations or requirements of law, any action duly and validly taken by the shareholders, and these By-Laws, the Board shall have full power to manage and administer the business and affairs of the Corporation.

SECTION 3.3. MEETINGS OF THE BOARD:

(a)    Meetings of the Board, regular or special, may be held at any place within or without the State of New Jersey as the Board from time to time may fix or as shall be specified in the respective notice or waivers of notice thereof.

(b)    The annual meeting of the Board shall be held either (i) without notice immediately after the annual meeting of shareholders and in the same place or (ii) as promptly as may be practicable after the annual meeting of shareholders, but in no event more than thirty (30) days after the annual meeting of shareholders, for the purpose of organizing the Board and electing and appointing officers for the ensuing year.

(c)    Regular meetings of the Board shall be held without notice at such time and place as the Board may, from time to time, set by resolution.

(d)    Special meetings of the Board may be called at any time by either the Chairman of the Board, if any, the President, or any three (3) directors. Notice of each special meeting of the Board, stating the day, time, place and purpose or purposes thereof, shall be given to each director not less than two (2) days by mail or one (1) day by facsimile, telephone (including voice mail) or electronic mail, prior to the date specified for the meeting. Notice of a meeting need not be given to any director who signs a waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior to the conclusion of the meeting, the lack of notice to him. Neither the business to be transacted at, nor the purpose of, any meeting of the Board need be specified in the notice or waiver of notice of such meeting. Notice of an adjourned meeting need not be given if the time and place are fixed at the meeting adjourning and if the period of adjournment does not exceed ten (10) days in any one adjournment.

SECTION 3.4. QUORUM: Except as may be otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, at all meetings of the Board a majority of the entire Board shall constitute a quorum for the transaction of business. No business may be transacted in the absence of a quorum; provided, however, less than a quorum may adjourn any meeting from time to time, and such adjourned meeting may be held without further notice being given.

SECTION 3.5. ACTION BY VOTE: Except as may be otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, when a quorum is present at any Board meeting, the vote of a majority of the directors present shall be the act of the Board.

SECTION 3.6. VACANCIES: Any vacancy in the Board arising from an increase in the number of directors or otherwise may be filled by the vote of a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Each director so elected shall hold office for the balance of the unexpired term of his predecessor and until his successor is elected and qualified for office. Directors appointed to fill vacancies on the Board shall be placed in a class in a manner designed to keep equality between the classes, to the extent possible. The shareholders may at any validly called meeting elect a director to fill any vacancy not filled by the Board. If the Board accepts the resignation of a director which is tendered to take

effect at a future time, a successor director may be elected to take office when the resigning director’s resignation becomes effective.

SECTION 3.7. TERM OF OFFICE: Directors will be elected to serve for a term of three (3) years and until their successors are duly elected and qualified. The Board shall be divided, as nearly as reasonably possible, into three (3) classes, and each director shall be elected to serve terms of three (3) years. The Board shall not be classified into more than three (3) separate and distinct classes of directors, and each director's particular term of office may not exceed three years. In full accordance with these By-Laws, a director may be re-nominated and/or re-elected to the Board.

SECTION 3.8. COMPENSATION: Directors may receive from the Corporation reasonable compensation for their services, including a fixed fee for, and reimbursement of expenses incurred in respect to, attendance at meetings of the Board or meetings of committees of the Board and/or a fixed annual fee or other type or manner of compensation, as shall be determined from time to time by the Board. A director serving as Chairman of the Board or of any committee of the Board may receive additional compensation for service in such capacity, as shall be determined from time to time by the Board.

SECTION 3.9. ACTION OF DIRECTORS WITHOUT A MEETING. Any action required or permitted to be taken pursuant to authorization voted at a meeting of the Board or any committee of the Board may be taken without a meeting if, prior or subsequent to the action, all directors or members of the committee, as the case may be, consent thereto in writing and the written consents are filed with the minutes of the proceedings of the Board or committee.

SECTION 3.10. TELEPHONE CONFERENCE MEETINGS OF THE BOARD. Any or all directors may participate in a meeting of the Board or a committee thereof by means of a conference telephone or any other means of communication by which all persons participating in the meeting are able to hear each other.

SECTION 3.11. DIRECTOR INELIGIBILITY: A person is not eligible to serve as a director of the Corporation if he or she: (a) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year; (b) is a person against whom a federal or state bank regulatory agency has issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal; (c) has been found either by any federal or state regulatory agency, whose decision is final and not subject to appeal, or by a court to have: (1) breached a fiduciary duty involving personal profit or (2) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any cease and desist order issued by a banking, securities, commodities or insurance regulatory agency; or (d) has been nominated by a person who would be ineligible to serve as a director of the Corporation by reason of clauses (a), (b) or (c) of this section; or (e) is a party (either directly or through an affiliate) to litigation or an administrative proceeding adverse to the Corporation or the Bank, except: (1) derivative litigation brought in the name of the Corporation or the Bank by the director in his capacity as a shareholder of the Corporation or (2) litigation arising out of a proxy fight concerning the election of directors of the Corporation or the Bank or otherwise involving control of the Corporation or the Bank. Each director of the Corporation is obligated to inform the Corporation immediately of any occurrence which comes within this section. In the case of any director who becomes ineligible to serve as a director under clause (e) of this section, the director may be considered for re-election to the Board after the conclusion of the litigation or administrative proceeding. The Corporation shall confirm in writing to any director who becomes ineligible to serve as a director of the Corporation as set forth in this section that the director has become ineligible and shall immediately cease to serve as a director

of the Corporation. In addition, notice of the director’s ineligibility and cessation of service shall be given to the Board as well as the Regional Office of the Board of Governors of the Federal Reserve System and, as appropriate, to the Commissioner of Banking and Insurance of the State of New Jersey.

SECTION 3.12. INTERESTED DIRECTORS AND OFFICERS:

(a)          No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of the Corporation’s directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if any one of the following is true:

(1)          the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee thereof, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or

(2)          the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or

(3)         the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof, or the shareholders.

(b)           The interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

SECTION 3.13. EXECUTIVE SESSIONS: The independent directors shall meet as often as necessary to fulfill their responsibilities, including in executive sessions without the attendance of non-independent directors and management, at least four times per year.

ARTICLE IV

COMMITTEES

SECTION 4.1. ESTABLISHMENT OF COMMITTEES: The Board, by resolution adopted by a majority of the entire Board, may appoint from among its members, an executive committee and one or more other committees, each of which shall have one or more members. All committee members shall be appointed for the term of one year but shall hold office until their successors are elected and have qualified.  The Board, by resolution adopted by a majority of the entire Board, may (a) fill any vacancy in any such committee for the unexpired term; (b) appoint one or more directors to serve as alternate members of any such committee, to act in the absence or disability of members of any such committee with all the powers of such absent or disabled members; (c) abolish any such committee at its pleasure; and (d) remove any director from membership on such committee at any time, with or without cause. The Board may determine whether any committee shall be composed in part or entirely of directors who are independent of the Corporation.  The Board shall make all determinations of whether a director is independent.

SECTION 4.2. COMMITTEE REPORTS: Actions taken at a meeting of any such committee shall be kept in a record of its proceedings, which shall be reported to the Board at its next meeting following such committee meeting; except that, when the meeting of the Board is held within two (2) days after the committee meeting, such report shall, if not made at the first meeting, be made to the Board at its second meeting following such committee meeting.

SECTION 4.3. POWERS OF COMMITTEES: Subject to the limitations and regulations prescribed by law, the By-Laws or by the Board, the committees established by the Board shall have and may exercise all the authority of the Board, subject to their respective charters, except that no committee may make, alter or repeal any by-laws, elect any director, remove any director or officer, submit to shareholders any action that requires shareholder approval, or amend or repeal any resolution of the Board establishing such committee or any other resolution of the Board which by its terms may be amended or repealed only by the Board.

SECTION 4.4. NOTICES AND MEETINGS OF COMMITTEE: The members of a committee of the Board may by resolution schedule regular committee meetings. Special meetings of a committee may be called as the committee may determine. Meetings of any committee of the Board, regular or special, may be held at any place within or without the State of New Jersey as such committee from time to time may fix. No notice of regular meetings need be given. Notice of each special meeting of a committee, stating the day, time, place and purpose or purposes thereof, shall be given to each member of the committee not less than two (2) days by mail or one (1) day by facsimile, telephone (including voice mail) or electronic mail, prior to the date specified for the meeting.

SECTION 4.5. QUORUM: At any committee meeting, a majority of the committee members shall constitute a quorum and, except where otherwise provided by law or the By-laws, a majority of committee members at a committee meeting at which a quorum is present shall decide any question that may come before the committee meeting.  A majority of the committee members present at any regular or special committee meeting, although less than a quorum, may adjourn the committee meeting from time to time, without notice other than as announced at the meeting, until a quorum is present.  At such adjourned committee meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original committee meeting.

     SECTION 4.6. COMMITTEE CHARTERS: Each committee may and, if directed by the Board, shall establish a charter reflecting its function, charge, and responsibilities.  The charter shall be prepared by the committee and shall be subject to approval by the Board.

ARTICLE V

OFFICERS

SECTION 5.1. OFFICERS ENUMERATED: The officers of the Corporation shall be a President, a Secretary, a Treasurer. The Board also may elect or appoint a Chairman of the Board, one or more Vice Chairmen, one or more Vice Presidents (any of whom may be designated as Executive Vice Presidents, Senior vice Presidents or otherwise) and one or more Assistant Secretaries. One person may hold more than one office. The Board may designate the officers who shall be the chief executive officer, chief operating officer, chief financial officer and chief legal officer of the Corporation.

SECTION 5.2. DUTIES:

(a)    Chairman of the Board. The Chairman shall preside at all meetings of the Board and of the shareholders.

(b)    Vice-Chairman of the Board. In the absence of the Chairman, the Vice-Chairman shall preside at all meetings of the Board and of the shareholders.

(c)    President. The President shall be subject to the control of the Board, and shall have the general supervision of the business affairs of the Corporation and shall, unless the Board shall designate another to the office, be the Chief Executive Officer of the Corporation, with the duties and responsibilities customarily pertaining to that office. The President shall, at each annual meeting of the shareholders, make an annual report on the business and fiscal affairs of the Corporation, and make such recommendations as he or she deems proper. The President shall preside at meetings in the absence of the Chairman and Vice-Chairman, if any.

(d)    Vice Presidents. The Vice President or, if there shall be more than one, the Vice Presidents, if any, in such order determined by the Board, shall perform, in the absence or disability of the President, the duties and exercise the powers of the President and shall have such other powers and duties as the Board or the President assigns to him, her or them.

(e)    Secretary. The Board shall appoint a Secretary of the Corporation who shall serve as Secretary of the Board and who shall oversee the keeping and preservation of accurate minutes and records of all meetings. The Secretary shall oversee the giving of all notices required by these By-Laws to be given; shall be the custodian of the corporate seal, records, documents and papers of the Corporation. The Secretary shall have and exercise any and all powers and duties pertaining, by law, regulation, or practice, to the office of Secretary or those imposed by these By-Laws and shall perform such other duties as may be assigned by the Board.

(f)    Treasurer. The Treasurer shall have the care and custody of all the monies and securities of the Corporation. The Treasurer shall cause to be entered in the books of the Corporation, full and accurate accounts of all monies received and paid, shall sign instruments requiring the signature of the Treasurer, and shall perform other duties usually pertaining to the office and as the Board shall direct.

(g)    Assistant Secretaries and Assistant Treasurers. The duties of any Assistant Secretary or Assistant Treasurer shall be those usually pertaining to their respective offices and as may be properly required of them by the Board or by the officers to whom they report.

SECTION 5.3. EXECUTIVE OFFICERS: The President, the Treasurer and the Secretary, and such other officers as shall be designated by the Board, shall be deemed the executive officers (each an “Executive Officer”) of the Corporation.

SECTION 5.5. ELECTION: The officers may be elected by the Board at the first meeting of the Board following the annual meeting of the shareholders or at any other time. At any time or from time to time, the Board may delegate to any officer its power to elect or appoint any other officer or any agents of the Corporation.

SECTION 5.6. TENURE; VACANCIES: Each officer shall hold office until the first meeting of the Board following the next annual meeting of the shareholders and until his or her successor is chosen and qualified, unless a shorter or longer period shall have been specified by the terms of his or her election or appointment or, in each case, until he or she sooner dies, resigns, is removed or becomes disqualified. Each agent shall retain its authority at the pleasure of the Board or the officer by whom he was appointed or by the officer who then holds agent appointive power. If an office becomes vacant for any reason, the Board may fill the vacancy and each officer so elected shall serve for the remainder of his or her predecessor’s term.

SECTION 5.7. REMOVAL: Any officer may be removed from office at any time, with or without cause, by the Board, but such removal shall be without prejudice to the contractual rights, if any, of the officer so removed. The Board may at any time terminate or modify the authority of any agent.

SECTION 5.8. RESIGNATION: Any officer may resign at any time by giving written notice to the Chairman of the Board, if any, the President, or the Vice President/Human Resources officer. Any such resignation shall take effect upon receipt of such notice or at any later time specified therein and without in either case the necessity of its being accepted unless the resignation shall so state.

SECTION 5.9. COMPENSATION: The compensation of all of the officers of the Corporation shall be fixed by the Board.

ARTICLE VI

CERTIFICATES AND TRANSFER OF SHARES

SECTION 6.1. CERTIFICATES; UNCERTIFICATED SHARES: The shares of the Corporation shall be represented by certificates, or shall be uncertificated shares that may be evidenced by a book entry system maintained by the registrar of such shares, or a combination of both, in each case as shall be approved by the Board. Certificates for the Corporation’s capital stock shall be in such form as required by law and as approved by the Board. Each certificate shall be signed in the name of the Corporation by the Chairman, if any, or the President or any Vice President and by the Secretary, the Treasurer or any Assistant Secretary or any Assistant

Treasurer and shall bear the seal of the Corporation or a facsimile thereof. If any certificate is countersigned by a transfer agent or registered by a registrar, other than the Corporation or its employees, the signature of any officer of the Corporation may be a facsimile signature. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature was placed on any certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued nevertheless by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

SECTION 6.2. TRANSFER OF SHARES: Transfers of shares shall be made upon the books of the Corporation: (a) upon surrender of a certificate or certificates for the shares by the registered holder in person or by duly authorized attorney, or upon presentation of proper statutory evidence of succession, assignment or authority to transfer the shares, and upon surrender of the appropriate certificate or certificates or (b) in the case of uncertificated shares, upon receipt of proper transfer instructions from the registered owner of such uncertificated shares, or from a duly authorized attorney or from an individual presenting proper evidence of succession, assignment or authority to transfer the shares. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the books of the Corporation as the owner of the share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions and to vote as the owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in such share or shares on the part of any other person.

SECTION 6.3. LOST, STOLEN OR DESTROYED CERTIFICATES: In the event a stock certificate is represented by a shareholder to be lost, stolen or destroyed, a new certificate shall be issued in place thereof upon such proof of the loss, theft or destruction and upon the giving of such bond or other security as may be required by the Board.

SECTION 6.4. TRANSFER AGENTS AND REGISTRARS: The Board may from time to time appoint one or more transfer agents and one or more registrars for the transfer and/or registration of shares who shall have such powers and duties as the Board shall specify.

ARTICLE VII

MISCELLANEOUS PROVISIONS

SECTION 7.1. CORPORATE SEAL: Any Executive Officer shall have authority to affix the corporate seal to any document requiring such seal, and to attest to the same. Such seal shall be in such form as shall be approved from time to time by the Board.

SECTION 7.2. AMENDMENTS: Except as may otherwise be required by law or by the Certificate of Incorporation, the By-Laws may be amended, altered or repealed, in whole or in part, by the affirmative vote of a majority of the directors then in office.

SECTION 7.3. FISCAL YEAR: The fiscal year of the Corporation shall be the calendar year.

SECTION 7.4. EXECUTION OF INSTRUMENTS:

(a) All agreements, indentures, deeds of trust, mortgages, deeds, titles, conveyances, assignments, transfers, security agreements, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, checks, drafts, letters of credit, bills of exchange, stock certificates, certified checks, certificates of deposits, affidavits, bonds, undertakings, signature guarantees, proxies, charges to deposit accounts, bank ledger entries, and other instrument or documents may be made, signed, executed, acknowledged, verified, delivered or accepted on behalf of the Corporation by any Executive Officer. Any such instruments may also be executed, acknowledged, verified, delivered, or accepted on behalf of the Corporation by such other officers or employees of the Corporation as the Board may from time to time by resolution authorize.

(b) Except as otherwise limited by the Board, every Executive Officer shall have the power and authority severally and without the signature of any other officer or agent, to vote any and all bonds or stocks, execute consent to reorganizations, modification agreements and compromises, with respect to any bonds or stock owned or held by the Corporation either in its own right or in trust, as an agent for another, or with respect to any agreements securing the same. Every Executive Officer shall have the power and authority to transfer, convert, endorse, sell, assign, set over and deliver any and all shares of stock, bonds, debentures or other securities now or hereafter standing in the name of the Corporation, and to execute and deliver any and all written instruments of assignment and transfer necessary or proper to effectuate such authority. Any officer or employee of the Corporation other than an Executive Officer shall have like duties and powers only when he shall receive express authority from the Board to act.

SECTION 7.5. PURPOSE: The object and purpose for which the Corporation is organized is to own and operate the Bank as a viable business through which members of the Bank community bear witness to Jesus Christ in recognition of a shared belief that Jesus Christ is Lord, that God raised Him from the dead and that He will enable us in unity and oneness of spirit to carry out this purpose.

SECTION 7.6. TITHING POLICY: The Corporation shall be a tithing corporation which means that ten percent (10%) of the pre-tax net profits of the Bank, after regulatory, organizational and operating expenses and necessary capital requirements are met and computing taxable income without regard to: (a) the deduction for contributions, (b) the deduction for dividends received, (c) net operating loss carry-back, and (d) any capital loss carry-forward, shall be donated by the Bank to U.S. Internal Revenue Service approved, not-for-profit, religious, educational, charitable, and/or evangelical religious recipients (other than particular churches or particular church denominations) as determined by the Board and the guidance of the Corporation’s shareholders. This tithing is done in gratitude to God for so great a salvation, recognizing that all that we have belongs to Him, in the ultimate sense.

SECTION 7.7. FORUM SELECTION: Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation; (ii) any action by one or more shareholders asserting a claim of a breach of fiduciary duty owed by a director or officer or former director or officer, to the Corporation or the Corporation’s shareholders or a breach of the Certificate of Incorporation or these By-Laws; (iii) any action brought by one or more shareholders asserting a claim against the Corporation or its directors or officers, or former directors or officers, arising under the Certificate of Incorporation or these By-Laws (as either may be amended from time to time) or under the New Jersey Business Corporation Act, N.J.S. 14A:1-1 etseq.; (iv) any other State law claim, including a class action asserting a breach of a duty to disclose or a similar claim brought by one

or more shareholders against the Corporation, its directors or officers, or its former directors or officers; or (v) any other claim brought by one or more shareholders which is governed by the internal affairs doctrine or an analogous doctrine, shall be the United States District Court for the District of New Jersey, or in the event that such court lacks jurisdiction to hear such action, a Superior Court of the State of New Jersey.

In the event that any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than a court located within the State of New Jersey (a “Foreign Action”) in the name of any shareholder or shareholders, such shareholder or shareholders shall be deemed to have consented to (i) the personal jurisdiction of the State and Federal courts located within the State of New Jersey in connection with any action brought in any such court to enforce the preceding sentence and (ii) having service of process made upon such shareholder or shareholders in any such action by service upon such shareholder’s or shareholders’ counsel in the Foreign Action as agent for such shareholder.

Any shareholder or shareholders who shall file an action in breach of the requirement contained in this SECTION 7.7 shall be liable for all reasonable costs incurred in enforcing the requirement, including, without limitation, reasonable attorneys’ fees of the defendants.

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 10, 2019

/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 10, 2019

/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, 2019 (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 10, 2019	/s/ Paul Van Ostenbridge
	Paul Van Ostenbridge
	President and Chief Executive Officer
Dated: May 10, 2019	/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, 2019	May 07, 2019
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, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		8,712,023
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019

XML

Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Assets
Cash and due from banks	$ 12,836	$ 16,340
Other interest-earning assets	321	483
Cash and cash equivalents	13,157	16,823
Securities available-for-sale	102,519	108,811
Securities held-to-maturity; estimated fair value of $61,110 (at March 31, 2019) and $60,997 (at December 31, 2018)	61,586	62,308
Other equity investments, at fair value	1,670	1,648
Federal Home Loan Bank of New York stock, at cost	3,922	3,965
Loans, net of allowance for loan losses of $8,018 (at March 31, 2019) and $7,926 (at December 31, 2018)	738,703	725,404
Premises and equipment, net	7,262	7,007
Accrued interest receivable	2,718	2,696
Right of use asset	3,092
Bank owned life insurance	21,771	21,636
Other assets	4,730	5,332
Total assets	961,130	955,630
Deposits:
Noninterest-bearing	176,356	174,717
Interest-bearing	607,260	607,374
Total deposits	783,616	782,091
Federal Home Loan Bank of New York advances	63,900	65,700
Subordinated Debentures and Subordinated Notes	23,398	23,382
Lease liability	3,217
Accrued interest payable	1,369	1,106
Accrued expenses and other liabilities	3,339	3,201
Total liabilities	878,839	875,480
Shareholders' equity
Common stock, no par value: 20,000,000 shares authorized at March 31, 2019 and December 31, 2018; 8,712,023 and 8,680,388 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	61,321	61,030
Retained earnings	22,160	21,056
Accumulated other comprehensive loss, net	(1,190)	(1,936)
Total Shareholders' equity	82,291	80,150
Total liabilities and Shareholders' equity	$ 961,130	$ 955,630

XML

Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Assets
Securities held to maturity	$ 61,110	$ 60,997
Allowance for loan losses	$ 8,018	$ 7,926
Shareholders' equity
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	8,712,023	8,680,388
Common stock, shares outstanding (in shares)	8,712,023	8,680,388

XML

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Interest income:
Loans	$ 8,238	$ 7,518
Securities held-to-maturity:
Taxable	375	250
Nontaxable	19	33
Securities available-for-sale:
Taxable	671	593
Nontaxable	14	14
Other equity investments	12	25
FHLB dividends	60	64
Other interest-earning assets	12	42
Total interest income	9,401	8,539
Interest expense:
Deposits	1,708	1,065
FHLB-NY Borrowings	316	259
Subordinated Debentures and Subordinated Notes	393	392
Total interest expense	2,417	1,716
Net interest income before provision for loan losses	6,984	6,823
Provision for loan losses	65	(335)
Net interest income after provision for loan losses	6,919	7,158
Noninterest income:
Fees and service charges	562	507
Bank owned life insurance	135	138
Gain on calls and sales of securities, net	2	6
Gain on sales of mortgage loans	25	22
Gain on sales of SBA loans	41	0
Gain (loss) on equity investments	22	(74)
Miscellaneous	119	126
Total noninterest income	906	725
Noninterest expenses:
Salaries and employee benefits	3,137	3,109
Occupancy, net	449	442
Equipment	205	181
Data processing	503	484
Advertising	183	157
FDIC insurance premium	64	64
Charitable contributions	195	180
Bank-card related services	131	127
Miscellaneous	725	684
Total noninterest expenses	5,592	5,428
Income before income tax expense	2,233	2,455
Income tax expense	586	647
Net income	$ 1,647	$ 1,808
Basic and diluted earnings per common share (in usd per share)	$ 0.19	$ 0.21
Weighted average number of basic and diluted common shares outstanding (in shares)	8,687,969	8,658,506

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 1,647	$ 1,808
Other comprehensive income (loss), net of tax:
Change in unrealized holding gains (losses) on securities available-for-sale during the period	962	(993)
Reclassification adjustment for securities available-for-sale gains in net income	(1)	(4)
Accretion of loss on securities reclassified to held-to-maturity	2	9
Change in fair value of interest rate swap in a cash flow hedging relationship	(219)
Change in fair value of interest rate swap in a cash flow hedging relationship		158
Reclassification adjustment for interest rate swap interest expense in net income	2
Reclassification adjustment for interest rate swap interest expense in net income		9
Total other comprehensive income (loss)	746	(821)
Total comprehensive income	$ 2,393	$ 987

XML

Consolidated Statement of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Retained Earnings	Accumulated Other Comprehensive Loss
Balance at the beginning (in shares) at Dec. 31, 2017		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)
Compensation expense on restricted stock	$ 48		48
Restricted stock forfeited (in shares)	(9,835)
Restricted stock forfeited	$ (105)
Net income	1,808		1,808
Other comprehensive income (loss)	(821)			(821)
Balance at the end (in shares) at Mar. 31, 2018		8,674,890
Balance at the end at Mar. 31, 2018	74,372	$ 60,975	15,439	(2,042)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reclassification due to adoption of ASU 2016-01	$ 163
Balance at the beginning (in shares) at Dec. 31, 2018	8,680,388	8,680,388
Balance at the beginning at Dec. 31, 2018	$ 80,150	$ 61,030	21,056	(1,936)
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)		2,475
Common stock issued under dividend reinvestment plan	21	$ 21
Common stock issued under stock plans (in shares)		1,593
Common stock issued under stock plans	14	$ 14
Issuance of restricted stock (in shares)		36,415
Issuance of restricted stock	0	$ 340	(340)
Compensation expense on restricted stock	57		57
Restricted stock forfeited (in shares)		(8,848)
Restricted stock forfeited	(83)	$ (83)
Net income	1,647		1,647
Other comprehensive income (loss)	$ 746			746
Balance at the end (in shares) at Mar. 31, 2019	8,712,023	8,712,023
Balance at the end at Mar. 31, 2019	$ 82,291	$ 61,321	$ 22,160	$ (1,190)

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities:
Net income	$ 1,647	$ 1,808
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization of premises and equipment	139	111
Amortization of premiums and accretion of discounts, net	105	132
Compensation expense on restricted stock, net of forfeitures	57	47
Amortization of subordinated debenture issuance costs	16	16
Accretion of deferred loan fees	41	26
Fair value adjustment for equity security	(22)	74
Provision for loan losses	65	(335)
Originations of mortgage loans held-for-sale	(985)	(847)
Proceeds from sale of mortgage loans	1,010	1,239
Gain on sales of mortgage loans	(25)	(22)
Gain on sale of SBA loans	(41)	0
Gain on calls and sales of securities	(2)	(6)
Deferred income tax expense (benefit)	(766)	134
(Increase) decrease in accrued interest receivable	(22)	128
Increase (decrease) in accrued interest payable	263	(451)
Earnings on bank owned life insurance	(135)	(138)
(Increase) decrease in other assets	984	(173)
Increase in other liabilities	47	452
Net cash provided by operating activities	2,376	2,195
Cash flows from investing activities:
Purchase of securities available-for-sale	0	(4,016)
Proceeds from maturities and principal repayments on securities available-for-sale	3,381	4,359
Proceeds from sales and calls on securities available-for-sale	4,170	1,006
Purchase of securities held-to-maturity	(1,468)	(1,493)
Proceeds from maturities and principal repayments on securities held-to-maturity	1,069	1,741
Proceeds from calls on securities held-to-maturity	1,105	280
Purchase of equity securities	0	(24)
Purchase of FHLB-NY stock	(2,902)	(756)
Redemption of FHLB-NY stock	2,945	1,432
Net (increase) decrease in loans	(13,364)	3,594
Additions to premises and equipment	(394)	(200)
Net cash proved by (used in) investing activities	(5,458)	5,923
Cash flows from financing activities:
Net increase in noninterest-bearing deposits	1,639	5,711
Net increase (decrease) in interest-bearing deposits	(114)	2,406
Net increase (decrease) in long term borrowings	5,000	(15,000)
Net decrease in short-term borrowings	(6,800)	0
Cash dividends paid on common stock	(260)	(260)
Payment of discount on dividend reinvestment plan	(1)	(1)
Taxes paid related to net share settlement of restricted stock	(83)	(104)
Issuance of common stock for cash	35	38
Net cash used in financing activities	(584)	(7,210)
Net increase (decrease) in cash and cash equivalents	(3,666)	908
Cash and cash equivalents - beginning	16,823	21,270
Cash and cash equivalents - ending	13,157	22,178
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	2,154	2,166
Cash paid during the period for income taxes	$ 14	$ 0

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

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, 2018, filed with the SEC on March 15, 2019.

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, 2019 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 from those estimates and assumptions.

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 February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 was permitted. Subsequently, the FASB issued the following standards related to ASU 2016-02: ASU 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments" ASU 2018-1, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842;" ASU 2018-10, "Codification Improvements to Topic 842, Leases" ASU 2018-11, "Leases (Topic 842): Targeted Improvements" and ASU 2019-01, "Leases (Topic 842): Codification Improvements". The Corporation adopted the modified retrospective approach under ASU 2018-11. The Corporation's adoption of the modified retrospective approach under ASU 2018-11 on January 1, 2019 resulted in the recording of a $3.4 million lease liability with a corresponding right of use asset on the Consolidated Statements of Financial Condition.

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 ASU 2016-13. The adoption of 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. As of March 31, 2019, the Corporation has evaluated available historical data, identified the expected loan pools, put in place preliminary shadow accounting and is currently continuing to review assumptions and sample forecasts.

In March 2017, the FASB issued ASU 2017-08, "Premium Amortization on Purchased Callable Debt Securities (Subtopic 310-20)." The update shortens the amortization period for premiums on purchased callable debt securities to the earliest call date. The amendment will apply only to callable debt securities with explicit, noncontingent call features that are callable at fixed prices and on preset dates, apply to all premiums on callable debt securities, regardless of how they were generated, and require companies to reset the effective yield using the payment terms of the debt security if the call option is not exercised on the earliest call date. ASU 2017-08 does not require an accounting change for securities held at a discount. The discount continues to be amortized to maturity and does not apply when the investor has already incorporated prepayments into the calculation of its effective yield under other GAAP. The amendments in ASU 2017-08 are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. As the Corporation already amortizes these premiums to the call date, the adoption of this ASU on January 1, 2019 did not have any impact on the Corporation's consolidated financial statements.

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Securities - Available-for-Sale and Held to Maturity

3 Months Ended

Mar. 31, 2019

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, 2019
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. government-sponsored agencies	$	21,744	$	9	$	(284	)	$	21,469
Obligations of state and political subdivisions	3,202		1		(17		)	3,186
Mortgage-backed securities	61,249		138		(845		)	60,542
Asset-backed securities (a)	4,201		3		(13		)	4,191
Corporate debt (b)	13,351		31		(251		)	13,131
Total available-for-sale securities	$	103,747	$	182	$	(1,410	)	$	102,519

	December 31, 2018
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. government-sponsored agencies	$	26,232	$	15	$	(498	)	$	25,749
Obligations of state and political subdivisions	3,205		—		(84		)	3,121
Mortgage-backed securities	63,659		68		(1,564		)	62,163
Asset-backed securities (a)	4,916		6		—			4,922
Corporate debt (b)	13,369		48		(561		)	12,856
Total available-for-sale securities	$	111,381	$	137	$	(2,707	)	$	108,811

(a) Collateralized by student loans.

(b) Corporate debt securities are primarily in financial institutions.

Cash proceeds realized from sales and calls of securities available-for-sale for the three months ended March 31, 2019 were $4,170,000. Cash proceeds realized from sales and calls of securities available-for-sale for the three months ended March 31, 2018 were $1,006,000. There were gross gains totaling $2,000 and no gross losses realized on sales or calls during the three months ended March 31, 2019. There were gross gains totaling $6,000 and no gross losses realized on sales or calls during the three months ended March 31, 2018.

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, 2019
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. Treasury	$	1,000	$	—	$	(10	)	$	990
U.S. government-sponsored agencies	34,564		33		(453		)	34,144
Obligations of state and political subdivisions	2,031		13		(20		)	2,024
Mortgage-backed securities	23,991		133		(172		)	23,952
Total held-to-maturity securities	$	61,586	$	179	$	(655	)	$	61,110

	December 31, 2018
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. Treasury	$	999	$	—	$	(14	)	$	985
U.S. government-sponsored agencies	35,565		20		(976		)	34,609
Obligations of state and political subdivisions	2,358		14		(27		)	2,345
Mortgage-backed securities	23,386		47		(375		)	23,058
Total held-to-maturity securities	$	62,308	$	81	$	(1,392	)	$	60,997

Cash proceeds realized from calls of securities held-to-maturity for the three months ended March 31, 2019 were $1,105,000. Cash proceeds realized from calls of securities held-to-maturity for the three months ended March 31, 2018 were $280,000. There were no gross gains and no gross losses realized on calls during the three months ended March 31, 2019 and March 31, 2018.

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, 2019
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale
Within one year	$	1,635	$	1,626
After one year, but within five years	11,728		11,610
After five years, but within ten years	20,708		20,465
After ten years	4,226		4,085
Mortgage-backed securities	61,249		60,542
Asset-backed securities	4,201		4,191
Total	$	103,747	$	102,519
Held-to-maturity
Within one year	$	1,655	$	1,650
After one year, but within five years	17,065		16,928
After five years, but within ten years	18,389		18,114
After ten years	486		466
Mortgage-backed securities	23,991		23,952
Total	$	61,586	$	61,110

The following tables summarize the fair value and unrealized losses of those investment securities which reported an unrealized loss at March 31, 2019 and December 31, 2018, and if the unrealized loss position was continuous for the twelve months prior to March 31, 2019 and December 31, 2018.

Available-for-sale
March 31, 2019	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	$	—	$	—		$	15,414	$	(284	)	$	15,414	$	(284	)
Obligations of state and political subdivisions	—		—			2,201		(17		)	2,201		(17		)
Mortgage-backed securities	158		—			46,607		(845		)	46,765		(845		)
Asset-backed securities	2,769		(13		)	—		—			2,769		(13		)
Corporate debt	—		—			9,101		(251		)	9,101		(251		)
Total temporarily impaired securities	$	2,927	$	(13	)	$	73,323	$	(1,397	)	$	76,250	$	(1,410	)

Available-for-sale
December 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	$	—	$	—		$	17,432	$	(498	)	$	17,432	$	(498	)
Obligations of state and political subdivisions	—		—			3,121		(84		)	3,121		(84		)
Mortgage-backed securities	4,177		(19		)	47,479		(1,545		)	51,656		(1,564		)
Asset-backed securities	2,892		—			—		—			2,892		—
Corporate debt	—		—			8,808		(561		)	8,808		(561		)
Total temporarily impaired securities	$	7,069	$	(19	)	$	76,840	$	(2,688	)	$	83,909	$	(2,707	)

Held-to-maturity
March 31, 2019	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	$	—	$	—		$	990	$	(10	)	$	990	$	(10	)
U.S. government- sponsored agencies	497		(2		)	25,442		(451		)	25,939		(453		)
Obligations of state and political subdivisions	—		—			466		(20		)	466		(20		)
Mortgage-backed securities	1,460		(3		)	13,778		(169		)	15,238		(172		)
Total temporarily impaired securities	$	1,957	$	(5	)	$	40,676	$	(650	)	$	42,633	$	(655	)

Held-to-maturity
December 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	$	—	$	—		$	985	$	(14	)	$	985	$	(14	)
U.S. government- sponsored agencies	2,496		(9		)	24,595		(967		)	27,091		(976		)
Obligations of state and political subdivisions	—		—			461		(27		)	461		(27		)
Mortgage-backed securities	5,885		(67		)	11,081		(308		)	16,966		(375		)
Total temporarily impaired securities	$	8,381	$	(76	)	$	37,122	$	(1,316	)	$	45,503	$	(1,392	)

Other-Than-Temporary Impairment

At March 31, 2019, there were available-for-sale investments comprising nineteen U.S. government-sponsored agency securities, five obligations of state and political subdivision securities, seventy-three mortgage-backed securities, and nine corporate debt securities in a continuous loss position for twelve months or longer. At March 31, 2019, there were held-to-maturity investments comprising one U.S. Treasury security, twenty-six U.S. government-sponsored agency securities, one obligation of state and political subdivision security, and thirty-two 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, 2019 and December 31, 2018 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.

Management does not intend to sell securities in an unrealized loss position and it is not more likely than not that the Corporation 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, 2019

Receivables [Abstract]

Loans and Allowance for Loan Losses

Loans and Allowance for Loan Losses

At March 31, 2019 and December 31, 2018, respectively, the loan portfolio consisted of the following:

	March 31, 2019		December 31, 2018
	(In thousands)
Commercial:
Secured by real estate	$	30,351	$	28,790
Other	75,458		64,965
Commercial real estate	504,961		504,522
Commercial construction	11,225		9,787
Residential real estate	81,215		82,491
Consumer:
Secured by real estate	36,919		36,120
Other	476		455
Government Guaranteed Loans - guaranteed portion	6,492		6,559
Other	82		98
Total gross loans	747,179		733,787
Less: Deferred loan costs, net	458		457
Allowance for loan losses	8,018		7,926
	8,476		8,383
Loans, net	$	738,703	$	725,404

Included in Commercial - Other and Commercial real estate at March 31, 2019 were $167,000 and $$3,589,000, respectively, of Small Business Administration ("SBA") loans for which the guaranteed portions have been sold.

In addition to the origination of SBA loans, prior to 2017, the Corporation purchased the guaranteed portion of several Government Guaranteed loans. These loans are listed separately in the table above. Due to the guarantee of the principal amount of these loans, no allowance for loan losses is established for these loans.

Excluded from the table above are $15.5 million and $14.3 million of unpaid principal balances of loans serviced for others at March 31, 2019 and December 31, 2018.

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

	Three Months Ended March 31, 2019
	Balance, beginning of period		Provision charged to operations			Loans charged off		Recoveries of loans charged off		Balance, end of period
	(In thousands)
Commercial	$	2,703	$	251		$	—	$	12	$	2,966
Commercial real estate	4,947		(209		)	—		15		4,753
Commercial construction	131		19			—		—		150
Residential real estate	65		11			—		—		76
Consumer	68		(7		)	—		—		61
Other loans	1		—			—		—		1
Unallocated	11		—			—		—		11
Total	$	7,926	$	65		$	—	$	27	$	8,018

	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

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, 2019 and December 31, 2018.

	March 31, 2019
	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	$	97	$	605	$	—	$	—	$	—	$	—	$	—	$	—	$	702
Collectively evaluated for impairment	2,869		4,148		150		76		61		—		1		11		7,316
Total ending allowance balance	$	2,966	$	4,753	$	150	$	76	$	61	$	—	$	1	$	11	$	8,018
Loans:
Loans individually evaluated for impairment	$	627	$	6,182	$	—	$	558	$	—	$	—	$	—	$	—	$	7,367
Loans collectively evaluated for impairment	105,182		498,779		11,225		80,657		37,395		6,492		82		—		739,812
Total ending loan balance	$	105,809	$	504,961	$	11,225	$	81,215	$	37,395	$	6,492	$	82	$	—	$	747,179

	December 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	$	88	$	561	$	—	$	—	$	—	$	—	$	—	$	—	$	649
Collectively evaluated for impairment	2,615		4,386		131		65		68		—		1		11		7,277
Total ending allowance balance	$	2,703	$	4,947	$	131	$	65	$	68	$	—	$	1	$	11	$	7,926
Loans:
Loans individually evaluated for impairment	$	633	$	6,079	$	—	$	576	$	—	$	—	$	—	$	—	$	7,288
Loans collectively evaluated for impairment	93,122		498,443		9,787		81,915		36,575		6,559		98		—		726,499
Total ending loan balance	$	93,755	$	504,522	$	9,787	$	82,491	$	36,575	$	6,559	$	98	$	—	$	733,787

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

	March 31, 2019		December 31, 2018
	(In thousands)
Commercial:
Secured by real estate	$	396	$	394
Commercial real estate	822		574
Residential real estate	558		576
Total nonaccrual loans	$	1,776	$	1,544

At March 31, 2019 and December 31, 2018, there were no loans that were past due 90 days and still accruing.

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

	At March 31, 2019
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	421	$	414
Commercial real estate	3,288		2,959
Residential Real Estate	579		558
	4,288		3,931
With an allowance recorded:
Commercial:
Secured by real estate	93		93		$	93
Other	120		120		4
Commercial real estate	3,223		3,223		605
	3,436		3,436		702
Total:
Commercial:
Secured by real estate	514		507		93
Other	120		120		4
Commercial real estate	6,511		6,182		605
Residential Real Estate	579		558		—
	$	7,724	$	7,367	$	702

	At December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	447	$	416
Commercial real estate	3,329		3,001
Residential real estate	587		576
	4,363		3,993
With an allowance recorded:
Commercial:
Secured by real estate	95		95		$	83
Other	122		122		5
Commercial real estate	3,078		3,078		561
	3,295		3,295		649
Total:
Commercial:
Secured by real estate	542		511		83
Other	122		122		5
Commercial real estate	6,407		6,079		561
Residential real estate	587		576		—
	$	7,658	$	7,288	$	649

	Three Months Ended March 31,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	415	$	—	$	386	$	4
Commercial real estate	2,980		33		3,108		26
Residential Real Estate	567		—		292		—
Consumer:
Secured by real estate	—		—		54		—
Total	3,962		33		3,840		30
With an allowance recorded:
Commercial:
Secured by real estate	94		1		16		—
Other	121		2		127		2
Commercial real estate	3,151		40		3,108		40
	3,366		43		3,251		42
Total	$	7,328	$	76	$	7,091	$	72

During the three months endedMarch 31, 2019 and 2018, 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, 2019 and December 31, 2018. Nonaccrual loans are included in the disclosure by payment status.

	March 31, 2019
	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	$	—	$	34	$	396	$	430	$	29,921	$	30,351
Other	—		—		—		—		75,458		75,458
Commercial real estate	255		—		509		764		504,197		504,961
Commercial construction	—		—		—		—		11,225		11,225
Residential real estate	36		649		—		685		80,530		81,215
Consumer:
Secured by real estate	—		—		—		—		36,919		36,919
Other	—		—		—		—		476		476
Government Guaranteed	—		—		—		—		6,492		6,492
Other	—		—		—		—		82		82
Total	$	291	$	683	$	905	$	1,879	$	745,300	$	747,179

	December 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	$	—	$	—	$	394	$	394	$	28,396	$	28,790
Other	6		—		—		6		64,959		64,965
Commercial real estate	2,155		—		509		2,664		501,858		504,522
Commercial construction	—		—		—		—		9,787		9,787
Residential real estate	112		42		308		462		82,029		82,491
Consumer:
Secured by real estate	—		—		—		—		36,120		36,120
Other	1		—		—		1		454		455
Government Guaranteed	—		—		—		—		6,559		6,559
Other	—		—		—		—		98		98
Total	$	2,274	$	42	$	1,211	$	3,527	$	730,260	$	733,787

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, 2019 and December 31, 2018, the Corporation had $6.2 million and $6.3 million, respectively, of loans whose terms have been modified in troubled debt restructurings. Of these loans, $5.6 million and $5.7 million had demonstrated a reasonable period of performance in accordance with their new terms at March 31, 2019 and December 31, 2018, respectively and are, therefore, accruing loans. The remaining troubled debt restructurings are reported as nonaccrual loans. Specific reserves of $636,000 and $649,000 have been recorded for the troubled debt restructurings at March 31, 2019 and December 31, 2018, respectively, and are included in the table above. As of March 31, 2019 and December 31, 2018, 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, 2019 or March 31, 2018.

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, 2019 and December 31, 2018, and based on the most recent analysis performed at those times, the risk category of loans by class is as follows:

	March 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	28,875	$	320	$	1,156	$	—	$	—	$	30,351
Other	74,053		120		1,285		—		—		75,458
Commercial real estate	495,866		2,129		6,966		—		—		504,961
Commercial construction	11,225		—		—		—		—		11,225
Government Guaranteed Loans - guaranteed portion	6,492		—		—		—		—		6,492
Total	$	616,511	$	2,569	$	9,407	$	—	$	—	$	628,487

	December 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	26,879	$	1,234	$	677	$	—	$	—	$	28,790
Other	63,438		181		1,346		—		—		64,965
Commercial real estate	490,661		7,086		6,775		—		—		504,522
Commercial construction	9,787		—		—		—		—		9,787
Government Guaranteed Loans - guaranteed portion	6,559		—		—		—		—		6,559
Total	$	597,324	$	8,501	$	8,798	$	—	$	—	$	614,623

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, 2019 and December 31, 2018.

	March 31, 2019
	Current		30+ Days Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	79,972	$	1,243	$	81,215
Consumer:
Secured by real estate	36,919		—		36,919
Other	476		—		476
Total	$	117,367	$	1,243	$	118,610

	December 31, 2018
	Current		30+ Days Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	81,761	$	730	$	82,491
Consumer:
Secured by real estate	36,120		—		36,120
Other	454		1		455
Total	$	118,335	$	731	$	119,066

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2019

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, 2019
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	21,469	$	—	$	21,469	$	—
Obligations of state and political subdivisions	3,186		—		3,186		—
Mortgage-backed securities	60,542		—		60,542		—
Asset-backed securities	4,191		—		4,191		—
Corporate debt	13,131		—		13,131		—
Total available-for-sale securities	$	102,519	$	—	$	102,519	$	—
Other equity investments	$	1,670	$	1,610	$	60	$	—
Interest rate swap	$	—	$	—	$	—	$	—
Liabilities:
Interest rate swap	$	417	$	—	$	417	$	—

			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, 2018
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	25,749	$	—	$	25,749	$	—
Obligations of state and political subdivisions	3,121		—		3,121		—
Mortgage-backed securities	62,163		—		62,163		—
Asset-backed securities	4,922		—		4,922		—
Corporate debt	12,856		—		12,856		—
Total available-for-sale securities	$	108,811	$	—	$	108,811	$	—
Other equity investments	$	1,648	$	1,588	$	60	$	—
Interest rate swap	$	134	$	—	$	134	$	—
Liabilities:
Interest rate swap	$	246	$	—	$	246	$	—

There were no transfers of assets between Level 1 and Level 2 during the three months ended March 31, 2019 or during the year ended December 31, 2018. There were no changes to the valuation techniques for fair value measurements as of March 31, 2019 and December 31, 2018.

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.

Other equity investments primarily represent a Community Reinvestment Act (CRA) mutual fund investment.

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

Assets and liabilities measured at fair value on a non-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, 2019
	(In thousands)
Assets:
Impaired loans
Commercial real estate	$	88	$	—	$	—	$	88
Total assets	$	88	$	—	$	—	$	88

			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, 2018
	(In thousands)
Assets:
Impaired loans
Commercial:
Secured by real estate	$	301	$	—	$	—	$	301
Residential real estate	308		—		—		308
Total assets	$	609	$	—	$	—	$	609

Collateral-dependent impaired loans measured for impairment using fair value of the collateral had a recorded investment value of $154,000, resulting in an increase in the allowance for loan losses of $66,000 for the three months ended March 31, 2019.

Collateral-dependent impaired loans measured for impairment using the fair value of the collateral had a recorded investment value of $692,000, resulting in an increase of the allowance for loan losses of $83,000 for the year ended December 31, 2018.

There was no OREO at March 31, 2019 or December 31, 2018.

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, the significant unobservable inputs used in the fair value measurements were as follows:

March 31, 2019
	Fair				Weighted
Assets	Value		Valuation Technique	Unobservable Inputs	Average
(Dollars in thousands)
Impaired loans	$	88	Comparable real estate sales and / or the income approach.	Adjustments for differences between comparable sales and income data available.	5%
				Estimated selling costs.	7%

December 31, 2018
	Fair				Weighted
Assets	Value		Valuation Technique	Unobservable Inputs	Average
(Dollars in thousands)
Impaired loans	$	609	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)
	March 31, 2019
	(In thousands)
Financial assets:
Cash and cash equivalents	$	13,157	$	13,157	$	—	$	—
Securities available-for-sale	102,519		—		102,519		—
Securities held-to-maturity	61,586		—		61,110		—
Other equity investments	1,670		1,610		60		—
FHLB-NY stock	3,922		N/A		N/A		N/A
Loans, net	738,703		—		—		716,689
Interest rate swap	—		—		—		—
Financial liabilities:
Deposits	783,616		580,351		202,551		—
FHLB-NY advances	63,900		—		63,977		—
Subordinated Debentures and Subordinated Notes	23,398		—		—		23,480
Interest rate swap	417		—		417		—

			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, 2018
	(In thousands)
Financial assets:
Cash and cash equivalents	$	16,823	$	16,823	$	—	$	—
Securities available-for-sale	108,811		—		108,811		—
Securities held-to-maturity	62,308		—		60,997		—
Other equity investments	1,648		1,588		60		—
FHLB-NY stock	3,965		N/A		N/A		N/A
Loans, net	725,404		—		—		704,273
Interest rate swap	134		—		134		—
Financial liabilities:
Deposits	782,091		578,460		201,846		—
FHLB-NY advances	65,700		—		65,477		—
Subordinated Debentures and Subordinated Notes	23,382		—		—		23,441
Interest rate swap	246		—		246		—

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 is based on an exit price model taking into account inputs such as probability of default and loss given default assumptions.

Commitments to extend credit – The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. At March 31, 2019 and December 31, 2018, the fair value of such commitments were not material.

Limitations

The preceding fair value estimates were made at March 31, 2019 and December 31, 2018 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, 2019 and December 31, 2018, 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, 2019

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,
	2019		2018
	(Dollars in thousands)
Net income	$	1,647	$	1,808
Weighted average common shares outstanding - basic	8,687,969		8,658,506
Effect of dilutive securities - stock options	N/A		N/A
Weighted average common shares outstanding - diluted	8,687,969		8,658,506
Basic earnings per common share	$	0.19	$	0.21
Diluted earnings per common share	$	0.19	$	0.21

There were no stock options to purchase shares of common stock for the three months ended March 31, 2019 and 2018.

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Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2019

Stockholders' Equity Note [Abstract]

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

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

	Three Months Ended March 31,
	2019									2018
	Gross			Tax Effect			Net			Gross			Tax Effect			Net
	(In thousands)
Other comprehensive income (loss):
Change in unrealized holding gains (losses) on securities available-for-sale	$	1,344		$	(382	)	$	962		$	(1,344	)	$	351		$	(993	)
Reclassification adjustment for gains in net income	(2		)	1			(1		)	(6		)	2			(4		)
Accretion of loss on securities reclassified to held-to-maturity	3			(1		)	2			12			(3		)	9
Change in fair value of interest rate swap	(308		)	89			(219		)	220			(62		)	158
Reclassification adjustment for interest rate swap interest expense in net income	3			(1		)	2			12			(3		)	9
Total other comprehensive income (loss)	$	1,040		$	(294	)	$	746		$	(1,106	)	$	285		$	(821	)

The following tables present the after-tax changes in the balances of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2019 and 2018.

	Three Months Ended March 31, 2019
	Components of Accumulated Other Comprehensive Income (Loss)									Total
	Unrealized Gains / (Losses) on Available-for-Sale Securities			Loss on Securities Reclassified from Available-for-Sale to Held-to-Maturity			Unrealized Gains / (Losses) on Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2018	$	(1,821	)	$	(38	)	$	(77	)	$	(1,936	)
Other comprehensive income (loss) before reclassifications	962			2			(219		)	745
Amounts reclassified from other comprehensive income (loss)	(1		)	—			2			1
Other comprehensive income (loss)	961			2			(217		)	746
Balance at March 31, 2019	$	(860	)	$	(36	)	$	(294	)	$	(1,190	)

	Three Months Ended March 31, 2018
	Components of Accumulated Other Comprehensive Income (Loss)									Total
	Unrealized Gains / (Losses) on Available-for-Sale Securities			Loss on Securities Reclassified from Available-for-Sale to Held-to-Maturity			Unrealized Gains / (Losses) on Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2017	$	(1,303	)	$	(60	)	$	(21	)	$	(1,384	)
Other comprehensive income (loss) before reclassifications	(993		)	9			158			(826		)
Amounts reclassified from other comprehensive income (loss)	(4		)	—			9			5
Other comprehensive income (loss)	(997		)	9			167			(821		)
Reclassification due to the adoption of ASU No. 2016-01	163			—			—			163
Balance at March 31, 2018	$	(2,137	)	$	(51	)	$	146		$	(2,042	)

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, 2019 and 2018.

	Three Months Ended						Income
Components of Accumulated Other	March 31,						Statement
Comprehensive Income (Loss)	2019			2018			Line Item
	(In thousands)
Unrealized gains on securities available-for-sale, before tax	$	2		$	6		Gains on securities transactions, net
Tax effect	(1		)	(2		)
Total, net of tax	1			4
Unrealized losses on derivatives before tax	(3		)	(12		)	Interest expense on derivatives
Tax effect	1			3
Total, net of tax	(2		)	(9		)
Total reclassifications, net of tax	$	(1	)	$	(5	)

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Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

Leases

The Corporation leases eight branch offices. In addition, the Corporation has 12 leases for equipment, which are primarily copiers, and one automobile lease. Four of the branch office leases have options to renew. The exercise of lease renewal options is at our sole discretion; therefore, are not included in the right of use (ROU) asset nor the Lease Liability as they are not reasonably certain of exercise. As a practical expedient, the ROU asset and Lease Liability exclude short-term leases.

As the leases do not provide an implicit rate, use of an incremental borrowing rate was based on the information available at the lease commencement date in determining the present value of the lease payments. The Corporation’s weighted average incremental borrowing rate used in the calculation of the ROU asset and Lease Liability was estimated at 3%.

The following table presents a maturity analysis of the operating lease liability at March 31, 2019, in thousands:

	Maturities of  Lease Liabilities
	(In thousands)
Nine months ended December 31, 2019	$	529
Year ended December 31, 2020	646
Year ended December 31, 2021	489
Year ended December 31, 2022	474
Thereafter	1,079
Lease Liability March 31, 2019	$	3,217

The weighted-average remaining lease term is 5.5 years.

Total lease costs for the three months ended March 31, 2019 was $240,000 consisting of $199,000 related to fixed rent expense, $32,000 related to variable rent expense and $19,000 related to short-term leases offset by $9,000 of sublease income. Variable lease expense consists primarily of expense paid to maintain common areas. Lease costs included in Occupancy expense totaled $213,000 and another $27,000 was included in Equipment expense.

Rent paid under operating leases was $193,000 for the three months ended March 31, 2019.

The following table presents future minimum rental payments as of March 31, 2019:

Expires  March 31,	Minimum  Rent
	(In thousands)
2020	$	773
2021	639
2022	527
2023	470
2024	383
Thereafter	584
	$	3,376

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

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, 2018, filed with the SEC on March 15, 2019.

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, 2019 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 from those estimates and assumptions.

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 February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 was permitted. Subsequently, the FASB issued the following standards related to ASU 2016-02: ASU 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments" ASU 2018-1, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842;" ASU 2018-10, "Codification Improvements to Topic 842, Leases" ASU 2018-11, "Leases (Topic 842): Targeted Improvements" and ASU 2019-01, "Leases (Topic 842): Codification Improvements". The Corporation adopted the modified retrospective approach under ASU 2018-11. The Corporation's adoption of the modified retrospective approach under ASU 2018-11 on January 1, 2019 resulted in the recording of a $3.4 million lease liability with a corresponding right of use asset on the Consolidated Statements of Financial Condition.

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 ASU 2016-13. The adoption of 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. As of March 31, 2019, the Corporation has evaluated available historical data, identified the expected loan pools, put in place preliminary shadow accounting and is currently continuing to review assumptions and sample forecasts.

In March 2017, the FASB issued ASU 2017-08, "Premium Amortization on Purchased Callable Debt Securities (Subtopic 310-20)." The update shortens the amortization period for premiums on purchased callable debt securities to the earliest call date. The amendment will apply only to callable debt securities with explicit, noncontingent call features that are callable at fixed prices and on preset dates, apply to all premiums on callable debt securities, regardless of how they were generated, and require companies to reset the effective yield using the payment terms of the debt security if the call option is not exercised on the earliest call date. ASU 2017-08 does not require an accounting change for securities held at a discount. The discount continues to be amortized to maturity and does not apply when the investor has already incorporated prepayments into the calculation of its effective yield under other GAAP. The amendments in ASU 2017-08 are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. As the Corporation already amortizes these premiums to the call date, the adoption of this ASU on January 1, 2019 did not have any impact 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, 2019

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, 2019
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. government-sponsored agencies	$	21,744	$	9	$	(284	)	$	21,469
Obligations of state and political subdivisions	3,202		1		(17		)	3,186
Mortgage-backed securities	61,249		138		(845		)	60,542
Asset-backed securities (a)	4,201		3		(13		)	4,191
Corporate debt (b)	13,351		31		(251		)	13,131
Total available-for-sale securities	$	103,747	$	182	$	(1,410	)	$	102,519

	December 31, 2018
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. government-sponsored agencies	$	26,232	$	15	$	(498	)	$	25,749
Obligations of state and political subdivisions	3,205		—		(84		)	3,121
Mortgage-backed securities	63,659		68		(1,564		)	62,163
Asset-backed securities (a)	4,916		6		—			4,922
Corporate debt (b)	13,369		48		(561		)	12,856
Total available-for-sale securities	$	111,381	$	137	$	(2,707	)	$	108,811

(a) Collateralized by student loans.

(b) Corporate debt securities are primarily in financial institutions.

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, 2019
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. Treasury	$	1,000	$	—	$	(10	)	$	990
U.S. government-sponsored agencies	34,564		33		(453		)	34,144
Obligations of state and political subdivisions	2,031		13		(20		)	2,024
Mortgage-backed securities	23,991		133		(172		)	23,952
Total held-to-maturity securities	$	61,586	$	179	$	(655	)	$	61,110

	December 31, 2018
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(In thousands)
U.S. Treasury	$	999	$	—	$	(14	)	$	985
U.S. government-sponsored agencies	35,565		20		(976		)	34,609
Obligations of state and political subdivisions	2,358		14		(27		)	2,345
Mortgage-backed securities	23,386		47		(375		)	23,058
Total held-to-maturity securities	$	62,308	$	81	$	(1,392	)	$	60,997

Held-to-maturity
March 31, 2019	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	$	—	$	—		$	990	$	(10	)	$	990	$	(10	)
U.S. government- sponsored agencies	497		(2		)	25,442		(451		)	25,939		(453		)
Obligations of state and political subdivisions	—		—			466		(20		)	466		(20		)
Mortgage-backed securities	1,460		(3		)	13,778		(169		)	15,238		(172		)
Total temporarily impaired securities	$	1,957	$	(5	)	$	40,676	$	(650	)	$	42,633	$	(655	)

Held-to-maturity
December 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	$	—	$	—		$	985	$	(14	)	$	985	$	(14	)
U.S. government- sponsored agencies	2,496		(9		)	24,595		(967		)	27,091		(976		)
Obligations of state and political subdivisions	—		—			461		(27		)	461		(27		)
Mortgage-backed securities	5,885		(67		)	11,081		(308		)	16,966		(375		)
Total temporarily impaired securities	$	8,381	$	(76	)	$	37,122	$	(1,316	)	$	45,503	$	(1,392	)

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, 2019
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale
Within one year	$	1,635	$	1,626
After one year, but within five years	11,728		11,610
After five years, but within ten years	20,708		20,465
After ten years	4,226		4,085
Mortgage-backed securities	61,249		60,542
Asset-backed securities	4,201		4,191
Total	$	103,747	$	102,519
Held-to-maturity
Within one year	$	1,655	$	1,650
After one year, but within five years	17,065		16,928
After five years, but within ten years	18,389		18,114
After ten years	486		466
Mortgage-backed securities	23,991		23,952
Total	$	61,586	$	61,110

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, 2019 and December 31, 2018, and if the unrealized loss position was continuous for the twelve months prior to March 31, 2019 and December 31, 2018.

Available-for-sale
March 31, 2019	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	$	—	$	—		$	15,414	$	(284	)	$	15,414	$	(284	)
Obligations of state and political subdivisions	—		—			2,201		(17		)	2,201		(17		)
Mortgage-backed securities	158		—			46,607		(845		)	46,765		(845		)
Asset-backed securities	2,769		(13		)	—		—			2,769		(13		)
Corporate debt	—		—			9,101		(251		)	9,101		(251		)
Total temporarily impaired securities	$	2,927	$	(13	)	$	73,323	$	(1,397	)	$	76,250	$	(1,410	)

Available-for-sale
December 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	$	—	$	—		$	17,432	$	(498	)	$	17,432	$	(498	)
Obligations of state and political subdivisions	—		—			3,121		(84		)	3,121		(84		)
Mortgage-backed securities	4,177		(19		)	47,479		(1,545		)	51,656		(1,564		)
Asset-backed securities	2,892		—			—		—			2,892		—
Corporate debt	—		—			8,808		(561		)	8,808		(561		)
Total temporarily impaired securities	$	7,069	$	(19	)	$	76,840	$	(2,688	)	$	83,909	$	(2,707	)

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Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Summary of Loan Portfolio

At March 31, 2019 and December 31, 2018, respectively, the loan portfolio consisted of the following:

	March 31, 2019		December 31, 2018
	(In thousands)
Commercial:
Secured by real estate	$	30,351	$	28,790
Other	75,458		64,965
Commercial real estate	504,961		504,522
Commercial construction	11,225		9,787
Residential real estate	81,215		82,491
Consumer:
Secured by real estate	36,919		36,120
Other	476		455
Government Guaranteed Loans - guaranteed portion	6,492		6,559
Other	82		98
Total gross loans	747,179		733,787
Less: Deferred loan costs, net	458		457
Allowance for loan losses	8,018		7,926
	8,476		8,383
Loans, net	$	738,703	$	725,404

Schedule of Allowance for Loan Losses

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

	Three Months Ended March 31, 2019
	Balance, beginning of period		Provision charged to operations			Loans charged off		Recoveries of loans charged off		Balance, end of period
	(In thousands)
Commercial	$	2,703	$	251		$	—	$	12	$	2,966
Commercial real estate	4,947		(209		)	—		15		4,753
Commercial construction	131		19			—		—		150
Residential real estate	65		11			—		—		76
Consumer	68		(7		)	—		—		61
Other loans	1		—			—		—		1
Unallocated	11		—			—		—		11
Total	$	7,926	$	65		$	—	$	27	$	8,018

	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

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, 2019 and December 31, 2018.

	March 31, 2019
	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	$	97	$	605	$	—	$	—	$	—	$	—	$	—	$	—	$	702
Collectively evaluated for impairment	2,869		4,148		150		76		61		—		1		11		7,316
Total ending allowance balance	$	2,966	$	4,753	$	150	$	76	$	61	$	—	$	1	$	11	$	8,018
Loans:
Loans individually evaluated for impairment	$	627	$	6,182	$	—	$	558	$	—	$	—	$	—	$	—	$	7,367
Loans collectively evaluated for impairment	105,182		498,779		11,225		80,657		37,395		6,492		82		—		739,812
Total ending loan balance	$	105,809	$	504,961	$	11,225	$	81,215	$	37,395	$	6,492	$	82	$	—	$	747,179

	December 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	$	88	$	561	$	—	$	—	$	—	$	—	$	—	$	—	$	649
Collectively evaluated for impairment	2,615		4,386		131		65		68		—		1		11		7,277
Total ending allowance balance	$	2,703	$	4,947	$	131	$	65	$	68	$	—	$	1	$	11	$	7,926
Loans:
Loans individually evaluated for impairment	$	633	$	6,079	$	—	$	576	$	—	$	—	$	—	$	—	$	7,288
Loans collectively evaluated for impairment	93,122		498,443		9,787		81,915		36,575		6,559		98		—		726,499
Total ending loan balance	$	93,755	$	504,522	$	9,787	$	82,491	$	36,575	$	6,559	$	98	$	—	$	733,787

Schedule of Recorded Investment in Nonaccrual Loans

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

	March 31, 2019		December 31, 2018
	(In thousands)
Commercial:
Secured by real estate	$	396	$	394
Commercial real estate	822		574
Residential real estate	558		576
Total nonaccrual loans	$	1,776	$	1,544

Schedule of Recorded Investments in Impaired Loans

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

	At March 31, 2019
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	421	$	414
Commercial real estate	3,288		2,959
Residential Real Estate	579		558
	4,288		3,931
With an allowance recorded:
Commercial:
Secured by real estate	93		93		$	93
Other	120		120		4
Commercial real estate	3,223		3,223		605
	3,436		3,436		702
Total:
Commercial:
Secured by real estate	514		507		93
Other	120		120		4
Commercial real estate	6,511		6,182		605
Residential Real Estate	579		558		—
	$	7,724	$	7,367	$	702

	At December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	447	$	416
Commercial real estate	3,329		3,001
Residential real estate	587		576
	4,363		3,993
With an allowance recorded:
Commercial:
Secured by real estate	95		95		$	83
Other	122		122		5
Commercial real estate	3,078		3,078		561
	3,295		3,295		649
Total:
Commercial:
Secured by real estate	542		511		83
Other	122		122		5
Commercial real estate	6,407		6,079		561
Residential real estate	587		576		—
	$	7,658	$	7,288	$	649

	Three Months Ended March 31,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	415	$	—	$	386	$	4
Commercial real estate	2,980		33		3,108		26
Residential Real Estate	567		—		292		—
Consumer:
Secured by real estate	—		—		54		—
Total	3,962		33		3,840		30
With an allowance recorded:
Commercial:
Secured by real estate	94		1		16		—
Other	121		2		127		2
Commercial real estate	3,151		40		3,108		40
	3,366		43		3,251		42
Total	$	7,328	$	76	$	7,091	$	72

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, 2019 and December 31, 2018. Nonaccrual loans are included in the disclosure by payment status.

	March 31, 2019
	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	$	—	$	34	$	396	$	430	$	29,921	$	30,351
Other	—		—		—		—		75,458		75,458
Commercial real estate	255		—		509		764		504,197		504,961
Commercial construction	—		—		—		—		11,225		11,225
Residential real estate	36		649		—		685		80,530		81,215
Consumer:
Secured by real estate	—		—		—		—		36,919		36,919
Other	—		—		—		—		476		476
Government Guaranteed	—		—		—		—		6,492		6,492
Other	—		—		—		—		82		82
Total	$	291	$	683	$	905	$	1,879	$	745,300	$	747,179

	December 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	$	—	$	—	$	394	$	394	$	28,396	$	28,790
Other	6		—		—		6		64,959		64,965
Commercial real estate	2,155		—		509		2,664		501,858		504,522
Commercial construction	—		—		—		—		9,787		9,787
Residential real estate	112		42		308		462		82,029		82,491
Consumer:
Secured by real estate	—		—		—		—		36,120		36,120
Other	1		—		—		1		454		455
Government Guaranteed	—		—		—		—		6,559		6,559
Other	—		—		—		—		98		98
Total	$	2,274	$	42	$	1,211	$	3,527	$	730,260	$	733,787

Schedule of Loans by Credit Quality Indicators

As of March 31, 2019 and December 31, 2018, and based on the most recent analysis performed at those times, the risk category of loans by class is as follows:

	March 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	28,875	$	320	$	1,156	$	—	$	—	$	30,351
Other	74,053		120		1,285		—		—		75,458
Commercial real estate	495,866		2,129		6,966		—		—		504,961
Commercial construction	11,225		—		—		—		—		11,225
Government Guaranteed Loans - guaranteed portion	6,492		—		—		—		—		6,492
Total	$	616,511	$	2,569	$	9,407	$	—	$	—	$	628,487

	December 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	26,879	$	1,234	$	677	$	—	$	—	$	28,790
Other	63,438		181		1,346		—		—		64,965
Commercial real estate	490,661		7,086		6,775		—		—		504,522
Commercial construction	9,787		—		—		—		—		9,787
Government Guaranteed Loans - guaranteed portion	6,559		—		—		—		—		6,559
Total	$	597,324	$	8,501	$	8,798	$	—	$	—	$	614,623

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, 2019 and December 31, 2018.

	March 31, 2019
	Current		30+ Days Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	79,972	$	1,243	$	81,215
Consumer:
Secured by real estate	36,919		—		36,919
Other	476		—		476
Total	$	117,367	$	1,243	$	118,610

	December 31, 2018
	Current		30+ Days Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	81,761	$	730	$	82,491
Consumer:
Secured by real estate	36,120		—		36,120
Other	454		1		455
Total	$	118,335	$	731	$	119,066

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

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, 2019
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	21,469	$	—	$	21,469	$	—
Obligations of state and political subdivisions	3,186		—		3,186		—
Mortgage-backed securities	60,542		—		60,542		—
Asset-backed securities	4,191		—		4,191		—
Corporate debt	13,131		—		13,131		—
Total available-for-sale securities	$	102,519	$	—	$	102,519	$	—
Other equity investments	$	1,670	$	1,610	$	60	$	—
Interest rate swap	$	—	$	—	$	—	$	—
Liabilities:
Interest rate swap	$	417	$	—	$	417	$	—

			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, 2018
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	25,749	$	—	$	25,749	$	—
Obligations of state and political subdivisions	3,121		—		3,121		—
Mortgage-backed securities	62,163		—		62,163		—
Asset-backed securities	4,922		—		4,922		—
Corporate debt	12,856		—		12,856		—
Total available-for-sale securities	$	108,811	$	—	$	108,811	$	—
Other equity investments	$	1,648	$	1,588	$	60	$	—
Interest rate swap	$	134	$	—	$	134	$	—
Liabilities:
Interest rate swap	$	246	$	—	$	246	$	—

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 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, 2019
	(In thousands)
Assets:
Impaired loans
Commercial real estate	$	88	$	—	$	—	$	88
Total assets	$	88	$	—	$	—	$	88

			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, 2018
	(In thousands)
Assets:
Impaired loans
Commercial:
Secured by real estate	$	301	$	—	$	—	$	301
Residential real estate	308		—		—		308
Total assets	$	609	$	—	$	—	$	609

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, the significant unobservable inputs used in the fair value measurements were as follows:

March 31, 2019
	Fair				Weighted
Assets	Value		Valuation Technique	Unobservable Inputs	Average
(Dollars in thousands)
Impaired loans	$	88	Comparable real estate sales and / or the income approach.	Adjustments for differences between comparable sales and income data available.	5%
				Estimated selling costs.	7%

December 31, 2018
	Fair				Weighted
Assets	Value		Valuation Technique	Unobservable Inputs	Average
(Dollars in thousands)
Impaired loans	$	609	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)
	March 31, 2019
	(In thousands)
Financial assets:
Cash and cash equivalents	$	13,157	$	13,157	$	—	$	—
Securities available-for-sale	102,519		—		102,519		—
Securities held-to-maturity	61,586		—		61,110		—
Other equity investments	1,670		1,610		60		—
FHLB-NY stock	3,922		N/A		N/A		N/A
Loans, net	738,703		—		—		716,689
Interest rate swap	—		—		—		—
Financial liabilities:
Deposits	783,616		580,351		202,551		—
FHLB-NY advances	63,900		—		63,977		—
Subordinated Debentures and Subordinated Notes	23,398		—		—		23,480
Interest rate swap	417		—		417		—

			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, 2018
	(In thousands)
Financial assets:
Cash and cash equivalents	$	16,823	$	16,823	$	—	$	—
Securities available-for-sale	108,811		—		108,811		—
Securities held-to-maturity	62,308		—		60,997		—
Other equity investments	1,648		1,588		60		—
FHLB-NY stock	3,965		N/A		N/A		N/A
Loans, net	725,404		—		—		704,273
Interest rate swap	134		—		134		—
Financial liabilities:
Deposits	782,091		578,460		201,846		—
FHLB-NY advances	65,700		—		65,477		—
Subordinated Debentures and Subordinated Notes	23,382		—		—		23,441
Interest rate swap	246		—		246		—

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2019

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,
	2019		2018
	(Dollars in thousands)
Net income	$	1,647	$	1,808
Weighted average common shares outstanding - basic	8,687,969		8,658,506
Effect of dilutive securities - stock options	N/A		N/A
Weighted average common shares outstanding - diluted	8,687,969		8,658,506
Basic earnings per common share	$	0.19	$	0.21
Diluted earnings per common share	$	0.19	$	0.21

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Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2019

Stockholders' Equity Note [Abstract]

Schedule of Components of Comprehensive Income

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

	Three Months Ended March 31,
	2019									2018
	Gross			Tax Effect			Net			Gross			Tax Effect			Net
	(In thousands)
Other comprehensive income (loss):
Change in unrealized holding gains (losses) on securities available-for-sale	$	1,344		$	(382	)	$	962		$	(1,344	)	$	351		$	(993	)
Reclassification adjustment for gains in net income	(2		)	1			(1		)	(6		)	2			(4		)
Accretion of loss on securities reclassified to held-to-maturity	3			(1		)	2			12			(3		)	9
Change in fair value of interest rate swap	(308		)	89			(219		)	220			(62		)	158
Reclassification adjustment for interest rate swap interest expense in net income	3			(1		)	2			12			(3		)	9
Total other comprehensive income (loss)	$	1,040		$	(294	)	$	746		$	(1,106	)	$	285		$	(821	)

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 (loss) for the three months ended March 31, 2019 and 2018.

	Three Months Ended March 31, 2019
	Components of Accumulated Other Comprehensive Income (Loss)									Total
	Unrealized Gains / (Losses) on Available-for-Sale Securities			Loss on Securities Reclassified from Available-for-Sale to Held-to-Maturity			Unrealized Gains / (Losses) on Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2018	$	(1,821	)	$	(38	)	$	(77	)	$	(1,936	)
Other comprehensive income (loss) before reclassifications	962			2			(219		)	745
Amounts reclassified from other comprehensive income (loss)	(1		)	—			2			1
Other comprehensive income (loss)	961			2			(217		)	746
Balance at March 31, 2019	$	(860	)	$	(36	)	$	(294	)	$	(1,190	)

	Three Months Ended March 31, 2018
	Components of Accumulated Other Comprehensive Income (Loss)									Total
	Unrealized Gains / (Losses) on Available-for-Sale Securities			Loss on Securities Reclassified from Available-for-Sale to Held-to-Maturity			Unrealized Gains / (Losses) on Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2017	$	(1,303	)	$	(60	)	$	(21	)	$	(1,384	)
Other comprehensive income (loss) before reclassifications	(993		)	9			158			(826		)
Amounts reclassified from other comprehensive income (loss)	(4		)	—			9			5
Other comprehensive income (loss)	(997		)	9			167			(821		)
Reclassification due to the adoption of ASU No. 2016-01	163			—			—			163
Balance at March 31, 2018	$	(2,137	)	$	(51	)	$	146		$	(2,042	)

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, 2019 and 2018.

	Three Months Ended						Income
Components of Accumulated Other	March 31,						Statement
Comprehensive Income (Loss)	2019			2018			Line Item
	(In thousands)
Unrealized gains on securities available-for-sale, before tax	$	2		$	6		Gains on securities transactions, net
Tax effect	(1		)	(2		)
Total, net of tax	1			4
Unrealized losses on derivatives before tax	(3		)	(12		)	Interest expense on derivatives
Tax effect	1			3
Total, net of tax	(2		)	(9		)
Total reclassifications, net of tax	$	(1	)	$	(5	)

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Leases (Tables)

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Schedule of Maturity of Lease Liabilities

The following table presents a maturity analysis of the operating lease liability at March 31, 2019, in thousands:

	Maturities of  Lease Liabilities
	(In thousands)
Nine months ended December 31, 2019	$	529
Year ended December 31, 2020	646
Year ended December 31, 2021	489
Year ended December 31, 2022	474
Thereafter	1,079
Lease Liability March 31, 2019	$	3,217

Schedule of Future Minimum Rental Payments

The following table presents future minimum rental payments as of March 31, 2019:

Expires  March 31,	Minimum  Rent
	(In thousands)
2020	$	773
2021	639
2022	527
2023	470
2024	383
Thereafter	584
	$	3,376

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Summary of Significant Accounting Policies Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right of use asset	$ 3,092
Lease liability	$ 3,217
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right of use asset		$ 3,400
Lease liability		$ 3,400

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Securities - Available-for-Sale and Held to Maturity (Narrative) (Details)	3 Months Ended
	Mar. 31, 2019 USD ($) security	Mar. 31, 2018 USD ($)
Investments, Debt and Equity Securities [Abstract]
Proceeds from sales and calls on securities available-for-sale | $	$ 4,170,000	$ 1,006,000
Gross gains realized from sales or calls of available-for-sale securities | $	2,000	6,000
Gross losses realized from sales or calls of available for sale securities | $	0	0
Proceeds from calls on securities held-to-maturity | $	1,105,000	280,000
Gross gains realized from calls of held to maturity securities | $	0	0
Gross losses realized from calls of held to maturity securities | $	$ 0	$ 0
U.S. Treasury
Debt Securities, Available-for-sale [Line Items]
Held-to-maturity securities, number of positions	1
U.S. government-sponsored agencies
Debt Securities, Available-for-sale [Line Items]
Debt securities, available-for-sale, number of positions	19
Held-to-maturity securities, number of positions	26
Obligations of state and political subdivisions
Debt Securities, Available-for-sale [Line Items]
Debt securities, available-for-sale, number of positions	5
Held-to-maturity securities, number of positions	1
Mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, available-for-sale, number of positions	73
Held-to-maturity securities, number of positions	32
Corporate debt securities
Debt Securities, Available-for-sale [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, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Available-for-sale securities, amortized cost basis	$ 103,747	$ 111,381
Available-for-sale securities, gross unrealized gains	182	137
Available-for-sale securities, gross unrealized losses	(1,410)	(2,707)
Available-for-sale securities, fair value	102,519	108,811
U.S. government-sponsored agencies
Debt Securities, Available-for-sale [Line Items]
Available-for-sale securities, amortized cost basis	21,744	26,232
Available-for-sale securities, gross unrealized gains	9	15
Available-for-sale securities, gross unrealized losses	(284)	(498)
Available-for-sale securities, fair value	21,469	25,749
Obligations of state and political subdivisions
Debt Securities, Available-for-sale [Line Items]
Available-for-sale securities, amortized cost basis	3,202	3,205
Available-for-sale securities, gross unrealized gains	1	0
Available-for-sale securities, gross unrealized losses	(17)	(84)
Available-for-sale securities, fair value	3,186	3,121
Mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Available-for-sale securities, amortized cost basis	61,249	63,659
Available-for-sale securities, gross unrealized gains	138	68
Available-for-sale securities, gross unrealized losses	(845)	(1,564)
Available-for-sale securities, fair value	60,542	62,163
Asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Available-for-sale securities, amortized cost basis	4,201	4,916
Available-for-sale securities, gross unrealized gains	3	6
Available-for-sale securities, gross unrealized losses	(13)	0
Available-for-sale securities, fair value	4,191	4,922
Corporate debt
Debt Securities, Available-for-sale [Line Items]
Available-for-sale securities, amortized cost basis	13,351	13,369
Available-for-sale securities, gross unrealized gains	31	48
Available-for-sale securities, gross unrealized losses	(251)	(561)
Available-for-sale securities, fair value	$ 13,131	$ 12,856

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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, 2019	Dec. 31, 2018
Debt Securities, Held-to-maturity [Abstract]
Amortized Cost	$ 61,586	$ 62,308
Gross Unrealized Gains	179	81
Gross Unrealized Losses	(655)	(1,392)
Fair value	61,110	60,997
U.S. Treasury
Debt Securities, Held-to-maturity [Abstract]
Amortized Cost	1,000	999
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(10)	(14)
Fair value	990	985
U.S. government-sponsored agencies
Debt Securities, Held-to-maturity [Abstract]
Amortized Cost	34,564	35,565
Gross Unrealized Gains	33	20
Gross Unrealized Losses	(453)	(976)
Fair value	34,144	34,609
Obligations of state and political subdivisions
Debt Securities, Held-to-maturity [Abstract]
Amortized Cost	2,031	2,358
Gross Unrealized Gains	13	14
Gross Unrealized Losses	(20)	(27)
Fair value	2,024	2,345
Mortgage-backed securities
Debt Securities, Held-to-maturity [Abstract]
Amortized Cost	23,991	23,386
Gross Unrealized Gains	133	47
Gross Unrealized Losses	(172)	(375)
Fair value	$ 23,952	$ 23,058

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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, 2019	Dec. 31, 2018
Available-for-sale, Amortized Cost
Within one year	$ 1,635
After one year, but within five years	11,728
After five years, but within ten years	20,708
After ten years	4,226
Amortized Cost	103,747	$ 111,381
Available-for-sale, Fair Value
Within one year	1,626
After one year, but within five years	11,610
After five years, but within ten years	20,465
After ten years	4,085
Fair Value	102,519	108,811
Held to maturity, Amortized Cost
Within one year	1,655
After one year, but within five years	17,065
After five years, but within ten years	18,389
After ten years	486
Securities held-to-maturity	61,586	62,308
Held to maturity, Fair Value
Within one year	1,650
After one year, but within five years	16,928
After five years, but within ten years	18,114
After ten years	466
Fair value	61,110	60,997
Mortgage-backed securities
Available-for-sale, Amortized Cost
Amortized Cost	61,249	63,659
Available-for-sale, Fair Value
Fair Value	60,542	62,163
Held to maturity, Amortized Cost
Securities held-to-maturity	23,991
Held to maturity, Fair Value
Fair value	23,952	23,058
Asset-backed securities
Available-for-sale, Amortized Cost
Amortized Cost	4,201	4,916
Available-for-sale, Fair Value
Fair Value	$ 4,191	$ 4,922

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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, 2019	Dec. 31, 2018
Available for sale, temporarily impaired securities
Less than 12 Months, Fair Value	$ 2,927	$ 7,069
Less than 12 Months, Unrealized Losses	(13)	(19)
12 Months or Longer, Fair Value	73,323	76,840
12 Months or Longer, Unrealized Losses	(1,397)	(2,688)
Fair Value	76,250	83,909
Unrealized Losses	(1,410)	(2,707)
Held to maturity securities,temporarily impaired securities
Less than 12 Months, Fair Value	1,957	8,381
Less than 12 Months, Unrealized Losses	(5)	(76)
12 Months or Longer, Fair Value	40,676	37,122
12 Months or Longer, Unrealized Losses	(650)	(1,316)
Fair Value	42,633	45,503
Unrealized Losses	(655)	(1,392)
U.S. Treasury
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	990	985
12 Months or Longer, Unrealized Losses	(10)	(14)
Fair Value	990	985
Unrealized Losses	(10)	(14)
U.S. government-sponsored agencies
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	15,414	17,432
12 Months or Longer, Unrealized Losses	(284)	(498)
Fair Value	15,414	17,432
Unrealized Losses	(284)	(498)
Held to maturity securities,temporarily impaired securities
Less than 12 Months, Fair Value	497	2,496
Less than 12 Months, Unrealized Losses	(2)	(9)
12 Months or Longer, Fair Value	25,442	24,595
12 Months or Longer, Unrealized Losses	(451)	(967)
Fair Value	25,939	27,091
Unrealized Losses	(453)	(976)
Obligations of state and political subdivisions
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	2,201	3,121
12 Months or Longer, Unrealized Losses	(17)	(84)
Fair Value	2,201	3,121
Unrealized Losses	(17)	(84)
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	466	461
12 Months or Longer, Unrealized Losses	(20)	(27)
Fair Value	466	461
Unrealized Losses	(20)	(27)
Mortgage-backed securities
Available for sale, temporarily impaired securities
Less than 12 Months, Fair Value	158	4,177
Less than 12 Months, Unrealized Losses	0	(19)
12 Months or Longer, Fair Value	46,607	47,479
12 Months or Longer, Unrealized Losses	(845)	(1,545)
Fair Value	46,765	51,656
Unrealized Losses	(845)	(1,564)
Held to maturity securities,temporarily impaired securities
Less than 12 Months, Fair Value	1,460	5,885
Less than 12 Months, Unrealized Losses	(3)	(67)
12 Months or Longer, Fair Value	13,778	11,081
12 Months or Longer, Unrealized Losses	(169)	(308)
Fair Value	15,238	16,966
Unrealized Losses	(172)	(375)
Asset-backed securities
Available for sale, temporarily impaired securities
Less than 12 Months, Fair Value	2,769	2,892
Less than 12 Months, Unrealized Losses	(13)	0
12 Months or Longer, Fair Value	0	0
12 Months or Longer, Unrealized Losses	0	0
Fair Value	2,769	2,892
Unrealized Losses	(13)	0
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	9,101	8,808
12 Months or Longer, Unrealized Losses	(251)	(561)
Fair Value	9,101	8,808
Unrealized Losses	$ (251)	$ (561)

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Loans and Allowance for Loan Losses (Loan Portfolio Schedule) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	$ 747,179	$ 733,787
Less: Deferred loan costs, net	458	457
Allowance for loan losses	8,018	7,926
Allowance net of deferred loan fees	8,476	8,383
Loans, net	738,703	725,404
Commercial
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	105,809	93,755
Allowance for loan losses	2,966	2,703
Commercial | Secured by real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	30,351	28,790
Commercial | Other
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	75,458	64,965
Commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	504,961	504,522
Allowance for loan losses	4,753	4,947
Commercial construction
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	11,225	9,787
Allowance for loan losses	150	131
Residential real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	81,215	82,491
Allowance for loan losses	76	65
Consumer
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	37,395	36,575
Allowance for loan losses	61	68
Consumer | Secured by real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	36,919	36,120
Consumer | Other
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	476	455
Government Guaranteed
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	6,492	6,559
Allowance for loan losses	0	0
Other
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	82	98
Allowance for loan losses	$ 1	$ 1

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Loans and Allowance for Loan Losses (Narrative) (Details)	3 Months Ended
	Mar. 31, 2019 USD ($) loan	Mar. 31, 2018 USD ($) loan	Dec. 31, 2018 USD ($)
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	$ 747,179,000		$ 733,787,000
Unpaid principal balance of loans serviced for others	15,500,000		14,300,000
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	6,200,000		6,300,000
Trouble debt restructuring classified as performing	5,600,000		5,700,000
Specific reserve related to TDR	636,000		649,000
Committed funds for construction loan, classified as troubled debt restructuring	$ 0		0
Number of loans | loan	0	0
Commercial portfolio segment
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	$ 105,809,000		93,755,000
Commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	504,961,000		$ 504,522,000
Small Business Administration Loans | Commercial portfolio segment
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	167,000
Small Business Administration Loans | Commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	$ 3,589,000

XML

Loans and Allowance for Loan Losses (Schedule of Allowance for Loan Losses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Activity in the allowance for loan losses
Balance, beginning of period	$ 7,926	$ 8,762
Provision charged to operations	65	(335)
Loans charged off	0	(30)
Recoveries of loans charged off	27	48
Balance, end of period	8,018	8,445
Commercial
Activity in the allowance for loan losses
Balance, beginning of period	2,703	3,058
Provision charged to operations	251	(189)
Loans charged off	0	(29)
Recoveries of loans charged off	12	25
Balance, end of period	2,966	2,865
Commercial real estate
Activity in the allowance for loan losses
Balance, beginning of period	4,947	5,531
Provision charged to operations	(209)	(204)
Loans charged off	0	0
Recoveries of loans charged off	15	22
Balance, end of period	4,753	5,349
Commercial construction
Activity in the allowance for loan losses
Balance, beginning of period	131	33
Provision charged to operations	19	48
Loans charged off	0	0
Recoveries of loans charged off	0	0
Balance, end of period	150	81
Residential real estate
Activity in the allowance for loan losses
Balance, beginning of period	65	68
Provision charged to operations	11	4
Loans charged off	0	0
Recoveries of loans charged off	0	0
Balance, end of period	76	72
Consumer
Activity in the allowance for loan losses
Balance, beginning of period	68	64
Provision charged to operations	(7)	2
Loans charged off	0	0
Recoveries of loans charged off	0	1
Balance, end of period	61	67
Other
Activity in the allowance for loan losses
Balance, beginning of period	1	1
Provision charged to operations	0	0
Loans charged off	0	(1)
Recoveries of loans charged off	0	0
Balance, end of period	1	0
Unallocated
Activity in the allowance for loan losses
Balance, beginning of period	11	7
Provision charged to operations	0	4
Loans charged off	0	0
Recoveries of loans charged off	0	0
Balance, end of period	$ 11	$ 11

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, 2019	Dec. 31, 2018
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	$ 702	$ 649
Collectively evaluated for impairment	7,316	7,277
Total ending allowance balance	8,018	7,926
Loans
Loans individually evaluated for impairment	7,367	7,288
Loans collectively evaluated for impairment	739,812	726,499
Total loans	747,179	733,787
Commercial
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	97	88
Collectively evaluated for impairment	2,869	2,615
Total ending allowance balance	2,966	2,703
Loans
Loans individually evaluated for impairment	627	633
Loans collectively evaluated for impairment	105,182	93,122
Total loans	105,809	93,755
Commercial real estate
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	605	561
Collectively evaluated for impairment	4,148	4,386
Total ending allowance balance	4,753	4,947
Loans
Loans individually evaluated for impairment	6,182	6,079
Loans collectively evaluated for impairment	498,779	498,443
Total loans	504,961	504,522
Commercial construction
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	150	131
Total ending allowance balance	150	131
Loans
Loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	11,225	9,787
Total loans	11,225	9,787
Residential real estate
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	76	65
Total ending allowance balance	76	65
Loans
Loans individually evaluated for impairment	558	576
Loans collectively evaluated for impairment	80,657	81,915
Total loans	81,215	82,491
Consumer
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	61	68
Total ending allowance balance	61	68
Loans
Loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	37,395	36,575
Total loans	37,395	36,575
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	6,492	6,559
Total loans	6,492	6,559
Other
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	1	1
Total ending allowance balance	1	1
Loans
Loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	82	98
Total loans	82	98
Unallocated
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	11	11
Total ending allowance balance	11	11
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, 2019	Dec. 31, 2018
Loans and Leases Receivable Disclosure [Line Items]
Total nonaccrual loans	$ 1,776	$ 1,544
Commercial portfolio segment | Secured by real estate
Loans and Leases Receivable Disclosure [Line Items]
Total nonaccrual loans	396	394
Commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Total nonaccrual loans	822	574
Residential real estate
Loans and Leases Receivable Disclosure [Line Items]
Total nonaccrual loans	$ 558	$ 576

XML

Loans and Allowance for Loan Losses (Schedule of Recorded Investments in Impaired Loans) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
With no related allowance recorded:
Unpaid Principal Balance	$ 4,288	$ 4,363
Recorded Investment	3,931	3,993
With an allowance recorded:
Unpaid Principal Balance	3,436	3,295
Recorded Investment	3,436	3,295
Allowance for Loan Losses Allocated	702	649
Total impaired loans
Total Unpaid Principal Balance	7,724	7,658
Total Recorded Investment	7,367	7,288
Commercial | Secured by real estate
With no related allowance recorded:
Unpaid Principal Balance	421	447
Recorded Investment	414	416
With an allowance recorded:
Unpaid Principal Balance	93	95
Recorded Investment	93	95
Allowance for Loan Losses Allocated	93	83
Total impaired loans
Total Unpaid Principal Balance	514	542
Total Recorded Investment	507	511
Commercial | Other
With an allowance recorded:
Unpaid Principal Balance	120	122
Recorded Investment	120	122
Allowance for Loan Losses Allocated	4	5
Total impaired loans
Total Unpaid Principal Balance	120	122
Total Recorded Investment	120	122
Commercial real estate
With no related allowance recorded:
Unpaid Principal Balance	3,288	3,329
Recorded Investment	2,959	3,001
With an allowance recorded:
Unpaid Principal Balance	3,223	3,078
Recorded Investment	3,223	3,078
Allowance for Loan Losses Allocated	605	561
Total impaired loans
Total Unpaid Principal Balance	6,511	6,407
Total Recorded Investment	6,182	6,079
Residential real estate
With no related allowance recorded:
Unpaid Principal Balance	579	587
Recorded Investment	558	576
With an allowance recorded:
Allowance for Loan Losses Allocated	0	0
Total impaired loans
Total Unpaid Principal Balance	579	587
Total Recorded Investment	$ 558	$ 576

XML

Loans and Allowance for Loan Losses (Schedule of Average Recorded Investments in Impaired Loans) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
With no related allowance recorded:
Average Recorded Investment	$ 3,962	$ 3,840
Interest Income Recognized	33	30
With an allowance recorded:
Average Recorded Investment	3,366	3,251
Interest Income Recognized	43	42
Total Average Recorded Investment	7,328	7,091
Total Interest Income Recognized	76	72
Commercial portfolio segment | Secured by real estate
With no related allowance recorded:
Average Recorded Investment	415	386
Interest Income Recognized	0	4
With an allowance recorded:
Average Recorded Investment	94	16
Interest Income Recognized	1	0
Commercial portfolio segment | Other
With an allowance recorded:
Average Recorded Investment	121	127
Interest Income Recognized	2	2
Commercial real estate
With no related allowance recorded:
Average Recorded Investment	2,980	3,108
Interest Income Recognized	33	26
With an allowance recorded:
Average Recorded Investment	3,151	3,108
Interest Income Recognized	40	40
Residential real estate
With no related allowance recorded:
Average Recorded Investment	567	292
Interest Income Recognized	0	0
Consumer | Secured by real estate
With no related allowance recorded:
Average Recorded Investment	0	54
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, 2019	Dec. 31, 2018
Aging analysis of past due loans
Total Past Due	$ 1,879	$ 3,527
Current	745,300	730,260
Total loans	747,179	733,787
30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	291	2,274
60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	683	42
Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	905	1,211
Commercial
Aging analysis of past due loans
Total loans	105,809	93,755
Commercial | Secured by real estate
Aging analysis of past due loans
Total Past Due	430	394
Current	29,921	28,396
Total loans	30,351	28,790
Commercial | Secured by real estate | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Commercial | Secured by real estate | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	34	0
Commercial | Secured by real estate | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	396	394
Commercial | Other
Aging analysis of past due loans
Total Past Due	0	6
Current	75,458	64,959
Total loans	75,458	64,965
Commercial | Other | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	6
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	764	2,664
Current	504,197	501,858
Total loans	504,961	504,522
Commercial real estate | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	255	2,155
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	509	509
Commercial construction
Aging analysis of past due loans
Total Past Due	0	0
Current	11,225	9,787
Total loans	11,225	9,787
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	685	462
Current	80,530	82,029
Total loans	81,215	82,491
Residential real estate | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	36	112
Residential real estate | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	649	42
Residential real estate | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	0	308
Consumer
Aging analysis of past due loans
Total loans	37,395	36,575
Consumer | Secured by real estate
Aging analysis of past due loans
Total Past Due	0	0
Current	36,919	36,120
Total loans	36,919	36,120
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	0	0
Consumer | Other
Aging analysis of past due loans
Total Past Due	0	1
Current	476	454
Total loans	476	455
Consumer | Other | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	1
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	6,492	6,559
Total loans	6,492	6,559
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	82	98
Total loans	82	98
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, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 747,179	$ 733,787
Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	105,809	93,755
Commercial | Secured by real estate
Financing Receivable, Recorded Investment [Line Items]
Total loans	30,351	28,790
Commercial | Other
Financing Receivable, Recorded Investment [Line Items]
Total loans	75,458	64,965
Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total loans	504,961	504,522
Commercial construction
Financing Receivable, Recorded Investment [Line Items]
Total loans	11,225	9,787
Government Guaranteed
Financing Receivable, Recorded Investment [Line Items]
Total loans	6,492	6,559
Receivables Acquired with Deteriorated Credit Quality
Financing Receivable, Recorded Investment [Line Items]
Total loans	628,487	614,623
Receivables Acquired with Deteriorated Credit Quality | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	616,511	597,324
Receivables Acquired with Deteriorated Credit Quality | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,569	8,501
Receivables Acquired with Deteriorated Credit Quality | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	9,407	8,798
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	30,351	28,790
Receivables Acquired with Deteriorated Credit Quality | Commercial | Secured by real estate | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	28,875	26,879
Receivables Acquired with Deteriorated Credit Quality | Commercial | Secured by real estate | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	320	1,234
Receivables Acquired with Deteriorated Credit Quality | Commercial | Secured by real estate | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,156	677
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	75,458	64,965
Receivables Acquired with Deteriorated Credit Quality | Commercial | Other | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	74,053	63,438
Receivables Acquired with Deteriorated Credit Quality | Commercial | Other | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	120	181
Receivables Acquired with Deteriorated Credit Quality | Commercial | Other | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,285	1,346
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	504,961	504,522
Receivables Acquired with Deteriorated Credit Quality | Commercial real estate | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	495,866	490,661
Receivables Acquired with Deteriorated Credit Quality | Commercial real estate | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,129	7,086
Receivables Acquired with Deteriorated Credit Quality | Commercial real estate | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	6,966	6,775
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	11,225	9,787
Receivables Acquired with Deteriorated Credit Quality | Commercial construction | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	11,225	9,787
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	6,492	6,559
Receivables Acquired with Deteriorated Credit Quality | Government Guaranteed | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	6,492	6,559
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, 2019	Dec. 31, 2018
Loans and Leases Receivable Disclosure [Line Items]
Total loans	$ 747,179	$ 733,787
Residential real estate
Loans and Leases Receivable Disclosure [Line Items]
Current	79,972	81,761
30 Days Past Due or Nonaccrual	1,243	730
Total loans	81,215	82,491
Consumer
Loans and Leases Receivable Disclosure [Line Items]
Total loans	37,395	36,575
Consumer | Secured by real estate
Loans and Leases Receivable Disclosure [Line Items]
Current	36,919	36,120
30 Days Past Due or Nonaccrual	0	0
Total loans	36,919	36,120
Consumer | Other
Loans and Leases Receivable Disclosure [Line Items]
Current	476	454
30 Days Past Due or Nonaccrual	0	1
Total loans	476	455
Residential real estate and consumer
Loans and Leases Receivable Disclosure [Line Items]
Current	117,367	118,335
30 Days Past Due or Nonaccrual	1,243	731
Total loans	$ 118,610	$ 119,066

XML

Fair Value of Financial Instruments (Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Assets:
Total available-for-sale securities	$ 102,519	$ 108,811
Other equity investments	1,670	1,648
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Total available-for-sale securities	0	0
Other equity investments	1,610	1,588
Interest rate swap	0	0
Liabilities:
Interest rate swap	0	0
Significant Other Observable Inputs (Level 2)
Assets:
Total available-for-sale securities	102,519	108,811
Other equity investments	60	60
Interest rate swap	0	134
Liabilities:
Interest rate swap	417	246
Significant Unobservable Inputs (Level 3)
Assets:
Total available-for-sale securities	0	0
Other equity investments	0	0
Interest rate swap	0	0
Liabilities:
Interest rate swap	0	0
Carrying Value
Assets:
Total available-for-sale securities	102,519	108,811
Other equity investments	1,670	1,648
Interest rate swap	0	134
Liabilities:
Interest rate swap	417	246
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	1,610	1,588
Interest rate swap	0	0
Liabilities:
Interest rate swap	0	0
Fair value measured on a recurring basis | Significant Other Observable Inputs (Level 2)
Assets:
U.S. government - sponsored agencies	21,469	25,749
Obligations of state and political subdivisions	3,186	3,121
Mortgage-backed securities	60,542	62,163
Asset-backed securities	4,191	4,922
Corporate debt	13,131	12,856
Total available-for-sale securities	102,519	108,811
Other equity investments	60	60
Interest rate swap	0	134
Liabilities:
Interest rate swap	417	246
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	0
Liabilities:
Interest rate swap	0	0
Fair value measured on a recurring basis | Carrying Value
Assets:
U.S. government - sponsored agencies	21,469	25,749
Obligations of state and political subdivisions	3,186	3,121
Mortgage-backed securities	60,542	62,163
Asset-backed securities	4,191	4,922
Corporate debt	13,131	12,856
Total available-for-sale securities	102,519	108,811
Other equity investments	1,670	1,648
Interest rate swap	0	134
Liabilities:
Interest rate swap	$ 417	$ 246

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, 2019	Dec. 31, 2018
Assets:
Commercial loan secured by real estate
Carrying Value
Assets:
Loans, net	738,703	$ 725,404
Fair value, measurements, nonrecurring | Carrying Value
Assets:
Commercial loan secured by real estate	88
Loans, net	88	609
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	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	0
Significant Unobservable Inputs (Level 3)
Assets:
Loans, net	716,689	704,273
Significant Unobservable Inputs (Level 3) | Fair value, measurements, nonrecurring
Assets:
Commercial loan secured by real estate	88
Loans, net	$ 88	609
Real estate | Fair value, measurements, nonrecurring | Carrying Value
Assets:
Commercial loan secured by real estate		301
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		301
Residential Mortgage | Fair value, measurements, nonrecurring | Carrying Value
Assets:
Loans, net		308
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		$ 308

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Fair Value of Financial Instruments (Narrative) (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2019 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2018 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Recorded Investment	$ 3,436,000		$ 3,295,000
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	154,000		$ 692,000
Adjustment to allowance	$ 66,000	$ 83,000
Discount rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount to real estate appraised values	0.12

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Fair Value of Financial Instruments (Schedule of Fair Value Assumptions for Level 3 Asset Measurements) (Details) - Significant Unobservable Inputs (Level 3) - Fair value, measurements, nonrecurring $ in Thousands	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Impaired loans
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value	$ 88	$ 609
Weighted Average | Adjustments for differences between comparable sales and income data available.
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Unobservable Inputs	0.05	0.05
Weighted Average | Estimated selling costs.
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Unobservable Inputs	0.07	0.07

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Fair Value of Financial Instruments (Schedule of Fair Value Estimates for the Financial Instruments) (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Financial assets:
Securities available-for-sale	$ 102,519	$ 108,811
Securities held-to-maturity	61,586	62,308
Other equity investments, at fair value	1,670	1,648
FHLB-NY stock	3,922	3,965
Financial liabilities:
Subordinated Debentures and Subordinated Notes	23,398	23,382
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Cash and cash equivalents	13,157	16,823
Securities available-for-sale	0	0
Securities held-to-maturity	0	0
Other equity investments, at fair value	1,610	1,588
Loans, net	0	0
Interest rate swap	0	0
Financial liabilities:
Deposits	580,351	578,460
FHLB-NY advances	0	0
Subordinated Debentures and Subordinated Notes	0	0
Interest rate swap	0	0
Significant Other Observable Inputs (Level 2)
Financial assets:
Cash and cash equivalents	0	0
Securities available-for-sale	102,519	108,811
Securities held-to-maturity	61,110	60,997
Other equity investments, at fair value	60	60
Loans, net	0	0
Interest rate swap	0	134
Financial liabilities:
Deposits	202,551	201,846
FHLB-NY advances	63,977	65,477
Subordinated Debentures and Subordinated Notes	0	0
Interest rate swap	417	246
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
Loans, net	716,689	704,273
Interest rate swap	0	0
Financial liabilities:
Deposits	0	0
FHLB-NY advances	0	0
Subordinated Debentures and Subordinated Notes	23,480	23,441
Interest rate swap	0	0
Carrying Value
Financial assets:
Cash and cash equivalents	13,157	16,823
Securities available-for-sale	102,519	108,811
Securities held-to-maturity	61,586	62,308
Other equity investments, at fair value	1,670	1,648
FHLB-NY stock	3,922	3,965
Loans, net	738,703	725,404
Interest rate swap	0	134
Financial liabilities:
Deposits	783,616	782,091
FHLB-NY advances	63,900	65,700
Subordinated Debentures and Subordinated Notes	23,398	23,382
Interest rate swap	$ 417	$ 246

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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, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Net income	$ 1,647	$ 1,808
Weighted average common shares outstanding - basic (in shares)	8,687,969	8,658,506
Weighted average common shares outstanding - diluted (in shares)	8,687,969	8,658,506
Basic earnings per common share (in usd per share)	$ 0.19	$ 0.21
Diluted earnings per common share (in usd per share)	$ 0.19	$ 0.21

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Earnings Per Share (Narrative) (Details) - shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
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, 2019	Mar. 31, 2018
Other comprehensive income (loss):
Other comprehensive income (loss), before reclassifications, net	$ 962	$ (993)
Other comprehensive income (loss), before reclassifications, net	(219)
Other comprehensive income (loss), before reclassifications, net		158
Reclassification adjustment for gains in net income, net	(1)	(4)
Accretion of loss on securities reclassified to held to maturity, net	2	9
Total comprehensive income, gross	1,040	(1,106)
Total comprehensive income, tax effect	(294)	285
Total other comprehensive income (loss)	746	(821)
Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities
Other comprehensive income (loss):
Other comprehensive income (loss), before reclassifications, before tax	1,344	(1,344)
Other comprehensive income (loss) before reclassifications, tax	(382)	351
Other comprehensive income (loss), before reclassifications, net	962	(993)
Reclassification adjustment for gains in net income, gross	(2)	(6)
Reclassification adjustment for gains in net income, tax effect	1	2
Reclassification adjustment for gains in net income, net	(1)	(4)
Accretion of loss on securities reclassified to held to maturity, gross	3	12
Accretion of loss on securities reclassified to held to maturity, tax effect	(1)	(3)
Accretion of loss on securities reclassified to held to maturity, net	2	9
Total other comprehensive income (loss)	961	(997)
Unrealized Gains / (Losses) on Derivatives
Other comprehensive income (loss):
Other comprehensive income (loss), before reclassifications, before tax	(308)
Other comprehensive income (loss) before reclassifications, tax	89
Other comprehensive income (loss), before reclassifications, net	(219)
Reclassification adjustment for gains in net income, gross	3
Reclassification adjustment for gains in net income, tax effect	(1)
Reclassification adjustment for gains in net income, net	2
Total other comprehensive income (loss)	$ (217)
Accumulated Net Gain (Loss) from Cash Flow Hedges
Other comprehensive income (loss):
Other comprehensive income (loss), before reclassifications, before tax		220
Other comprehensive income (loss) before reclassifications, tax		(62)
Other comprehensive income (loss), before reclassifications, net		158
Reclassification adjustment for gains in net income, gross		12
Reclassification adjustment for gains in net income, tax effect		(3)
Reclassification adjustment for gains in net income, net		9
Total other comprehensive income (loss)		$ 167

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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, 2019	Mar. 31, 2018	Jan. 01, 2018
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	$ 80,150	$ 73,665
Other comprehensive income (loss) before reclassifications	745	(826)
Amounts reclassified from other comprehensive income (loss)	1	5
Total other comprehensive income (loss)	746	(821)
Reclassification due to adoption of ASU 2016-01		163	$ 0
Balance at the end	82,291	74,372
Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	(1,821)	(1,303)
Other comprehensive income (loss) before reclassifications	962	(993)
Amounts reclassified from other comprehensive income (loss)	(1)	(4)
Total other comprehensive income (loss)	961	(997)
Reclassification due to adoption of ASU 2016-01		163
Balance at the end	(860)	(2,137)
Loss on Securities Reclassified from Available-for-Sale to Held to Maturity
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	(38)	(60)
Other comprehensive income (loss) before reclassifications	2	9
Amounts reclassified from other comprehensive income (loss)	0	0
Total other comprehensive income (loss)	2	9
Reclassification due to adoption of ASU 2016-01		0
Balance at the end	(36)	(51)
Unrealized Gains / (Losses) on Derivatives
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	(77)
Other comprehensive income (loss) before reclassifications	(219)
Amounts reclassified from other comprehensive income (loss)	2
Total other comprehensive income (loss)	(217)
Balance at the end	(294)
Accumulated Net Gain (Loss) from Cash Flow Hedges
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning		(21)
Other comprehensive income (loss) before reclassifications		158
Amounts reclassified from other comprehensive income (loss)		9
Total other comprehensive income (loss)		167
Reclassification due to adoption of ASU 2016-01		0
Balance at the end		146
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	(1,936)	(1,384)
Total other comprehensive income (loss)	746	(821)
Reclassification due to adoption of ASU 2016-01			$ 163
Balance at the end	$ (1,190)	$ (2,042)

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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, 2019	Mar. 31, 2018
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Income tax expense	$ (586)	$ (647)
Total reclassifications, net of tax	(1)	(5)
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	1	4
Unrealized Gains / (Losses) on Derivatives
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Total reclassifications, net of tax	(2)
Accumulated Net Gain (Loss) from Cash Flow Hedges
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Total reclassifications, net of tax		(9)
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]
Unrealized gains on securities available-for-sale, before tax	2	6
Income tax expense	(1)	(2)
Total, net of tax	1	4
Reclassification out of Accumulated Other Comprehensive Income | Unrealized Gains / (Losses) on Derivatives
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Unrealized losses on derivatives before tax	(3)
Income tax expense	1
Total, net of tax	$ (2)
Reclassification out of Accumulated Other Comprehensive Income | Accumulated Net Gain (Loss) from Cash Flow Hedges
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Unrealized losses on derivatives before tax		(12)
Income tax expense		3
Total, net of tax		$ (9)

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Leases (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) lease
Lessee, Lease, Description [Line Items]
Incremental borrowing rate	3.00%
Weighted-average remaining lease term	5 years 6 months
Lease costs	$ 240
Fixed rent expense	199
Variable rent expense	32
Short-term leases	19
Sublease income	9
Cash paid on operating leases	193
Occupancy expense
Lessee, Lease, Description [Line Items]
Lease costs	213
Equipment expense
Lessee, Lease, Description [Line Items]
Lease costs	$ 27
Branch offices
Lessee, Lease, Description [Line Items]
Number of operating leases | lease	8
Number of operating leases with renewal options | lease	4
Equipment
Lessee, Lease, Description [Line Items]
Number of operating leases | lease	12
Automobiles
Lessee, Lease, Description [Line Items]
Number of operating leases | lease	1

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Leases - Lease Maturity (Details) $ in Thousands	Mar. 31, 2019 USD ($)
Leases [Abstract]
Nine months ended December 31, 2019	$ 529
Year ended December 31, 2020	646
Year ended December 31, 2021	489
Year ended December 31, 2022	474
Thereafter	1,079
Lease Liability March 31, 2019	$ 3,217

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Leases - Future Minimum Lease Payments (Details) $ in Thousands	Mar. 31, 2019 USD ($)
Leases [Abstract]
2020	$ 773
2021	639
2022	527
2023	470
2024	383
Thereafter	584
Payments due	$ 3,376

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Label	Element	Value
Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (163,000)