10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

(Mark One)

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

For the quarterly period ended June 30, 2019

or

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

For the transition period from _____________ to _____________

Commission File Number: 001-34527

EMCLAIRE FINANCIAL CORP

(Exact name of registrant as specified in its charter)

Pennsylvania	25-1606091
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
612 Main Street, Emlenton, Pennsylvania	16373
(Address of principal executive offices)	(Zip Code)

(844) 767-2311

(Registrant’s telephone number)

N/A

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

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

Common Stock, par value $1.25 per share	EMCF	NASDAQ Capital Market (NASDAQ)
(Title of Class)	(Trading Symbol)	(Name of exchange on which registered)

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 ☒ No ☐

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 ☒ No ☐

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

Large accelerated filer ☐                Accelerated filer ☐                      Non-accelerated filer ☐

Smaller reporting company ☒        Emerging growth company ☐

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

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

The number of shares outstanding of the Registrant’s common stock was 2,698,712 at August 12, 2019.

EMCLAIRE FINANCIAL CORP

INDEX TO QUARTERLY REPORT ON FORM 10-Q

PART I – FINANCIAL INFORMATION
Item 1.	Interim Financial Statements (Unaudited)
	Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	1
	Consolidated Statements of Net Income for the three and six months ended June 30, 2019 and 2018	2
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	4
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
Signatures		41

PART I - FINANCIAL INFORMATION

Item 1. Interim Financial Statements

Emclaire Financial Corp

Consolidated Balance Sheets (Unaudited)

As of June 30, 2019 and December 31, 2018

(Dollar amounts in thousands, except share and per share data)

	June 30, 2019			December 31, 2018
Assets
Cash and due from banks	$	3,074		$	3,623
Interest earning deposits with banks		28,382			7,332
Cash and cash equivalents		31,456			10,955
Interest earning time deposits		9,958			6,738
Securities - available-for-sale		100,398			97,718
Securities - equity investments		16			7
Loans held for sale		134			—
Loans receivable, net of allowance for loan losses of $6,580 and $6,508		691,807			708,664
Federal bank stocks, at cost		5,764			6,351
Bank-owned life insurance		15,098			14,881
Accrued interest receivable		2,504			2,570
Premises and equipment, net		20,690			18,911
Goodwill		19,460			19,448
Core deposit intangible, net		1,333			1,423
Prepaid expenses and other assets		10,332			11,209
Total Assets	$	908,950		$	898,875
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Non-interest bearing	$	149,138		$	148,893
Interest bearing		628,468			612,653
Total deposits		777,606			761,546
Short-term borrowed funds		2,050			12,850
Long-term borrowed funds		32,000			32,500
Accrued interest payable		643			495
Accrued expenses and other liabilities		12,294			11,476
Total Liabilities		824,593			818,867
Commitments and Contingent Liabilities		—			—
Stockholders' Equity:
Preferred stock, $1.00 par value, 3,000,000 shares authorized; Series C, non-cumulative preferred stock, $2.9 million liquidation value, 268,888 shares issued and outstanding; Series D, non-cumulative preferred stock, $1.3 million liquidation value, 133,705 shares issued and outstanding		4,206			4,206
Common stock, $1.25 par value, 12,000,000 shares authorized; 2,800,729 shares issued; 2,698,712 shares outstanding		3,501			3,501
Additional paid-in capital		46,581			46,401
Treasury stock, at cost; 102,017 shares		(2,114	)		(2,114	)
Retained earnings		36,756			34,371
Accumulated other comprehensive loss		(4,573	)		(6,357	)
Total Stockholders' Equity		84,357			80,008
Total Liabilities and Stockholders' Equity	$	908,950		$	898,875

See accompanying notes to consolidated financial statements.

1

Emclaire Financial Corp

Consolidated Statements of Net Income (Unaudited)

For the three and six months ended June 30, 2019 and 2018

(Dollar amounts in thousands, except share and per share data) 

	For the three months ended June 30,					For the six months ended June 30,
	2019			2018		2019		2018
Interest and dividend income:
Loans receivable, including fees	$	8,113		$	6,678	$	16,344	$	13,015
Securities:
Taxable		530			439		1,022		847
Exempt from federal income tax		100			141		222		293
Federal bank stocks		112			93		212		157
Interest earning deposits with banks		99			83		146		117
Total interest and dividend income		8,954			7,434		17,946		14,429
Interest expense:
Deposits		1,636			1,102		3,107		2,093
Borrowed funds		236			141		537		299
Total interest expense		1,872			1,243		3,644		2,392
Net interest income		7,082			6,191		14,302		12,037
Provision for loan losses		270			300		450		680
Net interest income after provision for loan losses		6,812			5,891		13,852		11,357
Noninterest income:
Fees and service charges		536			463		1,091		900
Net realized gain (loss) on sales of securities		(1	)		—		1		(7	)
Net gain on sales of loans		38			2		52		24
Earnings on bank-owned life insurance		122			103		217		206
Other		436			481		827		824
Total noninterest income		1,131			1,049		2,188		1,947
Noninterest expense:
Compensation and employee benefits		2,787			2,521		5,704		4,974
Premises and equipment		840			758		1,726		1,528
Intangible asset amortization		45			68		90		136
Professional fees		165			254		386		470
Federal deposit insurance		131			151		267		288
Acquisition costs		—			358		—		358
Other		1,362			1,135		2,716		2,227
Total noninterest expense		5,330			5,245		10,889		9,981
Income before provision for income taxes		2,613			1,695		5,151		3,323
Provision for income taxes		473			282		929		548
Net income		2,140			1,413		4,222		2,775
Preferred stock dividends		91			—		91		—
Net income available to common stockholders	$	2,049		$	1,413	$	4,131	$	2,775
Basic earnings per common share	$	0.76		$	0.62	$	1.53	$	1.22
Diluted earnings per common share		0.75			0.62		1.52		1.21
Average common shares outstanding - basic		2,698,712			2,271,139		2,698,712		2,271,139
Average common shares outstanding - diluted		2,715,658			2,288,229		2,714,049		2,286,802

See accompanying notes to consolidated financial statements.

2

Emclaire Financial Corp

Consolidated Statements of Comprehensive Income (Unaudited)

For the three and six months ended June 30, 2019 and 2018

(Dollar amounts in thousands)

	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Net income	$	2,140		$	1,413		$	4,222		$	2,775
Other comprehensive income (loss)
Unrealized gains/(losses) on securities available-for-sale:
Unrealized holding gain (loss) arising during the period		1,152			(299	)		2,259			(1,591	)
Reclassification adjustment for (gains) losses included in net income		1			-			(1	)		7
Net period change		1,153			(299	)		2,258			(1,584	)
Tax effect		(242	)		63			(474	)		333
Net of tax		911			(236	)		1,784			(1,251	)
Comprehensive income	$	3,051		$	1,177		$	6,006		$	1,524

See accompanying notes to consolidated financial statements.

3

Emclaire Financial Corp

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the six months ended June 30, 2019 and 2018

(Dollar amounts in thousands)

	For the six months ended June 30,
	2019			2018
Cash flows from operating activities
Net income	$	4,222		$	2,775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		669			574
Provision for loan losses		450			680
Amortization/accretion of premiums, discounts and deferred costs and fees, net		109			223
Amortization of operating lease right-of-use assets		65			—
Amortization of intangible assets and mortgage servicing rights		121			162
Realized (gain) losses on sales of debt securities, net		(1	)		7
Change in fair value of equity securities, including realized gains		(10	)		(38	)
Net gains on sales of loans		(52	)		(24	)
Net loss on foreclosed real estate		32			44
Net gain on sale of premises and equipment		(11	)		(25	)
Loans originated for sale		(2,395	)		(2,038	)
Proceeds from the sale of loans originated for sale		2,313			2,566
Write-down of foreclosed real estate		35			11
Stock compensation expense		180			150
Increase in bank-owned life insurance, net		(217	)		(166	)
Decrease (increase) in accrued interest receivable		66			(33	)
Increase in prepaid expenses and other assets		(9	)		(97	)
Increase (decrease) in accrued interest payable		148			(3	)
Decrease in accrued expenses and other liabilities		(1,005	)		(122	)
Net cash provided by operating activities		4,710			4,646
Cash flows from investing activities
Loan originations and principal collections, net		16,035			(11,427	)
Available-for-sale securities:
Sales		12,882			6,795
Maturities, repayments and calls		8,240			4,810
Purchases		(21,602	)		(12,555	)
Net change in federal bank stocks		587			259
Net increase in interest earning time deposits		(3,220	)		(2,540	)
Proceeds from the sale of bank premises and equipment		251			155
Purchases of premises and equipment		(1,111	)		(332	)
Proceeds from the sale of foreclosed real estate		625			165
Net cash provided by (used in) investing activities		12,687			(14,670	)
Cash flows from financing activities
Net increase in deposits		16,060			30,908
Repayments on long-term debt		(500	)		(5,500	)
Net change in short-term borrowings		(10,800	)		(450	)
Dividends paid		(1,656	)		(1,272	)
Net cash provided by financing activities		3,104			23,686
Net increase in cash and cash equivalents		20,501			13,662
Cash and cash equivalents at beginning of period		10,955			10,176
Cash and cash equivalents at end of period	$	31,456		$	23,838
Supplemental information:
Interest paid	$	3,496		$	2,395
Income taxes paid		585			420
Supplemental noncash disclosure:
Transfers from loans to foreclosed real estate		324			526
Initial recognition of operating lease right-of-use assets		1,642			—
Initial recognition of operating lease liabilities		1,858			—

See accompanying notes to consolidated financial statements.

4

Emclaire Financial Corp

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

For the three and six months ended June 30, 2019 and 2018

(Dollar amounts in thousands, except per share data)

	Preferred Stock		Additional Paid-in Capital - Preferred		Common Stock		Additional Paid-in Capital - Common		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
Balance at January 1, 2018, as previously presented	$	—	$	—	$	2,966	$	31,031	$	(2,114	)	$	32,726		$	(5,518	)	$	59,091
Cumulative effect of change in accounting principle for marketable equity securities, net of tax		—		—		—		—		—			187			(187	)		—
Balance at January 1, 2018, as adjusted	$	—	$	—	$	2,966	$	31,031	$	(2,114	)	$	32,913		$	(5,705	)	$	59,091
Net income		—		—		—		—		—			1,362			—			1,362
Other comprehensive loss		—		—		—		—		—			—			(1,015	)		(1,015	)
Stock compensation expense		—		—		—		75		—			—			—			75
Cash dividends declared on common stock ($0.28 per share)		—		—		—		—		—			(636	)		—			(636	)
Balance at March 31, 2018		—		—		2,966		31,106		(2,114	)		33,639			(6,720	)		58,877
Net income		—		—		—		—		—			1,413			—			1,413
Other comprehensive loss		—		—		—		—		—			—			(236	)		(236	)
Stock compensation expense		—		—		—		75		—			—			—			75
Cash dividends declared on common stock ($0.28 per share)		—		—		—		—		—			(636	)		—			(636	)
Balance at June 30, 2018	$	—	$	—	$	2,966	$	31,181	$	(2,114	)	$	34,416		$	(6,956	)	$	59,493
Balance at January 1, 2019, as previously presented	$	421	$	3,785	$	3,501	$	46,401	$	(2,114	)	$	34,371		$	(6,357	)	$	80,008
Cumulative effect of change in accounting principle for leases and security premiums, net of tax		—		—		—		—		—			(181	)		—			(181	)
Balance at January 1, 2019, as adjusted	$	421	$	3,785	$	3,501	$	46,401	$	(2,114	)	$	34,190		$	(6,357	)	$	79,827
Net income		—		—		—		—		—			2,082			—			2,082
Other comprehensive income		—		—		—		—		—			—			873			873
Stock compensation expense		—		—		—		90		—			—			—			90
Cash dividends declared on common stock ($0.29 per share)		—		—		—		—		—			(783	)		—			(783	)
Balance at March 31, 2019		421		3,785		3,501		46,491		(2,114	)		35,489			(5,484	)		82,089
Net income		—		—		—		—		—			2,140			—			2,140
Other comprehensive income		—		—		—		—		—			—			911			911
Cash dividends declared on preferred stock		—		—		—		—		—			(91	)		—			(91	)
Stock compensation expense		—		—		—		90		—			—			—			90
Cash dividends declared on common stock ($0.29 per share)		—		—		—		—		—			(782	)		—			(782	)
Balance at June 30, 2019	$	421	$	3,785	$	3,501	$	46,581	$	(2,114	)	$	36,756		$	(4,573	)	$	84,357

See accompanying notes to consolidated financial statements.

5

Emclaire Financial Corp

Notes to Consolidated Financial Statements (Unaudited)

1. Nature of Operations and Basis of Presentation

Emclaire Financial Corp (the Corporation) is a Pennsylvania corporation and the holding company of The Farmers National Bank of Emlenton (the Bank) and Emclaire Settlement Services, LLC (the Title Company). The Corporation provides a variety of financial services to individuals and businesses through its offices in western Pennsylvania and northern West Virginia. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are residential and commercial mortgages, commercial business loans and consumer loans.

The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries, the Bank and the Title Company. All significant intercompany transactions and balances have been eliminated in preparing the consolidated financial statements.

The accompanying unaudited consolidated financial statements for the interim periods include all adjustments, consisting of normal recurring accruals, which are necessary, in the opinion of management, to fairly reflect the Corporation’s consolidated financial position and results of operations. Additionally, these consolidated financial statements for the interim periods have been prepared in accordance with instructions for the Securities and Exchange Commission’s (SEC’s) Form 10-Q and Article 10 of Regulation S-X and therefore do not include all information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (GAAP). For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended December 31, 2018, as contained in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC.

The balance sheet at December 31, 2018 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements.

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim quarterly or year-to-date periods are not necessarily indicative of the results that may be expected for the entire year or any other period. Certain amounts previously reported may have been reclassified to conform to the current year’s financial statement presentation.

6

2. Earnings per Common Share

Basic earnings per common share (EPS) excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of additional potential common shares for assumed issuance of restricted stock and shares issued under stock options.

The factors used in the Corporation’s earnings per common share computation follow:

(Dollar amounts in thousands, except for per share amounts)	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
Earnings per common share
Net income	$	2,140	$	1,413	$	4,222	$	2,775
Less: Preferred stock dividends		91		—		91		—
Net income available to common stockholders	$	2,049	$	1,413	$	4,131	$	2,775
Average common shares outstanding		2,698,712		2,271,139		2,698,712		2,271,139
Add: Dilutive effects of restricted stock awards		16,946		17,090		15,337		15,663
Average shares and dilutive potential common shares		2,715,658		2,288,229		2,714,049		2,286,802
Basic earnings per common share	$	0.76	$	0.62	$	1.53	$	1.22
Diluted earnings per common share	$	0.75	$	0.62	$	1.52	$	1.21
Restricted stock awards not considered in computing earnings per share because they were antidulitive		—		—		—		—

7

3. Securities

Equity Securities

The Corporation held equity securities with fair values of $16,000 and $7,000 at June 30, 2019 and December 31, 2018, respectively. Beginning January 1, 2018, with the adoption of ASU 2016-01, changes in the fair value of these securities are included in other income on the consolidated statements of net income as opposed to accumulated other comprehensive loss on the consolidated balance sheets. During the three and six months ended June 30, 2019, the Corporation recognized a gain of $0 and $10,000, respectively, on equity securities held at June 30, 2019, compared to a net gain of $81,000 and a net loss of $6,000, respectively, for the same periods in 2018. During the three and six months ended June 30, 2019, the Corporation did not sell any equity securities.  During the three and six months ended June 30, 2018, the Corporation sold $266,000 and $1.2 million of equity securities, respectively, with a realized net loss of $16,000 and realized net gain of $43,000, respectively.

Debt Securities - Available-for-Sale

The following table summarizes the Corporation’s debt securities as of June 30, 2019 and December 31, 2018:

(Dollar amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2019:
U.S. Treasury and federal agency	$	4,527	$	2	$	(10	)	$	4,519
U.S. government sponsored entities and agencies		12,093		53		(42	)		12,104
U.S. agency mortgage-backed securities: residential		40,692		362		(13	)		41,041
U.S. agency collateralized mortgage obligations: residential		22,958		64		(314	)		22,708
State and political subdivisions		10,786		151		(1	)		10,936
Corporate debt securities		9,005		93		(8	)		9,090
Total securities available-for-sale	$	100,061	$	725	$	(388	)	$	100,398
December 31, 2018:
U.S. Treasury and federal agency	$	4,532	$	—	$	(87	)	$	4,445
U.S. government sponsored entities and agencies		17,052		30		(299	)		16,783
U.S. agency mortgage-backed securities: residential		27,666		—		(490	)		27,176
U.S. agency collateralized mortgage obligations: residential		19,440		34		(810	)		18,664
State and political subdivisions		22,943		13		(224	)		22,732
Corporate debt securities		8,006		9		(97	)		7,918
Total securities available-for-sale	$	99,639	$	86	$	(2,007	)	$	97,718

The following table summarizes scheduled maturities of the Corporation’s debt securities as of June 30, 2019. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities and collateralized mortgage obligations are not due at a single maturity and are shown separately.

(Dollar amounts in thousands)	Available-for-sale
	Amortized Cost		Fair Value
Due in one year or less	$	1,499	$	1,492
Due after one year through five years		21,110		21,149
Due after five through ten years		12,065		12,230
Due after ten years		1,737		1,778
Mortgage-backed securities: residential		40,692		41,041
Collateralized mortgage obligations: residential		22,958		22,708
Total securities available-for-sale	$	100,061	$	100,398

8

3. Securities (continued)

Information pertaining to debt securities with gross unrealized losses at June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position are included in the table below:

(Dollar amounts in thousands)	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
June 30, 2019:
U.S. Treasury and federal agency	$	—	$	—		$	3,507	$	(10	)	$	3,507	$	(10	)
U.S. government sponsored entities and agencies		—		—			7,053		(42	)		7,053		(42	)
U.S. agency mortgage-backed securities: residential		—		—			3,743		(13	)		3,743		(13	)
U.S. agency collateralized mortgage obligations: residential		3,796		(31	)		15,939		(283	)		19,735		(314	)
State and political subdivisions		—		—			224		(1	)		224		(1	)
Corporate debt securities		—		—			994		(8	)		994		(8	)
Total	$	3,796	$	(31	)	$	31,460	$	(357	)	$	35,256	$	(388	)
December 31, 2018:
U.S. Treasury and federal agency	$	—	$	—		$	4,445	$	(87	)	$	4,445	$	(87	)
U.S. government sponsored entities and agencies		2,472		(30	)		10,337		(269	)		12,809		(299	)
U.S. agency mortgage-backed securities: residential		19,483		(297	)		7,693		(193	)		27,176		(490	)
U.S. agency collateralized mortgage obligations: residential		1,443		(5	)		15,388		(805	)		16,831		(810	)
State and political subdivisions		7,061		(67	)		10,083		(157	)		17,144		(224	)
Corporate debt securities		962		(38	)		2,448		(59	)		3,410		(97	)
Total	$	31,421	$	(437	)	$	50,394	$	(1,570	)	$	81,815	$	(2,007	)

Gains and losses on sales of securities for the three and six months ended June 30, were as follows:

(Dollar amounts in thousands)	For the three months ended June 30,					For the six months ended June 30,
	2019			2018		2019			2018
Proceeds	$	8,907		$	264	$	12,882		$	6,795
Gains		29			—		35			14
Losses		(30	)		—		(34	)		(21	)
Tax provision related to losses		—			—		—			(1	)

Management evaluates debt securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic, market or other conditions warrant such evaluation. Consideration is given to: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions and (4) whether the Corporation has the intent to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis. If the Corporation intends to sell an impaired security, or if it is more likely than not the Corporation will be required to sell the security before its anticipated recovery, the Corporation records an other-than-temporary loss in an amount equal to the entire difference between fair value and amortized cost. Otherwise, only the credit portion of the estimated loss on debt securities is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

There were 44 debt securities in an unrealized loss position as of June 30, 2019, all of which were in an unrealized loss position for more than 12 months. Of these 42 securities, 25 were collateralized mortgage obligations (issued by U.S. government sponsored entities), six were U.S. government sponsored entities and agency securities, four were mortgage-backed securities, four were U.S. Treasury securities, two were corporate securities and one was a state and political subdivision security. The unrealized losses associated with these securities were not due to the deterioration in the credit quality of the issuer that would likely result in the non-collection of contractual principal and interest, but rather have been caused by a rise in interest rates from the time the securities were purchased. Based on that evaluation and other general considerations, and given that the Corporation’s current intention is not to sell any impaired securities and it is more likely than not it will not be required to sell these securities before the recovery of their amortized cost basis, the Corporation does not consider these debt securities with unrealized losses as of June 30, 2019 to be other-than-temporarily impaired.

9

4. Loans Receivable and Related Allowance for Loan Losses

The Corporation’s loans receivable as of the respective dates are summarized as follows:

(Dollar amounts in thousands)	June 30, 2019		December 31, 2018
Mortgage loans on real estate:
Residential first mortgages	$	290,676	$	295,405
Home equity loans and lines of credit		102,035		103,752
Commercial real estate		228,040		238,734
Total real estate loans		620,751		637,891
Other loans:
Commercial business		66,942		66,009
Consumer		10,694		11,272
Total other loans		77,636		77,281
Total loans, gross		698,387		715,172
Less allowance for loan losses		6,580		6,508
Total loans, net	$	691,807	$	708,664

Included in total loans above are net deferred costs of $2.2 million and $2.2 million at June 30, 2019 and December 31, 2018, respectively.

An allowance for loan losses (ALL) is maintained to absorb probable incurred losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience and the amount of nonperforming loans.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

The allowance for loan losses is based on estimates and actual losses may vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

At June 30, 2019, there was no allowance for loan losses allocated to loans acquired from United American Savings Bank (2016), Northern Hancock Bank and Trust Co. (2017) or Community First Bancorp, Inc (2018).

10

4. Loans Receivable and Related Allowance for Loan Losses (continued)

The following table details activity in the ALL and the recorded investment by portfolio segment based on impairment method:

(Dollar amounts in thousands)	Residential Mortgages			Home Equity & Lines of Credit			Commercial Real Estate			Commercial Business			Consumer			Total
Three months ended June 30, 2019:
Allowance for loan losses:
Beginning Balance	$	2,256		$	650		$	3,043		$	635		$	55		$	6,639
Charge-offs		(194	)		(30	)		(23	)		(63	)		(36	)		(346	)
Recoveries		—			—			13			—			4			17
Provision		163			22			10			43			32			270
Ending Balance	$	2,225		$	642		$	3,043		$	615		$	55		$	6,580
Six months ended June 30, 2019:
Allowance for loan losses:
Beginning Balance	$	2,198		$	648		$	3,106		$	500		$	56		$	6,508
Charge-offs		(204	)		(34	)		(28	)		(134	)		(75	)		(475	)
Recoveries		40			1			28			—			28			97
Provision		191			27			(63	)		249			46			450
Ending Balance	$	2,225		$	642		$	3,043		$	615		$	55		$	6,580
At June 30, 2019:
Ending ALL balance attributable to loans:
Individually evaluated for impairment	$	6		$	—		$	—		$	—		$	—		$	6
Acquired loans collectively evaluated for impairment		—			—			—			—			—			—
Originated loans collectively evaluated for impairment		2,219			642			3,043			615			55			6,574
Total	$	2,225		$	642		$	3,043		$	615		$	55		$	6,580
Total loans:
Individually evaluated for impairment	$	376		$	5		$	2,478		$	238		$	—		$	3,097
Acquired loans collectively evaluated for impairment		67,181			12,261			49,018			9,493			2,506			140,459
Originated loans collectively evaluated for impairment		223,119			89,769			176,544			57,211			8,188			554,831
Total	$	290,676		$	102,035		$	228,040		$	66,942		$	10,694		$	698,387
At December 31, 2018:
Ending ALL balance attributable to loans:
Individually evaluated for impairment	$	12		$	—		$	—		$	—		$	—		$	12
Acquired loans collectively evaluated for impairment		—			—			—			—			—			—
Originated loans collectively evaluated for impairment		2,186			648			3,106			500			56			6,496
Total	$	2,198		$	648		$	3,106		$	500		$	56		$	6,508
Total loans:
Individually evaluated for impairment	$	389		$	6		$	34		$	39		$	—		$	468
Acquired loans collectively evaluated for impairment		72,654			13,750			56,690			12,974			3,306			159,374
Originated loans collectively evaluated for impairment		222,362			89,996			182,010			52,996			7,966			555,330
Total	$	295,405		$	103,752		$	238,734		$	66,009		$	11,272		$	715,172
Three months ended June 30, 2018:
Allowance for loan losses:
Beginning Balance	$	1,919		$	651		$	2,751		$	560		$	54		$	5,935
Charge-offs		—			(63	)		(33	)		—			(51	)		(147	)
Recoveries		—			10			16			1			3			30
Provision		114			52			148			(62	)		48			300
Ending Balance	$	2,033		$	650		$	2,882		$	499		$	54		$	6,118
Six months ended June 30, 2018:
Allowance for loan losses:
Beginning Balance	$	2,090		$	646		$	2,753		$	585		$	53		$	6,127
Charge-offs		(61	)		(83	)		(418	)		—			(170	)		(732	)
Recoveries		3			11			18			2			9			43
Provision		1			76			529			(88	)		162			680
Ending Balance	$	2,033		$	650		$	2,882		$	499		$	54		$	6,118

11

4. Loans Receivable and Related Allowance for Loan Losses (continued)

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of June 30, 2019:

(Dollar amounts in thousands)
	Impaired Loans with Specific Allowance
	As of June 30, 2019						For the three months ended June 30, 2019
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	73	$	73	$	6	$	73	$	1	$	1
Home equity and lines of credit		5		5		—		5		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		31		—		—
Consumer		—		—		—		—		—		—
Total	$	78	$	78	$	6	$	109	$	1	$	1

	For the six months ended June 30, 2019
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	73	$	2	$	2
Home equity and lines of credit		6		—		—
Commercial real estate		—		—		—
Commercial business		21		—		—
Consumer		—		—		—
Total	$	100	$	2	$	2

	Impaired Loans with No Specific Allowance
	As of June 30, 2019				For the three months ended June 30, 2019
	Unpaid Principal Balance		Recorded Investment		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	378	$	303	$	305	$	—	$	—
Home equity and lines of credit		—		—		—		—		—
Commercial real estate		2,478		2,478		1,255		52		—
Commercial business		238		238		139		6		1
Consumer		—		—		—		—		—
Total	$	3,094	$	3,019	$	1,699	$	58	$	1

	For the six months ended June 30, 2019
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	308	$	1	$	1
Home equity and lines of credit		—		—		—
Commercial real estate		848		53		1
Commercial business		106		7		2
Consumer		—		—		—
Total	$	1,262	$	61	$	4

12

4. Loans Receivable and Related Allowance for Loan Losses (continued)

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of December 31, 2018:

(Dollar amounts in thousands)
	Impaired Loans with Specific Allowance
	As of December 31, 2018						For the year ended December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	74	$	74	$	12	$	74	$	2	$	2
Home equity and lines of credit		6		6		—		7		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Total	$	80	$	80	$	12	$	81	$	2	$	2

	Impaired Loans with No Specific Allowance
	As of December 31, 2018				For the year ended December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	427	$	315	$	334	$	5	$	5
Home equity and lines of credit		—		—		—		—		—
Commercial real estate		34		34		768		156		73
Commercial business		39		39		248		74		74
Consumer		—		—		—		—		—
Total	$	500	$	388	$	1,350	$	235	$	152

13

4. Loans Receivable and Related Allowance for Loan Losses (continued)

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of  June 30, 2018:

(Dollar amounts in thousands)
	Impaired Loans with Specific Allowance
	As of June 30, 2018						For the three months ended June 30, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	74	$	74	$	7	$	75	$	1	$	1
Home equity and lines of credit		7		7		—		8		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Total	$	81	$	81	$	7	$	83	$	1	$	1

	For the six months ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	75	$	2	$	2
Home equity and lines of credit		7		—		—
Commercial real estate		—		—		—
Commercial business		—		—		—
Consumer		—		—		—
Total	$	82	$	2	$	2

	Impaired Loans with No Specific Allowance
	As of June 30, 2018				For the three months ended June 30, 2018
	Unpaid Principal Balance		Recorded Investment		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	446	$	334	$	339	$	2	$	2
Home equity and lines of credit		—		—		—		—		—
Commercial real estate		43		43		190		73		73
Commercial business		39		39		297		41		41
Consumer		—		—		—		—		—
Total	$	528	$	416	$	826	$	116	$	116

	For the six months ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	343	$	2	$	2
Home equity and lines of credit		—		—		—
Commercial real estate		431		73		73
Commercial business		387		42		42
Consumer		—		—		—
Total	$	1,161	$	117	$	117

Unpaid principal balance includes any loans that have been partially charged off but not forgiven. Accrued interest is not included in the recorded investment in loans presented above or in the tables that follow based on the amounts not being material.

14

4. Loans Receivable and Related Allowance for Loan Losses (continued)

Troubled debt restructurings (TDR). The Corporation has certain loans that have been modified in order to maximize collection of loan balances. If, for economic or legal reasons related to the customer’s financial difficulties, management grants a concession compared to the original terms and conditions of the loan that it would not have otherwise considered, the modified loan is classified as a TDR. Concessions related to TDRs generally do not include forgiveness of principal balances. The Corporation generally does not extend additional credit to borrowers with loans classified as TDRs.

At June 30, 2019 and December 31, 2018, the Corporation had $450,000 and $394,000, respectively, of loans classified as TDRs, which are included in impaired loans above. The Corporation had allocated $6,000 and $12,000 of specific allowance for these loans at June 30, 2019 and December 31, 2018, respectively.

During the three and six months ended June 30, 2019, the Corporation modified the interest rate and extended the payment amortization on one commercial real estate loan with a recorded investment of $73,000. At June 30, 2019, the Corporation did not have any specific allowance for loan losses allocated to this specific loan. During the three and six months ended June 30, 2018, the Corporation did not modify any loans as TDRs.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. During the three and six months ended June 30, 2019 and 2018, the Corporation did not have any loans which were modified as TDRs for which there was a payment default within twelve months following the modification.

Credit Quality Indicators. Management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.

Commercial real estate and commercial business loans not identified as impaired are evaluated as risk rated pools of loans utilizing a risk rating practice that is supported by a quarterly special asset review. In this review process, strengths and weaknesses are identified, evaluated and documented for each criticized and classified loan and borrower, strategic action plans are developed, risk ratings are confirmed and the loan’s performance status is reviewed.

Management has determined certain portions of the loan portfolio to be homogeneous in nature and assigns like reserve factors for the following loan pool types: residential real estate, home equity loans and lines of credit, and consumer installment and personal lines of credit.

The reserve allocation for risk rated loan pools is developed by applying the following factors:

Historic: Management utilizes a computer model to develop the historical net charge-off experience which is used to formulate the assumptions employed in the migration analysis applied to estimate losses in the portfolio. Outstanding balance and charge-off information are input into the model and historical loss migration rate assumptions are developed to apply to pass, special mention, substandard and doubtful risk rated loans. A twelve-quarter rolling weighted-average is utilized to estimate probable incurred losses in the portfolios.

Qualitative: Qualitative adjustment factors for pass, special mention, substandard and doubtful ratings are developed and applied to risk rated loans to allow for: quality of lending policies and procedures; national and local economic and business conditions; changes in the nature and volume of the portfolio; experiences, ability and depth of lending management; changes in trends, volume and severity of past due, nonaccrual and classified loans and loss and recovery trends; quality of loan review systems; concentrations of credit and other external factors.

15

4. Loans Receivable and Related Allowance for Loan Losses (continued)

Management uses the following definitions for risk ratings:

Pass: Loans classified as pass typically exhibit good payment performance and have underlying borrowers with acceptable financial trends where repayment capacity is evident. These borrowers typically would have a sufficient cash flow that would allow them to weather an economic downturn and the value of any underlying collateral could withstand a moderate degree of depreciation due to economic conditions.

Special Mention: Loans classified as special mention are characterized by potential weaknesses that could jeopardize repayment as contractually agreed. These loans may exhibit adverse trends such as increasing leverage, shrinking profit margins and/or deteriorating cash flows. These borrowers would inherently be more vulnerable to the application of economic pressures.

Substandard: Loans classified as substandard exhibit weaknesses that are well-defined to the point that repayment is jeopardized. Typically, the Corporation is no longer adequately protected by both the apparent net worth and repayment capacity of the borrower.

Doubtful: Loans classified as doubtful have advanced to the point that collection or liquidation in full, on the basis of currently ascertainable facts, conditions and value, is highly questionable or improbable.

The following table presents the classes of the loan portfolio summarized by the aggregate pass and the criticized categories of special mention, substandard and doubtful within the Corporation’s internal risk rating system as of June 30, 2019 and December 31, 2018:

(Dollar amounts in thousands)
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2019:
Residential first mortgages	$	289,060	$	—	$	—	$	1,616	$	—	$	290,676
Home equity and lines of credit		101,244		—		—		791		—		102,035
Commercial real estate		—		208,494		5,292		14,254		—		228,040
Commercial business		—		63,518		423		3,001		—		66,942
Consumer		10,567		—		—		127		—		10,694
Total loans	$	400,871	$	272,012	$	5,715	$	19,789	$	—	$	698,387
December 31, 2018:
Residential first mortgages	$	293,919	$	—	$	—	$	1,486	$	—	$	295,405
Home equity and lines of credit		102,869		—		—		883		—		103,752
Commercial real estate		—		222,335		5,942		10,457		—		238,734
Commercial business		—		62,022		542		3,445		—		66,009
Consumer		11,157		—		—		115		—		11,272
Total loans	$	407,945	$	284,357	$	6,484	$	16,386	$	—	$	715,172

16

4. Loans Receivable and Related Allowance for Loan Losses (continued)

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonperforming loans as of June 30, 2019 and December 31, 2018:

(Dollar amounts in thousands)
	Performing						Nonperforming
	Accruing Loans Not Past Due		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccrual		Total
June 30, 2019:
Residential first mortgages	$	285,753	$	2,215	$	1,284	$	221	$	1,203	$	290,676
Home equity and lines of credit		100,495		586		257		—		697		102,035
Commercial real estate		223,783		688		58		55		3,456		228,040
Commercial business		66,626		59		19		—		238		66,942
Consumer		10,445		101		20		—		128		10,694
Total loans	$	687,102	$	3,649	$	1,638	$	276	$	5,722	$	698,387
December 31, 2018:
Residential first mortgages	$	289,732	$	3,586	$	747	$	485	$	855	$	295,405
Home equity and lines of credit		101,920		707		351		287		487		103,752
Commercial real estate		232,865		5,013		231		19		606		238,734
Commercial business		65,538		50		247		—		174		66,009
Consumer		10,961		160		36		—		115		11,272
Total loans	$	701,016	$	9,516	$	1,612	$	791	$	2,237	$	715,172

The following table presents the Corporation’s nonaccrual loans by aging category as of June 30, 2019 and December 31, 2018:

(Dollar amounts in thousands)
	Not Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Total
June 30, 2019:
Residential first mortgages	$	259	$	—	$	73	$	871	$	1,203
Home equity and lines of credit		70		—		—		627		697
Commercial real estate		104		2,677		—		675		3,456
Commercial business		—		40		—		198		238
Consumer		—		—		—		128		128
Total loans	$	433	$	2,717	$	73	$	2,499	$	5,722
December 31, 2018:
Residential first mortgages	$	335	$	—	$	74	$	446	$	855
Home equity and lines of credit		6		—		—		481		487
Commercial real estate		111		265		—		230		606
Commercial business		—		—		39		135		174
Consumer		—		—		—		115		115
Total loans	$	452	$	265	$	113	$	1,407	$	2,237

17

5. Goodwill and Intangible Assets

The following table summarizes the Corporation’s acquired goodwill and intangible assets as of June 30, 2019 and December 31, 2018: 

(Dollar amounts in thousands)	June 30, 2019				December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill	$	19,460	$	—	$	19,448	$	—
Core deposit intangibles		5,634		4,301		5,634		4,211
Total	$	25,094	$	4,301	$	25,082	$	4,211

Goodwill resulted from five acquisitions. Goodwill represents the excess of the total purchase price paid for the acquisitions over the fair value of the identifiable assets acquired, net of the fair value of the liabilities assumed. Goodwill is not amortized but is evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. The Corporation has selected November 30 as the date to perform the annual impairment test. No goodwill impairment charges were recorded during 2018 or in the first six months of 2019.

The core deposit intangible asset, resulting from three acquisitions, is amortized over a weighted average estimated life of the related deposits and is not estimated to have a significant residual value. During the three and six months ended June 30, 2019, the Corporation recorded intangible amortization expense totaling $45,000 and $90,000, respectively, compared to $68,000 and $136,000, respectively, for the same periods in 2018.

6. Stock Compensation Plan

In April 2014, the Corporation adopted the 2014 Stock Incentive Plan (the 2014 Plan), which was approved by shareholders and permits the grant of restricted stock awards and options to its directors, officers and employees for up to 176,866 shares of common stock. As of June 30, 2019, 37,783 shares of restricted stock and 88,433 stock options remain available for issuance under the plan.

Incentive stock options, non-incentive or compensatory stock options and share awards may be granted under the Plan. The exercise price of each option shall at least equal the market price of a share of common stock on the date of grant and have a contractual term of ten years. Options shall vest and become exercisable at the rate, to the extent and subject to such limitations as may be specified by the Corporation. Compensation cost related to share-based payment transactions must be recognized in the financial statements with measurement based upon the fair value of the equity instruments issued.

At June 30, 2019, there were no options that were granted or outstanding under the Plan.

A summary of the status of the Corporation’s nonvested restricted stock awards as of June 30, 2019, and changes during the period then ended is presented below:

	Shares		Weighted-Average Grant-date Fair Value
Nonvested at January 1, 2019		37,250	$	29.94
Granted		—		—
Vested		—		—
Forfeited		—		—
Nonvested as of June 30, 2019		37,250	$	29.94

For the three and six months ended June 30, 2019, the Corporation recognized stock compensation expense of $90,000 and $180,000, respectively, compared to $75,000 and $150,000, respectively for the same periods in 2018. As of June 30, 2019, there was $604,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over the next three years. It is the Corporation’s policy to issue shares on the vesting date for restricted stock awards. Unvested restricted stock awards do not receive dividends declared by the Corporation.

18

7. Fair Value

Management uses its best judgment in estimating the fair value of the Corporation’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sale transaction or exit price on the date indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported.

Assets measured at fair value on a recurring basis. The Corporation used the following methods and significant assumptions to estimate the fair value of the following assets:

Debt securities available-for-sale, equity securities – The fair value of all investment securities are based upon the assumptions market participants would use in pricing the security. If available, investment securities are determined by quoted market prices (Level 1). Level 1 includes U.S. Treasury, federal agency securities and certain equity securities. For investment securities where quoted market prices are not available, fair values are calculated based on market prices on similar securities (Level 2). Level 2 includes U.S. Government sponsored entities and agencies, mortgage-backed securities, collateralized mortgage obligations, state and political subdivision securities and certain corporate debt securities. For investment securities where quoted prices or market prices of similar securities are not available, fair values are calculated by using unobservable inputs (Level 3) and may include certain corporate debt and equity securities held by the Corporation.

For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy are as follows:

(Dollar amounts in thousands)			(Level 1)		(Level 2)		(Level 3)
Description	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
June 30, 2019:
Securities available-for-sale
U.S. Treasury and federal agency	$	4,519	$	4,519	$	—	$	—
U.S. government sponsored entities and agencies		12,104		—		12,104		—
U.S. agency mortgage-backed securities: residential		41,041		—		41,041		—
U.S. agency collateralized mortgage obligations: residential		22,708		—		22,708		—
State and political subdivision		10,936		—		10,936		—
Corporate debt securities		9,090		—		6,090		3,000
Total available-for-sale securities	$	100,398	$	4,519	$	92,879	$	3,000
Equity securities	$	16	$	16	$	—	$	—
December 31, 2018:
Securities available-for-sale
U.S. Treasury and federal agency	$	4,445	$	4,445	$	—	$	—
U.S. government sponsored entities and agencies		16,783		—		16,783		—
U.S. agency mortgage-backed securities: residential		27,176		—		27,176		—
U.S. agency collateralized mortgage obligations: residential		18,664		—		18,664		—
State and political subdivisions		22,732		—		22,732		—
Corporate debt securities		7,918		—		4,418		3,500
Total available-for-sale securities	$	97,718	$	4,445	$	89,773	$	3,500
Equity securities	$	7	$	7	$	—	$	—

The Corporation’s policy is to transfer assets or liabilities from one level to another when the methodology to obtain the fair value changes such that there are more or fewer unobservable inputs as of the end of the reporting period. During the three and six months ended June 30, 2019, the Corporation reclassified one corporate security from Level 3 to Level 2. For the same period in 2018, the Corporation reclassified a restricted bank stock from the equity security portfolio to other assets and certain corporate securities from Level 3 to Level 2.  Also during 2018, the Corporation sold $25,000 in equity securities from Level 3.

19

7. Fair Value (continued)

The following table presents changes in Level 3 assets measured on a recurring basis for the three and six month periods ended June 30, 2019 and 2018:

(Dollar amounts in thousands)	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Balance at the beginning of the period	$	3,500		$	3,525		$	3,500		$	8,132
Total gains or losses (realized/unrealized):
Included in earnings		—			—			—			1
Included in other comprehensive income		—			—			—			—
Acquired		—			—			—			—
Sold out of Level 3		—			(25	)		—			(25	)
Transfers in and/or out of Level 3		(500	)		—			(500	)		(4,608	)
Balance at the end of the period	$	3,000		$	3,500		$	3,000		$	3,500

Assets measured at fair value on a non-recurring basis. The Corporation used the following methods and significant assumptions to estimate the fair value of the following assets:

Impaired loans – At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive a specific 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. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. As of June 30, 2019 and December 31, 2018, the Corporation did not have any impaired loans carried at fair value measured using the fair value of collateral. There was additional provision for loan losses recorded for impaired loans of $63,000 during the three and six month periods ended June 30, 2019.  There were no additional provisions recorded for impaired loans during the same periods in 2018.

Other real estate owned(OREO) – Assets acquired through or instead of foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. Management’s ongoing review of appraisal information may result in additional discounts or adjustments to the valuation based upon more recent market sales activity or more current appraisal information derived from properties of similar type and/or locale. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. As of June 30, 2019 the Corporation had no OREO measured at fair value. During the three and six month periods ended June 30, 2019, there was expense recorded of $14,000 and $35,000, respectively, associated with the write-down of OREO.  The related properties were sold prior to June 30, 2019. As of December 31, 2018, OREO measured at fair value less costs to sell had a net carrying amount of $160,000, which consisted of the outstanding balance of $415,000 less write-downs of $255,000.   As of June 30, 2018, OREO measured at fair value less costs to sell had a net carrying amount of $157,000, which consisted of the outstanding balance of $168,000 less write-downs of $11,000.  During the three and six month periods ended June 30, 2018, there was expense recorded of $11,000.

Appraisals for both collateral-dependent impaired loans and OREO are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed by the Corporation. Once received, management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Corporation compares the actual selling price of OREO that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value. The most recent analysis performed indicated that a discount of 10% should be applied.

For assets measured at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy are as follows:

(Dollar amounts in thousands)			(Level 1)		(Level 2)		(Level 3)
Description	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2018:
Other real estate owned	$	160	$	—	$	—	$	160
Total	$	160	$	—	$	—	$	160

20

7. Fair Value (continued)

The following table presents quantitative information about Level 3 fair value measurements for assets measured at fair value on a non-recurring basis:

(Dollar amounts in thousands)			Valuation	Unobservable	Weighted
			Techniques(s)	Input (s)	Average
December 31, 2018:
Other real estate owned	$	160	Sales comparison approach	Adjustment for differences between comparable sales	10	%

At June 30, 2019 and December 31, 2018 was an impaired residential mortgage loan totaling $67,000 and $61,000, respectively, and an impaired home equity loan totaling $5,000 and $6,000, respectively, which were classified as TDRs and measured using a discounted cash flow methodology.

The following table sets forth the carrying amount and fair value of the Corporation’s financial instruments included in the consolidated balance sheet: 

(Dollar amounts in thousands)
	Carrying		Fair Value Measurements using:
Description	Amount		Total		Level 1		Level 2		Level 3
June 30, 2019:
Financial Assets:
Cash and cash equivalents	$	31,456	$	31,456	$	31,456	$	—	$	—
Interest earning time deposits		9,958		9,958		—		9,958		—
Securities - available-for-sale		100,398		100,398		4,519		92,879		3,000
Securities - equities		16		16		16		—		—
Loans held for sale		134		134		—		134		—
Loans, net		691,807		685,812		—		—		685,812
Federal bank stock		5,764		N/A		N/A		N/A		N/A
Accrued interest receivable		2,504		2,504		73		298		2,133
Total	$	842,037	$	830,278	$	36,064	$	103,269	$	690,945
Financial Liabilities:
Deposits		777,606		784,206		553,331		230,875		—
Borrowed funds		34,050		34,472		—		34,472		—
Accrued interest payable		643		643		51		592		—
Total	$	812,299	$	819,321	$	553,382	$	265,939	$	—

	Carrying		Fair Value Measurements using:
	Amount		Total		Level 1		Level 2		Level 3
December 31, 2018:
Financial Assets:
Cash and cash equivalents	$	10,955	$	10,955	$	10,955	$	—	$	—
Interest earning time deposits		6,738		6,738		—		6,738		—
Securities - available-for-sale		97,718		97,718		4,445		89,773		3,500
Securities - equities		7		7		7		—		—
Loans held for sale		—		—		—		—		—
Loans, net		708,664		702,747		—		—		702,747
Federal bank stock		6,351		N/A		N/A		N/A		N/A
Accrued interest receivable		2,570		2,570		63		351		2,156
Total	$	833,003	$	820,735	$	15,470	$	96,862	$	708,403
Financial Liabilities:
Deposits		761,546		767,009		539,946		227,063		—
Borrowed funds		45,350		44,869		—		44,869		—
Accrued interest payable		495		495		30		465		—
Total	$	807,391	$	812,373	$	539,976	$	272,397	$	—

This information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation's assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation's disclosures and those of other companies may not be meaningful.

21

8. Regulatory Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

In 2018 the Board of Governors of the Federal Reserve System amended its Small Bank Holding Company Policy Statement by increasing the policy’s consolidated assets threshold from $1 billion to $3 billion. The primary benefit of being deemed a "small bank holding company" is the exemption from the requirement to maintain consolidated regulatory capital ratios; instead, regulatory capital ratios only apply at the subsidiary bank level.

The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (BASEL III rules) became effective for the Bank on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in on January 1, 2019. Under the BASEL III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in from 0.0% for 2015 to 2.50% in 2019. The capital conservation buffer for 2019 is 2.50% and for 2018 was 1.875%. Amounts recorded to accumulated other comprehensive income are not included in computing regulatory capital. Management believes as of June 30, 2019, the Bank met all capital adequacy requirements to which it was subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At June 30, 2019, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category.

The following table sets forth certain information concerning the Bank’s regulatory capital as of the dates presented. The capital adequacy ratios disclosed below are exclusive of the capital conservation buffer. 

(Dollar amounts in thousands)	June 30, 2019					December 31, 2018
	Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Actual	$	78,509		13.65	%	$	76,344		12.93	%
For capital adequacy purposes		46,020		8.00	%		47,252		8.00	%
To be well capitalized		57,525		10.00	%		59,065		10.00	%
Tier 1 capital to risk-weighted assets:
Actual	$	71,929		12.50	%	$	69,836		11.82	%
For capital adequacy purposes		34,515		6.00	%		35,439		6.00	%
To be well capitalized		46,020		8.00	%		47,252		8.00	%
Common Equity Tier 1 capital to risk-weighted assets:
Actual	$	71,929		12.50	%	$	69,836		11.82	%
For capital adequacy purposes		25,886		4.50	%		26,579		4.50	%
To be well capitalized		37,391		6.50	%		38,393		6.50	%
Tier 1 capital to average assets:
Actual	$	71,929		8.22	%	$	69,836		7.95	%
For capital adequacy purposes		35,013		4.00	%		35,126		4.00	%
To be well capitalized		43,766		5.00	%		43,908		5.00	%

22

9. Accumulated Other Comprehensive Income (Loss)

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss), net of tax, for the three months ended June 30, 2019 and 2018 and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive income:

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at April 1, 2019	$	(644	)	$	(4,840	)	$	(5,484	)
Other comprehensive income before reclassification		910			—			910
Amounts reclassified from accumulated other comprehensive income (loss)		1			—			1
Net current period other comprehensive income (loss)		911			—			911
Accumulated Other Comprehensive Income (Loss) at June 30, 2019	$	267		$	(4,840	)	$	(4,573	)

(Dollar amounts in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Loss Components	from Accumulated Other Comprehensive Income For the three months ended June 30, 2019		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	1	Net gain on sale of securities
Tax effect		—	Provision for income taxes
Total reclassifications for the period	$	1	Net of tax

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at April 1, 2018	$	(1,881	)	$	(4,839	)	$	(6,720	)
Other comprehensive income before reclassification		(236	)		—			(236	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			—			—
Net current period other comprehensive income (loss)		(236	)		—			(236	)
Accumulated Other Comprehensive Income (Loss) at June 30, 2018	$	(2,117	)	$	(4,839	)	$	(6,956	)

(Dollar amounts in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Loss Components	from Accumulated Other Comprehensive Income For the three months ended June 30, 2018		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	—	Net loss on sale of securities
Tax effect		—	Provision for income taxes
Total reclassifications for the period	$	—	Net of tax

23

9. Accumulated Other Comprehensive Income (Loss) (continued)

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss), net of tax, for the  six months ended June 30, 2019 and 2018 and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive income:

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at December 31, 2018	$	(1,517	)	$	(4,840	)	$	(6,357	)
Other comprehensive income before reclassification		1,785			—			1,785
Amounts reclassified from accumulated other comprehensive income (loss)		(1	)		—			(1	)
Net current period other comprehensive income		1,784			—			1,784
Accumulated Other Comprehensive Income (Loss) at June 30, 2019	$	267		$	(4,840	)	$	(4,573	)

(Dollar amount in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Income Components	from Accumulated Other Comprehensive Income For the six months ended June 30, 2019			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	(1	)	Net gain (loss) on sale of available-for-sale securities
Tax effect		—		Provision for income taxes
Total reclassifications for the period	$	(1	)	Net of tax

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at December 31, 2017	$	(679	)	$	(4,839	)	$	(5,518	)
Cumulative effect of change in accounting principle for marketable equity securities, net of tax		(187	)	$	-			(187	)
Accumulated Other Comprehensive Income (Loss) at January 1, 2018, as adjusted	$	(866	)	$	(4,839	)	$	(5,705	)
Other comprehensive income before reclassification		(1,257	)		—			(1,257	)
Amounts reclassified from accumulated other comprehensive income (loss)		6			—			6
Net current period other comprehensive income		(1,251	)		—			(1,251	)
Accumulated Other Comprehensive Income (Loss) at June 30, 2018	$	(2,117	)	$	(4,839	)	$	(6,956	)

(Dollar amount in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Income Components	from Accumulated Other Comprehensive Income For the six months ended June 30, 2018			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	7		Net gain on sale of available-for-sale securities
Tax effect		(1	)	Provision for income taxes
Total reclassifications for the period	$	6		Net of tax

24

10. Revenue Recognition

On January 1, 2018, the Corporation adopted ASU 2014-09 "Revenue from Contracts with Customers" (Topic 606) and all subsequent ASUs that modified Topic 606. Interest income, net securities gains (losses) and bank-owned life insurance are not included within the scope of Topic 606. For the revenue streams in the scope of Topic 606, service charges on deposits and electronic banking fees, there are no significant judgments related to the amount and timing of revenue recognition. All of the Corporation's revenue from contracts with customers is recognized within noninterest income.

Service charges on deposits: The Corporation earns fees from its deposit customers for transaction-based, account maintenance and overdraft services. Transaction-based fees, which include services such stop payment charges, statement rendering and other fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Electronic banking fees: The Corporation earns interchange and other ATM related fees from cardholder transactions conducted through the various payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The gross amount of these fees are processed through noninterest income. Other fees, such a transaction surcharges and card replacement fees are withdrawn from the customer's account balance at the time of service.

The following table presents the Corporation's sources of noninterest income for the three and six months ended June 30, 2019 and 2018.

(Dollar amounts in thousands)	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
Noninterest income
In-scope of Topic 606:
Service charges on deposits
Maintenance fees	$	42	$	37	$	82	$	76
Overdraft fees		412		353		850		682
Other fees		82		73		159		142
Electronic banking fees		371		329		695		644
Noninterest income (in-scope of Topic 606)		907		792		1,786		1,544
Noninterest income (out-of-scope of Topic 606)(1)		224		257		402		403
Total noninterest income	$	1,131	$	1,049	$	2,188	$	1,947

⁽¹⁾ Noninterest income items that are out-of-scope include net realized gains (losses) on sales of securities, net gains (losses) on sales of loans, earnings on bank-owned life insurance and certain other noninterest income items.

25

11. Leases

Effective January 1, 2019, the Corporation adopted ASU 2016-02, Leases (Topic 842).  As of June 30, 2019, the Corporation leases real estate for five branch offices under various operating lease agreements. The lease agreements have maturity dates ranging from August 2025 to December 2056, including all extension periods. The Corporation has assumed that there are currently no circumstances in which the leases would be terminated before exhausting all options for extensions.  The weighted average remaining life of the lease term for these leases was 13.40 years as of June 30, 2019.

The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term as of January 1, 2019 for leases that existed at adoption.  This methodology will be continued for the commencement of any subsequent lease agreements.  The weighted average discount rate for the leases was 3.48% as of June 30, 2019.

The total operating lease costs were $48,000 and $97,000, respectively, for the three and six months ended June 30, 2019.  The right-of-use asset, included in premises and equipment, and lease liability, included in other liabilities, was $1.6 million and $1.8 million, respectively, as of June 30, 2019.  Rental expense for operating leases classified under ASC 840 for the three and six months ended June 30, 2018 was $50,000 and $100,000, respectively.

Total estimated rental commitments for the operating leases were as follows as of June 30, 2019:

(Dollar amounts in thousands)
Year ending December 31:
2019 (excluding six months)	$	106
2020		212
2021		217
2022		222
2023		222
Thereafter		1,289
Total minimum lease payments		2,268
Discount effect of cash flows		(485	)
Present value of lease liabilities	$	1,783

26

12. Recent Accounting Pronouncements (continued)

Newly Issued Not Yet Effective Accounting Standards

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 significantly changes the way impairment of financial instruments is recognized by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of the financial instruments. The main provisions of the guidance include (1) replacing the “incurred loss” approach under current GAAP with an “expected loss” model for instruments measured at amortized cost, (2) requiring entities to record an allowance for available-for-sale debt securities rather than reduce the carrying amount of the investments, as is required by the other-than-temporary impairment model under current GAAP, and (3) a simplified accounting model for purchased credit-impaired debt securities and loans. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted. Management has selected a software vendor and is currently working through the implementation process.  The Corporation is reviewing available historical information in order to assess the expected credit losses and determine the impact of the adoption of ASU 2016-13 on the Corporation's financial statements.  On July 17, 2019, FASB voted to delay the effective date of this ASU for smaller reporting companies until fiscal years beginning after December 15, 2022.  As the Corporation is a smaller reporting company, the proposed delay would be applicable, if approved by FASB.

In January 2017, FASB ASU 2017-04, "Simplifying the Test for Goodwill Impairment". This ASU simplifies the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under this amendment, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Corporation has goodwill from prior business combinations and performs an annual impairment test or more frequently if changes or circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Corporation's most recent annual impairment assessment determined that the Corporation's goodwill was not impaired. Although the Corporation cannot anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated and, therefore, does not anticipate a material impact from these amendments to the Corporation's financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.

Adoption of New Accounting Policies

In February 2016, the FASB issued ASU 2016-02 "Leases". This ASU requires lessees to record most leases on their balance sheet but recognize expenses in the income statement in a manner similar to current accounting treatment. This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases. ASU 2016-02 was effective for annual periods beginning after December 15, 2018, and interim periods therein. In January 2018, the FASB issued ASU 2018-01, which allows entities the option to apply the provisions of the new lease guidance at the effective date without adjusting the comparative periods presented. Adoption of this guidance as of January 1, 2019 resulted in the recording of operating lease right-of-use assets of $1.6 million and operating lease liabilities of $1.8 million.  The Corporation recorded a cumulative adjustment to retained earning for prior periods of $170,000, net of deferred taxes of $45,000.  See Note 11-Leases for more information.

In March 2017, the FASB issued ASU 2017-08, “Receivable - Nonrefundable Fees and Other Costs (Subtopic 310-20) Premium Amortization on Purchased Callable Debt Securities.” ASU 2017-08 amends guidance on the amortization period of premiums on certain purchased callable debt securities to shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods therein.  The adoption of this guidance on January 1, 2019 resulted in a cumulative adjustment to retained earnings of $10,000, net of deferred taxes of $3,000, for the prior periods. The remaining securities subject to this guidance have a call date one month prior to maturity, therefore the impact to the statement of income in subsequent periods is immaterial.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The amendments in this Update are to better reflect the economic results of hedging in the financial statements along with simplification of certain hedge accounting requirements. Specifically, the entire change in the fair value of the hedging instrument is required to be presented in the same income statement line as and in the same period that the earnings effect of the hedged item is recognized. Therefore, hedge ineffectiveness will not be reported separately or in a different period. In addition, hedge effectiveness can be determined qualitatively in periods following inception. The amendments permit an entity to measure the change in fair value of the hedged item on the basis of the benchmark rate component. They also permit an entity to measure the hedged item in a partial-term fair value hedge of interest rate risk by assuming the hedged item has a term that reflects only the designated cash flows being hedged. For a closed portfolio of prepayable financial assets, an entity is permitted to designate the amount that is not expected to be affected by prepayments or defaults as the hedged item. For public business entities, the new guidance was effective for fiscal years beginning after December 15, 2018, and interim periods therein. The Corporation currently does not have derivative or hedging instruments so this guidance had no impact on consolidated financial statements.

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

This section discusses the consolidated financial condition and results of operations of Emclaire Financial Corp and its wholly owned subsidiaries for the three and six months ended June 30, 2019, compared to the same periods in 2018 and should be read in conjunction with the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC and with the accompanying consolidated financial statements and notes presented in this Form 10-Q.

This Form 10-Q, including the financial statements and related notes, contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” or words or phrases of similar meaning. We caution that the forward looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performances or achievements could differ materially from those contemplated, expressed or implied by the forward looking statements. Therefore, we caution you not to place undue reliance on our forward looking information and statements. Except as required by applicable law or regulation, we will not update the forward looking statements to reflect actual results or changes in factors affecting the forward looking statements.

CHANGES IN FINANCIAL CONDITION

Total assets increased $10.1 million, or 1.1%, to $909.0 million at June 30, 2019 from $898.9 million at December 31, 2018. The change in assets was driven primarily by a increase in cash and cash equivalents, interest earning time deposits and securities of $20.5 million, $3.2 million and $2.7 million, respectively, partially offset by a decrease in net loans of $16.9 million. Total liabilities increased $5.7 million to $824.6 million at June 30, 2019 from $818.9 million at December 31, 2018 due to an increase in customer deposits of $16.1 million, partially offset by a decrease in borrowed funds of $11.3 million.

Stockholders’ equity increased $4.3 million, or 5.4%, to $84.4 million at June 30, 2019 from $80.0 million at December 31, 2018 primarily due to a $2.4 million increase in retained earnings as a result of $4.2 million of net income, partially offset by $1.7 million of dividends paid.  Additionally, the accumulated other comprehensive loss was reduced by $1.8 million.  The Corporation remains well capitalized and is positioned for continued growth with total stockholders’ equity at 9.3% of total assets.  Book value per common share was $29.70 at June 30, 2019, compared to $28.09 at December 31, 2018. 

At June 30, 2019, the Bank was considered “well-capitalized” with a Tier 1 leverage ratio, Common Equity Tier 1 ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio of 8.22%, 12.50%, 12.50% and 13.65%, respectively. The Bank was also considered “well-capitalized” at December 31, 2018 with a Tier 1 leverage ratio, Common Equity Tier 1 ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio of 7.95%, 11.82%, 11.82% and 12.93%, respectively.

RESULTS OF OPERATIONS

Comparison of Results for the Three Months Ended June 30, 2019 and 2018

General. Net income available to common stockholders increased $636,000, or 45.0%, to $2.0 million for the three months ended June 30, 2019 from $1.4 million for the same period in 2018. This increase was the result of increases in net interest income and noninterest income of $891,000 and $82,000, respectively, and a decrease of $30,000 in the provision for loan losses, partially offset by increases in noninterest expense, the provision for income taxes and preferred stock dividends of $85,000, $191,000 and $91,000, respectively.

Net interest income. Tax equivalent net interest income increased $889,000, or 14.2%, to $7.1 million for the three months ended June 30, 2019 from $6.2 million for the three months ended June 30, 2018. This increase was attributed to an increase in tax equivalent interest income of $1.5 million, partially offset by an increase in interest expense of $629,000.

Interest income. Tax equivalent interest income increased $1.5 million, or 20.3%, to $9.0 million for the three months ended June 30, 2019 from $7.5 million for the same period in 2018. This increase was attributed to increases in interest earned on loans and securities, dividends on federal bank stocks and interest earned on interest-earning deposits with banks of $1.4 million, $44,000, $19,000 and $16,000, respectively.

Tax equivalent interest earned on loans receivable increased $1.4 million, or 21.5%, to $8.1 million for the three months ended June 30, 2019 compared to $6.7 million for the same period in 2018. This increase resulted from a $109.4 million, or 18.5%, increase in average loans, accounting for a $1.3 million increase in interest income. The increase in loans receivable was related to the acquisition of Community First Bancorp, Inc. in October 2018 and strong loan growth during 2018. Adding to this favorable volume variance, the average yield on loans increased 12 basis points to 4.66% for the three months ended June 30, 2019, versus 4.54% for the same period in 2018. This favorable yield variance accounted for a $173,000 increase in interest income. Accretion of purchase accounting adjustments on acquired loans accounted for approximately 6 basis points of the yield increase.

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Tax equivalent interest earned on securities increased $44,000, or 7.3%, to $646,000 for the three months ended June 30, 2019 compared to $602,000 for the three months ended June 30, 2018. This increase resulted from a 16 basis point increase in the average yield on securities to 2.63% for the three months ended June 30, 2019 versus 2.47% for the same period in 2018. This favorable yield variance accounted for a $41,000 increase in interest income. Additionally, the average balance of securities increased $496,000 accounting for a $3,000 increase in interest income.

Interest earned on deposits with banks increased $16,000, or 19.3%, to $99,000 for the three months ended June 30, 2019 compared to $83,000 for the three months ended June 30, 2018. This increase resulted from a 27 basis point increase in the average yield on these accounts to 1.64% for the three months ended June 30, 2019, versus 1.37% for the same period in 2018, accounting for an $16,000 increase in interest income.

Dividends on federal bank stocks increased $19,000, or 20.4%, to $112,000 for the three months ended June 30, 2019 from $93,000 for the same period in 2018. This increase was primarily due to a $1.4 million, or 31.6%, increase in the average balance of federal bank stocks, accounted for a $27,000 increase in interest income.  Partially offsetting this favorable volume variance, a decrease of 73 basis points in the average yield on federal bank stocks to 7.79% for the three months ended June 30, 2019, versus 8.52% for the same period in 2018, accounted for an $8,000 decrease in interest income.

Interest expense. Interest expense increased $629,000, or 50.6%, to $1.9 million for the three months ended June 30, 2019 from $1.2 million for the same period in 2018. This increase in interest expense can be attributed to increases in interest incurred on deposits and borrowed funds of $534,000 and $95,000, respectively.

Interest expense incurred on deposits increased $534,000, or 48.5%, to $1.6 million for the three months ended June 30, 2019 compared to $1.1 million for the same period in 2018. The average cost of interest-bearing deposits increased 27 basis points to 1.07% for the three months ended June 30, 2019, versus 0.80% for the same period in 2018, accounting for a $393,000 increase in interest expense. Additionally, the average balance of interest-bearing deposits increased $64.6 million, or 11.7%, to $614.6 million for the three months ended June 30, 2019, compared to $550.0 million for the same period in 2018 causing a $141,000 increase in interest expense. This increase was primarily due to the acquisition of Community First in October 2018.

Interest expense incurred on borrowed funds increased $95,000, or 67.4%, to $236,000 for the three months ended June 30, 2019, compared to $141,000 for the same period in the prior year. The average balance of borrowed funds increased $14.3 million, or 71.2%, to $34.3 million for the three months ended June 30, 2019, compared to $20.1 million for the same period in 2018 causing an $93,000 increase in interest expense. The increase in the outstanding balance of borrowed funds primarily resulted from three additional $5.0 million FHLB long-term notes taken in December 2018. The average cost of long-term borrowed funds increased 8 basis points to 2.56% for the three months ended June 30, 2019 compared to 2.48% for the same period in 2018 causing a $3,000 increase in interest expense.  Partially offsetting the cost of long-term borrowings, the average cost of short-term borrowed funds decreased 26 basis points to 5.47% for the three months ended June 30, 2019 compared to 5.73% for the same period in 2018 causing a $1,000 decrease in interest expense.

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Average Balance Sheet and Yield/Rate Analysis. The following table sets forth, for the periods indicated, information concerning the total dollar amounts of interest income from interest-earning assets and the resulting average yields, the total dollar amounts of interest expense on interest-bearing liabilities and the resulting average costs, net interest income, interest rate spread and the net interest margin earned on average interest-earning assets. For purposes of this table, average loan balances include nonaccrual loans and exclude the allowance for loan losses and interest income includes accretion of net deferred loan fees. Interest and yields on tax-exempt loans and securities (tax-exempt for federal income tax purposes) are shown on a fully tax equivalent basis. The information is based on average daily balances during the periods presented.

(Dollar amounts in thousands)	Three months ended June 30,
	2019							2018
	Average Balance		Interest		Yield/ Rate			Average Balance		Interest		Yield/ Rate
Interest-earning assets:
Loans, taxable	$	680,410	$	7,937		4.68	%	$	571,306	$	6,514		4.57	%
Loans, tax exempt		21,278		210		3.95	%		21,022		194		3.70	%
Total loans receivable		701,688		8,147		4.66	%		592,328		6,708		4.54	%
Securities, taxable		81,224		530		2.62	%		73,199		439		2.41	%
Securities, tax exempt		17,131		116		2.71	%		24,660		163		2.65	%
Total securities		98,355		646		2.63	%		97,859		602		2.47	%
Interest-earning deposits with banks		24,184		99		1.64	%		24,225		83		1.37	%
Federal bank stocks		5,765		112		7.79	%		4,380		93		8.52	%
Total interest-earning cash equivalents		29,949		211		2.83	%		28,605		176		2.47	%
Total interest-earning assets		829,992		9,004		4.35	%		718,792		7,486		4.18	%
Cash and due from banks		3,232							2,837
Other noninterest-earning assets		62,927							46,462
Total Assets	$	896,151						$	768,091
Interest-bearing liabilities:
Interest-bearing demand deposits	$	393,513	$	586		0.60	%	$	379,094	$	470		0.50	%
Time deposits		221,053		1,050		1.91	%		170,902		632		1.48	%
Total interest-bearing deposits		614,566		1,636		1.07	%		549,996		1,102		0.80	%
Borrowed funds, short-term		2,322		32		5.47	%		2,050		29		5.73	%
Borrowed funds, long-term		32,000		204		2.56	%		18,003		112		2.48	%
Total borrowed funds		34,322		236		2.76	%		20,053		141		2.82	%
Total interest-bearing liabilities		648,888		1,872		1.16	%		570,049		1,243		0.87	%
Noninterest-bearing demand deposits		150,807		—		—			128,578		—		—
Funding and cost of funds		799,695		1,872		0.94	%		698,627		1,243		0.71	%
Other noninterest-bearing liabilities		13,597							10,344
Total Liabilities		813,292							708,971
Stockholders' Equity		82,859							59,120
Total Liabilities and Stockholders' Equity	$	896,151						$	768,091
Net interest income			$	7,132						$	6,243
Interest rate spread (difference between weighted average rate on interest-earning assets and interest-bearing liabilities)						3.19	%						3.30	%
Net interest margin (net interest income as a percentage of average interest-earning assets)						3.45	%						3.48	%

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Analysis of Changes in Net Interest Income. The following table analyzes the changes in interest income and interest expense in terms of: (1) changes in volume of interest-earning assets and interest-bearing liabilities and (2) changes in yields and rates. The table reflects the extent to which changes in the Corporation’s interest income and interest expense are attributable to changes in volume (changes in volume multiplied by prior year rate), rate (change in rate multiplied by prior year volume) and changes attributable to the combined impact of volume/rate (change in rate multiplied by change in volume). The changes attributable to the combined impact of volume/rate are allocated on a consistent basis between the volume and rate variances. Changes in interest income on loans and securities reflect the changes in interest income on a fully tax equivalent basis.

(Dollar amounts in thousands)	Three months ended June 30,
	2019 versus 2018
	Increase (Decrease) due to
	Volume		Rate			Total
Interest income:
Loans	$	1,266	$	173		$	1,439
Securities		3		41			44
Interest-earning deposits with banks		—		16			16
Federal bank stocks		27		(8	)		19
Total interest-earning assets		1,296		222			1,518
Interest expense:
Interest-bearing deposits		141		393			534
Borrowed funds, short-term		4		(1	)		3
Borrowed funds, long-term		89		3			92
Total interest-bearing liabilities		234		395			629
Net interest income	$	1,062	$	(173	)	$	889

Provision for loan losses. The Corporation records provisions for loan losses to maintain a level of total allowance for loan losses that management believes, to the best of its knowledge, covers all probable incurred losses estimable at each reporting date. Management considers historical loss experience, the present and prospective financial condition of borrowers, current conditions (particularly as they relate to markets where the Corporation originates loans), the status of nonperforming assets, the estimated underlying value of the collateral and other factors related to the collectability of the loan portfolio.

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Information pertaining to the allowance for loan losses and nonperforming assets for the three months ended June 30, 2019 and 2018 is as follows:

(Dollar amounts in thousands)	As of or for the three months ended
	June 30,
	2019			2018
Balance at the beginning of the period	$	6,639		$	5,935
Provision for loan losses		270			300
Charge-offs		(346	)		(147	)
Recoveries		17			30
Balance at the end of the period	$	6,580		$	6,118
Nonperforming loans	$	5,998		$	2,486
Nonperforming assets		6,331			3,304
Nonperforming loans to total loans		0.86	%		0.42	%
Nonperforming assets to total assets		0.70	%		0.43	%
Allowance for loan losses to total loans		0.94	%		1.03	%
Allowance for loan losses to nonperforming loans		109.70	%		246.10	%

Nonperforming loans increased $2.3 million, or 62.7% to $6.0 million at June 30, 2019 from $3.7 million at March 31, 2019. This was primarily due to the addition of one commercial real estate loan totaling $2.4 million being placed on non-accrual status. In 2016, the Corporation purchased a participation interest in this loan from another local financial institution.  The proceeds of the loan, which was originated as a construction loan with a permanent financing mortgage loan upon completion of construction, was used by the borrower to construct an apartment complex located in Beaver County, Pennsylvania. During the three months ended June 30, 2019, the developer of the property was indicted on multiple charges of fraud. Also, it was discovered that the financials initially provided to obtain the financing for the project may have contained fraudulent information which caused the lead bank to demand that the outstanding loan be paid in full.  In addition, the lead lender commenced foreclosure proceedings and the property was placed into receivership during the quarter. At June 30, 2019, the loan was in arrears and therefore considered a nonperforming loan.

As of June 30, 2019, the Corporation’s classified and criticized assets amounted to $25.5 million, or 2.8% of total assets, with $19.8 million classified as substandard and $5.7 million identified as special mention. This compares to classified and criticized assets of $21.5 million, or 2.4% of total assets, with $15.2 million classified as substandard and $6.3 million identified as special mention at March 31, 2019. This increase was primarily related to two additional commercial relationships totaling $4.9 million being classified as substandard in the second quarter of 2019.

The provision for loan losses decreased $30,000, or 10.0%, to $270,000 for the three months ended June 30, 2019 from $300,000 for the same period in 2018 as loan balances declined $8.5 million during the three months ended June 30, 2019. The previously described $2.4 million commercial relationship which was downgraded to substandard and placed on non-accrual status during the quarter ended June 30, 2019, was individually evaluated for impairment and based on management's analysis of the value of the collateral pledged on the loan, it was determined that no additional provision was required with respect to such loan. The provision for loan losses recorded for the three months ended June 30, 2018 was higher primarily due to growth in the loan portfolio of $3.0 million.

Noninterest income.  Noninterest income increased $82,000, or 7.8%, to $1.1 million for the three months ended June 30, 2019, compared to $1.0 million for the same period in 2018. Fees and service charges increased $73,000 primarily associated with the operation of the new full-service banking offices which were acquired from Community First and general increases in overdraft fee income.

Noninterest expense.  Noninterest expense increased $85,000, or 1.6%, to $5.3 million for the three months ended June 30, 2019 from $5.2 million for the same period in 2018.  The increase primarily related to increases in compensation and benefits expense and other noninterest expense of $266,000 and $227,000, respectively, partially offset by a reduction in acquistion costs of $358,000.   The increases primarily related to costs associated with the aforementioned new banking offices and normal salary and benefit and operating expense increases.

Provision for income taxes. The provision for income taxes increased $191,000, or 67.6%, to $473,000 for the three months ended June 30, 2019 compared to $282,000 for the same period in the prior year as a result of the increase in net income before provision for income taxes.

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Comparison of Results for the Six Months Ended June 30, 2019 and 2018

General. Net income available to common stockholders increased $1.4 million, or 48.8%, to $4.1 million for the six months ended June 30, 2019 from $2.8 million for the same period in 2018. This increase was the result of increases in net interest income and noninterest income of $2.3 million and $242,000, respectively, and a decrease of $230,000 in the provision for loan losses, partially offset by increases in noninterest expense, provision for income taxes and preferred stock dividends of $908,000, $381,000 and $91,000, respectively.

Net interest income. Tax equivalent net interest income increased $2.3 million, or 18.6%, to $14.4 million for the six months ended June 30, 2019 from $12.1 million for the six months ended June 30, 2018. This increase was attributed to an increase in tax equivalent interest income of $3.5 million, partially offset by an increase in interest expense of $1.3 million.

Interest income. Tax equivalent interest income increased $3.5 million, or 24.2%, to $18.0 million for the six months ended June 30, 2019 from $14.5 million for the same period in 2018. This increase was attributed to increases in interest earned on loans and securities, dividends on federal bank stocks and interest earned on interest-earning deposits with banks of $3.3 million, $94,000, $55,000 and $29,000, respectively.

Tax equivalent interest earned on loans receivable increased $3.3 million, or 25.5%, to $16.4 million for the six months ended June 30, 2019 compared to $13.1 million for the same period in 2018. This increase resulted from a $117.0 million, or 19.9%, increase in average loans, accounting for an increase of $2.7 million in interest income. The increase in loans receivable was related to the acquisition of Community First Bancorp, Inc. in October 2018 and strong loan growth during 2018. Adding to this favorable volume variance, the average yield on loans increased 21 basis points to 4.69% for the six months ended June 30, 2019, versus 4.48% for the same period in 2018. This favorable yield variance accounted for a $635,000 increase in interest income. Accretion of purchase accounting adjustments on acquired loans accounted for approximately 6 basis points of the yield increase.

Tax equivalent interest earned on securities increased $94,000, or 7.9%, to $1.3 million for the six months ended June 30, 2019 compared to $1.2 million for the six months ended June 30, 2018. This increase resulted from a 22 basis point increase in the average yield on securities to 2.64% for the six months ended June 30, 2019 versus 2.42% for the same period in 2018. This favorable yield variance accounted for a $104,000 increase in interest income. Partially offsetting this favorable variance, the average balance of securities decreased $860,000 accounting for a $10,000 decrease in interest income.

Interest earned on deposits with banks increased $29,000, or 24.8%, to $146,000 for the six months ended June 30, 2019 compared to $117,000 for the six months ended June 30, 2018. This increase resulted from a 31 basis point increase in the average yield on these accounts to 1.60% for the six months ended June 30, 2019, versus 1.29% for the same period in 2018, accounting for a $28,000 increase in interest income. Additionally, the average balance of interest-earning deposits increased $109,000 accounting for an increase of $1,000 in interest income.

Dividends on federal bank stocks increased $55,000, or 35.0%, to $212,000 for the six months ended June 30, 2019 from $157,000 for the same period in 2018. This increase was primarily due to a $1.4 million, or 31.8%, increase in the average balance of federal bank stocks, accounting for a $51,000 increase in interest income.  Furthermore, an increase of 18 basis points in the average yield on federal bank stocks to 7.27% for the six months ended June 30, 2019, versus 7.09% for the same period in 2018, accounted for a $4,000 increase in interest income.

Interest expense. Interest expense increased $1.3 million, or 52.3%, to $3.6 million for the six months ended June 30, 2019 from $2.4 million for the same period in 2018. This increase in interest expense can be attributed to a $1.0 million increase in interest incurred on deposits and an increase of $238,000 in interest incurred on borrowed funds.

Interest expense incurred on deposits increased $1.0 million, or 48.4%, to $3.1 million for the six months ended June 30, 2019 compared to $2.1 million for the same period in 2018. The average cost of interest-bearing deposits increased 25 basis points to 1.03% for the six months ended June 30, 2019, versus 0.78% for the same period in 2018, accounting for a $719,000 increase in interest expense. Additionally, the average balance of interest-bearing deposits increased $70.0 million, or 12.9%, to $611.2 million for the six months ended June 30, 2019, compared to $541.3 million for the same period in 2018 causing a $295,000 increase in interest expense. This increase was primarily due to the acquisition of Community First in October 2018.

Interest expense incurred on borrowed funds increased $238,000, or 79.6%, to $537,000 for the six months ended June 30, 2019, compared to $299,000 for the same period in the prior year. The average balance of borrowed funds increased $17.1 million, or 76.6%, to $39.4 million for the six months ended June 30, 2019, compared to $22.3 million for the same period in 2018 causing a $238,000 increase in interest expense. The increase in the outstanding balance of borrowed funds primarily resulted from three additional $5.0 million FHLB long-term notes taken in December 2018. Additionally, the average cost of borrowed funds increased 4 basis points to 2.74% for the six months ended June 30, 2019 compared to 2.70% for the same period in 2018 .

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Average Balance Sheet and Yield/Rate Analysis. The following table sets forth, for the periods indicated, information concerning the total dollar amounts of interest income from interest-earning assets and the resulting average yields, the total dollar amounts of interest expense on interest-bearing liabilities and the resulting average costs, net interest income, interest rate spread and the net interest margin earned on average interest-earning assets. For purposes of this table, average loan balances include nonaccrual loans and exclude the allowance for loan losses and interest income includes accretion of net deferred loan fees. Interest and yields on tax-exempt loans and securities (tax-exempt for federal income tax purposes) are shown on a fully tax equivalent basis. The information is based on average daily balances during the periods presented.

(Dollar amounts in thousands)	Six months ended June 30,
	2019							2018
	Average				Yield/			Average				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate
Interest-earning assets:
Loans, taxable	$	684,915	$	16,008		4.71	%	$	567,139	$	12,687		4.51	%
Loans, tax exempt		20,570		399		3.91	%		21,355		388		3.67	%
Total loans receivable		705,485		16,407		4.69	%		588,494		13,075		4.48	%
Securities, taxable		78,344		1,022		2.63	%		72,665		847		2.35	%
Securities, tax exempt		19,459		257		2.66	%		25,998		338		2.62	%
Total securities		97,803		1,279		2.64	%		98,663		1,185		2.42	%
Interest-earning deposits with banks		18,396		146		1.60	%		18,287		117		1.29	%
Federal bank stocks		5,884		212		7.27	%		4,466		157		7.09	%
Total interest-earning cash equivalents		24,280		358		2.97	%		22,753		274		2.43	%
Total interest-earning assets		827,568		18,044		4.40	%		709,910		14,534		4.13	%
Cash and due from banks		3,246							2,748
Other noninterest-earning assets		62,926							46,071
Total Assets	$	893,740						$	758,729
Interest-bearing liabilities:
Interest-bearing demand deposits	$	390,664	$	1,115		0.58	%	$	370,486	$	873		0.48	%
Time deposits		220,544		1,992		1.82	%		170,771		1,220		1.44	%
Total interest-bearing deposits		611,208		3,107		1.03	%		541,257		2,093		0.78	%
Borrowed funds, short-term		7,307		127		3.51	%		3,207		66		4.12	%
Borrowed funds, long-term		32,124		410		2.57	%		19,122		233		2.46	%
Total borrowed funds		39,431		537		2.74	%		22,329		299		2.70	%
Total interest-bearing liabilities		650,639		3,644		1.13	%		563,586		2,392		0.86	%
Noninterest-bearing demand deposits		147,705		—		—			125,768		—		—
Funding and cost of funds		798,344		3,644		0.92	%		689,354		2,392		0.70	%
Other noninterest-bearing liabilities		13,655							10,376
Total Liabilities		811,999							699,730
Stockholders' Equity		81,741							58,999
Total Liabilities and Stockholders' Equity	$	893,740						$	758,729
Net interest income			$	14,400						$	12,142
Interest rate spread (difference between weighted average rate on interest-earning assets and interest-bearing liabilities)						3.27	%						3.27	%
Net interest margin (net interest income as a percentage of average interest-earning assets)						3.51	%						3.45	%

34

Analysis of Changes in Net Interest Income. The following table analyzes the changes in interest income and interest expense in terms of: (1) changes in volume of interest-earning assets and interest-bearing liabilities and (2) changes in yields and rates. The table reflects the extent to which changes in the Corporation’s interest income and interest expense are attributable to changes in volume (changes in volume multiplied by prior year rate), rate (change in rate multiplied by prior year volume) and changes attributable to the combined impact of volume/rate (change in rate multiplied by change in volume). The changes attributable to the combined impact of volume/rate are allocated on a consistent basis between the volume and rate variances. Changes in interest income on loans and securities reflect the changes in interest income on a fully tax equivalent basis.

(Dollar amounts in thousands)	Six months ended June 30,
	2019 versus 2018
	Increase (Decrease) due to
	Volume			Rate			Total
Interest income:
Loans	$	2,697		$	635		$	3,332
Securities		(10	)		104			94
Interest-earning deposits with banks		1			28			29
Federal bank stocks		51			4			55
Total interest-earning assets		2,739			771			3,510
Interest expense:
Interest-bearing deposits		295			719			1,014
Borrowed funds, short-term		73			(12	)		61
Borrowed funds, long-term		165			12			177
Total interest-bearing liabilities		533			719			1,252
Net interest income	$	2,206		$	52		$	2,258

Provision for loan losses. The Corporation records provisions for loan losses to maintain a level of total allowance for loan losses that management believes, to the best of its knowledge, covers all probable incurred losses estimable at each reporting date. Management considers historical loss experience, the present and prospective financial condition of borrowers, current conditions (particularly as they relate to markets where the Corporation originates loans), the status of nonperforming assets, the estimated underlying value of the collateral and other factors related to the collectability of the loan portfolio.

35

Information pertaining to the allowance for loan losses and nonperforming assets for the six months ended June 30, 2019 and 2018 is as follows:

(Dollar amounts in thousands)	As of or for the six months ended
	June 30,
	2019			2018
Balance at the beginning of the period	$	6,508		$	6,127
Provision for loan losses		450			680
Charge-offs		(475	)		(732	)
Recoveries		97			43
Balance at the end of the period	$	6,580		$	6,118
Nonperforming loans	$	5,998		$	2,486
Nonperforming assets		6,331			3,304
Nonperforming loans to total loans		0.86	%		0.42	%
Nonperforming assets to total assets		0.70	%		0.43	%
Allowance for loan losses to total loans		0.94	%		1.03	%
Allowance for loan losses to nonperforming loans		109.70	%		246.10	%

Nonperforming loans increased $3.0 million, or 98.1%, to $6.0 million at June 30, 2019 from $3.0 million at December 31, 2018. This was primarily due to the addition of two commercial relationships totaling $2.6 million and one residential loan totaling $423,000 being placed on non-accrual status during the six months ended June 30, 2019. This included the previously discussed $2.4 million commercial real estate loan for the apartment complex in Beaver County.

As of June 30, 2019, the Corporation’s classified and criticized assets amounted to $25.5 million, or 2.8% of total assets, with $19.8 million classified as substandard and $5.7 million identified as special mention. This compares to classified and criticized assets of $22.9 million, or 2.5% of total assets, with $16.4 million classified as substandard and $6.5 million identified as special mention at December 31, 2018. This increase was primarily related to the addition of two commercial relationships totaling $4.9 million, partially offset by the payoffs of five commercial relationships totaling $2.2 million and the transfer to OREO of one commercial relationship totaling $232,000.

The provision for loan losses decreased $230,000, or 33.8%, to $450,000 for the six months ended June 30, 2019 from $680,000 for the same period in 2018 as loan balances declined $16.9 million during the six months ended June 30, 2019 and portfolio net charge-offs were lower than normal. Additionally, the $2.4 million commercial relationship, which was downgraded to substandard and placed on non-accrual status during the quarter ended June 30, 2019, was individually evaluated for impairment, and due to sufficient collateral values, was determined to no longer need an allowance allocated to it. The provision for loan losses recorded for the six months ended June 30, 2018 was higher due to growth in the loan portfolio of $10.0 million and higher than normal net charge-offs for the period.

Noninterest income.  Noninterest income increased $242,000, or 12.4%, to $2.2 million for the six months ended June 30, 2019, compared to $1.9 million for the same period in 2018. Fees and service charges increased $191,000, primarily associated with the operation of the new full-service banking offices which were acquired from Community First and general increases in overdraft fee income.

Noninterest expense.  Noninterest expense increased $908,000, or 9.1%, to $10.9 million for the six months ended June 30, 2019 from $10.0 million for the same period in 2018.  The increase primarily related to increases in compensation and benefits expense, other noninterest expense and occupancy and equipment expense of $730,000, $489,000 and $198,000, respectively. The increases primarily related to costs associated with the aforementioned new banking offices and normal salary and benefit and operating expense increases.

Provision for income taxes. The provision for income taxes increased $381,000, or 69.5%, to $929,000 for the six months ended June 30, 2019 compared to $548,000 for the same period in the prior year as a result of the increase in net income before provision for income taxes.

36

LIQUIDITY

The Corporation’s primary sources of funds generally have been deposits obtained through the offices of the Bank, borrowings from the FHLB, Federal Reserve and other correspondent banks, and amortization and prepayments of outstanding loans and maturing securities. During the six months ended June 30, 2019, the Corporation used its sources of funds primarily to reduce short-term borrowed funds and increase interest earning time deposits and investment balances. As of June 30, 2019, the Corporation had outstanding loan commitments, including undisbursed loans and amounts available under credit lines, totaling $99.3 million, and standby letters of credit totaling $712,000, net of collateral maintained by the Bank.

At June 30, 2019, time deposits amounted to $224.3 million, or 28.8% of the Corporation’s total consolidated deposits, including approximately $71.9 million of which are scheduled to mature within the next year. Management of the Corporation believes (i) it has adequate resources to fund all of its commitments, (ii) all of its commitments will be funded as required by related maturity dates and (iii) based upon past experience and current pricing policies, it can adjust the rates of time deposits to retain a substantial portion of maturing liabilities if necessary.

Aside from liquidity available from customer deposits or through sales and maturities of securities, the Corporation and the Bank have alternative sources of funds. These sources include a line of credit for the Corporation with a correspondent bank, the Bank's line of credit and term borrowing capacity from the FHLB and the Federal Reserve’s discount window and, to a more limited extent, through the sale of loans. At June 30, 2019, the Corporation had borrowed funds of $34.1 million consisting of $30.0 million of long-term FHLB advances, a $2.0 million long-term advance with a correspondent bank and $2.1 million outstanding on a line of credit with a correspondent bank. At June 30, 2019, the Corporation’s borrowing capacity with the FHLB, net of funds borrowed and irrevocable standby letters of credit issue to secure certain deposit accounts, was $249.9 million.

Management is not aware of any conditions, including any regulatory recommendations or requirements, which would adversely impact its liquidity or its ability to meet funding needs in the ordinary course of business.

RECENT REGULATORY DEVELOPMENTS

The final rules implementing the Basel Committee on Banking Supervision’s (BCBS) capital guidelines for U.S. banks were approved by the FRB and FDIC. Under the final rules, minimum requirements increased for both the quantity and quality of capital. The rules include a new common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0%, require a minimum ratio of Total Capital to risk-weighted assets of 8.0% and require a minimum Tier 1 leverage ratio of 4.0%. A new capital conservation buffer comprised of common equity Tier 1 capital was also established above the regulatory minimum capital requirements. This capital conservation buffer was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and has increased each subsequent year by an additional 0.625% until reaching its final level of 2.5% on January 1, 2019. Eligibility criteria for regulatory capital instruments were also implemented under the final rules. The final rules also revised the definition and calculation of Tier 1 capital, Total Capital and risk-weighted assets. The phase-in period for the final rules became effective on January 1, 2015 with full compliance with all of the final rules’ requirements phased in over a multi-year schedule which was fully phased-in on January 1, 2019.

At June 30, 2019, the Bank exceeded all minimum capital requirements under these capital guidelines.

37

CRITICAL ACCOUNTING POLICIES

The Corporation’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the industry in which it operates. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates or judgments. Certain policies inherently have a greater reliance on the use of estimates, and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates or judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by third-party sources, when available. When third-party information is not available, valuation adjustments are estimated in good faith by management primarily though the use of internal cash flow modeling techniques.

The most significant accounting policies followed by the Corporation are presented in Note 1 to the consolidated financial statements included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018. These policies, along with the disclosures presented in the other financial statement notes provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions and where changes in those estimates and assumptions could have a significant impact on the financial statements. Management has identified the following as critical accounting policies.

Allowance for loan losses. The Corporation considers that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The balance in the allowance for loan losses is determined based on management’s review and evaluation of the loan portfolio in relation to past loss experience, the size and composition of the portfolio, current economic events and conditions and other pertinent factors, including management’s assumptions as to future delinquencies, recoveries and losses. All of these factors may be susceptible to significant change. Among the many factors affecting the allowance for loan losses, some are quantitative while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers all of the potential factors that could potentially result in credit losses, the process includes subjective elements and may be susceptible to significant change. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses may be required that would adversely impact the Corporation’s financial condition or earnings in future periods.

Other-than-temporary impairment. Management evaluates debt securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic, market or other concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions and (4) whether the Corporation has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery.

Goodwill and intangible assets. Goodwill represents the excess cost over fair value of assets acquired in a business combination. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values. Goodwill is subject to ongoing periodic impairment tests based on the fair value of the reporting unit compared to its carrying amount, including goodwill. Impairment exists when a reporting unit’s carrying amount exceeds its fair value. At November 30, 2018, the required annual impairment test of goodwill was performed and no impairment existed as of the valuation date. If for any future period it is determined that there has been impairment in the carrying value of our goodwill balances, the Corporation will record a charge to earnings, which could have a material adverse effect on net income, but not risk based capital ratios.

38

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk for the Corporation consists primarily of interest rate risk exposure and liquidity risk. Since virtually all of the interest-earning assets and interest-bearing liabilities are at the Bank, virtually all of the interest rate risk and liquidity risk lies at the Bank level. The Bank is not subject to currency exchange risk or commodity price risk, and has no trading portfolio, and therefore, is not subject to any trading risk. In addition, the Bank does not participate in hedging transactions such as interest rate swaps and caps. Changes in interest rates will impact both income and expense recorded and also the market value of long-term interest-earning assets and interest-bearing liabilities. Interest rate risk and liquidity risk management is performed at the Bank level. Although the Bank has a diversified loan portfolio, loans outstanding to individuals and businesses depend upon the local economic conditions in the immediate trade area.

One of the primary functions of the Corporation’s asset/liability management committee is to monitor the level to which the balance sheet is subject to interest rate risk. The goal of the asset/liability committee is to manage the relationship between interest rate sensitive assets and liabilities, thereby minimizing the fluctuations in the net interest margin, which achieves consistent growth of net interest income during periods of changing interest rates.

Interest rate sensitivity is the result of differences in the amounts and repricing dates of the Bank’s rate sensitive assets and rate sensitive liabilities. These differences, or interest rate repricing “gap”, provide an indication of the extent that the Corporation’s net interest income is affected by future changes in interest rates. A gap is considered positive when the amount of interest rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities and is considered negative when the amount of interest rate-sensitive liabilities exceeds the amount of interest rate-sensitive assets. Generally, during a period of rising interest rates, a negative gap would adversely affect net interest income while a positive gap would result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would result in an increase in net interest income and a positive gap would adversely affect net interest income. The closer to zero that gap is maintained, generally, the lesser the impact of market interest rate changes on net interest income.

Assumptions about the timing and variability of cash flows are critical in gap analysis. Particularly important are the assumptions driving mortgage prepayments and the expected attrition of the core deposits portfolios. These assumptions are based on the Corporation’s historical experience, industry standards and assumptions provided by a federal regulatory agency, which management believes most accurately represents the sensitivity of the Corporation’s assets and liabilities to interest rate changes. As of June 30, 2019, the Corporation’s interest-earning assets maturing or repricing within one year totaled $235.5 million while the Corporation’s interest-bearing liabilities maturing or repricing within one-year totaled $185.1 million, providing an excess of interest-earning assets over interest-bearing liabilities of $50.4 million. At June 30, 2019, the percentage of the Corporation’s assets to liabilities maturing or repricing within one year was 127.2%.

For more information, see “Market Risk Management” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018.

Item 4. Controls and Procedures

The Corporation maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Corporation’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Corporation’s management, including its Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e).

As of June 30, 2019, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s CEO and CFO, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on the foregoing, the Corporation’s CEO and CFO concluded that the Corporation’s disclosure controls and procedures were effective. There have been no significant changes in the Corporation’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Corporation completed its evaluation.

There has been no change made in the Corporation’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

39

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Corporation is involved in various legal proceedings occurring in the ordinary course of business. It is the opinion of management, after consultation with legal counsel, that these matters will not materially affect the Corporation’s consolidated financial position or results of operations.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a) Not applicable.

(b) Not applicable.

Item 6. Exhibits

Exhibit 31.1	Rule 13a-14(a) Certification of Principal Executive Officer
Exhibit 31.2	Rule 13a-14(a) Certification of Principal Financial Officer
Exhibit 32.1	CEO Certification Pursuant to 18 U.S.C. Section 1350
Exhibit 32.2	CFO Certification Pursuant to 18 U.S.C. Section 1350
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

40

Signatures

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

	EMCLAIRE FINANCIAL CORP
Date: August 12, 2019	By:	/s/ William C. Marsh
	William C. Marsh
	Chairman of the Board,
	President and Chief Executive Officer
Date: August 12, 2019	By:	/s/ Amanda L. Engles
	Amanda L. Engles
	Chief Financial Officer
	Treasurer

41

EX-31.1

Exhibit 31.1

Certification of the Principal Executive Officer

(Pursuant to Rule 13a-14(a))

I, William C. Marsh, Chairman of the Board, President and Chief Executive Officer, certify that:

1. I have reviewed this Form 10-Q of Emclaire Financial Corp;

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 consolidated 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) Designed such internal controls over financial reporting or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and 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.

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: August 12, 2019	By:	/s/ William C. Marsh
	William C. Marsh
	Chairman of the Board,
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of the Principal Financial Officer

(Pursuant to Rule 13a-14(a))

I, Amanda L. Engles, Chief Financial Officer and Treasurer, certify that:

1. I have reviewed this Form 10-Q of Emclaire Financial Corp;

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 consolidated 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) Designed such internal controls over financial reporting or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and 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.

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: August 12, 2019	By:	/s/ Amanda L. Engles
	Amanda L. Engles
	Chief Financial Officer
	Treasurer

EX-32.1

Exhibit 32.1

CEO CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Emclaire Financial Corp (the Corporation) on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, William C. Marsh, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

/s/ William C. Marsh

William C. Marsh

Chairman of the Board,

President and Chief Executive Officer

August 12, 2019

Note: A signed original of this written statement has been provided to Emclaire Financial Corp and will be retained by the Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CFO CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Emclaire Financial Corp (the Corporation) on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Amanda L. Engles, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

/s/ Amanda L. Engles

Amanda L. Engles

Chief Financial Officer

August 12, 2019

Note: A signed original of this written statement has been provided to Emclaire Financial Corp and will be retained by the Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 12, 2019
Document Information [Line Items]
Entity Registrant Name	EMCLAIRE FINANCIAL CORP
Entity Central Index Key	0000858800
Trading Symbol	emcf
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		2,698,712
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common Stock

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Cash and due from banks	$ 3,074,000	$ 3,623,000
Interest earning deposits with banks	28,382,000	7,332,000
Cash and cash equivalents	31,456,000	10,955,000
Interest earning time deposits	9,958,000	6,738,000
Securities - available-for-sale	100,398,000	97,718,000
Securities - equity investments	16,000	7,000
Loans held for sale	134,000
Loans receivable, net of allowance for loan losses of $6,580 and $6,508	691,807,000	708,664,000
Federal bank stocks, at cost	5,764,000	6,351,000
Bank-owned life insurance	15,098,000	14,881,000
Accrued interest receivable	2,504,000	2,570,000
Premises and equipment, net	20,690,000	18,911,000
Goodwill	19,460,000	19,448,000
Core deposit intangible, net	1,333,000	1,423,000
Prepaid expenses and other assets	10,332,000	11,209,000
Total Assets	908,950,000	898,875,000
Deposits:
Non-interest bearing	149,138,000	148,893,000
Interest bearing	628,468,000	612,653,000
Total deposits	777,606,000	761,546,000
Short-term borrowed funds	2,050,000	12,850,000
Long-term borrowed funds	32,000,000	32,500,000
Accrued interest payable	643,000	495,000
Accrued expenses and other liabilities	12,294,000	11,476,000
Total Liabilities	824,593,000	818,867,000
Commitments and Contingent Liabilities
Stockholders' Equity:
Preferred stock, $1.00 par value, 3,000,000 shares authorized; Series C, non-cumulative preferred stock, $2.9 million liquidation value, 268,888 shares issued and outstanding; Series D, non-cumulative preferred stock, $1.3 million liquidation value, 133,705 shares issued and outstanding	4,206,000	4,206,000
Common stock, $1.25 par value, 12,000,000 shares authorized; 2,800,729 shares issued; 2,698,712 shares outstanding	3,501,000	3,501,000
Additional paid-in capital	46,581,000	46,401,000
Treasury stock, at cost; 102,017 shares	(2,114,000)	(2,114,000)
Retained earnings	36,756,000	34,371,000
Accumulated other comprehensive loss	(4,573,000)	(6,357,000)
Total Stockholders' Equity	84,357,000	80,008,000
Total Liabilities and Stockholders' Equity	$ 908,950,000	$ 898,875,000

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Allowance for loan losses	$ 6,580	$ 6,508
Preferred stock, par value (in dollars per share)	$ 1	$ 1
Preferred stock, authorized (in shares)	3,000,000	3,000,000
Common stock, par value (in dollars per share)	$ 1.25	$ 1.25
Common stock, authorized (in shares)	12,000,000	12,000,000
Common stock, issued (in shares)	2,800,729	2,800,729
Common stock, outstanding (in shares)	2,698,712	2,698,712
Treasury stock (in shares)	102,017	102,017
Series C Preferred Stock [Member]
Preferred stock, issued (in shares)	268,888	268,888
Preferred stock, outstanding (in shares)	268,888	268,888
Preferred stock, liquidation value	$ 2,900	$ 2,900
Series D Preferred Stock [Member]
Preferred stock, issued (in shares)	133,705	133,705
Preferred stock, outstanding (in shares)	133,705	133,705
Preferred stock, liquidation value	$ 1,300	$ 1,300

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Consolidated Statements of Net Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest and dividend income:
Loans receivable, including fees	$ 8,113,000	$ 6,678,000	$ 16,344,000	$ 13,015,000
Securities:
Taxable	530,000	439,000	1,022,000	847,000
Exempt from federal income tax	100,000	141,000	222,000	293,000
Federal bank stocks	112,000	93,000	212,000	157,000
Interest earning deposits with banks	99,000	83,000	146,000	117,000
Total interest and dividend income	8,954,000	7,434,000	17,946,000	14,429,000
Interest expense:
Deposits	1,636,000	1,102,000	3,107,000	2,093,000
Borrowed funds	236,000	141,000	537,000	299,000
Total interest expense	1,872,000	1,243,000	3,644,000	2,392,000
Net interest income	7,082,000	6,191,000	14,302,000	12,037,000
Provision for loan losses	270,000	300,000	450,000	680,000
Net interest income after provision for loan losses	6,812,000	5,891,000	13,852,000	11,357,000
Noninterest income:
Fees and service charges	536,000	463,000	1,091,000	900,000
Net realized gain (loss) on sales of securities	(1,000)		1,000	(7,000)
Net gain on sales of loans	38,000	2,000	52,000	24,000
Earnings on bank-owned life insurance	122,000	103,000	217,000	206,000
Other	436,000	481,000	827,000	824,000
Total noninterest income	1,131,000	1,049,000	2,188,000	1,947,000
Noninterest expense:
Compensation and employee benefits	2,787,000	2,521,000	5,704,000	4,974,000
Premises and equipment	840,000	758,000	1,726,000	1,528,000
Intangible asset amortization	45,000	68,000	90,000	136,000
Professional fees	165,000	254,000	386,000	470,000
Federal deposit insurance	131,000	151,000	267,000	288,000
Acquisition costs		358,000		358,000
Other	1,362,000	1,135,000	2,716,000	2,227,000
Total noninterest expense	5,330,000	5,245,000	10,889,000	9,981,000
Income before provision for income taxes	2,613,000	1,695,000	5,151,000	3,323,000
Provision for income taxes	473,000	282,000	929,000	548,000
Net income	2,140,000	1,413,000	4,222,000	2,775,000
Preferred stock dividends	91,000		91,000
Net income available to common stockholders	$ 2,049,000	$ 1,413,000	$ 4,131,000	$ 2,775,000
Basic earnings per common share (in dollars per share)	$ 0.76	$ 0.62	$ 1.53	$ 1.22
Diluted earnings per common share (in dollars per share)	$ 0.75	$ 0.62	$ 1.52	$ 1.21
Average common shares outstanding - basic (in shares)	2,698,712	2,271,139	2,698,712	2,271,139
Average common shares outstanding - diluted (in shares)	2,715,658	2,288,229	2,714,049	2,286,802

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Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income	$ 2,140	$ 1,413	$ 4,222	$ 2,775
Unrealized gains/(losses) on securities available-for-sale:
Unrealized holding gain (loss) arising during the period	1,152	(299)	2,259	(1,591)
Reclassification adjustment for (gains) losses included in net income	1		(1)	7
Net period change	1,153	(299)	2,258	(1,584)
Tax effect	(242)	63	(474)	333
Net of tax	911	(236)	1,784	(1,251)
Comprehensive income	$ 3,051	$ 1,177	$ 6,006	$ 1,524

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities
Net income	$ 4,222	$ 2,775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment	669	574
Provision for loan losses	450	680
Amortization/accretion of premiums, discounts and deferred costs and fees, net	109	223
Amortization of operating lease right-of-use assets	65
Amortization of intangible assets and mortgage servicing rights	121	162
Realized (gain) losses on sales of debt securities, net	(1)	7
Change in fair value of equity securities, including realized gains	(10)	(38)
Net gains on sales of loans	(52)	(24)
Net loss on foreclosed real estate	32	44
Net gain on sale of premises and equipment	(11)	(25)
Loans originated for sale	(2,395)	(2,038)
Proceeds from the sale of loans originated for sale	2,313	2,566
Write-down of foreclosed real estate	35	11
Stock compensation expense	180	150
Increase in bank-owned life insurance, net	(217)	(166)
Decrease (increase) in accrued interest receivable	66	(33)
Increase in prepaid expenses and other assets	(9)	(97)
Increase (decrease) in accrued interest payable	148	(3)
Decrease in accrued expenses and other liabilities	(1,005)	(122)
Net cash provided by operating activities	4,710	4,646
Cash flows from investing activities
Loan originations and principal collections, net	16,035	(11,427)
Available-for-sale securities:
Sales	12,882	6,795
Maturities, repayments and calls	8,240	4,810
Purchases	(21,602)	(12,555)
Net change in federal bank stocks	587	259
Net increase in interest earning time deposits	(3,220)	(2,540)
Proceeds from the sale of bank premises and equipment	251	155
Purchases of premises and equipment	(1,111)	(332)
Proceeds from the sale of foreclosed real estate	625	165
Net cash provided by (used in) investing activities	12,687	(14,670)
Cash flows from financing activities
Net increase in deposits	16,060	30,908
Repayments on long-term debt	(500)	(5,500)
Net change in short-term borrowings	(10,800)	(450)
Dividends paid	(1,656)	(1,272)
Net cash provided by financing activities	3,104	23,686
Net increase in cash and cash equivalents	20,501	13,662
Cash and cash equivalents at beginning of period	10,955	10,176
Cash and cash equivalents at end of period	31,456	23,838
Supplemental information:
Interest paid	3,496	2,395
Income taxes paid	585	420
Supplemental noncash disclosure:
Transfers from loans to foreclosed real estate	324	$ 526
Initial recognition of operating lease right-of-use assets	1,642
Initial recognition of operating lease liabilities	$ 1,858

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Preferred Stock [Member]	Preferred Stock Including Additional Paid in Capital [Member]	Common Stock [Member]	Common Stock Including Additional Paid in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance at Dec. 31, 2017			$ 2,966	$ 31,031	$ (2,114)	$ 32,726	$ (5,518)	$ 59,091
Cumulative effect of change in accounting principle, net of tax at Dec. 31, 2017						187	(187)
Balance, as adjusted at Dec. 31, 2017			2,966	31,031	(2,114)	32,913	(5,705)	59,091
Net income						1,362		1,362
Other comprehensive income (loss)							(1,015)	(1,015)
Stock compensation expense				75				75
Cash dividends declared on common stock						(636)		(636)
Balance at Mar. 31, 2018			2,966	31,106	(2,114)	33,639	(6,720)	58,877
Balance at Dec. 31, 2017			2,966	31,031	(2,114)	32,726	(5,518)	59,091
Cumulative effect of change in accounting principle, net of tax at Dec. 31, 2017						187	(187)
Balance, as adjusted at Dec. 31, 2017			2,966	31,031	(2,114)	32,913	(5,705)	59,091
Net income								2,775
Other comprehensive income (loss)							(1,251)
Balance at Jun. 30, 2018			2,966	31,181	(2,114)	34,416	(6,956)	59,493
Balance at Mar. 31, 2018			2,966	31,106	(2,114)	33,639	(6,720)	58,877
Net income						1,413		1,413
Other comprehensive income (loss)							(236)	(236)
Stock compensation expense				75				75
Cash dividends declared on common stock						(636)		(636)
Balance at Jun. 30, 2018			2,966	31,181	(2,114)	34,416	(6,956)	59,493
Balance at Dec. 31, 2018	421	3,785	3,501	46,401	(2,114)	34,371	(6,357)	80,008
Cumulative effect of change in accounting principle, net of tax at Dec. 31, 2018						(181)		(181)
Balance, as adjusted at Dec. 31, 2018	421	3,785	3,501	46,401	(2,114)	34,190	(6,357)	79,827
Net income						2,082		2,082
Other comprehensive income (loss)							873	873
Stock compensation expense				90				90
Cash dividends declared on common stock						(783)		(783)
Balance at Mar. 31, 2019	421	3,785	3,501	46,491	(2,114)	35,489	(5,484)	82,089
Balance at Dec. 31, 2018	421	3,785	3,501	46,401	(2,114)	34,371	(6,357)	80,008
Cumulative effect of change in accounting principle, net of tax at Dec. 31, 2018						(181)		(181)
Balance, as adjusted at Dec. 31, 2018	421	3,785	3,501	46,401	(2,114)	34,190	(6,357)	79,827
Net income								4,222
Other comprehensive income (loss)							1,784
Balance at Jun. 30, 2019	421	3,785	3,501	46,581	(2,114)	36,756	(4,573)	84,357
Balance at Mar. 31, 2019	421	3,785	3,501	46,491	(2,114)	35,489	(5,484)	82,089
Net income						2,140		2,140
Other comprehensive income (loss)							911	911
Stock compensation expense				90				90
Cash dividends declared on common stock						(782)		(782)
Cash dividends declared on preferred stock						(91)		(91)
Balance at Jun. 30, 2019	$ 421	$ 3,785	$ 3,501	$ 46,581	$ (2,114)	$ 36,756	$ (4,573)	$ 84,357

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Cash dividends declared on common stock (in dollars per share)	$ 0.29	$ 0.29	$ 0.28	$ 0.28

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Note 1 - Nature of Operations and Basis of Presentation

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Nature of Operations and Basis of Presentation

Emclaire Financial Corp (the Corporation) is a Pennsylvania corporation and the holding company of The Farmers National Bank of Emlenton (the Bank) and Emclaire Settlement Services, LLC (the Title Company). The Corporation provides a variety of financial services to individuals and businesses through its offices in western Pennsylvania and northern West Virginia. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are residential and commercial mortgages, commercial business loans and consumer loans.

The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries, the Bank and the Title Company. All significant intercompany transactions and balances have been eliminated in preparing the consolidated financial statements.

The accompanying unaudited consolidated financial statements for the interim periods include all adjustments, consisting of normal recurring accruals, which are necessary, in the opinion of management, to fairly reflect the Corporation’s consolidated financial position and results of operations. Additionally, these consolidated financial statements for the interim periods have been prepared in accordance with instructions for the Securities and Exchange Commission’s (SEC’s) Form

10

-Q and Article

10

of Regulation S-

X

and therefore do

not

include all information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (GAAP). For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended

December 31, 2018,

as contained in the Corporation’s Annual Report on Form

10

-K for the year ended

December 31, 2018

filed with the SEC.

The balance sheet at

December 31, 2018

has been derived from the audited financial statements at that date but does

not

include all the information and footnotes required by GAAP for complete financial statements.

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim quarterly or year-to-date periods are

not

necessarily indicative of the results that

may

be expected for the entire year or any other period. Certain amounts previously reported

may

have been reclassified to conform to the current year’s financial statement presentation.

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Note 2 - Earnings Per Common Share

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

2. Earnings per Common Share

Basic earnings per common share (EPS) excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of additional potential common shares for assumed issuance of restricted stock and shares issued under stock options.

The factors used in the Corporation’s earnings per common share computation follow:

(Dollar amounts in thousands, except for per share amounts)	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
Earnings per common share
Net income	$	2,140	$	1,413	$	4,222	$	2,775
Less: Preferred stock dividends		91		—		91		—
Net income available to common stockholders	$	2,049	$	1,413	$	4,131	$	2,775
Average common shares outstanding		2,698,712		2,271,139		2,698,712		2,271,139
Add: Dilutive effects of restricted stock awards		16,946		17,090		15,337		15,663
Average shares and dilutive potential common shares		2,715,658		2,288,229		2,714,049		2,286,802
Basic earnings per common share	$	0.76	$	0.62	$	1.53	$	1.22
Diluted earnings per common share	$	0.75	$	0.62	$	1.52	$	1.21
Restricted stock awards not considered in computing earnings per share because they were antidulitive		—		—		—		—

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Note 3 - Securities

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

3. Securities

Equity Securities

The Corporation held equity securities with fair values of

$16,000

and

$7,000

 at

June 30, 2019

and

December 31, 2018,

respectively. Beginning

January 1, 2018,

with the adoption of ASU

2016

-

01,

changes in the fair value of these securities are included in other income on the consolidated statements of net income as opposed to accumulated other comprehensive loss on the consolidated balance sheets. During the 

three

and

six

months ended

June 30, 2019,

the Corporation recognized a gain of

$0

and

$10,000,

respectively, on equity securities held at

June 

30,

2019,

compared to a net gain of

$81,000

and a net loss of

$6,000,

respectively, for the same periods in

2018.

 During the

three

and

six

months ended

June 30, 2019,

the Corporation did

not

sell any equity securities.  During the

three

and

six

months ended

June 30, 2018,

the Corporation sold

$266,000

and

$1.2

million of equity securities, respectively, with a realized net loss of

$16,000

and realized net gain of

$43,000,

respectively.

Debt Securities - Available-for-Sale

The following table summarizes the Corporation’s debt securities as of

June 30, 2019

and

December 31, 2018:

(Dollar amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2019:
U.S. Treasury and federal agency	$	4,527	$	2	$	(10	)	$	4,519
U.S. government sponsored entities and agencies		12,093		53		(42	)		12,104
U.S. agency mortgage-backed securities: residential		40,692		362		(13	)		41,041
U.S. agency collateralized mortgage obligations: residential		22,958		64		(314	)		22,708
State and political subdivisions		10,786		151		(1	)		10,936
Corporate debt securities		9,005		93		(8	)		9,090
Total securities available-for-sale	$	100,061	$	725	$	(388	)	$	100,398
December 31, 2018:
U.S. Treasury and federal agency	$	4,532	$	—	$	(87	)	$	4,445
U.S. government sponsored entities and agencies		17,052		30		(299	)		16,783
U.S. agency mortgage-backed securities: residential		27,666		—		(490	)		27,176
U.S. agency collateralized mortgage obligations: residential		19,440		34		(810	)		18,664
State and political subdivisions		22,943		13		(224	)		22,732
Corporate debt securities		8,006		9		(97	)		7,918
Total securities available-for-sale	$	99,639	$	86	$	(2,007	)	$	97,718

The following table summarizes scheduled maturities of the Corporation’s debt securities as of

June 30, 2019.

Expected maturities

may

differ from contractual maturities because issuers

may

have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities and collateralized mortgage obligations are

not

due at a single maturity and are shown separately.

(Dollar amounts in thousands)	Available-for-sale
	Amortized Cost		Fair Value
Due in one year or less	$	1,499	$	1,492
Due after one year through five years		21,110		21,149
Due after five through ten years		12,065		12,230
Due after ten years		1,737		1,778
Mortgage-backed securities: residential		40,692		41,041
Collateralized mortgage obligations: residential		22,958		22,708
Total securities available-for-sale	$	100,061	$	100,398

Information pertaining to debt securities with gross unrealized losses at

June 30, 2019

and

December 31, 2018,

aggregated by investment category and length of time that individual securities have been in a continuous loss position are included in the table below:

(Dollar amounts in thousands)	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
June 30, 2019:
U.S. Treasury and federal agency	$	—	$	—		$	3,507	$	(10	)	$	3,507	$	(10	)
U.S. government sponsored entities and agencies		—		—			7,053		(42	)		7,053		(42	)
U.S. agency mortgage-backed securities: residential		—		—			3,743		(13	)		3,743		(13	)
U.S. agency collateralized mortgage obligations: residential		3,796		(31	)		15,939		(283	)		19,735		(314	)
State and political subdivisions		—		—			224		(1	)		224		(1	)
Corporate debt securities		—		—			994		(8	)		994		(8	)
Total	$	3,796	$	(31	)	$	31,460	$	(357	)	$	35,256	$	(388	)
December 31, 2018:
U.S. Treasury and federal agency	$	—	$	—		$	4,445	$	(87	)	$	4,445	$	(87	)
U.S. government sponsored entities and agencies		2,472		(30	)		10,337		(269	)		12,809		(299	)
U.S. agency mortgage-backed securities: residential		19,483		(297	)		7,693		(193	)		27,176		(490	)
U.S. agency collateralized mortgage obligations: residential		1,443		(5	)		15,388		(805	)		16,831		(810	)
State and political subdivisions		7,061		(67	)		10,083		(157	)		17,144		(224	)
Corporate debt securities		962		(38	)		2,448		(59	)		3,410		(97	)
Total	$	31,421	$	(437	)	$	50,394	$	(1,570	)	$	81,815	$	(2,007	)

Gains and losses on sales of securities for the

three

and 

six

months ended

June 30,

were as follows:

(Dollar amounts in thousands)	For the three months ended June 30,					For the six months ended June 30,
	2019			2018		2019			2018
Proceeds	$	8,907		$	264	$	12,882		$	6,795
Gains		29			—		35			14
Losses		(30	)		—		(34	)		(21	)
Tax provision related to losses		—			—		—			(1	)

Management evaluates debt securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic, market or other conditions warrant such evaluation. Consideration is given to: (

1

) the length of time and the extent to which the fair value has been less than cost, (

2

) the financial condition and near-term prospects of the issuer, (

3

) whether the market decline was affected by macroeconomic conditions and (

4

) whether the Corporation has the intent to sell the security or more likely than

not

will be required to sell the security before recovery of its amortized cost basis. If the Corporation intends to sell an impaired security, or if it is more likely than

not

the Corporation will be required to sell the security before its anticipated recovery, the Corporation records an other-than-temporary loss in an amount equal to the entire difference between fair value and amortized cost. Otherwise, only the credit portion of the estimated loss on debt securities is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

There were

44

 debt securities in an unrealized loss position as of 

June 30, 2019,

all of which were in an unrealized loss position for more than

12

months. Of these

42

 securities,

25

 were collateralized mortgage obligations (issued by U.S. government sponsored entities),

six

 were U.S. government sponsored entities and agency securities,

four

 were mortgage-backed securities,

four

 were U.S. Treasury securities, 

two

 were corporate securities and

one

was a state and political subdivision security. The unrealized losses associated with these securities were

not

due to the deterioration in the credit quality of the issuer that would likely result in the non-collection of contractual principal and interest, but rather have been caused by a rise in interest rates from the time the securities were purchased. Based on that evaluation and other general considerations, and given that the Corporation’s current intention is

not

to sell any impaired securities and it is more likely than

not

it will

not

be required to sell these securities before the recovery of their amortized cost basis, the Corporation does

not

consider these debt securities with unrealized losses as of 

June 30, 2019 

to be other-than-temporarily impaired.

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Note 4 - Loans Receivable and Related Allowance for Loan Losses

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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

4. Loans Receivable and Related Allowance for Loan Losses

The Corporation’s loans receivable as of the respective dates are summarized as follows:

(Dollar amounts in thousands)	June 30, 2019		December 31, 2018
Mortgage loans on real estate:
Residential first mortgages	$	290,676	$	295,405
Home equity loans and lines of credit		102,035		103,752
Commercial real estate		228,040		238,734
Total real estate loans		620,751		637,891
Other loans:
Commercial business		66,942		66,009
Consumer		10,694		11,272
Total other loans		77,636		77,281
Total loans, gross		698,387		715,172
Less allowance for loan losses		6,580		6,508
Total loans, net	$	691,807	$	708,664

Included in total loans above are net deferred costs of

$2.2

 million and

$2.2

 million at

June 30, 2019

and

December 31, 2018,

respectively.

An allowance for loan losses (ALL) is maintained to absorb probable incurred losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience and the amount of nonperforming loans.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

The allowance for loan losses is based on estimates and actual losses

may

vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

At

June 30, 2019,

there was

no

allowance for loan losses allocated to loans acquired from United American Savings Bank (

2016

), Northern Hancock Bank and Trust Co. (

2017

) or Community First Bancorp, Inc (

2018

).

The following table details activity in the ALL and the recorded investment by portfolio segment based on impairment method:

(Dollar amounts in thousands)	Residential Mortgages			Home Equity & Lines of Credit			Commercial Real Estate			Commercial Business			Consumer			Total
Three months ended June 30, 2019:
Allowance for loan losses:
Beginning Balance	$	2,256		$	650		$	3,043		$	635		$	55		$	6,639
Charge-offs		(194	)		(30	)		(23	)		(63	)		(36	)		(346	)
Recoveries		—			—			13			—			4			17
Provision		163			22			10			43			32			270
Ending Balance	$	2,225		$	642		$	3,043		$	615		$	55		$	6,580
Six months ended June 30, 2019:
Allowance for loan losses:
Beginning Balance	$	2,198		$	648		$	3,106		$	500		$	56		$	6,508
Charge-offs		(204	)		(34	)		(28	)		(134	)		(75	)		(475	)
Recoveries		40			1			28			—			28			97
Provision		191			27			(63	)		249			46			450
Ending Balance	$	2,225		$	642		$	3,043		$	615		$	55		$	6,580
At June 30, 2019:
Ending ALL balance attributable to loans:
Individually evaluated for impairment	$	6		$	—		$	—		$	—		$	—		$	6
Acquired loans collectively evaluated for impairment		—			—			—			—			—			—
Originated loans collectively evaluated for impairment		2,219			642			3,043			615			55			6,574
Total	$	2,225		$	642		$	3,043		$	615		$	55		$	6,580
Total loans:
Individually evaluated for impairment	$	376		$	5		$	2,478		$	238		$	—		$	3,097
Acquired loans collectively evaluated for impairment		67,181			12,261			49,018			9,493			2,506			140,459
Originated loans collectively evaluated for impairment		223,119			89,769			176,544			57,211			8,188			554,831
Total	$	290,676		$	102,035		$	228,040		$	66,942		$	10,694		$	698,387
At December 31, 2018:
Ending ALL balance attributable to loans:
Individually evaluated for impairment	$	12		$	—		$	—		$	—		$	—		$	12
Acquired loans collectively evaluated for impairment		—			—			—			—			—			—
Originated loans collectively evaluated for impairment		2,186			648			3,106			500			56			6,496
Total	$	2,198		$	648		$	3,106		$	500		$	56		$	6,508
Total loans:
Individually evaluated for impairment	$	389		$	6		$	34		$	39		$	—		$	468
Acquired loans collectively evaluated for impairment		72,654			13,750			56,690			12,974			3,306			159,374
Originated loans collectively evaluated for impairment		222,362			89,996			182,010			52,996			7,966			555,330
Total	$	295,405		$	103,752		$	238,734		$	66,009		$	11,272		$	715,172
Three months ended June 30, 2018:
Allowance for loan losses:
Beginning Balance	$	1,919		$	651		$	2,751		$	560		$	54		$	5,935
Charge-offs		—			(63	)		(33	)		—			(51	)		(147	)
Recoveries		—			10			16			1			3			30
Provision		114			52			148			(62	)		48			300
Ending Balance	$	2,033		$	650		$	2,882		$	499		$	54		$	6,118
Six months ended June 30, 2018:
Allowance for loan losses:
Beginning Balance	$	2,090		$	646		$	2,753		$	585		$	53		$	6,127
Charge-offs		(61	)		(83	)		(418	)		—			(170	)		(732	)
Recoveries		3			11			18			2			9			43
Provision		1			76			529			(88	)		162			680
Ending Balance	$	2,033		$	650		$	2,882		$	499		$	54		$	6,118

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was

not

necessary as of

June 30, 2019:

(Dollar amounts in thousands)
	Impaired Loans with Specific Allowance
	As of June 30, 2019						For the three months ended June 30, 2019
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	73	$	73	$	6	$	73	$	1	$	1
Home equity and lines of credit		5		5		—		5		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		31		—		—
Consumer		—		—		—		—		—		—
Total	$	78	$	78	$	6	$	109	$	1	$	1

	For the six months ended June 30, 2019
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	73	$	2	$	2
Home equity and lines of credit		6		—		—
Commercial real estate		—		—		—
Commercial business		21		—		—
Consumer		—		—		—
Total	$	100	$	2	$	2

	Impaired Loans with No Specific Allowance
	As of June 30, 2019				For the three months ended June 30, 2019
	Unpaid Principal Balance		Recorded Investment		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	378	$	303	$	305	$	—	$	—
Home equity and lines of credit		—		—		—		—		—
Commercial real estate		2,478		2,478		1,255		52		—
Commercial business		238		238		139		6		1
Consumer		—		—		—		—		—
Total	$	3,094	$	3,019	$	1,699	$	58	$	1

	For the six months ended June 30, 2019
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	308	$	1	$	1
Home equity and lines of credit		—		—		—
Commercial real estate		848		53		1
Commercial business		106		7		2
Consumer		—		—		—
Total	$	1,262	$	61	$	4

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was

not

necessary as of 

December 31, 2018:

(Dollar amounts in thousands)
	Impaired Loans with Specific Allowance
	As of December 31, 2018						For the year ended December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	74	$	74	$	12	$	74	$	2	$	2
Home equity and lines of credit		6		6		—		7		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Total	$	80	$	80	$	12	$	81	$	2	$	2

	Impaired Loans with No Specific Allowance
	As of December 31, 2018				For the year ended December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	427	$	315	$	334	$	5	$	5
Home equity and lines of credit		—		—		—		—		—
Commercial real estate		34		34		768		156		73
Commercial business		39		39		248		74		74
Consumer		—		—		—		—		—
Total	$	500	$	388	$	1,350	$	235	$	152

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was

not

necessary as of  

June 30, 2018:

(Dollar amounts in thousands)
	Impaired Loans with Specific Allowance
	As of June 30, 2018						For the three months ended June 30, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	74	$	74	$	7	$	75	$	1	$	1
Home equity and lines of credit		7		7		—		8		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Total	$	81	$	81	$	7	$	83	$	1	$	1

	For the six months ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	75	$	2	$	2
Home equity and lines of credit		7		—		—
Commercial real estate		—		—		—
Commercial business		—		—		—
Consumer		—		—		—
Total	$	82	$	2	$	2

	Impaired Loans with No Specific Allowance
	As of June 30, 2018				For the three months ended June 30, 2018
	Unpaid Principal Balance		Recorded Investment		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	446	$	334	$	339	$	2	$	2
Home equity and lines of credit		—		—		—		—		—
Commercial real estate		43		43		190		73		73
Commercial business		39		39		297		41		41
Consumer		—		—		—		—		—
Total	$	528	$	416	$	826	$	116	$	116

	For the six months ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	343	$	2	$	2
Home equity and lines of credit		—		—		—
Commercial real estate		431		73		73
Commercial business		387		42		42
Consumer		—		—		—
Total	$	1,161	$	117	$	117

Unpaid principal balance includes any loans that have been partially charged off but

not

forgiven. Accrued interest is

not

included in the recorded investment in loans presented above or in the tables that follow based on the amounts

not

being material.

Troubled debt restructurings (TDR).

The Corporation has certain loans that have been modified in order to maximize collection of loan balances. If, for economic or legal reasons related to the customer’s financial difficulties, management grants a concession compared to the original terms and conditions of the loan that it would

not

have otherwise considered, the modified loan is classified as a TDR. Concessions related to TDRs generally do

not

include forgiveness of principal balances. The Corporation generally does

not

extend additional credit to borrowers with loans classified as TDRs.

At

June 30, 2019

and

December 31, 2018

, the Corporation had

$450,000

and

$394,000,

respectively, of loans classified as TDRs, which are included in impaired loans above. The Corporation had allocated

$6,000

and

$12,000

of specific allowance for these loans at

June 30, 2019

and

December 31, 2018

, respectively.

During the

three

and

six

months ended

June 30, 2019,

the Corporation modified the interest rate and extended the payment amortization on

one

commercial real estate loan with a recorded investment of

$73,000.

 At

June 30, 2019

, the Corporation did

not

have any specific allowance for loan losses allocated to this specific loan. During the

three

and

six

months ended

June 30, 2018,

the Corporation did

not

modify any loans as TDRs.

A loan is considered to be in payment default once it is

30

days contractually past due under the modified terms. During the

three

and

six

months ended

June 30, 2019

and

2018,

the Corporation did

not

have any loans which were modified

as TDRs for which there was a payment default within

twelve

months following the modification.

Credit Quality Indicators.

Management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.

Commercial real estate and commercial business loans

not

identified as impaired are evaluated as risk rated pools of loans utilizing a risk rating practice that is supported by a quarterly special asset review. In this review process, strengths and weaknesses are identified, evaluated and documented for each criticized and classified loan and borrower, strategic action plans are developed, risk ratings are confirmed and the loan’s performance status is reviewed.

Management has determined certain portions of the loan portfolio to be homogeneous in nature and assigns like reserve factors for the following loan pool types: residential real estate, home equity loans and lines of credit, and consumer installment and personal lines of credit.

The reserve allocation for risk rated loan pools is developed by applying the following factors:

Historic

: Management utilizes a computer model to develop the historical net charge-off experience which is used to formulate the assumptions employed in the migration analysis applied to estimate losses in the portfolio. Outstanding balance and charge-off information are input into the model and historical loss migration rate assumptions are developed to apply to pass, special mention, substandard and doubtful risk rated loans. A

twelve

-quarter rolling weighted-average is utilized to estimate probable incurred losses in the portfolios.

Qualitative

: Qualitative adjustment factors for pass, special mention, substandard and doubtful ratings are developed and applied to risk rated loans to allow for: quality of lending policies and procedures; national and local economic and business conditions; changes in the nature and volume of the portfolio; experiences, ability and depth of lending management; changes in trends, volume and severity of past due, nonaccrual and classified loans and loss and recovery trends; quality of loan review systems; concentrations of credit and other external factors.

Management uses the following definitions for risk ratings:

Pass

: Loans classified as pass typically exhibit good payment performance and have underlying borrowers with acceptable financial trends where repayment capacity is evident. These borrowers typically would have a sufficient cash flow that would allow them to weather an economic downturn and the value of any underlying collateral could withstand a moderate degree of depreciation due to economic conditions.

Special Mention

: Loans classified as special mention are characterized by potential weaknesses that could jeopardize repayment as contractually agreed. These loans

may

exhibit adverse trends such as increasing leverage, shrinking profit margins and/or deteriorating cash flows. These borrowers would inherently be more vulnerable to the application of economic pressures.

Substandard

: Loans classified as substandard exhibit weaknesses that are well-defined to the point that repayment is jeopardized. Typically, the Corporation is

no

longer adequately protected by both the apparent net worth and repayment capacity of the borrower.

Doubtful

: Loans classified as doubtful have advanced to the point that collection or liquidation in full, on the basis of currently ascertainable facts, conditions and value, is highly questionable or improbable.

The following table presents the classes of the loan portfolio summarized by the aggregate pass and the criticized categories of special mention, substandard and doubtful within the Corporation’s internal risk rating system as of

June 30, 2019

and

December 31, 2018:

(Dollar amounts in thousands)
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2019:
Residential first mortgages	$	289,060	$	—	$	—	$	1,616	$	—	$	290,676
Home equity and lines of credit		101,244		—		—		791		—		102,035
Commercial real estate		—		208,494		5,292		14,254		—		228,040
Commercial business		—		63,518		423		3,001		—		66,942
Consumer		10,567		—		—		127		—		10,694
Total loans	$	400,871	$	272,012	$	5,715	$	19,789	$	—	$	698,387
December 31, 2018:
Residential first mortgages	$	293,919	$	—	$	—	$	1,486	$	—	$	295,405
Home equity and lines of credit		102,869		—		—		883		—		103,752
Commercial real estate		—		222,335		5,942		10,457		—		238,734
Commercial business		—		62,022		542		3,445		—		66,009
Consumer		11,157		—		—		115		—		11,272
Total loans	$	407,945	$	284,357	$	6,484	$	16,386	$	—	$	715,172

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonperforming loans as of

June 30, 2019

and

December 31, 2018:

(Dollar amounts in thousands)
	Performing						Nonperforming
	Accruing Loans Not Past Due		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccrual		Total
June 30, 2019:
Residential first mortgages	$	285,753	$	2,215	$	1,284	$	221	$	1,203	$	290,676
Home equity and lines of credit		100,495		586		257		—		697		102,035
Commercial real estate		223,783		688		58		55		3,456		228,040
Commercial business		66,626		59		19		—		238		66,942
Consumer		10,445		101		20		—		128		10,694
Total loans	$	687,102	$	3,649	$	1,638	$	276	$	5,722	$	698,387
December 31, 2018:
Residential first mortgages	$	289,732	$	3,586	$	747	$	485	$	855	$	295,405
Home equity and lines of credit		101,920		707		351		287		487		103,752
Commercial real estate		232,865		5,013		231		19		606		238,734
Commercial business		65,538		50		247		—		174		66,009
Consumer		10,961		160		36		—		115		11,272
Total loans	$	701,016	$	9,516	$	1,612	$	791	$	2,237	$	715,172

The following table presents the Corporation’s nonaccrual loans by aging category as of

June 30, 2019

and

December 31, 2018:

(Dollar amounts in thousands)
	Not Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Total
June 30, 2019:
Residential first mortgages	$	259	$	—	$	73	$	871	$	1,203
Home equity and lines of credit		70		—		—		627		697
Commercial real estate		104		2,677		—		675		3,456
Commercial business		—		40		—		198		238
Consumer		—		—		—		128		128
Total loans	$	433	$	2,717	$	73	$	2,499	$	5,722
December 31, 2018:
Residential first mortgages	$	335	$	—	$	74	$	446	$	855
Home equity and lines of credit		6		—		—		481		487
Commercial real estate		111		265		—		230		606
Commercial business		—		—		39		135		174
Consumer		—		—		—		115		115
Total loans	$	452	$	265	$	113	$	1,407	$	2,237

XML

Note 5 - Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

5. Goodwill and Intangible Assets

The following table summarizes the Corporation’s acquired goodwill and intangible assets as of

June 30, 2019

and

December 31, 2018: 

(Dollar amounts in thousands)	June 30, 2019				December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill	$	19,460	$	—	$	19,448	$	—
Core deposit intangibles		5,634		4,301		5,634		4,211
Total	$	25,094	$	4,301	$	25,082	$	4,211

Goodwill resulted from

five

 acquisitions. Goodwill represents the excess of the total purchase price paid for the acquisitions over the fair value of the identifiable assets acquired, net of the fair value of the liabilities assumed. Goodwill is

not

amortized but is evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value

may

not

be recoverable. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. The Corporation has selected

November 30

as the date to perform the annual impairment test.

No

goodwill impairment charges were recorded during

2018

or in the

first

six

months of

2019.

The core deposit intangible asset, resulting from

three

acquisitions, is amortized over a weighted average estimated life of the related deposits and is

not

estimated to have a significant residual value. During the

three

and

six

months ended

June 30, 2019,

the Corporation recorded intangible amortization expense totaling

$45,000

and

$90,000,

respectively, compared to

$68,000

and

$136,000,

respectively, for the same periods in

2018.

XML

Note 6 - Stock Compensation Plan

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

6. Stock Compensation Plan

In

April 2014,

the Corporation adopted the

2014

Stock Incentive Plan (the

2014

Plan), which was approved by shareholders and permits the grant of restricted stock awards and options to its directors, officers and employees for up to

176,866

shares of common stock. As of

June 30, 2019,

37,783

 shares of restricted stock and

88,433

stock options remain available for issuance under the plan.

Incentive stock options, non-incentive or compensatory stock options and share awards

may

be granted under the Plan. The exercise price of each option shall at least equal the market price of a share of common stock on the date of grant and have a contractual term of

ten

years. Options shall vest and become exercisable at the rate, to the extent and subject to such limitations as

may

be specified by the Corporation. Compensation cost related to share-based payment transactions must be recognized in the financial statements with measurement based upon the fair value of the equity instruments issued.

At

June 30, 2019,

there were 

no

options that were granted or outstanding under the Plan.

A summary of the status of the Corporation’s nonvested restricted stock awards as of

June 30, 2019,

and changes during the period then ended is presented below:

	Shares		Weighted-Average Grant-date Fair Value
Nonvested at January 1, 2019		37,250	$	29.94
Granted		—		—
Vested		—		—
Forfeited		—		—
Nonvested as of June 30, 2019		37,250	$	29.94

For the

three

and

six

months ended

June 30, 2019,

the Corporation recognized stock compensation expense of

$90,000

 and

$180,000,

respectively, compared to

$75,000

and

$150,000,

respectively for the same periods in

2018.

 As of

June 30, 2019,

there was

$604,000

of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over the next

three

years. It is the Corporation’s policy to issue shares on the vesting date for restricted stock awards. Unvested restricted stock awards do

not

receive dividends declared by the Corporation.

XML

Note 7 - Fair Value

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

7. Fair Value

Management uses its best judgment in estimating the fair value of the Corporation’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are

not

necessarily indicative of the amounts the Corporation could have realized in a sale transaction or exit price on the date indicated. The estimated fair value amounts have been measured as of their respective year-ends and have

not

been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates

may

be different than the amounts reported.

Assets measured at fair value on a recurring basis. 

The Corporation used the following methods and significant assumptions to estimate the fair value of the following assets:

Debt securities available-for-sale, equity securities

– The fair value of all investment securities are based upon the assumptions market participants would use in pricing the security. If available, investment securities are determined by quoted market prices (Level

1

). Level

1

includes U.S. Treasury, federal agency securities and certain equity securities. For investment securities where quoted market prices are

not

available, fair values are calculated based on market prices on similar securities (Level

2

). Level

2

includes U.S. Government sponsored entities and agencies, mortgage-backed securities, collateralized mortgage obligations, state and political subdivision securities and certain corporate debt securities. For investment securities where quoted prices or market prices of similar securities are

not

available, fair values are calculated by using unobservable inputs (Level

3

) and

may

include certain corporate debt and equity securities held by the Corporation.

For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy are as follows:

(Dollar amounts in thousands)			(Level 1)		(Level 2)		(Level 3)
Description	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
June 30, 2019:
Securities available-for-sale
U.S. Treasury and federal agency	$	4,519	$	4,519	$	—	$	—
U.S. government sponsored entities and agencies		12,104		—		12,104		—
U.S. agency mortgage-backed securities: residential		41,041		—		41,041		—
U.S. agency collateralized mortgage obligations: residential		22,708		—		22,708		—
State and political subdivision		10,936		—		10,936		—
Corporate debt securities		9,090		—		6,090		3,000
Total available-for-sale securities	$	100,398	$	4,519	$	92,879	$	3,000
Equity securities	$	16	$	16	$	—	$	—
December 31, 2018:
Securities available-for-sale
U.S. Treasury and federal agency	$	4,445	$	4,445	$	—	$	—
U.S. government sponsored entities and agencies		16,783		—		16,783		—
U.S. agency mortgage-backed securities: residential		27,176		—		27,176		—
U.S. agency collateralized mortgage obligations: residential		18,664		—		18,664		—
State and political subdivisions		22,732		—		22,732		—
Corporate debt securities		7,918		—		4,418		3,500
Total available-for-sale securities	$	97,718	$	4,445	$	89,773	$	3,500
Equity securities	$	7	$	7	$	—	$	—

The Corporation’s policy is to transfer assets or liabilities from

one

level to another when the methodology to obtain the fair value changes such that there are more or fewer unobservable inputs as of the end of the reporting period. During the 

three

and

six

months ended

June 30, 2019,

the Corporation reclassified

one

corporate security from Level

3

to Level

2.

 For the same period in

2018

, the Corporation reclassified a restricted bank stock from the equity security portfolio to other assets and certain corporate securities from Level

3

to Level

2.

  Also during

2018,

the Corporation sold

$25,000

in equity securities from Level

3.

The following table presents changes in Level

3

assets measured on a recurring basis for the

three

and 

six

month periods ended

June 30, 2019

and

2018

:

(Dollar amounts in thousands)	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Balance at the beginning of the period	$	3,500		$	3,525		$	3,500		$	8,132
Total gains or losses (realized/unrealized):
Included in earnings		—			—			—			1
Included in other comprehensive income		—			—			—			—
Acquired		—			—			—			—
Sold out of Level 3		—			(25	)		—			(25	)
Transfers in and/or out of Level 3		(500	)		—			(500	)		(4,608	)
Balance at the end of the period	$	3,000		$	3,500		$	3,000		$	3,500

Assets measured at fair value on a non-recurring basis. 

The Corporation used the following methods and significant assumptions to estimate the fair value of the following assets:

Impaired loans –

At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive a specific 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. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level

3

classification of the inputs for determining fair value. Non-real estate collateral

may

be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level

3

classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. As of

June 30, 2019

 and 

December 31, 2018

, the Corporation did

not

have any impaired loans carried at fair value measured using the fair value of collateral. There was additional provision for loan losses recorded for impaired loans of

$63,000

during the

three

and 

six

month periods ended

June 30, 2019. 

There were

no

additional provisions recorded for impaired loans during the same periods in 

2018

.

Other real estate owned

(OREO)

– Assets acquired through or instead of foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. Management’s ongoing review of appraisal information

may

result in additional discounts or adjustments to the valuation based upon more recent market sales activity or more current appraisal information derived from properties of similar type and/or locale. Such adjustments are usually significant and typically result in a Level

3

classification of the inputs for determining fair value. As of

June 30, 2019

 the Corporation had

no

OREO measured at fair value. During the

three

and 

six

month periods ended

June 30, 2019,

t

here was expense recorded of 

$14,000

and

$35,000,

 respectively, associated with the write-down of OREO.  The related properties were sold prior to

June 30, 2019. 

As of

December 31, 2018

, OREO measured at fair value less costs to sell had a net carrying amount of

$160,000,

which consisted of the outstanding balance of

$415,000

less write-downs of

$255,000.

   

As of

June 

30,

2018,

OREO measured at fair value less costs to sell had a net carrying amount of

$157,000,

which consisted of the outstanding balance of

$168,000

less write-downs of

$11,000.

  During the

three

and

six

month periods ended

June 30, 2018,

there was expense recorded of

$11,000

.

Appraisals for both collateral-dependent impaired loans and OREO are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed by the Corporation. Once received, management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Corporation compares the actual selling price of OREO that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value. The most recent analysis performed indicated that a discount of

10%

should be applied.

For assets measured at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy are as follows:

(Dollar amounts in thousands)			(Level 1)		(Level 2)		(Level 3)
Description	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2018:
Other real estate owned	$	160	$	—	$	—	$	160
Total	$	160	$	—	$	—	$	160

The following table presents quantitative information about Level

3

fair value measurements for assets measured at fair value on a non-recurring basis:

(Dollar amounts in thousands)			Valuation	Unobservable	Weighted
			Techniques(s)	Input (s)	Average
December 31, 2018:
Other real estate owned	$	160	Sales comparison approach	Adjustment for differences between comparable sales	10	%

At

June 30, 2019

and

December 31, 2018

was an impaired residential mortgage loan totaling

$67,000

and

$61,000,

respectively, and an impaired home equity loan totaling

$5,000

and

$6,000,

respectively, which were classified as TDRs and measured using a discounted cash flow methodology.

The following table sets forth the carrying amount and fair value of the Corporation’s financial instruments included in the consolidated balance sheet: 

(Dollar amounts in thousands)
	Carrying		Fair Value Measurements using:
Description	Amount		Total		Level 1		Level 2		Level 3
June 30, 2019:
Financial Assets:
Cash and cash equivalents	$	31,456	$	31,456	$	31,456	$	—	$	—
Interest earning time deposits		9,958		9,958		—		9,958		—
Securities - available-for-sale		100,398		100,398		4,519		92,879		3,000
Securities - equities		16		16		16		—		—
Loans held for sale		134		134		—		134		—
Loans, net		691,807		685,812		—		—		685,812
Federal bank stock		5,764		N/A		N/A		N/A		N/A
Accrued interest receivable		2,504		2,504		73		298		2,133
Total	$	842,037	$	830,278	$	36,064	$	103,269	$	690,945
Financial Liabilities:
Deposits		777,606		784,206		553,331		230,875		—
Borrowed funds		34,050		34,472		—		34,472		—
Accrued interest payable		643		643		51		592		—
Total	$	812,299	$	819,321	$	553,382	$	265,939	$	—

	Carrying		Fair Value Measurements using:
	Amount		Total		Level 1		Level 2		Level 3
December 31, 2018:
Financial Assets:
Cash and cash equivalents	$	10,955	$	10,955	$	10,955	$	—	$	—
Interest earning time deposits		6,738		6,738		—		6,738		—
Securities - available-for-sale		97,718		97,718		4,445		89,773		3,500
Securities - equities		7		7		7		—		—
Loans held for sale		—		—		—		—		—
Loans, net		708,664		702,747		—		—		702,747
Federal bank stock		6,351		N/A		N/A		N/A		N/A
Accrued interest receivable		2,570		2,570		63		351		2,156
Total	$	833,003	$	820,735	$	15,470	$	96,862	$	708,403
Financial Liabilities:
Deposits		761,546		767,009		539,946		227,063		—
Borrowed funds		45,350		44,869		—		44,869		—
Accrued interest payable		495		495		30		465		—
Total	$	807,391	$	812,373	$	539,976	$	272,397	$	—

This information should

not

be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation's assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation's disclosures and those of other companies

may

not

be meaningful.

XML

Note 8 - Regulatory Matters

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

8. Regulatory Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

In

2018

 the Board of Governors of the Federal Reserve System amended its Small Bank Holding Company Policy Statement by increasing the policy’s consolidated assets threshold from

$1

 billion to

$3

 billion. The primary benefit of being deemed a "small bank holding company" is the exemption from the requirement to maintain consolidated regulatory capital ratios; instead, regulatory capital ratios only apply at the subsidiary bank level.

The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (BASEL III rules) became effective for the Bank on

January 1, 2015

with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in on 

January 1, 2019.

Under the BASEL III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in from

0.0%

for

2015

to

2.50%

in 

2019.

The capital conservation buffer for

2019

is

2.50%

and for

2018

was 

1.875%.

Amounts recorded to accumulated other comprehensive income are 

not

included in computing regulatory capital. Management believes as of

June 30, 2019,

the Bank met all capital adequacy requirements to which it was subject.

Prompt corrective action regulations provide

five

classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are

not

used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At

June 30, 2019,

the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are

no

conditions or events since that notification that management believes have changed the institution's category.

The following table sets forth certain information concerning the Bank’s regulatory capital as of the dates presented. The capital adequacy ratios disclosed below are exclusive of the capital conservation buffer. 

(Dollar amounts in thousands)	June 30, 2019					December 31, 2018
	Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Actual	$	78,509		13.65	%	$	76,344		12.93	%
For capital adequacy purposes		46,020		8.00	%		47,252		8.00	%
To be well capitalized		57,525		10.00	%		59,065		10.00	%
Tier 1 capital to risk-weighted assets:
Actual	$	71,929		12.50	%	$	69,836		11.82	%
For capital adequacy purposes		34,515		6.00	%		35,439		6.00	%
To be well capitalized		46,020		8.00	%		47,252		8.00	%
Common Equity Tier 1 capital to risk-weighted assets:
Actual	$	71,929		12.50	%	$	69,836		11.82	%
For capital adequacy purposes		25,886		4.50	%		26,579		4.50	%
To be well capitalized		37,391		6.50	%		38,393		6.50	%
Tier 1 capital to average assets:
Actual	$	71,929		8.22	%	$	69,836		7.95	%
For capital adequacy purposes		35,013		4.00	%		35,126		4.00	%
To be well capitalized		43,766		5.00	%		43,908		5.00	%

XML

Note 9 - Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

9. Accumulated Other Comprehensive Income (Loss)

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss), net of tax, for the

three

months ended

June 30, 2019

and

2018

and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive income:

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at April 1, 2019	$	(644	)	$	(4,840	)	$	(5,484	)
Other comprehensive income before reclassification		910			—			910
Amounts reclassified from accumulated other comprehensive income (loss)		1			—			1
Net current period other comprehensive income (loss)		911			—			911
Accumulated Other Comprehensive Income (Loss) at June 30, 2019	$	267		$	(4,840	)	$	(4,573	)

(Dollar amounts in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Loss Components	from Accumulated Other Comprehensive Income For the three months ended June 30, 2019		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	1	Net gain on sale of securities
Tax effect		—	Provision for income taxes
Total reclassifications for the period	$	1	Net of tax

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at April 1, 2018	$	(1,881	)	$	(4,839	)	$	(6,720	)
Other comprehensive income before reclassification		(236	)		—			(236	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			—			—
Net current period other comprehensive income (loss)		(236	)		—			(236	)
Accumulated Other Comprehensive Income (Loss) at June 30, 2018	$	(2,117	)	$	(4,839	)	$	(6,956	)

(Dollar amounts in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Loss Components	from Accumulated Other Comprehensive Income For the three months ended June 30, 2018		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	—	Net loss on sale of securities
Tax effect		—	Provision for income taxes
Total reclassifications for the period	$	—	Net of tax

The following tables summarize the changes within each classification of accumulated other comprehensive income (loss), net of tax, for the  

six

months ended

June 30, 2019

and

2018

and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive income:

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at December 31, 2018	$	(1,517	)	$	(4,840	)	$	(6,357	)
Other comprehensive income before reclassification		1,785			—			1,785
Amounts reclassified from accumulated other comprehensive income (loss)		(1	)		—			(1	)
Net current period other comprehensive income		1,784			—			1,784
Accumulated Other Comprehensive Income (Loss) at June 30, 2019	$	267		$	(4,840	)	$	(4,573	)

(Dollar amount in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Income Components	from Accumulated Other Comprehensive Income For the six months ended June 30, 2019			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	(1	)	Net gain (loss) on sale of available-for-sale securities
Tax effect		—		Provision for income taxes
Total reclassifications for the period	$	(1	)	Net of tax

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at December 31, 2017	$	(679	)	$	(4,839	)	$	(5,518	)
Cumulative effect of change in accounting principle for marketable equity securities, net of tax		(187	)	$	-			(187	)
Accumulated Other Comprehensive Income (Loss) at January 1, 2018, as adjusted	$	(866	)	$	(4,839	)	$	(5,705	)
Other comprehensive income before reclassification		(1,257	)		—			(1,257	)
Amounts reclassified from accumulated other comprehensive income (loss)		6			—			6
Net current period other comprehensive income		(1,251	)		—			(1,251	)
Accumulated Other Comprehensive Income (Loss) at June 30, 2018	$	(2,117	)	$	(4,839	)	$	(6,956	)

(Dollar amount in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Income Components	from Accumulated Other Comprehensive Income For the six months ended June 30, 2018			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	7		Net gain on sale of available-for-sale securities
Tax effect		(1	)	Provision for income taxes
Total reclassifications for the period	$	6		Net of tax

XML

Note 10 - Revenue Recognition

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

10. Revenue Recognition

On

January 1, 2018,

the Corporation adopted ASU

2014

-

09

"Revenue from Contracts with Customers" (Topic

606

) and all subsequent ASUs that modified Topic

606.

Interest income, net securities gains (losses) and bank-owned life insurance are

not

included within the scope of Topic

606.

For the revenue streams in the scope of Topic

606,

service charges on deposits and electronic banking fees, there are

no

significant judgments related to the amount and timing of revenue recognition. All of the Corporation's revenue from contracts with customers is recognized within noninterest income.

Service charges on deposits:

The Corporation earns fees from its deposit customers for transaction-based, account maintenance and overdraft services. Transaction-based fees, which include services such stop payment charges, statement rendering and other fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Electronic banking fees:

The Corporation earns interchange and other ATM related fees from cardholder transactions conducted through the various payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The gross amount of these fees are processed through noninterest income. Other fees, such a transaction surcharges and card replacement fees are withdrawn from the customer's account balance at the time of service.

The following table presents the Corporation's sources of noninterest income for the

three

and

six

months ended

June 30, 2019

and

2018.

(Dollar amounts in thousands)	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
Noninterest income
In-scope of Topic 606:
Service charges on deposits
Maintenance fees	$	42	$	37	$	82	$	76
Overdraft fees		412		353		850		682
Other fees		82		73		159		142
Electronic banking fees		371		329		695		644
Noninterest income (in-scope of Topic 606)		907		792		1,786		1,544
Noninterest income (out-of-scope of Topic 606)(1)		224		257		402		403
Total noninterest income	$	1,131	$	1,049	$	2,188	$	1,947

( 1 ) Noninterest income items that are out-of-scope include net realized gains (losses) on sales of securities, net gains (losses) on sales of loans, earnings on bank-owned life insurance and certain other noninterest income items.

XML

Note 11 - Leases

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

11. Leases

Effective

January 1, 2019,

the Corporation adopted ASU

2016

-

02,

Leases (Topic

842

).  As of

June 30, 2019,

the Corporation leases real estate for

five

 branch offices under various operating lease agreements. The lease agreements have maturity dates ranging from

August 2025

to

December 2056,

including all extension periods. The Corporation has assumed that there are currently

no

circumstances in which the leases would be terminated before exhausting all options for extensions.  The weighted average remaining life of the lease term for these leases was

13.40

 years as of

June 30, 2019.

The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term as of

January 1, 2019

for leases that existed at adoption.  This methodology will be continued for the commencement of any subsequent lease agreements.  The weighted average discount rate for the leases was

3.48%

as of

June 30, 2019.

The total operating lease costs were

$48,000

and

$97,000,

respectively, for the

three

and

six

months ended

June 30, 2019. 

The right-of-use asset, included in premises and equipment, and lease liability, included in other liabilities, was 

$1.6

million and

$1.8

million, respectively, as of

June 30, 2019. 

Rental expense for operating leases classified under ASC

840

for the

three

and

six

months ended

June 30, 2018

was

$50,000

and

$100,000,

respectively.

Total estimated rental commitments for the operating leases were as follows as of

June 30, 2019:

(Dollar amounts in thousands)
Year ending December 31:
2019 (excluding six months)	$	106
2020		212
2021		217
2022		222
2023		222
Thereafter		1,289
Total minimum lease payments		2,268
Discount effect of cash flows		(485	)
Present value of lease liabilities	$	1,783

XML

Note 12 - Recent Accounting Pronouncements (continued)

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

12. Recent Accounting Pronouncements (continued)

Newly Issued

Not

Yet Effective Accounting Standards

In

June 2016,

the FASB issued ASU

2016

-

13,

“Financial Instruments - Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments”. ASU

2016

-

13

significantly changes the way impairment of financial instruments is recognized by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of the financial instruments. The main provisions of the guidance include (

1

) replacing the “incurred loss” approach under current GAAP with an “expected loss” model for instruments measured at amortized cost, (

2

) requiring entities to record an allowance for available-for-sale debt securities rather than reduce the carrying amount of the investments, as is required by the other-than-temporary impairment model under current GAAP, and (

3

) a simplified accounting model for purchased credit-impaired debt securities and loans. The ASU is effective for interim and annual reporting periods beginning after

December 15, 2019,

although early adoption is permitted. Management has selected a software vendor and is currently working through the implementation process.  The Corporation is reviewing available historical information in order to assess the expected credit losses and determine the impact of the adoption of ASU

2016

-

13

on the Corporation's financial statements.  On

July 17, 2019,

FASB voted to delay the effective date of this ASU for smaller reporting companies until fiscal years beginning after

December 15, 2022. 

As the Corporation is a smaller reporting company, the proposed delay would be applicable, if approved by FASB.

In

January 2017,

FASB ASU

2017

-

04,

"Simplifying the Test for Goodwill Impairment". This ASU simplifies the measurement of goodwill by eliminating Step

2

from the goodwill impairment test. Instead, under this amendment, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should

not

exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the

first

interim and annual reporting periods beginning after

December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after

January 1, 2017.

The Corporation has goodwill from prior business combinations and performs an annual impairment test or more frequently if changes or circumstances occur that would more likely than

not

reduce the fair value of the reporting unit below its carrying value. The Corporation's most recent annual impairment assessment determined that the Corporation's goodwill was

not

impaired. Although the Corporation cannot anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated and, therefore, does

not

anticipate a material impact from these amendments to the Corporation's financial position and results of operations. The current accounting policies and processes are

not

anticipated to change, except for the elimination of the Step

2

analysis.

Adoption of New Accounting Policies

In

February 2016,

the FASB issued ASU

2016

-

02

"Leases". This ASU requires lessees to record most leases on their balance sheet but recognize expenses in the income statement in a manner similar to current accounting treatment. This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases. ASU

2016

-

02

was effective for annual periods beginning after

December 15, 2018,

and interim periods therein. In

January 2018,

the FASB issued ASU

2018

-

01,

which allows entities the option to apply the provisions of the new lease guidance at the effective date without adjusting the comparative periods presented. Adoption of this guidance as of

January 1, 2019

resulted in the recording of operating lease right-of-use assets of

$1.6

million and operating lease liabilities of

$1.8

million.  The Corporation recorded a cumulative adjustment to retained earning for prior periods of

$170,000,

net of deferred taxes of

$45,000.

  See Note

11

-Leases for more information.

In

March 2017,

the FASB issued ASU

2017

-

08,

“Receivable - Nonrefundable Fees and Other Costs (Subtopic

310

-

20

) Premium Amortization on Purchased Callable Debt Securities.” ASU

2017

-

08

amends guidance on the amortization period of premiums on certain purchased callable debt securities to shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The amendments are effective for public business entities for fiscal years beginning after

December 15, 2018,

and interim periods therein.  The adoption of this guidance on

January 1, 2019

resulted in a cumulative adjustment to retained earnings of

$10,000,

net of deferred taxes of

$3,000,

for the prior periods. The remaining securities subject to this guidance have a call date

one

month prior to maturity, therefore the impact to the statement of income in subsequent periods is immaterial.

In

August 2017,

the FASB issued ASU

2017

-

12,

"Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging Activities." The amendments in this Update are to better reflect the economic results of hedging in the financial statements along with simplification of certain hedge accounting requirements. Specifically, the entire change in the fair value of the hedging instrument is required to be presented in the same income statement line as and in the same period that the earnings effect of the hedged item is recognized. Therefore, hedge ineffectiveness will

not

be reported separately or in a different period. In addition, hedge effectiveness can be determined qualitatively in periods following inception. The amendments permit an entity to measure the change in fair value of the hedged item on the basis of the benchmark rate component. They also permit an entity to measure the hedged item in a partial-term fair value hedge of interest rate risk by assuming the hedged item has a term that reflects only the designated cash flows being hedged. For a closed portfolio of prepayable financial assets, an entity is permitted to designate the amount that is

not

expected to be affected by prepayments or defaults as the hedged item. For public business entities, the new guidance was effective for fiscal years beginning after

December 15, 2018,

and interim periods therein. The Corporation currently does

not

have derivative or hedging instruments so this guidance had

no

impact on consolidated financial statements.

XML

Note 2 - Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

(Dollar amounts in thousands, except for per share amounts)	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
Earnings per common share
Net income	$	2,140	$	1,413	$	4,222	$	2,775
Less: Preferred stock dividends		91		—		91		—
Net income available to common stockholders	$	2,049	$	1,413	$	4,131	$	2,775
Average common shares outstanding		2,698,712		2,271,139		2,698,712		2,271,139
Add: Dilutive effects of restricted stock awards		16,946		17,090		15,337		15,663
Average shares and dilutive potential common shares		2,715,658		2,288,229		2,714,049		2,286,802
Basic earnings per common share	$	0.76	$	0.62	$	1.53	$	1.22
Diluted earnings per common share	$	0.75	$	0.62	$	1.52	$	1.21
Restricted stock awards not considered in computing earnings per share because they were antidulitive		—		—		—		—

XML

Note 3 - Securities (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

(Dollar amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2019:
U.S. Treasury and federal agency	$	4,527	$	2	$	(10	)	$	4,519
U.S. government sponsored entities and agencies		12,093		53		(42	)		12,104
U.S. agency mortgage-backed securities: residential		40,692		362		(13	)		41,041
U.S. agency collateralized mortgage obligations: residential		22,958		64		(314	)		22,708
State and political subdivisions		10,786		151		(1	)		10,936
Corporate debt securities		9,005		93		(8	)		9,090
Total securities available-for-sale	$	100,061	$	725	$	(388	)	$	100,398
December 31, 2018:
U.S. Treasury and federal agency	$	4,532	$	—	$	(87	)	$	4,445
U.S. government sponsored entities and agencies		17,052		30		(299	)		16,783
U.S. agency mortgage-backed securities: residential		27,666		—		(490	)		27,176
U.S. agency collateralized mortgage obligations: residential		19,440		34		(810	)		18,664
State and political subdivisions		22,943		13		(224	)		22,732
Corporate debt securities		8,006		9		(97	)		7,918
Total securities available-for-sale	$	99,639	$	86	$	(2,007	)	$	97,718

Investments Classified by Contractual Maturity Date [Table Text Block]

(Dollar amounts in thousands)	Available-for-sale
	Amortized Cost		Fair Value
Due in one year or less	$	1,499	$	1,492
Due after one year through five years		21,110		21,149
Due after five through ten years		12,065		12,230
Due after ten years		1,737		1,778
Mortgage-backed securities: residential		40,692		41,041
Collateralized mortgage obligations: residential		22,958		22,708
Total securities available-for-sale	$	100,061	$	100,398

Schedule of Unrealized Loss on Investments [Table Text Block]

(Dollar amounts in thousands)	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
June 30, 2019:
U.S. Treasury and federal agency	$	—	$	—		$	3,507	$	(10	)	$	3,507	$	(10	)
U.S. government sponsored entities and agencies		—		—			7,053		(42	)		7,053		(42	)
U.S. agency mortgage-backed securities: residential		—		—			3,743		(13	)		3,743		(13	)
U.S. agency collateralized mortgage obligations: residential		3,796		(31	)		15,939		(283	)		19,735		(314	)
State and political subdivisions		—		—			224		(1	)		224		(1	)
Corporate debt securities		—		—			994		(8	)		994		(8	)
Total	$	3,796	$	(31	)	$	31,460	$	(357	)	$	35,256	$	(388	)
December 31, 2018:
U.S. Treasury and federal agency	$	—	$	—		$	4,445	$	(87	)	$	4,445	$	(87	)
U.S. government sponsored entities and agencies		2,472		(30	)		10,337		(269	)		12,809		(299	)
U.S. agency mortgage-backed securities: residential		19,483		(297	)		7,693		(193	)		27,176		(490	)
U.S. agency collateralized mortgage obligations: residential		1,443		(5	)		15,388		(805	)		16,831		(810	)
State and political subdivisions		7,061		(67	)		10,083		(157	)		17,144		(224	)
Corporate debt securities		962		(38	)		2,448		(59	)		3,410		(97	)
Total	$	31,421	$	(437	)	$	50,394	$	(1,570	)	$	81,815	$	(2,007	)

Schedule of Realized Gain (Loss) [Table Text Block]

(Dollar amounts in thousands)	For the three months ended June 30,					For the six months ended June 30,
	2019			2018		2019			2018
Proceeds	$	8,907		$	264	$	12,882		$	6,795
Gains		29			—		35			14
Losses		(30	)		—		(34	)		(21	)
Tax provision related to losses		—			—		—			(1	)

XML

Note 4 - Loans Receivable and Related Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

(Dollar amounts in thousands)	June 30, 2019		December 31, 2018
Mortgage loans on real estate:
Residential first mortgages	$	290,676	$	295,405
Home equity loans and lines of credit		102,035		103,752
Commercial real estate		228,040		238,734
Total real estate loans		620,751		637,891
Other loans:
Commercial business		66,942		66,009
Consumer		10,694		11,272
Total other loans		77,636		77,281
Total loans, gross		698,387		715,172
Less allowance for loan losses		6,580		6,508
Total loans, net	$	691,807	$	708,664

Financing Receivable, Allowance for Credit Loss [Table Text Block]

(Dollar amounts in thousands)	Residential Mortgages			Home Equity & Lines of Credit			Commercial Real Estate			Commercial Business			Consumer			Total
Three months ended June 30, 2019:
Allowance for loan losses:
Beginning Balance	$	2,256		$	650		$	3,043		$	635		$	55		$	6,639
Charge-offs		(194	)		(30	)		(23	)		(63	)		(36	)		(346	)
Recoveries		—			—			13			—			4			17
Provision		163			22			10			43			32			270
Ending Balance	$	2,225		$	642		$	3,043		$	615		$	55		$	6,580
Six months ended June 30, 2019:
Allowance for loan losses:
Beginning Balance	$	2,198		$	648		$	3,106		$	500		$	56		$	6,508
Charge-offs		(204	)		(34	)		(28	)		(134	)		(75	)		(475	)
Recoveries		40			1			28			—			28			97
Provision		191			27			(63	)		249			46			450
Ending Balance	$	2,225		$	642		$	3,043		$	615		$	55		$	6,580
At June 30, 2019:
Ending ALL balance attributable to loans:
Individually evaluated for impairment	$	6		$	—		$	—		$	—		$	—		$	6
Acquired loans collectively evaluated for impairment		—			—			—			—			—			—
Originated loans collectively evaluated for impairment		2,219			642			3,043			615			55			6,574
Total	$	2,225		$	642		$	3,043		$	615		$	55		$	6,580
Total loans:
Individually evaluated for impairment	$	376		$	5		$	2,478		$	238		$	—		$	3,097
Acquired loans collectively evaluated for impairment		67,181			12,261			49,018			9,493			2,506			140,459
Originated loans collectively evaluated for impairment		223,119			89,769			176,544			57,211			8,188			554,831
Total	$	290,676		$	102,035		$	228,040		$	66,942		$	10,694		$	698,387
At December 31, 2018:
Ending ALL balance attributable to loans:
Individually evaluated for impairment	$	12		$	—		$	—		$	—		$	—		$	12
Acquired loans collectively evaluated for impairment		—			—			—			—			—			—
Originated loans collectively evaluated for impairment		2,186			648			3,106			500			56			6,496
Total	$	2,198		$	648		$	3,106		$	500		$	56		$	6,508
Total loans:
Individually evaluated for impairment	$	389		$	6		$	34		$	39		$	—		$	468
Acquired loans collectively evaluated for impairment		72,654			13,750			56,690			12,974			3,306			159,374
Originated loans collectively evaluated for impairment		222,362			89,996			182,010			52,996			7,966			555,330
Total	$	295,405		$	103,752		$	238,734		$	66,009		$	11,272		$	715,172
Three months ended June 30, 2018:
Allowance for loan losses:
Beginning Balance	$	1,919		$	651		$	2,751		$	560		$	54		$	5,935
Charge-offs		—			(63	)		(33	)		—			(51	)		(147	)
Recoveries		—			10			16			1			3			30
Provision		114			52			148			(62	)		48			300
Ending Balance	$	2,033		$	650		$	2,882		$	499		$	54		$	6,118
Six months ended June 30, 2018:
Allowance for loan losses:
Beginning Balance	$	2,090		$	646		$	2,753		$	585		$	53		$	6,127
Charge-offs		(61	)		(83	)		(418	)		—			(170	)		(732	)
Recoveries		3			11			18			2			9			43
Provision		1			76			529			(88	)		162			680
Ending Balance	$	2,033		$	650		$	2,882		$	499		$	54		$	6,118

Impaired Financing Receivables [Table Text Block]

(Dollar amounts in thousands)
	Impaired Loans with Specific Allowance
	As of June 30, 2019						For the three months ended June 30, 2019
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	73	$	73	$	6	$	73	$	1	$	1
Home equity and lines of credit		5		5		—		5		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		31		—		—
Consumer		—		—		—		—		—		—
Total	$	78	$	78	$	6	$	109	$	1	$	1

	For the six months ended June 30, 2019
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	73	$	2	$	2
Home equity and lines of credit		6		—		—
Commercial real estate		—		—		—
Commercial business		21		—		—
Consumer		—		—		—
Total	$	100	$	2	$	2

	Impaired Loans with No Specific Allowance
	As of June 30, 2019				For the three months ended June 30, 2019
	Unpaid Principal Balance		Recorded Investment		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	378	$	303	$	305	$	—	$	—
Home equity and lines of credit		—		—		—		—		—
Commercial real estate		2,478		2,478		1,255		52		—
Commercial business		238		238		139		6		1
Consumer		—		—		—		—		—
Total	$	3,094	$	3,019	$	1,699	$	58	$	1

	For the six months ended June 30, 2019
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	308	$	1	$	1
Home equity and lines of credit		—		—		—
Commercial real estate		848		53		1
Commercial business		106		7		2
Consumer		—		—		—
Total	$	1,262	$	61	$	4

(Dollar amounts in thousands)
	Impaired Loans with Specific Allowance
	As of December 31, 2018						For the year ended December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	74	$	74	$	12	$	74	$	2	$	2
Home equity and lines of credit		6		6		—		7		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Total	$	80	$	80	$	12	$	81	$	2	$	2

	Impaired Loans with No Specific Allowance
	As of December 31, 2018				For the year ended December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	427	$	315	$	334	$	5	$	5
Home equity and lines of credit		—		—		—		—		—
Commercial real estate		34		34		768		156		73
Commercial business		39		39		248		74		74
Consumer		—		—		—		—		—
Total	$	500	$	388	$	1,350	$	235	$	152

(Dollar amounts in thousands)
	Impaired Loans with Specific Allowance
	As of June 30, 2018						For the three months ended June 30, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	74	$	74	$	7	$	75	$	1	$	1
Home equity and lines of credit		7		7		—		8		—		—
Commercial real estate		—		—		—		—		—		—
Commercial business		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Total	$	81	$	81	$	7	$	83	$	1	$	1

	For the six months ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	75	$	2	$	2
Home equity and lines of credit		7		—		—
Commercial real estate		—		—		—
Commercial business		—		—		—
Consumer		—		—		—
Total	$	82	$	2	$	2

	Impaired Loans with No Specific Allowance
	As of June 30, 2018				For the three months ended June 30, 2018
	Unpaid Principal Balance		Recorded Investment		Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	446	$	334	$	339	$	2	$	2
Home equity and lines of credit		—		—		—		—		—
Commercial real estate		43		43		190		73		73
Commercial business		39		39		297		41		41
Consumer		—		—		—		—		—
Total	$	528	$	416	$	826	$	116	$	116

	For the six months ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized in Period		Cash Basis Interest Recognized in Period
Residential first mortgages	$	343	$	2	$	2
Home equity and lines of credit		—		—		—
Commercial real estate		431		73		73
Commercial business		387		42		42
Consumer		—		—		—
Total	$	1,161	$	117	$	117

Financing Receivable Credit Quality Indicators [Table Text Block]

(Dollar amounts in thousands)
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2019:
Residential first mortgages	$	289,060	$	—	$	—	$	1,616	$	—	$	290,676
Home equity and lines of credit		101,244		—		—		791		—		102,035
Commercial real estate		—		208,494		5,292		14,254		—		228,040
Commercial business		—		63,518		423		3,001		—		66,942
Consumer		10,567		—		—		127		—		10,694
Total loans	$	400,871	$	272,012	$	5,715	$	19,789	$	—	$	698,387
December 31, 2018:
Residential first mortgages	$	293,919	$	—	$	—	$	1,486	$	—	$	295,405
Home equity and lines of credit		102,869		—		—		883		—		103,752
Commercial real estate		—		222,335		5,942		10,457		—		238,734
Commercial business		—		62,022		542		3,445		—		66,009
Consumer		11,157		—		—		115		—		11,272
Total loans	$	407,945	$	284,357	$	6,484	$	16,386	$	—	$	715,172

Financing Receivable, Past Due [Table Text Block]

(Dollar amounts in thousands)
	Performing						Nonperforming
	Accruing Loans Not Past Due		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccrual		Total
June 30, 2019:
Residential first mortgages	$	285,753	$	2,215	$	1,284	$	221	$	1,203	$	290,676
Home equity and lines of credit		100,495		586		257		—		697		102,035
Commercial real estate		223,783		688		58		55		3,456		228,040
Commercial business		66,626		59		19		—		238		66,942
Consumer		10,445		101		20		—		128		10,694
Total loans	$	687,102	$	3,649	$	1,638	$	276	$	5,722	$	698,387
December 31, 2018:
Residential first mortgages	$	289,732	$	3,586	$	747	$	485	$	855	$	295,405
Home equity and lines of credit		101,920		707		351		287		487		103,752
Commercial real estate		232,865		5,013		231		19		606		238,734
Commercial business		65,538		50		247		—		174		66,009
Consumer		10,961		160		36		—		115		11,272
Total loans	$	701,016	$	9,516	$	1,612	$	791	$	2,237	$	715,172

Financing Receivable, Nonaccrual [Table Text Block]

(Dollar amounts in thousands)
	Not Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Total
June 30, 2019:
Residential first mortgages	$	259	$	—	$	73	$	871	$	1,203
Home equity and lines of credit		70		—		—		627		697
Commercial real estate		104		2,677		—		675		3,456
Commercial business		—		40		—		198		238
Consumer		—		—		—		128		128
Total loans	$	433	$	2,717	$	73	$	2,499	$	5,722
December 31, 2018:
Residential first mortgages	$	335	$	—	$	74	$	446	$	855
Home equity and lines of credit		6		—		—		481		487
Commercial real estate		111		265		—		230		606
Commercial business		—		—		39		135		174
Consumer		—		—		—		115		115
Total loans	$	452	$	265	$	113	$	1,407	$	2,237

XML

Note 5 - Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Intangible Assets and Goodwill [Table Text Block]

(Dollar amounts in thousands)	June 30, 2019				December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill	$	19,460	$	—	$	19,448	$	—
Core deposit intangibles		5,634		4,301		5,634		4,211
Total	$	25,094	$	4,301	$	25,082	$	4,211

XML

Note 6 - Stock Compensation Plan (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

	Shares		Weighted-Average Grant-date Fair Value
Nonvested at January 1, 2019		37,250	$	29.94
Granted		—		—
Vested		—		—
Forfeited		—		—
Nonvested as of June 30, 2019		37,250	$	29.94

XML

Note 7 - Fair Value (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

(Dollar amounts in thousands)			(Level 1)		(Level 2)		(Level 3)
Description	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
June 30, 2019:
Securities available-for-sale
U.S. Treasury and federal agency	$	4,519	$	4,519	$	—	$	—
U.S. government sponsored entities and agencies		12,104		—		12,104		—
U.S. agency mortgage-backed securities: residential		41,041		—		41,041		—
U.S. agency collateralized mortgage obligations: residential		22,708		—		22,708		—
State and political subdivision		10,936		—		10,936		—
Corporate debt securities		9,090		—		6,090		3,000
Total available-for-sale securities	$	100,398	$	4,519	$	92,879	$	3,000
Equity securities	$	16	$	16	$	—	$	—
December 31, 2018:
Securities available-for-sale
U.S. Treasury and federal agency	$	4,445	$	4,445	$	—	$	—
U.S. government sponsored entities and agencies		16,783		—		16,783		—
U.S. agency mortgage-backed securities: residential		27,176		—		27,176		—
U.S. agency collateralized mortgage obligations: residential		18,664		—		18,664		—
State and political subdivisions		22,732		—		22,732		—
Corporate debt securities		7,918		—		4,418		3,500
Total available-for-sale securities	$	97,718	$	4,445	$	89,773	$	3,500
Equity securities	$	7	$	7	$	—	$	—

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

(Dollar amounts in thousands)	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Balance at the beginning of the period	$	3,500		$	3,525		$	3,500		$	8,132
Total gains or losses (realized/unrealized):
Included in earnings		—			—			—			1
Included in other comprehensive income		—			—			—			—
Acquired		—			—			—			—
Sold out of Level 3		—			(25	)		—			(25	)
Transfers in and/or out of Level 3		(500	)		—			(500	)		(4,608	)
Balance at the end of the period	$	3,000		$	3,500		$	3,000		$	3,500

Fair Value Measurements, Recurring and Nonrecurring [Table Text Block]

(Dollar amounts in thousands)			(Level 1)		(Level 2)		(Level 3)
Description	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2018:
Other real estate owned	$	160	$	—	$	—	$	160
Total	$	160	$	—	$	—	$	160

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

(Dollar amounts in thousands)			Valuation	Unobservable	Weighted
			Techniques(s)	Input (s)	Average
December 31, 2018:
Other real estate owned	$	160	Sales comparison approach	Adjustment for differences between comparable sales	10	%

Fair Value, by Balance Sheet Grouping [Table Text Block]

(Dollar amounts in thousands)
	Carrying		Fair Value Measurements using:
Description	Amount		Total		Level 1		Level 2		Level 3
June 30, 2019:
Financial Assets:
Cash and cash equivalents	$	31,456	$	31,456	$	31,456	$	—	$	—
Interest earning time deposits		9,958		9,958		—		9,958		—
Securities - available-for-sale		100,398		100,398		4,519		92,879		3,000
Securities - equities		16		16		16		—		—
Loans held for sale		134		134		—		134		—
Loans, net		691,807		685,812		—		—		685,812
Federal bank stock		5,764		N/A		N/A		N/A		N/A
Accrued interest receivable		2,504		2,504		73		298		2,133
Total	$	842,037	$	830,278	$	36,064	$	103,269	$	690,945
Financial Liabilities:
Deposits		777,606		784,206		553,331		230,875		—
Borrowed funds		34,050		34,472		—		34,472		—
Accrued interest payable		643		643		51		592		—
Total	$	812,299	$	819,321	$	553,382	$	265,939	$	—

	Carrying		Fair Value Measurements using:
	Amount		Total		Level 1		Level 2		Level 3
December 31, 2018:
Financial Assets:
Cash and cash equivalents	$	10,955	$	10,955	$	10,955	$	—	$	—
Interest earning time deposits		6,738		6,738		—		6,738		—
Securities - available-for-sale		97,718		97,718		4,445		89,773		3,500
Securities - equities		7		7		7		—		—
Loans held for sale		—		—		—		—		—
Loans, net		708,664		702,747		—		—		702,747
Federal bank stock		6,351		N/A		N/A		N/A		N/A
Accrued interest receivable		2,570		2,570		63		351		2,156
Total	$	833,003	$	820,735	$	15,470	$	96,862	$	708,403
Financial Liabilities:
Deposits		761,546		767,009		539,946		227,063		—
Borrowed funds		45,350		44,869		—		44,869		—
Accrued interest payable		495		495		30		465		—
Total	$	807,391	$	812,373	$	539,976	$	272,397	$	—

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Note 8 - Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

(Dollar amounts in thousands)	June 30, 2019					December 31, 2018
	Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Actual	$	78,509		13.65	%	$	76,344		12.93	%
For capital adequacy purposes		46,020		8.00	%		47,252		8.00	%
To be well capitalized		57,525		10.00	%		59,065		10.00	%
Tier 1 capital to risk-weighted assets:
Actual	$	71,929		12.50	%	$	69,836		11.82	%
For capital adequacy purposes		34,515		6.00	%		35,439		6.00	%
To be well capitalized		46,020		8.00	%		47,252		8.00	%
Common Equity Tier 1 capital to risk-weighted assets:
Actual	$	71,929		12.50	%	$	69,836		11.82	%
For capital adequacy purposes		25,886		4.50	%		26,579		4.50	%
To be well capitalized		37,391		6.50	%		38,393		6.50	%
Tier 1 capital to average assets:
Actual	$	71,929		8.22	%	$	69,836		7.95	%
For capital adequacy purposes		35,013		4.00	%		35,126		4.00	%
To be well capitalized		43,766		5.00	%		43,908		5.00	%

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Note 9 - Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at April 1, 2019	$	(644	)	$	(4,840	)	$	(5,484	)
Other comprehensive income before reclassification		910			—			910
Amounts reclassified from accumulated other comprehensive income (loss)		1			—			1
Net current period other comprehensive income (loss)		911			—			911
Accumulated Other Comprehensive Income (Loss) at June 30, 2019	$	267		$	(4,840	)	$	(4,573	)

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at April 1, 2018	$	(1,881	)	$	(4,839	)	$	(6,720	)
Other comprehensive income before reclassification		(236	)		—			(236	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			—			—
Net current period other comprehensive income (loss)		(236	)		—			(236	)
Accumulated Other Comprehensive Income (Loss) at June 30, 2018	$	(2,117	)	$	(4,839	)	$	(6,956	)

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at December 31, 2018	$	(1,517	)	$	(4,840	)	$	(6,357	)
Other comprehensive income before reclassification		1,785			—			1,785
Amounts reclassified from accumulated other comprehensive income (loss)		(1	)		—			(1	)
Net current period other comprehensive income		1,784			—			1,784
Accumulated Other Comprehensive Income (Loss) at June 30, 2019	$	267		$	(4,840	)	$	(4,573	)

(Dollar amounts in thousands)	Unrealized Gains and Losses on Available-for-Sale Securities			Defined Benefit Pension Items			Totals
Accumulated Other Comprehensive Income (Loss) at December 31, 2017	$	(679	)	$	(4,839	)	$	(5,518	)
Cumulative effect of change in accounting principle for marketable equity securities, net of tax		(187	)	$	-			(187	)
Accumulated Other Comprehensive Income (Loss) at January 1, 2018, as adjusted	$	(866	)	$	(4,839	)	$	(5,705	)
Other comprehensive income before reclassification		(1,257	)		—			(1,257	)
Amounts reclassified from accumulated other comprehensive income (loss)		6			—			6
Net current period other comprehensive income		(1,251	)		—			(1,251	)
Accumulated Other Comprehensive Income (Loss) at June 30, 2018	$	(2,117	)	$	(4,839	)	$	(6,956	)

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

(Dollar amounts in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Loss Components	from Accumulated Other Comprehensive Income For the three months ended June 30, 2019		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	1	Net gain on sale of securities
Tax effect		—	Provision for income taxes
Total reclassifications for the period	$	1	Net of tax

(Dollar amounts in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Loss Components	from Accumulated Other Comprehensive Income For the three months ended June 30, 2018		Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	—	Net loss on sale of securities
Tax effect		—	Provision for income taxes
Total reclassifications for the period	$	—	Net of tax

(Dollar amount in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Income Components	from Accumulated Other Comprehensive Income For the six months ended June 30, 2019			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	(1	)	Net gain (loss) on sale of available-for-sale securities
Tax effect		—		Provision for income taxes
Total reclassifications for the period	$	(1	)	Net of tax

(Dollar amount in thousands)	Amount Reclassified
Details about Accumulated Other Comprehensive Income Components	from Accumulated Other Comprehensive Income For the six months ended June 30, 2018			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	7		Net gain on sale of available-for-sale securities
Tax effect		(1	)	Provision for income taxes
Total reclassifications for the period	$	6		Net of tax

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Note 10 - Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

(Dollar amounts in thousands)	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
Noninterest income
In-scope of Topic 606:
Service charges on deposits
Maintenance fees	$	42	$	37	$	82	$	76
Overdraft fees		412		353		850		682
Other fees		82		73		159		142
Electronic banking fees		371		329		695		644
Noninterest income (in-scope of Topic 606)		907		792		1,786		1,544
Noninterest income (out-of-scope of Topic 606)(1)		224		257		402		403
Total noninterest income	$	1,131	$	1,049	$	2,188	$	1,947

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Note 11 - Leases (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

(Dollar amounts in thousands)
Year ending December 31:
2019 (excluding six months)	$	106
2020		212
2021		217
2022		222
2023		222
Thereafter		1,289
Total minimum lease payments		2,268
Discount effect of cash flows		(485	)
Present value of lease liabilities	$	1,783

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Note 2 - Earnings Per Share - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income	$ 2,140	$ 2,082	$ 1,413	$ 1,362	$ 4,222	$ 2,775
Preferred stock dividends	91				91
Net income available to common stockholders	$ 2,049		$ 1,413		$ 4,131	$ 2,775
Average common shares outstanding - basic (in shares)	2,698,712		2,271,139		2,698,712	2,271,139
Add: Dilutive effects of restricted stock awards (in shares)	16,946		17,090		15,337	15,663
Average shares and dilutive potential common shares (in shares)	2,715,658		2,288,229		2,714,049	2,286,802
Basic earnings per common share (in dollars per share)	$ 0.76		$ 0.62		$ 1.53	$ 1.22
Diluted earnings per common share (in dollars per share)	$ 0.75		$ 0.62		$ 1.52	$ 1.21
Restricted stock awards not considered in computing earnings per share because they were antidulitive (in shares)

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Note 3 - Securities (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Equity Securities, FV-NI	$ 16,000		$ 16,000		$ 7,000
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	0	$ 81,000	10,000	$ (6,000)
Equity Securities Sold, Amount	$ 0	266,000	$ 0	1,200,000
Equity Securities, FV-NI, Realized Gain (Loss), Total		$ (16,000)		$ 43,000
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	44		44
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions	42		42
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total			$ 0
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions	25		25
US Government-sponsored Enterprises Debt Securities [Member]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions	6		6
Collateralized Mortgage Backed Securities [Member]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions	4		4
US Treasury and Government [Member]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions	4		4
Corporate Debt Securities [Member]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions	2		2
US States and Political Subdivisions Debt Securities [Member]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions	1		1

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Note 3 - Securities - Summary of Securities (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Debt securities, amortized cost	$ 100,061,000	$ 99,639,000
Debt securities, gross unrealized gains	725,000	86,000
Debt securities, gross unrealized losses	(388,000)	(2,007,000)
Debt securities, fair value	100,398,000	97,718,000
US Treasury and Government [Member]
Debt securities, amortized cost	4,527,000	4,532,000
Debt securities, gross unrealized gains	2,000
Debt securities, gross unrealized losses	(10,000)	(87,000)
Debt securities, fair value	4,519,000	4,445,000
US Government-sponsored Enterprises Debt Securities [Member]
Debt securities, amortized cost	12,093,000	17,052,000
Debt securities, gross unrealized gains	53,000	30,000
Debt securities, gross unrealized losses	(42,000)	(299,000)
Debt securities, fair value	12,104,000	16,783,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Debt securities, amortized cost	40,692,000	27,666,000
Debt securities, gross unrealized gains	362,000
Debt securities, gross unrealized losses	(13,000)	(490,000)
Debt securities, fair value	41,041,000	27,176,000
Collateralized Mortgage Obligations [Member]
Debt securities, amortized cost	22,958,000	19,440,000
Debt securities, gross unrealized gains	64,000	34,000
Debt securities, gross unrealized losses	(314,000)	(810,000)
Debt securities, fair value	22,708,000	18,664,000
US States and Political Subdivisions Debt Securities [Member]
Debt securities, amortized cost	10,786,000	22,943
Debt securities, gross unrealized gains	151,000	13,000
Debt securities, gross unrealized losses	(1,000)	(224,000)
Debt securities, fair value	10,936,000	22,732,000
Corporate Debt Securities [Member]
Debt securities, amortized cost	9,005,000	8,006,000
Debt securities, gross unrealized gains	93,000	9,000
Debt securities, gross unrealized losses	(8,000)	(97,000)
Debt securities, fair value	$ 9,090,000	$ 7,918,000

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Note 3 - Securities - Maturity of Securities (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Due in one year or less, amortized cost	$ 1,499,000
Due in one year or less, fair value	1,492,000
Due after one year through five years, amortized cost	21,110,000
Due after one year through five years, fair value	21,149,000
Due after five through ten years, amortized cost	12,065,000
Due after five through ten years, fair value	12,230,000
Due after ten years, amortized cost	1,737,000
Due after ten years, fair value	1,778,000
Debt securities, amortized cost	100,061,000	$ 99,639,000
Securities available-for-sale, fair value	100,398,000	97,718,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities without maturity date, amortized cost	40,692,000
Securities without maturity date, fair value	41,041,000
Debt securities, amortized cost	40,692,000	27,666,000
Securities available-for-sale, fair value	41,041,000	27,176,000
Collateralized Mortgage Obligations [Member]
Securities without maturity date, amortized cost	22,958,000
Securities without maturity date, fair value	22,708,000
Debt securities, amortized cost	22,958,000	19,440,000
Securities available-for-sale, fair value	$ 22,708,000	$ 18,664,000

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Note 3 - Securities - Securities in a Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Less than 12 months, fair value	$ 3,796	$ 31,421
Less than 12 months, unrealized loss	(31)	(437)
12 months or more, fair value	31,460	50,394
12 months or more, unrealized loss	(357)	(1,570)
Total, fair value	35,256	81,815
Total, unrealized loss	(388)	(2,007)
US Treasury and Government [Member]
Less than 12 months, fair value
Less than 12 months, unrealized loss
12 months or more, fair value	3,507	4,445
12 months or more, unrealized loss	(10)	(87)
Total, fair value	3,507	4,445
Total, unrealized loss	(10)	(87)
US Government Agencies Debt Securities [Member]
Less than 12 months, fair value		2,472
Less than 12 months, unrealized loss		(30)
12 months or more, fair value	7,053	10,337
12 months or more, unrealized loss	(42)	(269)
Total, fair value	7,053	12,809
Total, unrealized loss	(42)	(299)
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Less than 12 months, fair value		19,483
Less than 12 months, unrealized loss		(297)
12 months or more, fair value	3,743	7,693
12 months or more, unrealized loss	(13)	(193)
Total, fair value	3,743	27,176
Total, unrealized loss	(13)	(490)
Collateralized Mortgage Obligations [Member]
Less than 12 months, fair value	3,796	1,443
Less than 12 months, unrealized loss	(31)	(5)
12 months or more, fair value	15,939	15,388
12 months or more, unrealized loss	(283)	(805)
Total, fair value	19,735	16,831
Total, unrealized loss	(314)	(810)
US States and Political Subdivisions Debt Securities [Member]
Less than 12 months, fair value		7,061
Less than 12 months, unrealized loss		(67)
12 months or more, fair value	224	10,083
12 months or more, unrealized loss	(1)	(157)
Total, fair value	224	17,144
Total, unrealized loss	(1)	(224)
Corporate Debt Securities [Member]
Less than 12 months, fair value		962
Less than 12 months, unrealized loss		(38)
12 months or more, fair value	994	2,448
12 months or more, unrealized loss	(8)	(59)
Total, fair value	994	3,410
Total, unrealized loss	$ (8)	$ (97)

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Note 3 - Securities - Gains on Sales of Available for Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Proceeds	$ 8,907	$ 264	$ 12,882	$ 6,795
Gains	29		35	14
Losses	(30)		(34)	(21)
Tax provision related to losses				$ (1)

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Note 4 - Loans Receivable and Related Allowance for Loan Losses (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Loans and Leases Receivable, Deferred Income, Total	$ 2,200,000		$ 2,200,000			$ 2,200,000
Loans and Leases Receivable, Allowance, Ending Balance	6,580,000	$ 6,118,000	6,580,000	$ 6,118,000	$ 6,639,000	6,508,000	$ 5,935,000	$ 6,127,000
Financing Receivable, Troubled Debt Restructuring	450,000		450,000			394,000
Allowance for Losses Allocated to Loans Classified as TDRS	$ 6,000		$ 6,000			12,000
Financing Receivable, Modifications, Number of Contracts		0		0
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	0	0	0	0
Residential Portfolio Segment [Member]
Loans and Leases Receivable, Allowance, Ending Balance	$ 2,225,000	$ 2,033,000	$ 2,225,000	$ 2,033,000	$ 2,256,000	$ 2,198,000	$ 1,919,000	$ 2,090,000
Financing Receivable, Troubled Debt Restructuring	73,000		$ 73,000
Financing Receivable, Modifications, Number of Contracts			1
Community First [Member]
Loans and Leases Receivable, Allowance, Ending Balance	0		$ 0
Northern Hancock Bank & Trust Co. [Member]
Loans and Leases Receivable, Allowance, Ending Balance	0		0
United American Savings Bank [Member]
Loans and Leases Receivable, Allowance, Ending Balance	$ 0		$ 0

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Note 4 - Loans Receivable and Related Allowance for Loan Losses - Summary of Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Loans, gross	$ 698,387		$ 715,172
Loans and Leases Receivable, Allowance, Ending Balance	6,580	$ 6,639	6,508	$ 6,118	$ 5,935	$ 6,127
Total loans, net	691,807		708,664
Mortgage Receivable [Member]
Loans, gross	620,751		637,891
Other Loans [Member]
Loans, gross	77,636		77,281
Residential Portfolio Segment [Member]
Loans, gross	290,676		295,405
Loans and Leases Receivable, Allowance, Ending Balance	2,225	2,256	2,198	2,033	1,919	2,090
Residential Portfolio Segment [Member] | Mortgage Receivable [Member]
Loans, gross	290,676		295,405
Home Equity Loans and Lines of Credit [Member]
Loans, gross	102,035		103,752
Loans and Leases Receivable, Allowance, Ending Balance	642	650	648	650	651	646
Home Equity Loans and Lines of Credit [Member] | Mortgage Receivable [Member]
Loans, gross	102,035		103,752
Commercial Real Estate Portfolio Segment [Member]
Loans, gross	228,040		238,734
Loans and Leases Receivable, Allowance, Ending Balance	3,043	3,043	3,106	2,882	2,751	2,753
Commercial Real Estate Portfolio Segment [Member] | Mortgage Receivable [Member]
Loans, gross	228,040		238,734
Commercial Portfolio Segment [Member]
Loans, gross	66,942		66,009
Loans and Leases Receivable, Allowance, Ending Balance	615	635	500	499	560	585
Commercial Portfolio Segment [Member] | Other Loans [Member]
Loans, gross	66,942		66,009
Consumer Portfolio Segment [Member]
Loans, gross	10,694		11,272
Loans and Leases Receivable, Allowance, Ending Balance	55	$ 55	56	$ 54	$ 54	$ 53
Consumer Portfolio Segment [Member] | Other Loans [Member]
Loans, gross	$ 10,694		$ 11,272

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Note 4 - Loans Receivable and Related Allowance for Loan Losses - Activity in Allowance for Loan Losses by Portfolio (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Beginning Balance	$ 6,639	$ 5,935	$ 6,508	$ 6,127
Charge-offs	(346)	(147)	(475)	(732)
Recoveries	17	30	97	43
Provision	270	300	450	680
Ending Balance	6,580	6,118	6,580	6,118
Individually evaluated for impairment					$ 6	$ 12
Total	6,580	5,935	6,580	6,118	6,580	6,508
Individually evaluated for impairment					3,097	468
Loans, gross					698,387	715,172
Financial Asset Acquired and No Credit Deterioration [Member]
Loans collectively evaluated for impairment
Loans collectively evaluated for impairment					140,459	159,374
Financial Asset Originated [Member]
Loans collectively evaluated for impairment					6,574	6,496
Loans collectively evaluated for impairment					554,831	555,330
Residential Portfolio Segment [Member]
Beginning Balance	2,256	1,919	2,198	2,090
Charge-offs	(194)		(204)	(61)
Recoveries			40	3
Provision	163	114	191	1
Ending Balance	2,225	2,033	2,225	2,033
Individually evaluated for impairment					6	12
Total	2,256	1,919	2,225	2,033	2,225	2,198
Individually evaluated for impairment					376	389
Loans, gross					290,676	295,405
Residential Portfolio Segment [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans collectively evaluated for impairment
Loans collectively evaluated for impairment					67,181	72,654
Residential Portfolio Segment [Member] | Financial Asset Originated [Member]
Loans collectively evaluated for impairment					2,219	2,186
Loans collectively evaluated for impairment					223,119	222,362
Home Equity Loans and Lines of Credit [Member]
Beginning Balance	650	651	648	646
Charge-offs	(30)	(63)	(34)	(83)
Recoveries		10	1	11
Provision	22	52	27	76
Ending Balance	642	650	642	650
Individually evaluated for impairment
Total	650	651	642	650	642	648
Individually evaluated for impairment					5	6
Loans, gross					102,035	103,752
Home Equity Loans and Lines of Credit [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans collectively evaluated for impairment
Loans collectively evaluated for impairment					12,261	13,750
Home Equity Loans and Lines of Credit [Member] | Financial Asset Originated [Member]
Loans collectively evaluated for impairment					642	648
Loans collectively evaluated for impairment					89,769	89,996
Commercial Real Estate Portfolio Segment [Member]
Beginning Balance	3,043	2,751	3,106	2,753
Charge-offs	(23)	(33)	(28)	(418)
Recoveries	13	16	28	18
Provision	10	148	(63)	529
Ending Balance	3,043	2,882	3,043	2,882
Individually evaluated for impairment
Total	3,043	2,751	3,043	2,882	3,043	3,106
Individually evaluated for impairment					2,478	34
Loans, gross					228,040	238,734
Commercial Real Estate Portfolio Segment [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans collectively evaluated for impairment
Loans collectively evaluated for impairment					49,018	56,690
Commercial Real Estate Portfolio Segment [Member] | Financial Asset Originated [Member]
Loans collectively evaluated for impairment					3,043	3,106
Loans collectively evaluated for impairment					176,544	182,010
Commercial Portfolio Segment [Member]
Beginning Balance	635	560	500	585
Charge-offs	(63)		(134)
Recoveries		1		2
Provision	43	(62)	249	(88)
Ending Balance	615	499	615	499
Individually evaluated for impairment
Total	635	560	615	499	615	500
Individually evaluated for impairment					238	39
Loans, gross					66,942	66,009
Commercial Portfolio Segment [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans collectively evaluated for impairment
Loans collectively evaluated for impairment					9,493	12,974
Commercial Portfolio Segment [Member] | Financial Asset Originated [Member]
Loans collectively evaluated for impairment					615	500
Loans collectively evaluated for impairment					57,211	52,996
Consumer Portfolio Segment [Member]
Beginning Balance	55	54	56	53
Charge-offs	(36)	(51)	(75)	(170)
Recoveries	4	3	28	9
Provision	32	48	46	162
Ending Balance	55	54	55	54
Individually evaluated for impairment
Total	$ 55	$ 54	$ 55	$ 54	55	56
Individually evaluated for impairment
Loans, gross					10,694	11,272
Consumer Portfolio Segment [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans collectively evaluated for impairment
Loans collectively evaluated for impairment					2,506	3,306
Consumer Portfolio Segment [Member] | Financial Asset Originated [Member]
Loans collectively evaluated for impairment					55	56
Loans collectively evaluated for impairment					$ 8,188	$ 7,966

XML

Note 4 - Loans Receivable and Related Allowance for Loan Losses - Impaired Loans by Class (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Impaired loans with specific allowance, unpaid principal balance	$ 78	$ 81	$ 78	$ 81	$ 80
Impaired loans with specific allowance, recorded investment	78	81	78	81	80
Related allowance	6	7	6	7	12
Impaired loans with specific allowance, average recorded investment	109	83	100	82	81
Impaired loans with specific allowance, interest income recognized in period	1	1	2	2	2
Impaired loans with specific allowance, cash basis interest recognized in period	1	1	2	2	2
Impaired loans with no specific allowance, unpaid principal balance	3,094	528	3,094	528	500
Impaired loans with no specific allowance, recorded investment	3,019	416	3,019	416	388
Impaired loans with no specific allowance, average recorded investment	1,699	826	1,262	1,161	1,350
Impaired loans with no specific allowance, interest income recognized in period	58	116	61	117	235
Impaired loans with no specific allowance, cash basis interest recognized in period	1	116	4	117	152
Residential Portfolio Segment [Member]
Impaired loans with specific allowance, unpaid principal balance	73	74	73	74	74
Impaired loans with specific allowance, recorded investment	73	74	73	74	74
Related allowance	6	7	6	7	12
Impaired loans with specific allowance, average recorded investment	73	75	73	75	74
Impaired loans with specific allowance, interest income recognized in period	1	1	2	2	2
Impaired loans with specific allowance, cash basis interest recognized in period	1	1	2	2	2
Impaired loans with no specific allowance, unpaid principal balance	378	446	378	446	427
Impaired loans with no specific allowance, recorded investment	303	334	303	334	315
Impaired loans with no specific allowance, average recorded investment	305	339	308	343	334
Impaired loans with no specific allowance, interest income recognized in period		2	1	2	5
Impaired loans with no specific allowance, cash basis interest recognized in period		2	1	2	5
Home Equity Loans and Lines of Credit [Member]
Impaired loans with specific allowance, unpaid principal balance	5	7	5	7	6
Impaired loans with specific allowance, recorded investment	5	7	5	7	6
Related allowance
Impaired loans with specific allowance, average recorded investment	5	8	6	7	7
Impaired loans with specific allowance, interest income recognized in period
Impaired loans with specific allowance, cash basis interest recognized in period
Impaired loans with no specific allowance, unpaid principal balance
Impaired loans with no specific allowance, recorded investment
Impaired loans with no specific allowance, average recorded investment
Impaired loans with no specific allowance, interest income recognized in period
Impaired loans with no specific allowance, cash basis interest recognized in period
Commercial Real Estate Portfolio Segment [Member]
Impaired loans with specific allowance, unpaid principal balance
Impaired loans with specific allowance, recorded investment
Related allowance
Impaired loans with specific allowance, average recorded investment
Impaired loans with specific allowance, interest income recognized in period
Impaired loans with specific allowance, cash basis interest recognized in period
Impaired loans with no specific allowance, unpaid principal balance	2,478	43	2,478	43	34
Impaired loans with no specific allowance, recorded investment	2,478	43	2,478	43	34
Impaired loans with no specific allowance, average recorded investment	1,255	190	848	431	768
Impaired loans with no specific allowance, interest income recognized in period	52	73	53	73	156
Impaired loans with no specific allowance, cash basis interest recognized in period		73	1	73	73
Commercial Portfolio Segment [Member]
Impaired loans with specific allowance, unpaid principal balance
Impaired loans with specific allowance, recorded investment
Related allowance
Impaired loans with specific allowance, average recorded investment	31		21
Impaired loans with specific allowance, interest income recognized in period
Impaired loans with specific allowance, cash basis interest recognized in period
Impaired loans with no specific allowance, unpaid principal balance	238	39	238	39	39
Impaired loans with no specific allowance, recorded investment	238	39	238	39	39
Impaired loans with no specific allowance, average recorded investment	139	297	106	387	248
Impaired loans with no specific allowance, interest income recognized in period	6	41	7	42	74
Impaired loans with no specific allowance, cash basis interest recognized in period	1	41	2	42	74
Consumer Portfolio Segment [Member]
Impaired loans with specific allowance, unpaid principal balance
Impaired loans with specific allowance, recorded investment
Related allowance
Impaired loans with specific allowance, average recorded investment
Impaired loans with specific allowance, interest income recognized in period
Impaired loans with specific allowance, cash basis interest recognized in period
Impaired loans with no specific allowance, unpaid principal balance
Impaired loans with no specific allowance, recorded investment
Impaired loans with no specific allowance, average recorded investment
Impaired loans with no specific allowance, interest income recognized in period
Impaired loans with no specific allowance, cash basis interest recognized in period

XML

Note 4 - Loans Receivable and Related Allowance for Loan Losses - Loan Portfolio by Internal Risk Rating (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Loans	$ 698,387	$ 715,172
Residential Portfolio Segment [Member]
Loans	290,676	295,405
Home Equity Loans and Lines of Credit [Member]
Loans	102,035	103,752
Commercial Real Estate Portfolio Segment [Member]
Loans	228,040	238,734
Commercial Portfolio Segment [Member]
Loans	66,942	66,009
Consumer Portfolio Segment [Member]
Loans	10,694	11,272
Not Rated [Member]
Loans	400,871	407,945
Not Rated [Member] | Residential Portfolio Segment [Member]
Loans	289,060	293,919
Not Rated [Member] | Home Equity Loans and Lines of Credit [Member]
Loans	101,244	102,869
Not Rated [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans
Not Rated [Member] | Commercial Portfolio Segment [Member]
Loans
Not Rated [Member] | Consumer Portfolio Segment [Member]
Loans	10,567	11,157
Pass [Member]
Loans	272,012	284,357
Pass [Member] | Residential Portfolio Segment [Member]
Loans
Pass [Member] | Home Equity Loans and Lines of Credit [Member]
Loans
Pass [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans	208,494	222,335
Pass [Member] | Commercial Portfolio Segment [Member]
Loans	63,518	62,022
Pass [Member] | Consumer Portfolio Segment [Member]
Loans
Special Mention [Member]
Loans	5,715	6,484
Special Mention [Member] | Residential Portfolio Segment [Member]
Loans
Special Mention [Member] | Home Equity Loans and Lines of Credit [Member]
Loans
Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans	5,292	5,942
Special Mention [Member] | Commercial Portfolio Segment [Member]
Loans	423	542
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans
Substandard [Member]
Loans	19,789	16,386
Substandard [Member] | Residential Portfolio Segment [Member]
Loans	1,616	1,486
Substandard [Member] | Home Equity Loans and Lines of Credit [Member]
Loans	791	883
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans	14,254	10,457
Substandard [Member] | Commercial Portfolio Segment [Member]
Loans	3,001	3,445
Substandard [Member] | Consumer Portfolio Segment [Member]
Loans	127	115
Doubtful [Member]
Loans
Doubtful [Member] | Residential Portfolio Segment [Member]
Loans
Doubtful [Member] | Home Equity Loans and Lines of Credit [Member]
Loans
Doubtful [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans
Doubtful [Member] | Commercial Portfolio Segment [Member]
Loans
Doubtful [Member] | Consumer Portfolio Segment [Member]
Loans

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Note 4 - Loans Receivable and Related Allowance for Loan Losses - Classes of Loan Portfolio by Aging Categories (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accruing loans not past due	$ 687,102	$ 701,016
Nonaccrual	5,722	2,237
Loans	698,387	715,172
Financial Asset, 30 to 59 Days Past Due [Member]
Accruing loans past due	3,649	9,516
Nonaccrual	2,717	265
Financial Asset, 60 to 89 Days Past Due [Member]
Accruing loans past due	1,638	1,612
Nonaccrual	73	113
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Accruing loans past due	276	791
Nonaccrual	2,499	1,407
Residential Portfolio Segment [Member]
Accruing loans not past due	285,753	289,732
Nonaccrual	1,203	855
Loans	290,676	295,405
Residential Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Accruing loans past due	2,215	3,586
Nonaccrual
Residential Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Accruing loans past due	1,284	747
Nonaccrual	73	74
Residential Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Accruing loans past due	221	485
Nonaccrual	871	446
Home Equity Loans and Lines of Credit [Member]
Accruing loans not past due	100,495	101,920
Nonaccrual	697	487
Loans	102,035	103,752
Home Equity Loans and Lines of Credit [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Accruing loans past due	586	707
Nonaccrual
Home Equity Loans and Lines of Credit [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Accruing loans past due	257	351
Nonaccrual
Home Equity Loans and Lines of Credit [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Accruing loans past due		287
Nonaccrual	627	481
Commercial Real Estate Portfolio Segment [Member]
Accruing loans not past due	223,783	232,865
Nonaccrual	3,456	606
Loans	228,040	238,734
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Accruing loans past due	688	5,013
Nonaccrual	2,677	265
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Accruing loans past due	58	231
Nonaccrual
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Accruing loans past due	55	19
Nonaccrual	675	230
Commercial Portfolio Segment [Member]
Accruing loans not past due	66,626	65,538
Nonaccrual	238	174
Loans	66,942	66,009
Commercial Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Accruing loans past due	59	50
Nonaccrual	40
Commercial Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Accruing loans past due	19	247
Nonaccrual		39
Commercial Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Accruing loans past due
Nonaccrual	198	135
Consumer Portfolio Segment [Member]
Accruing loans not past due	10,445	10,961
Nonaccrual	128	115
Loans	10,694	11,272
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Accruing loans past due	101	160
Nonaccrual
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Accruing loans past due	20	36
Nonaccrual
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Accruing loans past due
Nonaccrual	$ 128	$ 115

XML

Note 4 - Loans Receivable and Related Allowance for Loan Losses - Nonaccrual Loans by Aging Category (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Nonaccrual	$ 5,722	$ 2,237
Residential Portfolio Segment [Member]
Nonaccrual	1,203	855
Home Equity Loans and Lines of Credit [Member]
Nonaccrual	697	487
Commercial Real Estate Portfolio Segment [Member]
Nonaccrual	3,456	606
Commercial Portfolio Segment [Member]
Nonaccrual	238	174
Consumer Portfolio Segment [Member]
Nonaccrual	128	115
Not Past Due [Member]
Nonaccrual	433	452
Not Past Due [Member] | Residential Portfolio Segment [Member]
Nonaccrual	259	335
Not Past Due [Member] | Home Equity Loans and Lines of Credit [Member]
Nonaccrual	70	6
Not Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Nonaccrual	104	111
Not Past Due [Member] | Commercial Portfolio Segment [Member]
Nonaccrual
Not Past Due [Member] | Consumer Portfolio Segment [Member]
Nonaccrual
Financial Asset, 30 to 59 Days Past Due [Member]
Nonaccrual	2,717	265
Financial Asset, 30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member]
Nonaccrual
Financial Asset, 30 to 59 Days Past Due [Member] | Home Equity Loans and Lines of Credit [Member]
Nonaccrual
Financial Asset, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Nonaccrual	2,677	265
Financial Asset, 30 to 59 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Nonaccrual	40
Financial Asset, 30 to 59 Days Past Due [Member] | Consumer Portfolio Segment [Member]
Nonaccrual
Financial Asset, 60 to 89 Days Past Due [Member]
Nonaccrual	73	113
Financial Asset, 60 to 89 Days Past Due [Member] | Residential Portfolio Segment [Member]
Nonaccrual	73	74
Financial Asset, 60 to 89 Days Past Due [Member] | Home Equity Loans and Lines of Credit [Member]
Nonaccrual
Financial Asset, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Nonaccrual
Financial Asset, 60 to 89 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Nonaccrual		39
Financial Asset, 60 to 89 Days Past Due [Member] | Consumer Portfolio Segment [Member]
Nonaccrual
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Nonaccrual	2,499	1,407
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member]
Nonaccrual	871	446
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Home Equity Loans and Lines of Credit [Member]
Nonaccrual	627	481
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Nonaccrual	675	230
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Nonaccrual	198	135
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member]
Nonaccrual	$ 128	$ 115

XML

Note 5 - Goodwill and Intangible Assets (Details Textual)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Business Acquisition Number of Acquisitions Resulting in Goodwill	5		5
Goodwill, Impairment Loss			$ 0		$ 0
Business Acquisition, Number of Acquisitions Resulting in Intangible Assets	3		3
Amortization of Intangible Assets, Total	$ 45,000	$ 68,000	$ 90,000	$ 136,000

XML

Note 5 - Goodwill and Intangible Assets - Acquired Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Goodwill	$ 19,460	$ 19,448
Core deposit intangibles, gross carring amount	5,634	5,634
Core deposit intangibles, accumulated amortization	4,301	4,211
Total, gross carring amount	$ 25,094	$ 25,082

XML

Note 6 - Stock Compensation Plan (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Apr. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized					176,866
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance	0		0
Share-based Payment Arrangement, Expense	$ 90,000	$ 75,000	$ 180,000	$ 150,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 604,000		$ 604,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition			3 years
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	37,783		37,783
Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	88,433		88,433
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term			10 years

XML

Note 6 - Stock Compensation Plan - Summary of Nonvested Restricted Stock Awards (Details) - Restricted Stock [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Nonvested (in shares) | shares	37,250
Nonvested, weighted average grant date fair value (in dollars per share) | $ / shares	$ 29.94
Granted (in shares) | shares
Granted, weighted average grant date fair value (in dollars per share) | $ / shares
Vested (in shares) | shares
Vested, weighted average grant date fair value (in dollars per share) | $ / shares
Forfeited (in shares) | shares
Forfeited, weighted average grant date fair value (in dollars per share) | $ / shares
Nonvested (in shares) | shares	37,250
Nonvested, weighted average grant date fair value (in dollars per share) | $ / shares	$ 29.94

XML

Note 7 - Fair Value (Details Textual)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Provision for Loan and Lease Losses, Total	$ 270,000	$ 300,000	$ 450,000	$ 680,000
Measurement Input, Discount Rate [Member]
Other Real Estate Owned, Measurement Input	10		10
Fair Value, Nonrecurring [Member]
Other Real Estate, Ending Balance	$ 0	157,000	$ 0	157,000	$ 160,000
Other Real Estate, Disposals	14,000	11,000	35,000	11,000	255,000
Other Real Estate, Gross Amount		$ 168,000		$ 168,000	415,000
Impaired Loans [Member]
Provision for Loan and Lease Losses, Total	63,000		63,000
Real Estate Loan [Member]
Impaired Financing Receivable, Unpaid Principal Balance, Total	67,000		67,000		61,000
Home Equity Loan [Member]
Impaired Financing Receivable, Unpaid Principal Balance, Total	5,000		5,000		6,000
Market and Income Approach Valuation Technique [Member]
Impaired Financing Receivable, Recorded Investment, Total	$ 0		$ 0		$ 25,000

XML

Note 7 - Fair Value - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Securities - available-for-sale	$ 100,398,000	$ 97,718,000
Securities - equity investments	16,000	7,000
Fair Value, Inputs, Level 1 [Member]
Securities - available-for-sale	4,519,000	4,445,000
Securities - equity investments	16,000	7,000
Fair Value, Inputs, Level 2 [Member]
Securities - available-for-sale	92,879,000	89,773,000
Securities - equity investments
Fair Value, Inputs, Level 3 [Member]
Securities - available-for-sale	3,000,000	3,500,000
Securities - equity investments
US Treasury and Government [Member]
Securities - available-for-sale	4,519,000	4,445,000
US Treasury and Government [Member] | Fair Value, Inputs, Level 1 [Member]
Securities - available-for-sale	4,519,000	4,445,000
US Treasury and Government [Member] | Fair Value, Inputs, Level 2 [Member]
Securities - available-for-sale
US Treasury and Government [Member] | Fair Value, Inputs, Level 3 [Member]
Securities - available-for-sale
US Government-sponsored Enterprises Debt Securities [Member]
Securities - available-for-sale	12,104,000	16,783,000
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities - available-for-sale
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities - available-for-sale	12,104,000	16,783,000
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities - available-for-sale
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities - available-for-sale	41,041,000	27,176,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Inputs, Level 1 [Member]
Securities - available-for-sale
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Inputs, Level 2 [Member]
Securities - available-for-sale	41,041,000	27,176,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Inputs, Level 3 [Member]
Securities - available-for-sale
Collateralized Mortgage Obligations [Member]
Securities - available-for-sale	22,708,000	18,664,000
Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 1 [Member]
Securities - available-for-sale
Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 2 [Member]
Securities - available-for-sale	22,708,000	18,664,000
Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 3 [Member]
Securities - available-for-sale
US States and Political Subdivisions Debt Securities [Member]
Securities - available-for-sale	10,936,000	22,732,000
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities - available-for-sale
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities - available-for-sale	10,936,000	22,732,000
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities - available-for-sale
Corporate Debt Securities [Member]
Securities - available-for-sale	9,090,000	7,918,000
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities - available-for-sale
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities - available-for-sale	6,090,000	4,418,000
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities - available-for-sale	$ 3,000,000	$ 3,500,000

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Note 7 - Fair Value - Changes in Level 3 Assets Measured on a Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance at the beginning of the period	$ 3,500	$ 3,525	$ 3,500	$ 8,132
Included in earnings				1
Included in other comprehensive income
Acquired
Sold out of Level 3		(25)		(25)
Transfers in and/or out of Level 3	(500)		(500)	(4,608)
Balance at the end of the period	$ 3,000	$ 3,500	$ 3,000	$ 3,500

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Note 7 - Fair Value - Assets Measured at Fair Value on a Non-recurring Basis (Details) - Fair Value, Nonrecurring [Member] - USD ($)	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018
Other real estate owned	$ 0	$ 160,000	$ 157,000
Total		160,000
Fair Value, Inputs, Level 1 [Member]
Other real estate owned
Total
Fair Value, Inputs, Level 2 [Member]
Other real estate owned
Total
Fair Value, Inputs, Level 3 [Member]
Other real estate owned		160,000
Total		$ 160,000

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Note 7 - Fair Value - Schedule of Quantitative Information About Level 3 Fair Value Measurements (Details) - Fair Value, Nonrecurring [Member]	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Jun. 30, 2018 USD ($)
Other real estate owned	$ 0	$ 160,000	$ 157,000
Fair Value, Inputs, Level 3 [Member]
Other real estate owned		$ 160,000
Fair Value, Inputs, Level 3 [Member] | Measurement Input, Comparability Adjustment [Member] | Weighted Average [Member]
Other real estate owned, measurement input		0.1

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Note 7 - Fair Value - Carrying Amount and Fair Value of Financial Instruments Included in the Consolidated Balance Sheet (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Securities available-for-sale, fair value	$ 100,398,000	$ 97,718,000
Securities - equities	16,000	7,000
Fair Value, Inputs, Level 1 [Member]
Securities available-for-sale, fair value	4,519,000	4,445,000
Securities - equities	16,000	7,000
Fair Value, Inputs, Level 2 [Member]
Securities available-for-sale, fair value	92,879,000	89,773,000
Securities - equities
Fair Value, Inputs, Level 3 [Member]
Securities available-for-sale, fair value	3,000,000	3,500,000
Securities - equities
Reported Value Measurement [Member]
Cash and cash equivalents	31,456,000	10,955,000
Interest earning time deposits	9,958,000	6,738,000
Securities available-for-sale, fair value	100,398,000	97,718,000
Securities - equities	16,000	7,000
Loans held for sale	134,000
Loans, net	691,807,000	708,664,000
Federal bank stock	5,764,000	6,351,000
Accrued interest receivable	2,504,000	2,570,000
Total	842,037,000	833,003,000
Deposits	777,606,000	761,546,000
Borrowed funds	34,050,000	45,350,000
Accrued interest payable	643,000	495,000
Total	812,299,000	807,391,000
Estimate of Fair Value Measurement [Member]
Cash and cash equivalents	31,456,000	10,955,000
Interest earning time deposits	9,958,000	6,738,000
Securities available-for-sale, fair value	100,398,000	97,718,000
Securities - equities	16,000	7,000
Loans held for sale	134,000
Loans, net	685,812,000	702,747,000
Federal bank stock
Accrued interest receivable	2,504,000	2,570,000
Total	830,278,000	820,735,000
Deposits	784,206,000	767,009,000
Borrowed funds	34,472,000	44,869,000
Accrued interest payable	643,000	495,000
Total	819,321,000	812,373,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	31,456,000	10,955,000
Interest earning time deposits
Securities available-for-sale, fair value	4,519,000	4,445,000
Securities - equities	16,000	7,000
Loans held for sale
Loans, net
Federal bank stock
Accrued interest receivable	73,000	63,000
Total	36,064,000	15,470,000
Deposits	553,331,000	539,946,000
Borrowed funds
Accrued interest payable	51,000	30,000
Total	553,382,000	539,976,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents
Interest earning time deposits	9,958,000	6,738,000
Securities available-for-sale, fair value	92,879,000	89,773,000
Securities - equities
Loans held for sale	134,000
Loans, net
Federal bank stock
Accrued interest receivable	298,000	351,000
Total	103,269,000	96,862,000
Deposits	230,875,000	227,063,000
Borrowed funds	34,472,000	44,869,000
Accrued interest payable	592,000	465,000
Total	265,939,000	272,397,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents
Interest earning time deposits
Securities available-for-sale, fair value	3,000,000	3,500,000
Securities - equities
Loans held for sale
Loans, net	685,812,000	702,747,000
Federal bank stock
Accrued interest receivable	2,133,000	2,156,000
Total	690,945,000	708,403,000
Deposits
Borrowed funds
Accrued interest payable
Total

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Note 8 - Regulatory Matters (Details Textual)	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018	Dec. 31, 2015
Capital Conservation Buffer		2.50%	1.875%	0.00%
Forecast [Member]
Capital Conservation Buffer	2.50%

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Note 8 - Regulatory Matters - Schedule of Regulatory Capital (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Total capital to risk-weighted assets, actual, amount	$ 78,509	$ 76,344
Total capital to risk-weighted assets, actual, ratio	13.65%	12.93%
Total capital to risk-weighted assets, for capital adequacy purposes, amount	$ 46,020	$ 47,252
Total capital to risk-weighted assets, for capital adequacy purposes, ratio	8.00%	8.00%
Total capital to risk-weighted assets, to be well capitalized, amount	$ 57,525	$ 59,065
Total capital to risk-weighted assets, to be well capitalized, ratio	10.00%	10.00%
Tier 1 capital to risk-weighted assets, actual, amount	$ 71,929	$ 69,836
Tier 1 capital to risk-weighted assets, actual, ratio	12.50%	11.82%
Tier 1 capital to risk-weighted assets, for capital adequacy purposes, amount	$ 34,515	$ 35,439
Tier 1 capital to risk-weighted assets, for capital adequacy purposes, ratio	6.00%	6.00%
Tier 1 capital to risk-weighted assets, to be well capitalized, amount	$ 46,020	$ 47,252
Tier 1 capital to risk-weighted assets, to be well capitalized, ratio	8.00%	8.00%
Common equity tier 1 capital to risk-weighted assets, actual, amount	$ 71,929	$ 69,836
Common equity tier 1 capital to risk weighted assets, actual, ratio	12.50%	11.82%
Common equity tier 1 capital to risk-weighted assets, for capital adequacy purposes, amount	$ 25,886	$ 26,579
Common equity tier 1 capital to risk weighted assets, for capital adequacy purposes, ratio	4.50%	4.50%
Common equity tier 1 capital to risk-weighted assets, to. be well capitalized, amount	$ 37,391	$ 38,393
Common equity tier 1 capital to risk weighted assets, to be well capitalized, ratio	6.50%	6.50%
Tier 1 capital to average assets, actual, amount	$ 71,929	$ 69,836
Tier 1 capital to average asset, actual, ratio	8.22%	7.95%
Tier 1 capital to average assets, for capital adequacy purposes, amount	$ 35,013	$ 35,126
Tier 1 capital to average asset, for capital adequacy purposes, ratio	4.00%	4.00%
Tier 1 capital to average assets, to be well capitalized, amount	$ 43,766	$ 43,908
Tier 1 capital to average asset, to be well capitalized, ratio	5.00%	5.00%

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Note 9 - Accumulated Other Comprehensive Income (Loss) - Changes in Accumulated Other Comprehensive Income (Loss) by Component, Net of Tax (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance	$ 82,089	$ 80,008	$ 58,877	$ 59,091	$ 80,008	$ 59,091
Net current period other comprehensive income (loss)	911	873	(236)	(1,015)
Cumulative effect of change in accounting principle, net of tax		(181)			(181)
Balance, as adjusted		79,827		59,091	79,827	59,091
Balance	84,357	82,089	59,493	58,877	84,357	59,493
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Balance	(644)	(1,517)	(1,881)	(679)	(1,517)	(679)
Other comprehensive income before reclassification	910		(236)		1,785	(1,257)
Amounts reclassified from accumulated other comprehensive income (loss)	1				(1)	6
Net current period other comprehensive income (loss)	911		(236)		1,784	(1,251)
Cumulative effect of change in accounting principle, net of tax				(187)		(187)
Balance, as adjusted				(866)		(866)
Balance	267	(644)	(2,117)	(1,881)	267	(2,117)
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance	(4,840)	(4,840)	(4,839)	(4,839)	(4,840)	(4,839)
Other comprehensive income before reclassification
Amounts reclassified from accumulated other comprehensive income (loss)
Net current period other comprehensive income (loss)
Cumulative effect of change in accounting principle, net of tax
Balance, as adjusted				(4,839)		(4,839)
Balance	(4,840)	(4,840)	(4,839)	(4,839)	(4,840)	(4,839)
AOCI Attributable to Parent [Member]
Balance	(5,484)	(6,357)	(6,720)	(5,518)	(6,357)	(5,518)
Other comprehensive income before reclassification	910		(236)		1,785	(1,257)
Amounts reclassified from accumulated other comprehensive income (loss)	1				(1)	6
Net current period other comprehensive income (loss)	911	873	(236)	(1,015)	1,784	(1,251)
Cumulative effect of change in accounting principle, net of tax				(187)		(187)
Balance, as adjusted		(6,357)		(5,705)	(6,357)	(5,705)
Balance	$ (4,573)	$ (5,484)	$ (6,956)	$ (6,720)	$ (4,573)	$ (6,956)

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Note 9 - Accumulated Other Comprehensive Income (Loss) - Significant Amounts Reclassified Out of Each Component of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Provision for income taxes	$ 473		$ 282		$ 929	$ 548
Total reclassifications for the period	2,140	$ 2,082	1,413	$ 1,362	4,222	2,775
Reclassification out of Accumulated Other Comprehensive Income [Member]
Provision for income taxes						(1)
Total reclassifications for the period	1				(1)	6
Reclassification out of Accumulated Other Comprehensive Income [Member] | AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Unrealized gains and losses on available-for-sale securities	$ 1				$ (1)	$ 7

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Note 10 - Revenue Recognition - Noninterest Income (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Noninterest income (in-scope of Topic 606)		$ 907	$ 792	$ 1,786	$ 1,544
Noninterest income (out-of-scope of Topic 606)(1)	[1]	224	257	402	403
Total noninterest income		1,131	1,049	2,188	1,947
Maintenance Fees [Member]
Noninterest income (in-scope of Topic 606)		42	37	82	76
Overdraft Fees [Member]
Noninterest income (in-scope of Topic 606)		412	353	850	682
Other Fees [Member]
Noninterest income (in-scope of Topic 606)		82	73	159	142
Electronic Banking Fees [Member]
Noninterest income (in-scope of Topic 606)		$ 371	$ 329	$ 695	$ 644

[1] Noninterest income items that are out-of-scope include net realized gains (losses) on sales of securities, net gains (losses) on sales of loans, earnings on bank-owned life insurance and certain other noninterest income items.

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Note 11 - Leases (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Operating Lease, Weighted Average Remaining Lease Term	13 years 146 days		13 years 146 days
Operating Lease, Weighted Average Discount Rate, Percent	3.48%		3.48%
Operating Lease, Cost	$ 48,000		$ 97,000
Operating Lease, Liability, Total	1,783,000		1,783,000
Operating Leases, Rent Expense, Total		$ 50,000		$ 100,000
Premises and Equipment [Member]
Operating Lease, Right-of-Use Asset	1,600,000		1,600,000
Other Liabilities [Member]
Operating Lease, Liability, Total	$ 1,800,000		$ 1,800,000

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Note 11 - Leases - Estimated Rental Commitments for Operating Leases (Details) $ in Thousands	Jun. 30, 2019 USD ($)
2019 (excluding six months)	$ 106
2020	212
2021	217
2022	222
2023	222
Thereafter	1,289
Total minimum lease payments	2,268
Discount effect of cash flows	(485)
Present value of lease liabilities	$ 1,783

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Note 12 - Recent Accounting Pronouncements (continued) (Details Textual) - USD ($)	Jan. 01, 2019	Jun. 30, 2019
Operating Lease, Liability, Total		$ 1,783,000
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset	$ 1,600,000
Operating Lease, Liability, Total	1,800,000
Cumulative Effect on Retained Earnings, Net of Tax, Total	170,000
Cumulative Effect on Retained Earnings, Tax	45,000
Accounting Standards Update 2017-08 [Member]
Cumulative Effect on Retained Earnings, Net of Tax, Total	10,000
Cumulative Effect on Retained Earnings, Tax	$ 3,000