10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10-Q 

(Mark One)

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

FOR THE QUARTER ENDED SEPTEMBER 30, 2019

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

FOR THE TRANSITION PERIOD FROM ______________ TO _____________

UNITED BANCSHARES INC /PA

(Exact name of registrant as specified in its charter)

0-25976

Commission File Number

Pennsylvania	23-2802415
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)

30 S. 15th Street, Suite 1200, Philadelphia, PA	19102
(Address of principal executive office)	(Zip Code)

(215) 351-4600

(Registrant's telephone number, including area code)

N/A

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

Indicate by check mark whether 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 twelve months (or such shorter period that the registrant was required to filed such reports), and (2) has been subject to such filing requirements for the past 90 day. Yes ☐     No☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Registration S-T 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, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller Reporting Company ☒

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐ Not Applicable.

Applicable only to corporate issuers:

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.

United Bancshares, Inc. (sometimes herein also referred to as the “Company” or “UBS”) has two classes of capital stock authorized 2,000,000 shares of $0.01 par value Common Stock and 500,000 shares of $0.01 par value Series Preferred Stock. The Preferred Stock consists of 500,000 authorized shares of stock of which 250,000 have been designated as Series A, 7,000 as Series B, and 1,100 as Series C for which there were 99,442, 1,850, and 1,100 shares are issued, respectively as of October 24, 2022.

The Board of Directors designated a subclass of the common stock, Class B Common Stock, by filing of Articles of Amendment to its Articles of Incorporation on September 30, 1998. This Class B Common Stock has all of the rights and privileges of Common Stock with the exception of voting rights. Of the 2,000,000 shares of authorized Common Stock, 250,000 have been designated Class B Common Stock. There is no market for the Common Stock. As of October 24, 2022, the aggregate number of the shares of the Registrant’s Common Stock issued was 843,050.

FORM 10-Q

Index

Item No.		Page
PART I - OTHER INFORMATION		3
Item 1.	Financial Statements (unaudited)	3
Item 2.	Management Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	41
PART II - OTHER INFORMATION		42
Item 1.	Legal Proceedings.	42
Item 1A.	Risk Factors.	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	42
Item 3.	Defaults Upon Senior Securities.	42
Item 4.	Mine Safety Disclosures.	42
Item 5.	Other Information.	42
Item 6.	Exhibits.	43

2

PART I - OTHER INFORMATION

Item 1.  Financial Statements (unaudited)

UNITED BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2019			December 31, 2018
Assets:
Cash and due from banks	$	1,569,933		$	2,003,085
Interest-bearing deposits with banks		5,449,578			3,360,937
Federal funds sold and other cash equivalents		5,468,524			3,074,021
Cash and cash equivalents		12,488,035			8,438,043
Investment securities available-for-sale, at fair value		4,431,700			4,580,610
Loans held for sale		8,426,558			10,072,777
Loans held at fair value		5,886,789			5,420,004
Loans, net of unearned discounts and deferred fees		17,365,120			20,542,863
Less allowance for loan losses		(218,910	)		(278,095	)
Net loans		17,146,210			20,264,768
Operating lease right of use asset		1,644,806			-
Bank premises and equipment, net		106,172			163,124
Accrued interest receivable		167,303			152,953
Other real estate owned		235,571			391,571
Servicing asset		253,738			313,489
Prepaid expenses and other assets		448,561			397,284
Total assets	$	51,235,442		$	50,194,623
Liabilities and Shareholders’ Equity
Liabilities:
Demand deposits, noninterest-bearing	$	16,788,603		$	16,216,607
Demand deposits, interest-bearing		14,170,026			13,599,641
Savings deposits		10,555,548			10,589,054
Time deposits, under $250,000		3,372,630			3,467,732
Time deposits, $250,000 and over		1,504,397			4,399,159
Total deposits		46,391,204			48,272,193
Operating lease liability		1,750,369			-
Accrued interest payable		6,100			17,376
Accrued expenses and other liabilities		164,429			145,308
Total liabilities		48,277,091			48,434,877
Shareholders’ equity:
Series A preferred stock, noncumulative, 6%, $0.01 par value, 500,000 shares authorized; 99,342 issued and outstanding		993			993
Series B preferred stock, noncumulative, 7%, $0.01 par value, 7,000 shares authorized; 1,850 issued and outstanding		18			18
Common stock, $0.01 par value; 2,000,000 shares authorized; 826,921 issued and outstanding		8,269			8,269
Additional paid-in-capital		15,677,626			15,677,626
Accumulated deficit		(12,748,217	)		(13,834,625	)
Accumulated other comprehensive income (loss)		19,662			(92,535	)
Total shareholders’ equity		2,958,351			1,759,746
Total liabilities and shareholders’ equity	$	51,235,442		$	50,194,623

See accompanying notes to the unaudited consolidated financial statements.

3

UNITED BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

 (Unaudited)

	Three Months ended September 30, 2019			Three Months ended September 30, 2018			Nine Months ended September 30, 2019			Nine Months ended September 30, 2018
Interest income:
Interest and fees on loans	$	451,587		$	600,438		$	1,489,830		$	1,745,278
Interest on investment securities		26,407			28,394			82,322			86,743
Interest on federal funds sold		30,459			27,531			92,545			115,980
Interest on interest bearing deposits with other banks		35,291			21,950			89,315			22,690
Total interest income		543,744			678,313			1,754,012			1,970,691
Interest expense:
Interest on time deposits		3,189			10,787			21,289			35,064
Interest on demand deposits		5,855			6,675			17,432			19,708
Interest on savings deposits		1,320			1,395			3,906			4,234
Total interest expense		10,364			18,857			42,627			59,006
Net interest income		533,380			659,456			1,711,385			1,911,685
(Credit) provision for loan losses		(10,000	)		20,000			(32,000	)		45,000
Net interest income after (credit) provision for loan losses		543,380			639,456			1,743,385			1,866,685
Noninterest income:
Customer service fees		104,134			106,909			290,042			309,849
ATM fee income		24,628			24,777			73,288			76,134
Gain on sale of loans		-			41,204			81,475			265,022
Net change in fair value of financial instruments		(6,196	)		83,278			(715,621	)		103,794
Gain (loss) on sale of other real estate		-			16			(18,723	)		(11,588	)
Loan syndication fees		65,000			100,000			65,000			100,000
Grant income		-			-			2,500,000			-
Service fees on loans		38,180			27,345			106,303			55,515
Other income		9,689			8,902			32,364			28,828
Total noninterest income		235,435			392,431			2,414,128			927,554
Noninterest expense:
Salaries, wages and employee benefits		315,293			372,642			979,050			1,154,522
Occupancy and equipment		247,143			244,865			707,993			746,000
Office operations and supplies		51,060			62,202			150,663			200,825
Marketing and public relations		5,490			1,742			9,809			27,069
Professional services		50,089			65,481			160,717			137,753
Data processing		111,014			98,878			324,908			307,735
Deposit insurance assessments		24,000			24,000			56,353			73,000
Other real estate expense		6,581			13,850			21,989			38,629
Loan and collection expense		73,543			50,974			253,623			115,968
Other operating		118,675			154,132			356,540			399,689
Total noninterest expense		1,002,887			1,088,766			3,021,644			3,201,190
Net (loss) income before income taxes		(224,072	)		(56,879	)		1,135,869			(406,951	)
Provision for income taxes		-			-			-			-
Net (loss) income	$	(224,072	)	$	(56,879	)	$	1,135,869		$	(406,951	)
Net (loss) income per common share—basic and diluted	$	(0.27	)	$	(0.07	)	$	1.37		$	(0.49	)
Weighted average number of common shares outstanding		826,921			826,921			826,921			826,921
Comprehensive (loss) income:
Net (loss) income	$	(224,072	)	$	(56,879	)	$	1,135,869		$	(406,951	)
Unrealized gains (losses) on available for sale securities, net of taxes		13,401			(26,040	)		112,196			(96,179	)
Total comprehensive (loss) income	$	(210,671	)	$	(82,919	)	$	1,248,065		$	(503,130	)

See accompanying notes to the unaudited consolidated financial statements.

4

UNITED BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 

Nine Months Ended September 30, 2019

	Series A Preferred stock				Series B Preferred stock				Common stock				Additional paid-in		Accumulated			Accumulated Other Comprehensive			Total Shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		capital		Deficit			Income (Loss)			Equity
Balance at December 31, 2018		99,342	$	993		1,850	$	18		826,921	$	8,269	$	15,677,626	($13,834,625)			$	(92,535	)	$	1,759,746
Net loss		-		-		-		-		-		-		-		(227,508	)		-			(227,508	)
Other comprehensive income, net of tax		-		-		-		-		-		-		-		-			57,890			57,890
Cumulative effect of adoption of ASU 2016-02, Leases (Topic 842)																(49,460	)					(49,460	)
Balance at March 31, 2019		99,342	$	993		1,850	$	18		826,921	$	8,269	$	15,677,626	$	(14,111,593	)	$	(34,645	)	$	1,540,668
Net income		-		-		-		-		-		-		-		1,587,448			-			1,587,448
Other comprehensive income, net of tax		-		-		-		-		-		-		-		-			40,905			40,905
Balance at June 30, 2019		99,342	$	993		1,850	$	18		826,921	$	8,269	$	15,677,626	$	(12,524,145	)	$	6,260		$	3,169,021
Net loss		-		-		-		-		-		-		-		(224,072	)		-			(224,072	)
Other comprehensive income, net of tax		-		-		-		-		-		-		-		-			13,402			13,402
Balance at September 30, 2019		99,342	$	993		1,850	$	18		826,921	$	8,269	$	15,677,626	$	(12,748,217	)	$	19,662		$	2,958,351

See accompanying notes to the unaudited consolidated financial statements.

5

UNITED BANCSHARES, INC. AND SUBSIDIARY

 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 

Nine Months Ended September 30, 2018

	Series A Preferred stock				Series B Preferred stock				Common stock				Additional paid-in		Accumulated			Accumulated Other Comprehensive			Total Shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		capital		Deficit			Loss			Equity
Balance at December 31, 2017		99,342	$	993		1,850	$	18		826,921	$	8,269	$	15,677,626	$	(12,348,988	)	$	(57,396	)	$	3,280,522
Net loss		-		-		-		-		-		-		-		(198,026	)		-			(198,026	)
Other comprehensive loss, net of tax		-		-		-		-		-		-		-		-			(53,879	)		(53,879	)
Balance at March 31, 2018		99,342	$	993		1,850	$	18		826,921	$	8,269	$	15,677,626		(12,547,014	)		(111,275	)		3,028,617
Net loss				-				-		-		-		-		(152,046	)		-			(152,046	)
Other comprehensive loss, net of tax		-		-		-		-		-		-		-		-			(16,259	)		(16,259	)
Balance at June 31, 2018		99,342	$	993		1,850	$	18		826,921	$	8,269	$	15,677,626	$	(12,699,060	)	$	(127,534	)	$	2,860,312
Net loss		-		-		-		-		-		-		-		(56,879	)		-			(56,879	)
Other comprehensive loss, net of tax		-		-		-		-		-		-		-		-			(26,041	)		(26,041	)
Balance at September 31, 2018		99,342	$	993		1,850	$	18		826,921	$	8,269	$	15,677,626	$	(12,755,939	)	$	(153,575	)	$	2,777,392

See accompanying notes to the unaudited consolidated financial statements.

6

UNITED BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30, 2019

	2019			2018
Cash flows from operating activities:
Net income (loss)	$	1,135,869		$	(406,951	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Credit) provision for loan losses		(32,000	)		45,000
Amortization of premiums on investments, net		4,203			5,360
Loss on disposition of other real estate		18,723			11,588
Write-down of other real estate		-			5,000
Amortization of servicing asset		24,198			91,919
Depreciation on fixed assets		60,233			137,032
Net change in fair value of financial instruments		715,621			(103,794	)
Gain on sale of loans		(81,475	)		(265,022	)
Proceeds from the sale of loans held-for-sale		1,144,073			3,098,258
Loans originated for sale		(598,785	)		(5,747,443	)
Increase in accrued interest receivable and other assets		(30,074	)		(115,552	)
Increase (decrease) in accrued interest payable and other liabilities		28,937			(100,436	)
Net cash provided by (used in) operating activities		2,389,523			(3,345,041	)
Cash flows from investing activities:
Proceeds from maturity and principal reductions of available-for-sale investment securities		256,903			457,629
Purchase of securities available-for-sale		-			(1,765	)
Net decrease in loans		3,150,558			3,627,344
Proceeds from sale of other real estate		137,277			217,911
Purchase of bank premises and equipment		(3,281	)		(20,086	)
Net cash provided by investing activities		3,541,457			4,281,031
Cash flows from financing activities:
Net decrease in deposits		(1,880,989	)		(4,385,667	)
Net cash used in financing activities		(1,880,990	)		(4,385,667	)
Net increase (decrease) in cash and cash equivalents	$	4,049,992		$	(3,449,677	)
Cash and cash equivalents at beginning of period	$	8,438,043		$	11,671,253
Cash and cash equivalents at end of period	$	12,488,035		$	8,221,576
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	53,903		$	61,390
Transfer of investment to other cash equivalents	$	-		$	133,296
Transfer of loans from held-for-sale to held at fair value	$	1,580,482		$	731,625
Non-cash addition of operating lease right of use asset	$	(1,644,806	)	$	-
Non-cash addition of operating lease liability	$	1,750,369		$	-

See accompanying notes to the unaudited consolidated financial statements.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(unaudited)

1. Significant Accounting Policies

United Bancshares, Inc. (the "Company") is a bank holding company registered under the Bank Holding Company Act of 1956.  The Company's principal activity is the ownership and management of its wholly owned subsidiary, United Bank of Philadelphia (the "Bank").

During interim periods, the Company follows the accounting policies set forth in its Annual Report on Form 10-K filed with the Securities and Exchange Commission.  Readers are encouraged to refer to the Company's Form 10-K for the fiscal year ended December 31, 2018 when reviewing this Form 10-Q.  Because this report is based on an interim period, certain information and footnote disclosures normally included in the Annual Report on Form 10-K have been condensed or omitted. Quarterly results reported herein are not necessarily indicative of results to be expected for other quarters.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the Company's consolidated financial position as of September 30, 2019 and December 31, 2018 and the consolidated results of its operations and its cash flows for the three and nine months ended September 30, 2019 and 2018.

Management’s Use of Estimates

The preparation of the financial statements has been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities, the determination of the allowance for loan losses, the fair value of loans held for sale and at fair value, valuation allowance for deferred tax assets, the carrying value of other real estate owned, the determination of other than temporary impairment for securities.

Commitments

In the general course of business, there are various outstanding commitments to extend credit, such as letters of credit and un-advanced loan commitments, which are not reflected in the accompanying financial statements. Management does not anticipate any material losses as a result of these commitments.

Contingencies

The Company is from time to time a party to routine litigation in the normal course of its business. Management does not believe that the resolution of any such litigation will have a material adverse effect on the financial condition or results of operations of the Company. However, the ultimate outcome of any such litigation, as with litigation generally, is inherently uncertain and it is possible that some litigation matters may be resolved adversely to the Company.

Loans Held for Sale

The Bank originates SBA loans for which the guaranteed portion is intended to be sold within a short period of time in the secondary market.  These loans are carried at fair value based on a loan-by-loan valuation using actual market bids.  Any change in the balance of the loan and its fair value is recorded as income or expense in each reporting period.  When the guaranteed portion of the loan is sold, the gain on the sale is reduced by the income previously recognized as part of the fair value adjustment.

Loans Held at Fair Value

The Bank originates SBA loans for which the un-guaranteed portion is retained after the guaranteed portion is sold in the secondary market.  Management has elected to carry these loans at fair value in accordance with the irrevocable option permitted under Accounting Standards Codification (“ASC”) 825-10-25 Financial Instruments.  Fair value of these loans is estimated based on the present value of future cash flows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries. When a SBA loan held at fair value becomes nonperforming, the fair value estimate is based on the net liquidation value of collateral or the present value of future cashflows.

8

Loans

The Bank has both the positive intent and ability to hold the majority of its loans to maturity.  These loans are stated at the amount of unpaid principal, reduced by net unearned discount and an allowance for loan losses.  Interest income on loans is recognized as earned based on contractual interest rates applied to daily principal amounts outstanding and accretion of discount.   

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses.  Loans that are determined to be uncollectible are charged against the allowance account, and subsequent recoveries, if any, are credited to the allowance.  When evaluating the adequacy of the allowance, an assessment of the loan portfolio will typically include changes in the composition and volume of the loan portfolio, overall portfolio quality and past loss experience, review of specific problem loans, current economic conditions which may affect borrowers’ ability to repay, and other factors which may warrant current recognition.  Such periodic assessments may, in management’s judgment, require the Bank to recognize additions or reductions to the allowance. 

Various regulatory agencies periodically review the adequacy of the Bank’s allowance for loan losses as an integral part of their examination process.  Such agencies may require the Bank to recognize additions or reductions to the allowance based on their evaluation of information available to them at the time of their examination.  It is reasonably possible that the above factors may change significantly and, therefore, affects management’s determination of the allowance for loan losses in the near term.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers non-impaired loans and is based on historical charge-off experience, other qualitative factors, and adjustments made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.  The Bank does not allocate reserves for unfunded commitments to fund lines of credit.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Bank will identify and assess loans that may be impaired through any of the following processes:

· During regularly scheduled meetings of the Asset Quality Committee

· During regular reviews of the delinquency report

· During the course of routine account servicing, annual review, or credit file update

· Upon receipt of verifiable evidence of a material reduction in the value of collateral to a level that creates a less than desirable Loan-to-Value ratio

Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller, homogeneous loans, including consumer installment and home equity loans, 1-4 family residential mortgages, and student loans are evaluated collectively for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures.

Non-accrual and Past Due Loans.

Loans are considered past due if the required principal and interest payments have not been received within 30 days as of the date such payments were due.  The Bank generally places a loan on non-accrual status when interest or principal is past due 90 days or more.  If it otherwise appears doubtful that the loan will be repaid, management may place the loan on nonaccrual status before the lapse of 90 days. Interest on loans past due 90 days or more ceases to accrue except for loans that are well collateralized and in the process of collection.  When a loan is placed on nonaccrual status, previously accrued and unpaid interest is reversed out of income.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

9

Income Taxes

Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities.  Deferred tax assets are subject to management’s judgment based upon available evidence that future realization is more likely than not.   For financial reporting purposes, a valuation allowance of 100% of the net deferred tax asset, other than the asset/liability related to the available for sale investment, has been recognized to offset the net deferred tax assets related to cumulative temporary differences and tax loss carryforwards.  If management determines that the Company may be able to realize all or part of the deferred tax asset in the future, an income tax benefit may be required to increase the recorded value of the net deferred tax asset to the expected realizable amount.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more-likely-than not recognition threshold is measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits, if any, would be recognized in income tax expense in the consolidated statements of operations.

2. Net (Loss) Income Per Share

The calculation of net (loss) income per share follows:

	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018			Nine Months Ended September 30, 2019		Nine Months Ended September 30, 2018
Basic:
Net (loss) income available to common shareholders	$	(224,072	)	$	(56,879	)	$	1,135,869	$	(406,951	)
Average common shares outstanding-basic		826,921			826,921			826,921		826,921
Net (loss) income per share-basic	$	(0.27	)	$	(0.07	)	$	1.37	$	(0.49	)
Diluted:
Average common shares-diluted		826,921			826,921			826,921		826,921
Net (loss) income per share-diluted	$	(0.27	)	$	(0.07	)	$	1.37	$	(0.49	)

The preferred stock is non-cumulative and the Company is restricted from paying dividends.  Therefore, no effect of the preferred stock is included in the (loss) income per share calculations.

3. Changes in Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss) which is solely comprised of the unrealized gain or loss of available for sale investment securities:

	Three Months Ended September 30, 2019
	Before tax		Deferred			Net of tax
(in (000’s)	Amount		Taxes			Amount
Beginning balance	$	8	$	(2	)	$	6
Unrealized gain on securities:
Unrealized holding gain arising during period		18		(4	)		14
Other comprehensive income, net		18		(4	)		14
Ending balance	$	26	$	(6	)	$	20

	Three Months Ended September 30, 2018
	Before tax			Deferred		Net of tax
(in (000’s)	Amount			Taxes		Amount
Beginning balance	$	(161	)	$	34	$	(127	)
Unrealized loss on securities:
Unrealized holding loss arising during period		(32	)		6		(26	)
Other comprehensive loss, net		(32	)		6		(26	)
Ending balance	$	(193	)	$	40	$	(153	)

10

	Nine Months Ended September 30, 2019
	Before tax			Deferred			Net of tax
(in (000’s)	Amount			Taxes			Amount
Beginning balance	$	(117	)	$	25		$	(92	)
Unrealized gain on securities:
Unrealized holding gain arising during period		143			(31	)		112
Other comprehensive gain, net		143			(31	)		112
Ending balance	$	26		$	(6	)	$	20

	Nine Months Ended September 30, 2018
	Before tax			Deferred		Net of tax
(in (000’s)	Amount			Taxes		Amount
Beginning balance	$	(73	)	$	16	$	(57	)
Unrealized loss on securities:
Unrealized holding loss arising during period		(120	)		24		(96	)
Other comprehensive loss, net		(120			24		(96	)
Ending balance	$	(193	)	$	40	$	(153	)

4. New Authoritative Accounting Guidance

Adoption of Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. Additionally, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) — Targeted Improvements , which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted ASU 2016-02 and its related amendments as of January 1, 2019, which resulted in the recognition of operating right-of-use assets totaling $1,824,729, as well as operating lease liabilities totaling $1,931,239 estimate of credit losses that are expected to occur over the remaining life of a financial asset.  The Company elected to adopt the transition relief provisions from ASU 2018-11 and recorded the impact of adoption as of January 1, 2019, without restating any prior-year amounts or disclosures. The related policy elections made by the Company and the additional lease disclosures can be found in Note 8. The cumulative effect adjustment to retained earnings was a reduction of $49,460.

Effect of Upcoming Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.  The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset.  The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.  The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements.  The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  This Update is not expected to have a significant impact on the Company’s financial statements.

11

In January 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications to ease the financial reporting burdens of the expected market transition from LIBOR to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. The Company has identified its LIBOR exposure across product categories and is analyzing the risks associated with the LIBOR transition. However, it is too early to predict whether a new rate index replacement and the adoption of this ASU will have a material impact on the Company’s financial statements.

5.  Investment Securities

The following is a summary of the Company's investment portfolio: 

(In 000’s)	September 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-sale:
U.S. Government agency securities	$	2,349	$	-	$	(3	)	$	2,346
Government Sponsored Enterprises residential mortgage-backed securities		2,057		31		(3	)		2,085
	$	4,406	$	31	$	(6	)	$	4,431

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-sale:
U.S. Government agency securities	$	2,349	$	-	$	(72	)	$	2,277
Government Sponsored Enterprises residential mortgage-backed securities		2,349		9		(54	)		2,304
	$	4,698	$	9	$	(126	)	$	4,581

The amortized cost and fair value of debt securities classified as available-for-sale by contractual maturity as of September 30, 2019, are as follows:

(In 000’s)	Amortized Cost		Fair Value
Due in one year	$	-	$	-
Due after one year through five years		-		-
Due after five years through ten years		2,349		2,346
Government Sponsored Enterprises residential mortgage-backed securities		2,057		2,085
	$	4,406	$	4,431

Expected maturities will differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without any penalties.

There were no sales of securities during the three and nine months ended September 30, 2019 and 2018.

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at September 30, 2019:

(in 000’s)	Number		Less than 12 months					12 months or longer					Total
Description of	of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	Securities		Value		Losses			Value		losses			Value		Losses
U.S. Government agency securities		4	$	749	$	(1	)	$	747	$	(2	)	$	1,496	$	(3	)
Government Sponsored Enterprises residential mortgage-backed securities		3		491		(3	)		-		-			491		(3	)
Total temporarily impaired investment Securities		7	$	1,240	$	(4	)	$	747	$	(2	)	$	1,987	$	(6	)

12

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2018:

(in 000’s)	Number		Less than 12 months					12 months or longer					Total
Description of	of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	securities		Value		Losses			Value		losses			Value		Losses
U.S. Government agency securities		7	$	-	$	-		$	2,277	$	(72	)	$	2,277	$	(72	)
Government Sponsored Enterprises residential mortgage-backed securities		14		718		(10	)		1,299		(44	)		2,017		(54	)
Total temporarily impaired investment Securities		21	$	718	$	(10	)	$	3,576	$	(116	)	$	4,294	$	(126	)

Government Sponsored Enterprises residential mortgage-backed securities. Unrealized losses on the Company’s investment in Government Sponsored Enterprises residential mortgage-backed securities were caused by market interest rate increases. The Company purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company’s investments. Because the decline in fair value is attributable to changes in market interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired.

U.S. Government and Agency Securities. Unrealized losses on the Company's investments in direct obligations of U.S. government agencies were caused by market interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired.

The Company has a process in place to identify debt securities that could potentially have a credit impairment that is other than temporary.  This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.  On a quarterly basis, the Company reviews all securities to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. The Company considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, the intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, the Company’s ability and intent to hold the security for a period of time that allows for the recovery in value. 

As of September 30, 2019 and December 31, 2018, investment securities with a carrying value of $774,000 and $3,668,000, respectively, were pledged as collateral to secure public deposits and contingent borrowing at the Federal Reserve Discount Window.

6. Loans and Allowance for Loan Losses

The composition of the Bank’s loan portfolio is as follows:

(in 000’s)	September 30, 2019		December 31, 2018
Commercial and industrial	$	1,340	$	1,545
Commercial real estate		14,293		17,038
Consumer real estate		1,083		1,226
Consumer loans other		649		734
Total loans	$	17,365	$	20,543

At September 30, 2019 and December 31, 2018, there was no unearned discount. 

13

The determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance is the accumulation of three components that are calculated based on various independent methodologies that are based on management’s estimates.  The three components are as follows:

· Specific Loan Evaluation Component – Includes the specific evaluation of impaired loans.

· Historical Charge-Off Component – Applies an eight-quarter rolling historical charge-off rate to all portfolio segments of non-classified loans.

· Qualitative Factors Component – The loan portfolio is broken down into portfolio segments, upon which multiple factors (such as delinquency trends, economic conditions, concentrations, growth/volume trends, and management/staff ability) are evaluated, resulting in an allowance amount for each of the sub classifications. The sum of these amounts comprises the Qualitative Factors Component.

All of these factors may be susceptible to significant change.  During the nine months ended September 30, 2019, the Bank did not change any of its qualitative factors in any segment of the loan portfolio; however, the average historical loss factor increased significantly for commercial and industrial loans because of net charge-offs that resulted in an increase in general reserves. Credits to the provision for the nine months ended September 30, 2019 were primarily related to decreases in the balance of commercial real estate loans as well as the origination of SBA loans that are accounted for at fair value and are not included in the calculation of the allowance for loan losses. During the nine months, ended September 30, 2019, there was an increase in the commercial real estate reserve allocation because of the modification of an impaired commercial industrial loan to become secured by real estate.  Specific reserves allocated to this loan were reclassified to commercial real estate. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods.  The following table presents an analysis of the allowance for loan losses.

(in 000's)	For the Three months ended September 30, 2019
	Commercial and industrial			Commercial real estate			Consumer real estate			Consumer loans Other			Unallocated			Total
Beginning balance	$	49		$	185		$	2		$	-		$	-		$	236
(Credit) provision for loan losses		(11	)		3			(1	)		-			(1	)		(10	)
Charge-offs		-			(20	)		-			(1	)		-			(21	)
Recoveries		-			12			-			1			1			14
Net charge-offs		-			(8	)		-			-			1			(7	)
Ending balance	$	38		$	180		$	1		$	-		$	-		$	219

(in 000's)	For the Three months ended September 30, 2018
	Commercial and industrial		Commercial real Estate			Consumer real estate		Consumer loans Other			Unallocated			Total
Beginning balance	$	3	$	150		$	4	$	8		$	15		$	180
Provision (credit) for loan losses		80		(37	)		-		(8	)		(15	)		20
Charge-offs		-		-			-		(1	)		-			(1	)
Recoveries		1		1			-		1			-			3
Net recoveries		1		1			-		-			-			2
Ending balance	$	84	$	114		$	4	$	-		$	-		$	202

(in 000's)	For the Nine months ended September 30, 2019
	Commercial and industrial			Commercial real estate			Consumer real estate			Consumer loans Other			Unallocated			Total
Beginning balance	$	102		$	139		$	4		$	-		$	33		$	278
Provision (credit) for loan losses		(48	)		62			(12	)		(1	)		(33	)		(32	)
Charge-offs		(19	)		(41	)		(12	)		(7	)		-			(79	)
Recoveries		3			20			21			8			-			52
Net (charge-offs) recoveries		(16	)		(21	)		9			1			-			(27	)
Ending balance	$	38		$	180		$	1		$	-		$	-		$	219

14

(in 000's)	For the Nine months ended September 30, 2018
	Commercial and industrial			Commercial real estate			Consumer real estate			Consumer loans Other			Unallocated		Total
Beginning balance	$	7		$	155		$	10		$	8		$	-	$	180
Provision (credit) for loan losses		84			(26	)		(6	)		(7	)				45
Charge-offs		(10	)		(18	)		-			(8	)		-		(36	)
Recoveries		3			3			-			7			-		13
Net charge-offs		(7	)		(15	)		-			(1	)		-		(23	)
Ending balance	$	84		$	114		$	4		$	-		$	-	$	202

(in 000's)	September 30, 2019
	Commercial and industrial		Commercial real Estate		Consumer real estate		Consumer loans Other		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$	-	$	81	$	-	$	-	$	-	$	81
Loans collectively evaluated for impairment		38		99		1		-		-		138
	$	38	$	180	$	1	$	-	$	-	$	219
Loans, ending balance:
Loans individually evaluated for impairment	$	76	$	1,249	$	-	$	-	$	-	$	1,325
Loans collectively evaluated for impairment		1,264		13,044		1,083		649		-		16,040
Total	$	1,340	$	14,293	$	1,083	$	649	$	-	$	17,365

(in 000's)	December 31, 2018
	Commercial and industrial		Commercial real Estate		Consumer real estate		Consumer loans Other		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$	95	$	44	$	-	$	-	$	-	$	139
Loans collectively evaluated for impairment		7		95		4		-		33		139
	$	102	$	139	$	4	$	-	$	33	$	278
Loans, ending balance:
Loans individually evaluated for impairment	$	289	$	1,148	$	-	$	-	$	-	$	1,437
Loans collectively evaluated for impairment		1,256		15,890		1,226		734		-		19,106
Total	$	1,545	$	17,038	$	1,226	$	734	$	-	$	20,543

15

Nonperforming and Nonaccrual and Past Due Loans

An age analysis of past due loans, segregated by class of loans, as of September 30, 2019 is as follows:

			Accruing		Nonaccrual
	Loans		Loans 90 or		Loans 90 or
(In 000's)	30-89 Days		More Days		More Days		Total Past		Current
	Past Due		Past Due		Past Due		Due Loans		Loans		Total Loans
Commercial and industrial:
Commercial	$	-	$	-	$	-	$	-	$	1,039	$	1,039
SBA loans		-		-		-		-		-		-
Asset-based		-		-		76		76		225		301
Total Commercial and industrial		-		-		76		76		1,264		1,340
Commercial real estate:
Commercial mortgages		-		-		1,010		1,010		6,358		7,368
SBA loans		-		-		60		60		175		235
Construction		-		-		-		-		-		-
Religious organizations		369		-		179		548		6,142		6,690
Total Commercial real estate		369		-		1,249		1,618		12,675		14,293
Consumer real estate:
Home equity loans		-		148		240		388		151		539
Home equity lines of credit		-		-		-		-		13		13
1-4 family residential mortgages		-		-		-		-		531		531
Total consumer real estate		-		148		240		388		695		1,083
Total real estate		369		148		1,489		2,006		13,370		15,376
Consumer and other:
Student loans		6		5		-		11		553		564
Other		1		-		-		1		84		85
Total consumer and other		7		5		-		12		637		649
Total loans	$	376	$	153	$	1,565	$	2,094	$	15,271	$	17,365

An age analysis of past due loans, segregated by class of loans, as of December 31, 2018 is as follows:

			Accruing		Nonaccrual
	Loans		Loans 90 or		Loans 90 or
	30-89 Days		More Days		More Days		Total Past		Current
(In 000's)	Past Due		Past Due		Past Due		Due Loans		Loans		Total Loans
Commercial and industrial:
Commercial	$	-	$	-	$	-	$	-	$	1,055	$	1,055
SBA Loans		-		-		18		18		-		18
Asset-based		-		-		76		76		396		472
Total Commercial and industrial		-		-		94		94		1,451		1,545
Commercial real estate:
Commercial mortgages		-		45		902		947		8,585		9,532
SBA loans		-		-		69		69		179		248
Construction		-		-		-		-		-		-
Religious organizations		-		-		179		179		7,078		7,257
Total Commercial real estate		-		45		1,150		1,195		15,843		17,038
Consumer real estate:
Home equity loans		-		150		281		431		197		628
Home equity lines of credit		-		-		-		-		15		15
1-4 family residential mortgages		-		-		85		85		498		583
Total consumer real estate		-		150		366		516		710		1,226
Total real estate		-		195		1,516		1,711		16,553		18,264
Consumer and other:
Student loans		14		57		-		71		551		622
Other		1		-		-		1		111		112
Total consumer and other		15		57		-		72		662		734
Total loans	$	15	$	252	$	1,661	$	1,928	$	18,615	$	20,543

16

Loan Origination/Risk Management. The Bank has lending policies and procedures in place to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with periodic reports related to loan origination, asset quality, concentrations of credit, loan delinquencies and non-performing and emerging problem loans. Diversification in the portfolio is a means of managing risk with fluctuations in economic conditions.

Credit Quality Indicators. For commercial loans, management uses internally assigned risk ratings as the best indicator of credit quality. Each loan’s internal risk weighting is assigned at origination and updated at least annually and more frequently if circumstances warrant a change in risk rating. The Bank uses a 1 through 8 loan grading system that follows regulatory accepted definitions as follows:

· Risk ratings of “1” through “3” are used for loans that are performing and meet and are expected to continue to meet all of the terms and conditions set forth in the original loan documentation and are generally current on principal and interest payments. Loans with these risk ratings are reflected as “Good/Excellent” and “Satisfactory” in the following table.

· Risk ratings of “4” are assigned to “Pass/Watch” loans which may require a higher degree of regular, careful attention. Borrowers may be exhibiting weaker balance sheets and positive but inconsistent cash flow coverage. Borrowers in this classification generally exhibit a higher level of credit risk and are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Loans with this rating would not normally be acceptable as new credits unless they are adequately secured and/or carry substantial guarantors. Loans with this rating are reflected as “Pass” in the following table.

· Risk ratings of “5” are assigned to “Special Mention” loans that do not presently expose the Bank to a significant degree of risks, but have potential weaknesses/deficiencies deserving Management’s closer attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. No loss of principal or interest is envisioned. Borrower is experiencing adverse operating trends, which potentially could impair debt, services capacity and may necessitate restructuring of credit. Secondary sources of repayment are accessible and considered adequate to cover the Bank's exposure. However, a restructuring of the debt should result in repayment. The asset is currently protected, but is potentially weak. This category may include credits with inadequate loan agreements, control over the collateral or an unbalanced position in the balance sheet which has not reached a point where the liquidation is jeopardized but exceptions are considered material. These borrowers would have limited ability to obtain credit elsewhere.

· Risk ratings of “6” are assigned to “Substandard” loans which are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets must have a well-defined weakness. They are characterized by the distinct possibility that some loss is possible if the deficiencies are not corrected. The borrower’s recent performance indicated an inability to repay the debt, even if restructured. Primary source of repayment is gone or severely impaired and the Bank may have to rely upon the secondary source. Secondary sources of repayment (e.g., guarantors and collateral) should be adequate for a full recovery. Flaws in documentation may leave the bank in a subordinated or unsecured position when the collateral is needed for the repayment.

· Risk ratings of “7” are assigned to “Doubtful” loans which have all the weaknesses inherent in those classified “Substandard” with the added characteristic that the weakness makes the collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. The borrower's recent performance indicates an inability to repay the debt. Recovery from secondary sources is uncertain. The possibility of a loss is extremely high, but because of certain important and reasonably- specific pending factors, its classification as a loss is deferred.

· Risk rating of “8” are assigned to “Loss” loans which are considered non-collectible and do not warrant classification as active assets. They are recommended for charge-off if attempts to recover will be long term in nature. This classification does not mean that an asset has no recovery or salvage value, but rather, that it is not practical or desirable to defer writing off the loss, although a future recovery may be possible. Loss should always be taken in the period in which they surface and are identified as non-collectible as a result there is no tabular presentation.

For consumer and residential mortgage loans, management uses performing versus nonperforming as the best indicator of credit quality. Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being in default for a period of 90 days or more or when the ability to collect principal and interest according to contractual terms is in doubt as well as loans that are 90 days or more past due and have not been placed on nonaccrual. These credit quality indicators are updated on an ongoing basis. A loan is placed on nonaccrual status as soon as management believes there is doubt as to the ultimate ability to collect interest on a loan.

17

The tables below detail the Bank’s loans by class according to their credit quality indicators discussed above.

(In 000's)	Commercial Loans September 30, 2019
	Good/ Excellent		Satisfactory		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial:
Commercial	$	250	$	578	$	-	$	-	$	211	$	-	$	1,039
SBA loans		-		-		-		-		-		-		-
Asset-based		-		225		-		-		-		76		301
		250		803		-		-		211		76		1,340
Commercial real estate:
Commercial mortgages		-		4,864		1,705		-		613		186		7,368
SBA Loans		-		175		-		-		60		-		235
Construction		-		-		-		-		-		-		-
Religious organizations		8		4,469		2,034		-		179		-		6,690
		8		9,508		3,739		-		852		186		14,293
Total commercial loans	$	258	$	10,311	$	3,739	$	-	$	1,063	$	262	$	15,633

	Residential Mortgage and Consumer Loans September 30, 2019
	Performing		Nonperforming		Total
Consumer Real Estate:
Home equity	$	151	$	388	$	539
Home equity line of credit		13		-		13
1-4 family residential mortgages		291		-		531
		455		388		1,083
Consumer Other:
Student loans		559		5		564
Other		85		-		85
		644		5		649
Total  consumer loans	$	1,099	$	393	$	1,732

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(In 000's)	Commercial Loans,  December 31, 2018
	Good/ Excellent		Satisfactory		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial:
Commercial	$	250	$	592	$	-	$	-	$	213	$	-	$	1,055
SBA loans		-		-		-		-		-		-		18
Asset-based		-		272		124		-		18		76		472
		250		864		124		-		231		76		1,545
Commercial real estate:
Commercial mortgages		-		5,814		2,759		52		703		204		9,532
SBA Loans		-		179		-		-		69		-		248
Construction		-		-		-		-		-		-		-
Religious organizations		24		5,041		2,013		-		180		-		7,258
		24		11,034		4,772		52		952		204		17,038
Total commercial loans	$	274	$	11,898	$	4,896	$	52	$	1,183	$	280	$	18,583

	Residential Mortgage and Consumer Loans December 31, 2018
	Performing		Nonperforming		Total
Consumer Real Estate:
Home equity	$	197	$	431	$	628
Home equity line of credit		15		-		15
1-4 family residential mortgages		498		85		583
		710		516		1,226
Consumer Other:
Student loans		565		57		622
Other		112		-		112
		677		57		734
Total  consumer loans	$	1,387	$	573	$	1,960

Impaired Loans. The Bank identifies a loan as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement. The Bank recognizes interest income on impaired loans under the cash basis when the collateral on the loan is sufficient to cover the outstanding obligation to the Bank.   If these factors do not exist, the Bank will record interest payments on the cost recovery basis.

In accordance with guidance provided by ASC 310-10, Accounting by Creditors for Impairment of a Loan, management employs one of three methods to determine and measure impairment: The Present Value of Future Cash Flow Method; the Fair Value of Collateral Method; or the Observable Market Price of a Loan Method.  To perform an impairment analysis, the Company reviews a loan’s internally assigned grade, its outstanding balance, guarantors, collateral, strategy, and a current report of the action being implemented. Based on the nature of the specific loans, one of the impairment methods is chosen for the respective loan and any impairment is determined, based on criteria established in ASC 310-10.  

The Company makes partial charge-offs of impaired loans when the impairment is deemed permanent and is considered a loss.  Specific reserves are allocated to cover “other-than-permanent” impairment for which the underlying collateral value may fluctuate with market conditions.  There were no partial charge-offs for the nine months ended September 30, 2019.

Consumer real estate and other loans are not individually evaluated for impairment, but collectively evaluated, because they are pools of smaller balance homogeneous loans.  

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Impaired loans as of September 30, 2019 are set forth in the following table.

(In 000's)	Unpaid Contractual		Recorded Investment		Recorded Investment		Total
	Principal		With No		With		Recorded		Related
	Balance		Allowance		Allowance		Investment		Allowance
Commercial and industrial:
Commercial	$	-	$	-	$	-	$	-	$	-
SBA loans		-		-		-		-		-
Asset-based		76		76		-		76		-
Total commercial and industrial		76		76		-		76		-
Commercial real estate:
Commercial mortgages		1,010		799		211		1,010		81
SBA Loans		60		60		-		60		-
Religious organizations		179		179		-		179		-
Total commercial real estate		1,249		1,038		211		1,249		81
Total loans	$	1,325	$	1,114	$	211	$	1,325	$	81

Impaired loans as of December 31, 2018 are set forth in the following table.

(In 000's)	Unpaid Contractual		Recorded  Investment		Recorded  Investment		Total
	Principal		With No		With		Recorded		Related
	Balance		Allowance		Allowance		Investment		Allowance
Commercial and industrial:
Commercial	$	213	$	-	$	213	$	213	$	81
SBA		-		-		-		-		-
Asset based		76		-		76		76		14
Total Commercial and industrial		289		-		289		289		95
Commercial real estate:
Commercial mortgages		898		739		159		898		13
SBA  Loans		71		71		-		71		-
Religious Organizations		179		-		179		179		31
Total Commercial real estate		1,148		810		338		1,148		44
Total loans	$	1,437	$	810	$	627	$	1,437	$	139

The Bank recognizes interest income on impaired loans under the cash basis when the collateral on the loan is sufficient to cover the outstanding obligation to the Bank.   If these factors do not exist, the Bank will record interest payments on the cost recovery basis. The following tables present additional information about impaired loans.

(In 000's)	Three Months Ended  September 30, 2019				Three Months Ended  September 30, 2018
	Average		Interest recognized		Average		Interest recognized
	Recorded		on impaired		Recorded		on impaired
	Investment		Loans		Investment		Loans
Commercial and industrial:
Commercial	$	-	$	-	$	25	$	-
SBA  loans		-		-		-		-
Asset-based		76		-		76		-
Total commercial and industrial		76		-		101		-
Commercial real estate:
Commercial mortgages		1,104		5		936		1
SBA loans		62		-		73		-
Religious organizations		179		-		180		-
Total commercial real estate		1,345		5		1,189		-
Total loans	$	1,421	$	5	$	1,290	$	1

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(In 000's)	Nine Months Ended  September 30, 2019				Nine Months Ended  September 30, 2018
	Average		Interest recognized		Average		Interest recognized
	Recorded		on impaired		Recorded		on impaired
	Investment		Loans		Investment		Loans
Commercial and industrial:
Commercial	$	183	$	-	$	8	$	2
SBA  loans		-		-		-		-
Asset-based		76		-		76		-
Total commercial and industrial		259		-		84		2
Commercial real estate:
Commercial mortgages		847		-		946		1
SBA loans		65		-		76		-
Religious organizations		179		-		182		-
Total commercial real estate		1,091		-		1,204		-
Total loans	$	1,350	$	-	$	1,288	$	3

Troubled debt restructurings (“TDRs”).  TDRs occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider, such as a below market interest rate, extending the maturity of a loan, or a combination of both. The Company made modifications to certain loans in its commercial loan portfolio that included the term out of lines of credit to begin the amortization of principal.  The terms of these loans do not include any financial concessions and are not consistent with the current market.  Management reviews all loan modifications to determine whether the modification qualifies as a troubled debt restructuring (i.e. whether the creditor has been granted a concession or is experiencing financial difficulties).  Based on this review and evaluation, none of the modified loans met the criteria of a troubled debt restructuring.  Therefore, the Company had no troubled debt restructurings at September 30, 2019 and December 31, 2018.

7. Other Real Estate Owned

Other real estate owned (“OREO”) consists of properties acquired as a result of deed in-lieu-of foreclosure and foreclosures. Properties or other assets are classified as OREO and are reported at the lower of carrying value or fair value, less estimated costs to sell. Costs relating to the development or improvement of assets are capitalized, and costs relating to holding the property are charged to expense. Activity in other real estate owned for the periods was as follows: 

(in 000's)	Three  Months Ended		Three  Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2019		September 30, 2018			September 30, 2019			September 30, 2018
Beginning balance	$	236	$	402		$	392		$	626
Additions, transfers from loans		-		-			-			-
Sales		-		(10	)		(156	)		(229	)
		236		392			236			397
Write-ups (downs)		-		-			-			(5	)
Ending Balance	$	236	$	392		$	236		$	392

There were no loans in the process of foreclosure at September 30, 2019 and December 31, 2018.

The following schedule reflects the components of other real estate owned:

(in 000's)	September 30, 2019		December 31, 2018
Commercial real estate	$	161	$	168
Residential real estate		75		224
Total	$	236	$	392

8.   Lease Commitments

Due to the adoption of ASU 2016-02, Leases (Topic 842) , the Company completed a comprehensive review and analysis of all its property contracts. As a result of this review, it was determined that the Company leases two office locations and office equipment under operating leases. Several assumptions and judgments were made when applying the requirements of Topic 842 to the Company’s existing lease commitments, including the allocation of consideration in the contracts between lease and non-lease components, determination of the lease term, and determination of the discount rate used in calculating the present value of the lease payments.

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The Company has elected to account for the variable non-lease components, such as common area maintenance charges, utilities, real estate taxes, and insurance, separately from the lease component. Such variable non-lease components are reported in net occupancy expense on the Consolidated Statements of Operations when paid. These variable non-lease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they are not included in the right-of-use assets and lease liabilities reported on the Consolidated Balance Sheets. The following table presents the lease cost associated with both operating and financing leases for the three-month period ending March 31, 2019 (in thousands). Total operating rent expense recorded during the three-month period ended September 30, 2019 and 2018 was $134,000 and $119,000, respectively. Total operating rent expense recorded during the nine-month period ended September 30, 2019 and 2018 was $385,000 and $354,000, respectively.

Certain of the Company’s leases contain options to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the positive performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease as of January 1, 2019. The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at September 30, 2019.

	Operating
Weighted-average remaining term (years)		4.62
Weighted-average discount rate		3.50	%

The following table presents the undiscounted cash flows due related to operating and financing leases as of September 30, 2019, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets.

	Operating
Undiscounted cash flows due:
Within 1 year	$	433
After 1 year but within 2 years		438
After 2 years but within 3 years		447
After 3 years but within 4 years		455
After 4 years but within 5 years		92
After 5 years		133
Total undiscounted cash flows		1,998
Discount on cash flows		(248	)
Total lease liabilities	$	1,750

Under Topic 842, the lessee can elect to not record on the Consolidated Balance Sheets a lease whose term is twelve months or less and does not include a purchase option that the lessee is reasonably certain to exercise. As of September 30, 2019, the Company had one lease for its Mount Airy branch that had a term of twelve months or less that did not include a purchase option.  This lease is excluded from total lease liabilities.

9.  Fair Value 

Fair Value Measurement

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of ASC 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

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The fair value guidance in FASB ASC 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried at fair value in three levels as follows:

Level 1

· Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2

· Quoted prices for similar assets or liabilities in active markets.

· Quoted prices for identical or similar assets or liabilities in markets that are not active.

· Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (e.g., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.”

Level 3

· Prices or valuation techniques that require inputs that are both unobservable (i.e., supported by little or no market activity) and that are significant to the fair value of the assets or liabilities.

· These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Fair Value on a Recurring Basis

Securities Available for Sale (“AFS”): Where quoted prices are available in an active market, securities would be classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow models. Level 2 securities include U.S. agency securities and mortgage backed agency securities.

Loans Held for Sale. Fair values are estimated by using actual indicative market bids on a loan by loan basis.

Loans Held at Fair Value. Fair values for loans for which the guaranteed portion is intended to be sold are estimated by using actual quoted market bids on a loan by loan basis. Fair values for the un-guaranteed portion of SBA loans are estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries.

Servicing Assets. Fair values for servicing assets related to SBA loans are estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries. 

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Assets on the consolidated balance sheets measured at fair value on a recurring basis are summarized below.

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets Measured at Fair Value at September 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$	2,346	$	-	$	2,346	$	-
Government Sponsored Enterprises residential mortgage-backed securities		2,085		-		2,085		-
Total	$	4,431		-	$	4,431		-
Loans held for sale	$	8,426	$	-	$	8,426	$	-
Loans held at fair value	$	5,887	$	-	$	-	$	5,887
Servicing asset	$	254	$	-	$	-	$	254

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets Measured at Fair Value at December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$	2,277	$	-	$	2,277	$	-
Government Sponsored Enterprises residential mortgage-backed securities		2,304		-		2,304		-
Total	$	4,581	$	-	$	4,581	$	-
Loans held for sale	$	10,073	$	-	$	10,073	$	-
Loans held at fair value	$	5,420	$	-	$	-	$	5.420
Servicing asset	$	313	$	-	$	-	$	313

The fair value of the Bank’s AFS securities portfolio was approximately $4,431,000 and $4,581,000 at September 30, 2019 and December 31, 2018, respectively. All the residential mortgage-backed securities were issued or guaranteed by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corporation (“FHLMC”).  The underlying loans for these securities are residential mortgages that are geographically dispersed throughout the United States.  The valuation of AFS securities using Level 2 inputs was primarily determined using the market approach, which uses quoted prices for similar instruments and all relevant information.  There were no transfers between Level 1 and Level 2 assets during the periods ended September 30, 2019 and 2018.

When estimating the fair value of Level 3 financial instruments, management uses various observable and unobservable inputs.  These inputs include estimated cashflows, prepayment speeds, average projected default rate and discount rates as follows:

(in 000’s)

Assets measured at fair value	September 30, 2019 Fair value		December 31, 2018 Fair Value		Principal valuation techniques	Significant observable inputs	September 30, 2019 Range of inputs	December 31, 2018 Range of inputs
Loans held at fair value	$	5,887	$	5,420	Discounted cash flow	Constant prepayment rate	0% to 23.24%	0% to 16.5%
						Discount rate	7.95% to 10.37%	5.49% to 9.76%
						Weighted average life	1.69 yrs. to 4.42 yrs.	2.04 yrs. to 6.89 yrs.
						Projected default rate	2.22% to 11.59%	1.07% to 10.12%

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 (in 000’s)

Assets measured at fair value	September 30, 2019 Fair value		December 31, 2018 Fair Value		Principal valuation techniques	Significant observable inputs	September 30, 2019 Range of inputs	December 31, 2018 Range of inputs
Servicing asset	$	254	$	313	Discounted cash flow	Constant prepayment rate	7.24% to 21.96%	4.94% to 15.92 %
						Discount rate	8.71% to 26.59%	11.38% to 19.61%
						Weighted average life	1.52 yrs. to 4.42 yrs.	2.04 yrs. to 6.77 yrs.

Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, fair value as determined by management may fluctuate from period to period.

The following table summarizes additional information about assets measured at fair value on a recurring basis for which level 3 inputs were utilized to determine fair value:

(in 000’s)	Loans held at fair value			Servicing Asset
Balance at December 31, 2018	$	5,420		$	313
Origination of loans/transfers		1,822			17
Principal repayments/amortization		(742	)		(24	)
Change in fair value of financial instruments		(613	)		(52	)
Balance at September 30, 2019	$	5,887		$	254

Fair Value on a Nonrecurring Basis

Certain assets are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  The following table presents the assets carried on the consolidated balance sheet by level within the hierarchy as of September 30, 2019 and December 31, 2018, for which a nonrecurring change in fair value has been recorded during the nine months ended September 30, 2019 and year ended December 31, 2018.

Carrying Value at September 30, 2019:

(in 000’s)	Total		Quoted Prices in Active markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Impaired loans	$	131	$	-	$	-	$	131
Other real estate owned (“OREO”)	$	236	$	-	$	-	$	236

Carrying Value at December 31, 2018:

(in 000’s)	Total		Quoted Prices in Active markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans	$	324	$	-	$	-	$	324
Other real estate owned (“OREO”)	$	392	$	-	$	-	$	392

The Company has measured impairment on impaired loans generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value of the collateral dependent loan is less than the carrying amount of the loan a specific reserve for the loan is made in the allowance for loan losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the table above as a Level 3 measurement. If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not included in the table above as it is not currently being carried at its fair value. At September 30, 2019 and December 31, 2018, the fair values shown above exclude estimated selling costs of $28,500 and $15,000, respectively.

OREO is carried at the lower of cost or fair value, which is measured at the foreclosure date. If the fair value of the collateral exceeds the carrying amount of the loan, no charge-off or adjustment is necessary, the loan is not considered to be carried at fair value, and is therefore not included in the table above. If the fair value of the collateral is less than the carrying amount of the loan, management will charge the loan down to its estimated realizable value. The fair value of OREO is based on the appraised value of the property, which is generally unadjusted by management and is based on comparable sales for similar properties in the same geographic region as the subject property, and is included in the above table as a Level 2 measurement. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. In these cases, the loans are categorized in the above table as Level 3 measurement since these adjustments are considered to be unobservable inputs. Income and expenses from operations and further declines in the fair value of the collateral subsequent to foreclosure are included in net expenses from OREO.

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Fair Value of Financial Instruments

FASB ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.  

The fair value of assets and liabilities not previously disclosed are depicted below:

		September 30, 2019				December 31, 2018
(in 000’s)	Level in	Carrying		Fair		Carrying		Fair
	Value Hierarchy	Amount		Value		Amount		Value
(Dollars in thousands)
Assets:
Cash and cash equivalents	Level 1	$	12,488	$	12,488	$	8,438	$	8,438
Loans, net of allowance for loan losses	(1)		17,146		17,196		20,265		21,979
Accrued interest receivable	Level 1		167		167		153		153
Liabilities:
Demand deposits	Level 1		30,959		30,959		29,816		29,816
Savings deposits	Level 1		10,556		10,556		10,589		10,589
Time deposits	(2)		4,877		4,814		7,867		7,757
Accrued interest payable	Level 1		6		6		17		17

(1) Level 2 for non-impaired loans; Level 3 for impaired loans.

(2) Level 1 for variable rate instruments, level 3 for fixed rate instruments.

10. Revenue Recognition

Management determined that the primary sources of revenue associated with financial instruments, including interest income on loans and investments, along with certain noninterest revenue sources including gains on the sale of loans, the change in fair value of financial instruments, are not within the scope of Topic 606.

The significant components of noninterest income within the scope of Topic 606 are as follows:

Customer Service Fees and ATM Fees — The Company has contracts with its deposit account customers where fees are charged for certain items or services. Service charges include account analysis fees, monthly service fees, overdraft fees, and other deposit account related fees. Additionally, the Company collects revenue when outside customers utilize the Bank’s ATM machines for transactions.  Revenue related to account analysis fees, ATM transactions and service fees is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. Fees attributable to specific performance obligations of the Company (i.e. overdraft fees, etc.) are recognized at a defined point in time based on completion of the requested service or transaction.

Loan Syndication Fees – The Company contracts with certain corporate entities as an arranging institution for loan syndications whereby a fee is earned by the Company for soliciting, assembling, and obtaining commitments from other lenders related to certain facilities of the corporate entity.  A portion of the fee is paid as an up-front payment for acting as the arranger, which is earned and recognized on the date the contract is signed without further commitment.  Another portion of the fee is earned, and generally paid, upon completion of the loan syndication arrangement which is the performance obligation for that portion of the fee.

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The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine months ended September 30, 2019 and 2018.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
(Dollars in thousands)
Noninterest income:
In-scope of Topic 606
Customer Service Fees	$	104		$	107	$	290		$	310
ATM Fee Income		24			25		73			76
Loan Syndication Fees		65			100		65			100
Other income		48			36		2,638			84
Noninterest income (in-scope of Topic 606)		241			268		3,066			570
Noninterest income (out-of-scope of Topic 606)		(6	)		124		(652	)		358
Total noninterest income	$	235		$	392	$	2,414		$	928

11. Regulatory

On April 25, 2018, the Bank entered into stipulations consenting to the issuance of amended and restated Consent Orders with the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking (“Department”) which serve as a prescriptive Restoration Plan providing benchmarks for capital, earnings and asset quality. The material terms of the Consent Orders are identical. The requirements and status of items included in the Orders are as follows:

The Orders will remain in effect until modified or terminated by the FDIC and the Department and do not restrict the Bank from transacting its normal banking business. The Bank will continue to serve its customers in all areas including making loans, establishing lines of credit, accepting deposits and processing banking transactions. Customer deposits remain fully insured to the highest limits set by the FDIC. The FDIC and the Department did not impose or recommend any monetary penalties in connection with the Consent Orders. The Board of Directors is optimistic about the Bank’s ability to achieve the requirements as stated. These Orders represent a more tailored approach by regulators to strengthen and preserve minority-owned financial institutions like United Bank of Philadelphia. The priority for the Board of Directors and management is to comply with the Order promptly. The requirements of the Orders are as follows:

· Increase participation of the Bank’s board of directors in the Bank’s affairs by having the board assume full responsibility for approving the Bank’s policies and objectives and for supervising the Bank’s management;

· Have and retain qualified management, and notify the FDIC and the Department of any changes in the Bank’s board of directors or senior executive officers. Add two additional board members with banking experience.

· Complete audited financial statements for 2016, 2017, and 2018.

· Formulate and implement a Restoration/Strategic Plan to increase profitability reduce expenses and improve operating performance and related ratios.

· Develop and implement a Strategic Plan for each year during which the orders are in effect, to be revised Develop a written capital plan detailing the manner in which the Bank will meet and maintain a ratio of Tier 1 capital to total assets (“leverage ratio”) of at least 8.5% and a ratio of qualifying total capital to risk-weighted assets (total risk-based capital ratio) of at least 12.5%, by September 2019;

· Formulate a written plan to improve asset quality and reduce the Bank’s risk positions in assets classified as “Doubtful” or “Substandard” at its regulatory examination;

· Eliminate all assets classified as “Loss” at its current regulatory examination;

· Refrain from accepting any brokered deposits; Prepare and submit quarterly reports to the FDIC and the Department detailing the actions taken to secure compliance with the Orders.

· Refrain from paying cash dividends without prior approval of the FDIC and the Department;

As of September 30, 2019 and December 31, 2018, the Bank’s tier one leverage capital ratio was 5.37% and 3.00%, respectively, and its total risk-based capital ratio was 11.96%and 6.34%, respectively. These ratios are below the levels required by the Consent Orders. Management is in the process of addressing all matters outlined in the Consent Orders. The net loss during the quarter resulted in a decrease in the capital ratios. Management has developed and submitted a Capital Plan that focuses on the following:

· Core Profitability from Bank operations—Core profitability is essential to stop the erosion of capital.

· External equity investments—During 2017, the Company received external investments of $925,000 and from other financial institutions. In May 2021, the Company received a $600,000 capital investment from another financial institution.

· Performance grants---Management has developed a performance grant strategy to attract funding based on economic impact and job creation/retention. The goal is to obtain grant funding from local entities that are seeking a “return on impact”. In April 2019, the Bank received a $2.5 million economic stimulus grant from the City of Philadelphia.

· Other grants---In September 2020, the Bank received a grant totaling $3.4 million from the Pennsylvania CDFI Network to provide financial assistance related to potential losses related to the COVID-19 pandemic. Approximately $2.8 million of this grant was recorded as grant revenue and $617,000 was recorded as deferred revenue. The deferred revenue portion of the grant was allocated to be used to make principal and interest payments for up to six months for struggling small businesses in the Bank’s loan portfolio.

· Further, in August 2021, the Bank was awarded a grant totaling $1,286,000 from the US Treasury’s CDFI Rapid Response Program that was geared to strengthen the Bank as the economy recovers from the effects of the COVID-19 pandemic. This grant resulted in further improvement in the Bank’s capital ratios.

As a result of the above actions, management believes that the Bank has and will be able to comply with the terms and conditions of the Orders.  At June 30, 2022, the Bank’s Tier 1 leverage ratio was 9.50% and its total risk-based capital ratio was 21.92% which is considered “well capitalized” under the regulatory framework for prompt and corrective action.

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12.  Going Concern

The Company’s consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in its consolidated financial statements, the Company reported a net loss of approximately $224,000 for the quarter ended September 30, 2019 and net loss of approximately $57,000 for the same quarter in 2018. Additionally, the Company reported net income of $1,136,000 for the nine months ended September 30, 2019 and a net loss of $407,000 for the nine months ended September 30, 2018.  Further, the Company has entered into Consent Orders with the FDIC and the Department which, among other provisions, require the Bank to increase its tier one leverage capital ratio to 8.50% and its total risk-based capital ratio to 12.50%.  As of September 30, 2019, the Bank’s tier one leverage capital ratio was 5.37% and its total risk-based capital ratio was 11.96%.  The Bank’s failure to comply with the terms of the Consent Orders could result in additional regulatory supervision and/or actions.  The ability of the Bank to continue as a going concern is dependent on many factors, including achieving required capital levels, earnings and fully complying with the Consent Orders.  The Consent Orders raise substantial doubt about the Company’s ability to continue as a going concern.

Management has developed a plan to alleviate the substantial doubt about the Company’s ability to continue as a going concern.  This plan is primarily based on the following:

· Increase earnings: Core profitability is essential to stop the erosion of capital. Noninterest income will continue to be an important element of the Bank’s earnings enhancement plan, specifically noninterest income from SBA loans will continue to be an important income strategy for the Bank. In addition, management will seek to reduce noninterest expense by reducing targeted areas of overhead including the closure of the Mount Airy branch in 2018 as well as the projected recovery of SBA loan fair value write-downs and other cost reduction strategies. During 2018 and in 2019, there were SBA fair value write-downs on defaulted loans that totaled approximately $1.2 million. Management has developed forbearance agreements and implemented other collection strategies including the sale of underlying collateral to mitigate the exposure on these loans that management believes will result in the recovery of some fair value write-downs.

· Strengthen Capital: A concentrated effort will continue to be made to stabilize and strengthen the Bank’s capital. Management has identified potential sources of external capital that have been received in 2020 and 2021. This capital will be used to further strengthen the Bank’s balance sheet. At June 30, 2022, the Bank’s Tier 1 leverage ratio was 9.50% and its total risk-based capital ratio was 21.92% which is considered “well capitalized”.

· Comply with the Consent Orders: Management has developed a Restoration Plan to address matters outlined in the Consent Orders including strengthening management, asset quality, profitability and capital. This plan received a “non-objection” from the Bank’s primary regulators. Management plans to implement the Restoration Plan in an attempt to comply with the terms and conditions of the Orders.

Based on management’s assessment of the Company’s ability to alleviate the substantial doubt about the its ability to continue as a going concern, these consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

13.  Subsequent Events

Beginning in March 2020, the onset of the COVID-19 pandemic has had an adverse economic effect on a global, national, and local level. Following the outbreak, market interest rates have declined significantly, as the 10-year Treasury bond fell below 1.00% in early March 2020 that could lead to a reduction in the Bank’s net interest margin.  In addition, this event may adversely affect asset quality related to the Company’s small business loan customers that have been affected by a reduction in their business operations because of government-imposed restrictions.  As a result, the Company has deferred loan payments as necessary for those customers that have been impacted by the pandemic.  The pandemic has also affected the way that the Company is conducting business. Since notice of the pandemic, the Company has temporarily closed its Center City branch office and consolidated all customer service activity at its Progress Plaza branch.  In addition, the Company has maintained limited on-site presence of four employees or less in the Lending Department while all other employees work remotely in an effort to slow the spread of the pandemic. The full extent of the effect of the pandemic is not yet known.

In September 2020, the Bank received a grant totaling $3.4 million from the Pennsylvania CDFI Network to provide financial assistance related to potential losses related to the COVID-19 pandemic. Approximately $2.8 million of this grant was recorded as noninterest income and $617,000 was recorded as deferred revenue. The deferred revenue portion of the grant was allocated to be used to make principal and interest payments for up to six months for struggling small businesses in the Bank’s loan portfolio.

In May 2021, the Company received an external investment of $600,000 from another financial institution from the issuance of a combination of Common voting and Series C Preferred Stock. Further, in August 2021, the Bank was awarded a grant totaling $1,286,000 from the US Treasury’s CDFI Rapid Response Program that was geared to strengthen the Bank as the economy recovers from the effects of the COVID-19 pandemic.

At June 30, 2022, the Bank’s Tier 1 leverage ratio was 9.50% and its total risk-based capital ratio was 21.92% which is considered “well capitalized” under the regulatory framework for prompt and corrective action.

On October 31, 2022, the Board of Directors unanimously approved an Offer of Settlement with the Securities and Exchange Commission over the Company’s failure to comply with the Exchange Act Section 12(a) and Rules 13a-1 and 13a-13 thereunder because it has not filed periodic reports with the Commission since the period ended December 31, 2018.  The Offer of Settlement revokes the registration of each class of the Company’s securities registered pursuant to Section 12 of the Exchange Act as of the effective date of the Offer of Settlement until there are two consecutive timely filings. There is currently no financial impact related to the revocation; however, management is working to remedy the matter to avoid further action.

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

United Bancshares, Inc. (the "Company") is a bank holding company registered under the Bank Holding Company Act of 1956.  The Company's principal activity is the ownership and management of its wholly owned subsidiary, United Bank of Philadelphia (the "Bank").

Special Cautionary Notice Regarding Forward-looking Statements

Certain of the matters discussed in this document and the documents incorporated by reference herein, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may constitute forward looking statements for the purposes of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, and may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of United Bancshares, Inc (“UBS”) to be materially different from future results, performance or achievements expressed or implied by such forward looking statements.  The words “expect,” “anticipate,” “intended,” “plan,” “believe,” “seek,” “estimate,” “may,” and similar expressions are intended to identify such forward-looking statements.  These forward-looking statements include: (a) statements of goals, intentions and expectations; and (b) statements regarding business prospects, asset quality, credit risk, reserve adequacy and liquidity.  UBS’ actual results may differ materially from the results anticipated by the forward-looking statements due to a variety of factors, including without limitation: (a) the effects of future economic conditions on UBS and its customers, including economic factors which affect consumer confidence in the securities markets, wealth creation, investment and consumer saving patterns; (b) UBS interest rate risk exposure and credit risk; (c) changes in the securities markets with respect to the market values of financial assets and the stability of particular securities markets; (d) governmental monetary and fiscal policies, as well as legislation and regulatory changes; (e) changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral and securities, as well as interest-rate risks; (f) changes in accounting requirements or interpretations; (g) the effects of competition from other commercial banks, thrifts, mortgage companies, consumer finance companies, credit unions securities brokerage firms, insurance companies, money-market and mutual funds and other financial institutions operating in the UBS’ trade market area and elsewhere including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet; (h) any extraordinary events (such as the September 11, 2001 events), the war on terrorism and the U.S. Government’s response to those events or the U.S. Government becoming involved in a conflict in a foreign country including the war in Iraq; (i) the failure of assumptions underlying the establishment of reserves for loan losses and estimates in the value of collateral, and various financial assets and liabilities and technological changes being more difficult or expensive than anticipated; (j) UBS’ success in generating new business in its existing markets, as well as its success in identifying and penetrating targeted markets and generating a profit in those markets in a reasonable time; (k) UBS’ timely development of competitive new products and services in a changing environment and the acceptance of such products and services by its customers; (l) any downgrades, in the credit rating of the United States Government and federal agencies; (m) changes in technology being more expensive or difficult than expected; (n) the ability of key third party providers to perform their obligations to UBS and; (o) the Bank and UBS’ success in managing the risks involved in the foregoing, and (p) failure to comply with the Consent Orders with the FDIC and the Pennsylvania Department of Banking.

All written or oral forward-looking statements attributed to the Company are expressly qualified in their entirety by use of the foregoing cautionary statements.  All forward-looking statements included in this Report are based upon information presently available, and UBS assumes no obligation to update any forward-looking statement.

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Overview

The Company reported a net loss of approximately $224,000 ($0.27 per common share) for the quarter ended September 30, 2019 compared to a net loss of approximately $57,000 ($0.07 per common share) for the same quarter in 2018.  The Company reported net income of approximately $1,136,000 ($1.37 per common share) for the nine months ended September 30, 2019 compared to a net loss of approximately $407,000 ($0.49 per common share) for the same period in 2018.  Management remains committed to improving the Company’s operating performance by continuing to implement its profit enhancement strategies that are centered on small business lending products and services. The following actions are critical to ensure continued improvement in the Company’s financial performance:

Increase Capital.  The critical importance of establishing and maintaining capital levels to support the Bank’s risk profile and growth is understood; however, capital declined as a result of operating losses. A concentrated effort will be made to further stabilize and strengthen the Bank’s capital by the following:

· Core Profitability from Bank operations—Core profitability is essential to stop the erosion of capital. Refer to the Earnings Enhancement discussion below.

· External equity investments— Utilizing a CRA platform, instead of seeking one large investor, the Board will continue to solicit a number of smaller investments from institutional and individual investors. During 2017, the Company received external investments of $925,000 from other financial institutions through issuance of Series B Preferred Stock. In May 2021, the Company received an external investment of $600,000 from another financial institution from the issuance of a combination of Common voting and Series C Preferred Stock.

· Performance grants---Management has developed a performance grant strategy to attract funding based on economic impact and job creation/retention. The goal is to obtain grant funding from local entities that are seeking a “return on impact”. In April 2019, the Bank received a $2.5 million economic stimulus grant from the City of Philadelphia.   In September 2020, the Bank received a grant totaling $3.4 million from the Pennsylvania CDFI Network to provide financial assistance related to potential losses related to the COVID-19 pandemic. Approximately $2.8 million of this grant was recorded as grant revenue and $617,000 was recorded as deferred revenue. The deferred revenue portion of the grant was allocated to be used to make principal and interest payments for up to six months for struggling small businesses in the Bank’s loan portfolio.   In July 2021, the Bank received a Rapid Response grant from the U.S. Department of Treasury totaling approximately $1.3 million to provide support related to the economic impact of the COVID-19 pandemic on the Bank and its small business customers.

Manage asset quality to minimize credit losses and reduce collection costs. There was continued deterioration in asset quality during the nine months ended September 30, 2019 that resulted in significant fair value write-downs related to defaulted SBA loans. Management will seek to improve asset quality by adhering to its underwriting standards as well as good customer relationship management practices. In addition, proactive monitoring of the loan portfolio is essential to the identification of emerging problem credits and is performed during Asset Quality Committee meetings. Forbearance, foreclosure and/or other appropriate collection methods will be used as necessary and may result in increased loan and collection expense.

Earnings enhancement plan. Management seeks to increase noninterest income and further reduce noninterest expense to achieve core earnings. The primary strategy will continue to focus on increasing SBA loan origination activity and selling the guaranteed portion in the secondary market for gains.  Management continues to  grow the SBA loan pipeline through relationships with feeder organizations to maximize this income.

While some expense reductions were achieved during the quarter in personnel, professional services, other real estate and office operations and supplies there was an increase in data processing and other operating expenses. Management will seek additional expense reductions, where possible, by performing a line-by-line expense review to identify additional savings.

Another challenge to increased earnings is the restriction on asset growth because of the Bank’s capital levels; however, the Bank’s net interest margin has remained a significant strength. To further increase the Bank’s net interest margin, management will seek to shift excess liquidity into higher yielding loans instead of investments and Federal Funds Sold while managing the cost of funds. In addition, management will continue to balance asset growth with capital adequacy requirements.

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Significant Accounting Policies

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the dates of the balance sheets and revenues and expenditures for the periods presented.  Therefore, actual results could differ from these estimates. 

The Company considers that the determinations of the allowance for loan losses and the fair value of loans involve 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.   The fair value of loans depends on a variety of factors including estimates of prepayment speed, discount rates, and credit quality of the receivables. All of these factors 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 earnings in future periods.  

The Company’s significant accounting policies are presented in Note 1 to the  Company’s audited consolidated financial statements filed as part of the 2018 Annual Report on Form 10-K and in the footnotes to the Company’s unaudited financial statements filed as part of this Form 10-Q. 

Selected Financial Data

The following table sets forth selected financial data for each of the following periods:

(Thousands of dollars, except per share data)	Quarter ended September 30, 2019			Quarter ended September 30, 2018			Nine Months ended September 30, 2019			Nine Months ended September 30, 2018
Statement of operations information:
Net interest income	$	533		$	659		$	1,711		$	1,912
(Credit) provision for loan losses		(10	)		20			(32	)		45
Noninterest income		235			392			2,414			928
Noninterest expense		1,003			1,089			3,022			3,201
Net income (loss)		(224	)		(57	)		1,136			(407	)
Net loss per share-basic and diluted		(0.27	)		(0.07	)		1.37			(0.49	)

Balance Sheet information:	September 30, 2019			December 31, 2018
Total assets	$	51,235		$	50,195
Loans held for sale		8,427			10,073
Loans, net		17,146			20,265
Investment securities		4,432			4,581
Deposits		46,391			48,272
Shareholders' equity		2,958			1,760
Ratios*:	Quarter ended September 30, 2019			Quarter ended September 30, 2018
Return on assets		(0.18	)%		(0.32	)%
Return on equity		(36.55	)%		(7.65	)%

*annualized

Financial Condition

Sources and Uses of Funds

The financial condition of the Bank can be evaluated in terms of trends in its sources and uses of funds.  The comparison of average balances in the following table indicates how the Bank has managed these elements. Average funding uses decreased approximately $968,000 or 2.01% during the quarter ended September 30, 2019 compared to the quarter ended June 30, 2019. Average funding sources decreased approximately $654,000, or 1.42% during the same period.

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Sources and Uses of Funds Trends

( dollars in 000’s)	September 30, 2019								June 30, 2019
	Average		Increase (Decrease)			Increase (Decrease)			Average
	Balance		Amount			%			Balance
Funding uses:
Loans*	$	32,386	$	(1,475	)		(4.36	)%	$	33,861
Investment Securities		4,609		(99	)		(2.10	)%		4,708
Federal funds sold		5,513		(291	)		(5.01	)%		5,804
Balances with other banks		4,607		897			24.18	%		3,710
Total  uses	$	47,115	$	(968	)		(2.01	)%	$	48,083
Funding sources:
Demand deposits
Noninterest-bearing	$	16,159	$	(435	)		(2.62	)%	$	16,594
Interest-bearing		13,590		1,197			9.66	%		12,393
Savings deposits		10,557		128			1.23	%		10,429
Time deposits		5,024		(1,544	)		(23.51	)%		6,568
Total sources	$	45,330	$	(654	)		(1.42	)%	$	45,984

*Total includes loans held for sale, loans held at fair value, and net loans.

Loans

Average loans decreased by approximately $1,475,000 or 4.36% during the quarter ended September 30, 2019. While there was origination activity, it was offset by loan paydowns and fair value write-downs.  The Bank’s commercial loan pipeline continues to grow as a result of its small business banking focus specifically targeting SBA loans. This strategy is designed to generate fee income from sales of the guaranteed portion as well as build loan volume.  There are a significant number of small businesses in the region that may fall below minimum business loan levels of the money center banks in the region which provides an opportunity for the Bank to continue to grow its SBA lending as a niche business. Management will continue to work in alliance with its third-party SBA loan origination group, commercial real estate brokers, accountants, lawyers, SBA brokers, and other centers of influence to build loan volume.   

The Bank’s consumer and residential mortgage loan portfolios continue to decline as a result of residential mortgages and home equity repayment activity as consumers repay loans and refinance to take advantage of the continued low interest rate environment.  The Bank does not originate residential mortgage loans and made a strategic shift in its lending program in 2012 to phase out consumer lending, including home equity loans and lines of credit.   

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The Bank’s loan portfolio continues to be concentrated in commercial real estate loans that comprise approximately $14.3 million, or 83%, of total loans at September 30, 2019.  The Bank continues to have a strong niche in lending to religious organizations for which total loans at September 30, 2019 were approximately $7.0 million, or 47%, of the commercial real estate portfolio.   Management closely monitors this concentration to proactively identify and manage credit risk for any conditions that might negatively affect the level of tithes and offerings that provide cash flow for repayment.  The composition of the net loans is as follows:

	September 30,			December 31,
(In 000's)	2019			2018
Commercial and industrial:
Commercial	$	1,039		$	1,055
SBA Loans		-			18
Asset-based		301			472
Total commercial and industrial		1,340			1,545
Commercial real estate:
Commercial mortgages		7,368			9,532
SBA loans		235			248
Construction		-			-
Religious organizations		6,690			7,257
Total commercial real estate		14,293			17,038
Consumer real estate:
Home equity loans		539			628
Home equity lines of credit		13			15
1-4 family residential mortgages		531			583
Total consumer real estate		1,083			1,226
Total real estate		15,376			18,264
Consumer and other:
Student loans		564			622
Other		85			112
Total consumer and other		649			734
Allowance for loan losses		(219	)		(278	)
Loans, net	$	17,146		$	20,265

Allowance for Loan Losses

The allowance for loan losses reflects management’s continuing evaluation of the loan portfolio, the diversification and size of the portfolio, and adequacy of collateral. Provisions are made to the allowance for loan losses in accordance with a detailed periodic analysis.  This analysis includes specific reserves allocated to impaired loans based on underlying recovery values as well as a general reserve based on charge-off history and various qualitative factors including delinquency trends, loan terms, regulatory environment, economic conditions, concentrations of credit risk and other relevant data.  The Bank utilizes an eight-rolling quarter historical loss factor as management believes this best represents the current trends and market conditions.  The allowance for loan losses as a percentage of total loans was 1.26% at September 30, 2019 compared to 1.35% at December 31, 2018.   

Loans deemed “impaired” are those for which borrowers are no longer able to pay in accordance with the terms of their loan agreements.  The Bank’s source of repayment is generally the net liquidation value of the underlying collateral.  Impaired loans totaled approximately $1,325,000 at September 30, 2019 compared to $1,437,000 at December 31, 2018.  There was an $80,000 valuation allowance associated with impaired loans at September 30, 2019 compared to $139,000 allowance at December 31, 2018.  Management continues to work to reduce the level of classified and impaired loans. Forbearance, foreclosure and/or other appropriate collection methods will be used as necessary.

At September 30, 2019 and December 31, 2018, loans to religious organizations represented approximately $179,000 of total impaired loans. Management continues to work closely with its attorneys and the leadership of these organizations in an attempt to develop suitable repayment plans to avoid foreclosure.  In general, loans to religious organizations are being monitored closely to proactively identify potential weaknesses in this area of high concentration. 

Management uses all available information to recognize losses on loans; however, future additions may be necessary based on further deterioration in economic conditions and market conditions affecting underlying real estate collateral values.  In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses.  Such agencies may require the Bank to recognize additions to the allowance based on their judgments of information available to them at the time of the examination. Although management uses the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short-term change.

The percentage of allowance to nonperforming loans was 12.75% and 14.53% at September 30, 2019 and December 31, 2018 respectively. The percentage of nonperforming loans to total loans increased from 9.31% at December 31, 2018 to 9.89% at September 30, 2019.  95.29% of nonperforming loans are secured by real estate which serves to mitigate the risk of loss.

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The following table sets forth information concerning nonperforming loans and nonperforming assets.

(In 000's)	September 30, 2019			December 31, 2018
Commercial and industrial:
Commercial	$	-		$	-
SBA		-			18
Asset-based		76			76
Total commercial and industrial		76			94
Commercial real estate:
Commercial mortgages		1,010			902
SBA loans		60			69
Religious organizations		179			179
Total commercial real estate		1,249			1,150
Consumer real estate:
Home equity loans		240			281
1-4 family residential mortgages		-			85
Total consumer real estate		240			366
Total real estate		1,489			1,516
Consumer and other:
Student loans		-			-
Other		-			-
Total consumer and other		-			-
Total nonaccrual		1,565			1,610
Total past due 90 days and accruing		153			252
OREO		236			392
Total nonperforming assets	$	1,954		$	2,254
	September 30, 2019			December 31, 2018
Nonperforming loans to total loans		9.89	%		9.06	%
Nonperforming assets to total loans and OREO		11.10	%		10.77	%
Nonperforming assets to total assets		3.95	%		4.49	%
Allowance for loan losses as a percentage of:
Total loans		1.26	%		1.35	%
Total nonperforming loans		12.75	%		14.93	%

The following table sets forth information related to loans past due 90 days or more and still accruing interest.

(In 000's)	September 30, 2019		December 31, 2018
Commercial and industrial:
Asset-based	$	-	$	-
Total commercial and industrial		-		-
Commercial real estate:
Commercial mortgages		-		45
SBA loans		-		-
Total commercial real estate		-		45
Consumer real estate:
Home equity loans		148		150
Total consumer real estate		148		150
Consumer and other:
Student loans		5		57
Other		-		-
Total consumer and other		5		57
Total	$	153	$	252

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Investment Securities and Other Short-term Investments

Average investment securities decreased by approximately $99,000 or 2.10% during the quarter ended September 30, 2019. The decrease was primarily related to payments received on mortgage-backed securities.

The average yield on the investment portfolio increased slightly to 2.32% for the nine months ended September 30, 2019 compared to 2.28% for the nine months ended September 30, 2018.  Amortizing GSE mortgage-backed securities comprises approximate 47% of the portfolio. The payments of principal and interest on these pools of GSE loans serve to provide monthly cash flow and are guaranteed by these entities that bear the risk of default.  The Bank’s risk is prepayment risk when defaults accelerate the repayment activity.  These loans have longer-term contractual maturities but are sometimes paid off/down before maturity or have repricing characteristics that occur before final maturity.  Management’s goal is to maintain a portfolio with a relatively short duration to allow for adequate cash flow to fund loan origination activity and to manage interest rate risk. 

Deposits

During the quarter ended September 30, 2019, average deposits decreased approximately $654,000, or 1.42%. The decrease was concentrated in time deposit accounts that decreased on average by approximately $1,544,000, or 23.51%,  primarily related to the maturity and nonrenewal of a $2.5 million certificate of deposit with the City of Philadelphia.  This reduction is consistent with the Bank’s strategy to reduce its average assets to improve its capital ratios.

Commitments and Lines of Credit

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and letters of credit, which are conditional commitments issued by the Bank to guarantee the performance of an obligation of a customer to a third party. Commitments to extend credit fluctuate with the completion and conversion of construction lines of credit to permanent commercial mortgage loans and/or the closing of loans approved but not funded from one period to another.

Many of the commitments are expected to expire without being drawn upon. The total commitment amounts do not necessarily represent future cash requirements.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  Management believes the Bank has adequate liquidity to support the funding of unused commitments.  The Bank's financial instrument commitments are summarized below: 

(in 000’s)	September 30, 2019		December 31, 2018
Commitments to extend credit	$	3,220	$	1,903
Letters of credit		176		45

The level of commitments increased during the quarter ended September 30, 2019 because of a higher level of approved but unfunded SBA loans.  Approximately $840,000 of the Bank’s outstanding commitments consist of unused lines of credit with Fortune 500 corporations for which the Bank leads and/or participates in syndications that are not expected to be drawn upon.

Liquidity

The primary functions of asset/liability management are to assure adequate liquidity and maintain appropriate balance between interest-sensitive earning assets and interest-bearing liabilities.  Liquidity management involves the ability to meet cash flow requirements of customers who may be either depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs.  Interest rate sensitivity management seeks to avoid fluctuating net interest margins and to enhance consistent growth of net interest income through periods of changing interest rates.

By policy, the Bank’s minimum level of liquidity is 10% of total assets.  At September 30, 2019, the Bank had total short-term liquidity, including cash and federal funds sold, of approximately $12.5 million, or 24.37% of total assets, compared to $8.4 million, or 16.81%, at December 31, 2018. 

The Bank's principal sources of asset liquidity include investment securities consisting principally of U.S. Government and agency issues, particularly those of shorter maturities, and mortgage-backed securities with monthly repayments of principal and interest. In addition, the Bank’s investment portfolio is classified as available-for-sale; however, the majority of these securities are pledged as collateral for deposits of governmental/quasi-governmental agencies as well as the Discount Window at the Federal Reserve Bank.  Therefore, they are restricted from use to fund loans or to meet other liquidity requirements.  

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Other types of assets such as federal funds sold, as well as maturing loans, are also sources of liquidity.  Approximately $10.2 million in loans are scheduled to mature within one year.  To ensure the ongoing adequacy of liquidity, the following contingency strategies will be utilized in order of priority, if necessary:

· Seek non-public deposits from existing private sector customers; specifically, additional deposits from members of the National Bankers Association (“NBA”) will be considered a potential source.

· Sell participations of existing commercial credits to other financial institutions in the region and/or NBA member banks based on participation agreements.

The Bank’s contingent funding sources  include the Discount Window at the Federal Reserve Bank for which it currently has $750,000 in securities pledged that result in borrowing capacity of approximately $700,000.  In light of the Bank’s regulatory Orders and “Troubled Bank” designation, liquidity will continue to be closely monitored and managed to minimize risk and ensure that adequate funds are available to meet daily customer requirements and loan demand.

Interest rate sensitivity

Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities.  Overnight federal funds on which rates change daily and loans which are tied to prime or other short-term indices differ considerably from long-term investment securities and fixed-rate loans.  Similarly, time deposits are much more interest sensitive than passbook savings accounts.  The shorter-term interest rate sensitivities are critical to measuring the interest sensitivity gap, or excess earning assets over interest-bearing liabilities.  Management of interest sensitivity involves matching repricing dates of interest-earning assets with interest-bearing liabilities in a manner designed to optimize net interest income within the limits imposed by regulatory authorities, liquidity determinations and capital considerations.  At September 30, 2019, a positive gap position is maintained on a cumulative basis through 1 year of 14.42% that is within the Bank’s policy guidelines of +/- 15% on a cumulative 1-year basis, down from the December 31, 2018 positive gap position of 5.73%. The Bank’s positive gap position is largely due to a high level of loans maturing and/or repricing in one to three months as well as a significant level of federal funds sold.  This position makes the Bank’s net interest income more favorable in a rising interest rate environment.  Management will continue review and monitor the structure and rates on investment purchases, new loan originations and renewals to manage the interest rate risk profile within acceptable limits.

While using the interest sensitivity gap analysis is a useful management tool as it considers the quantity of assets and liabilities subject to repricing in a given time period, it does not consider the relative sensitivity to market interest rate changes that are characteristic of various interest rate-sensitive assets and liabilities.  A simulation model is used to estimate the impact of various changes, both upward and downward, in market interest rates and volumes of assets and liabilities on the net income of the Bank.  This model produces an interest rate exposure report that forecasts changes in the market value of portfolio equity under alternative interest rate environments.  The market value of portfolio equity is defined as the present value of the Company’s existing assets, liabilities and off-balance-sheet instruments.  At September 30, 2019, the change in the market value of equity in a +200-basis point interest rate change is (24.77%),  within the policy limit of  (25.00%), and (40.72%) in a +400-basis point interest rate change, within the policy limit of (50.00%).   

Capital Resources

Total shareholders’ equity increased approximately $1,199,000 or 68.13%, during the nine months ended September 30, 2019 which is attributable to net income of approximately $1136,000 for the nine months ended September 30, 2019 and unrealized gains  on available for sale securities of approximately $112,000 for the same period partially offset by the $49,000 cumulative effect of adoption of the new lease accounting standard.    

The critical importance of establishing and maintaining capital levels to support the Bank’s risk profile and growth is understood.  A concentrated effort will be made to stabilize and strengthen the Bank’s capital through the generation of core profitability from Bank operations and external investment utilizing investment bankers.

On April 25, 2018, the Bank entered into stipulations consenting to the issuance of amended and restated Consent Orders with the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking (“Department”) which serve as a prescriptive Restoration Plan providing benchmarks for capital, earnings and asset quality. The material terms of the Consent Orders are identical. 

The Bank’s Consent Order with its primary regulators that requires the development of a written capital plan ("Capital Plan") that details the manner in which the Bank will meet and maintain a Leverage Ratio of at least 8.50% and a Total Risk-Based Capital Ratio of at least 12.50%.  At a minimum, the Capital Plan must include specific benchmark Leverage Ratios and Total Risk-Based Capital Ratios to be met at each calendar quarter-end, until the required capital levels are achieved. 

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In September 2020, the Bank received a grant totaling $3.4 million from the Pennsylvania CDFI Network to provide financial assistance related to potential losses related to the COVID-19 pandemic.  Approximately $2.8 million of this grant was recorded as noninterest income and $617,000 was recorded as deferred revenue.  The deferred revenue portion of the grant was allocated to be used to make principal and interest payments for up to six months for struggling small businesses in the Bank’s loan portfolio to mitigate potential asset quality deterioration.

Further, in May 2021, the Bank received an equity investment of $600,000 from another financial institution. In August 2021, the Bank received a $1,286,000 grant from the US Treasury CDFI Fund to assist the Bank in its recovery from the effects of the pandemic.  These new sources of capital will serve to further improve the Bank’s capital ratios.

At June 30, 2022 the Bank’s tier one leverage capital ratio was 9.50% and its total risk-based capital ratio was 21.92% that is considered “well capitalized” under the regulatory framework for prompt and corrective action.  The Bank’s growth and other operating factors such as the need for additional provisions to the allowance for loans losses may have an adverse effect on its capital ratios. The Company and the Bank do not anticipate paying dividends in the near future.

The following table presents the capital ratios of the Company and the Bank as of September 30, 2019 and December 31, 2018: 

	September 30, 2019										December 31, 2018
(In 000’s)	Actual					Minimum to be Well Capitalized					Actual					Minimum to be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total (Tier II) capital to risk weighted assets:
Company	$	2,904		11.96	%		N/A				$	1,817		6.48	%		N/A
Bank		2,904		11.96	%	$	2,429		10.00	%		1,777		6.34	%	$	2,803		10.00	%
Tier I capital to risk weighted assets
Company		2,685		11.06	%		N/A					1,539		5.49	%		N/A
Bank		2,685		11.06	%		1,942		8.00	%		1,499		5.35	%		2,242		8.00	%
Common equity Tier I capital to risk weighted assets
Company		2,685		11.06	%		N/A					1,539		5.49	%		N/A
Bank		2,685		11.06	%		1,579		6.50	%		1,499		5.35	%		1,822		6.50	%
Tier I Leverage ratio (Tier I capital to total quarterly average assets)
Company		2,685		5.37	%		N/A					1,539		3.08	%		N/A
Bank		2,685		5.37	%		2,431		5.00	%		1,499		3.00	%		2,502		5.00	%

Results of Operations

Summary

The Company reported a net loss of approximately $224,000 ($0.27 per common share) for the quarter ended September 30, 2019 compared to a net loss of approximately $57,000 ($0.07 per common share) for the same quarter in 2018.  The Company reported net income of approximately $1,136,000 ($1.37 per common share) for the nine months ended September 30, 2019 compared to a net loss of approximately $407,000 ($0.49 per common share) for the same period in 2018.  A detailed explanation of each component of operations is included in the sections below.

Net Interest Income

Net interest income is an effective measure of how well management has balanced the Bank’s interest rate-sensitive assets and liabilities.  Net interest income, the difference between (a) interest and fees on interest-earning assets and (b) interest paid on interest-bearing liabilities, is a significant component of the Bank’s earnings.  Changes in net interest income result primarily from increases or decreases in the average balances of interest-earning assets, the availability of particular sources of funds and changes in prevailing interest rates.

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Average Balances, Rates, and Interest Income and Expense Summary

	Three months ended September 30, 2019							Three months ended September 30, 2018
(in 000’s)	Average Balance		Interest		Yield/Rate			Average Balance		Interest		Yield/Rate
Assets:
Interest-earning assets:
Loans*	$	32,386	$	452		5.58	%	$	40,168	$	600		5.98	%
Investment securities		4,609		26		2.26	%		4,971		28		2.28	%
Federal funds sold		5,513		30		2.18	%		5,535		28		1.99	%
Interest bearing balances with other banks		4,607		35		3.04	%		2,845		22		3.09	%
Total interest-earning assets		47,115		543		4.61	%		53,519		678		5.07	%
Interest-bearing liabilities
Demand deposits		13,590		6		0.18	%		15,704		7		0.17	%
Savings deposits		10,557		1		0.04	%		11,164		1		0.05	%
Time deposits		5,024		3		0.24	%		8,581		11		0.50	%
Total interest-bearing liabilities	$	29,171		10		0.14	%	$	35,095		19		0.21	%
Net interest income			$	533						$	659
Net yield on interest-earning assets						4.53	%						4.93	%

	Nine months ended September 30, 2019							Nine  months ended September 30, 2018
(in 000’s)	Average Balance		Interest		Yield/Rate			Average Balance		Interest		Yield/Rate
Assets:
Interest-earning assets:
Loans*	$	34,086	$	1,490		5.83	%	$	40,283	$	1,745		5.78	%
Investment securities		4,706		82		2.32	%		5,072		87		2.28
Federal funds sold		5,361		93		2.31	%		9,047		116		1.71
Interest bearing balances with other banks		4,004		89		2.96	%		1,165		23		2.60
Total interest-earning assets		48,157		1,754		4.86	%		55,567		1,971		4.73
Interest-bearing liabilities
Demand deposits		13,072		17		0.13	%		14,833		20		0.18
Savings deposits		10,518		4		0.05	%		11,404		4		0.05
Time deposits		6,475		21		0.43	%		9,122		35		0.51
Total interest-bearing liabilities	$	30,065		42		0.19	%	$	35,359		59		0.22
Net interest income			$	1,712						$	1,912
Net yield on interest-earning assets						4.74	%						4.59	%

For purposes of computing the average balance, loans include all loans including loans held for sale and held at fair value.  Loan balances are not reduced for nonperforming loans.  Loan fee income is included in interest income on loans but is not considered material.

For the quarter ended September 30, 2019 compared to the same period in 2018, there was a decrease in net interest income of approximately $126,000. For the nine months ended September 30, 2019 compared to the same period in 2018, there was a decrease in net interest income of approximately $200,000.  The decrease was primarily related to a decrease in average loans of $7.9 million during the quarter ended September 30, 2019 compared to the same quarter in 2018.  There was an increase in the net yield for the nine months ended September 30, 2019 compared to the same period in 2018 because of an increase in the yield on all interest earning assets.

Rate-Volume Analysis of Changes in Net Interest Income

	Three months ended September 30, 2019 compared to 2018									Three months ended September 30, 2018 compared to 2017
	Increase (decrease) due to									Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Net			Volume			Rate			Net
Interest earned on:
Loans	$	(110	)	$	(38	)	$	(148	)	$	47		$	(59	)	$	(12	)
Investment securities		(2	)		-			(2	)		(2	)		-			(2	)
Federal funds sold		-			2			2			(15	)		11			(4	)
Interest bearing balances with other banks		13			-			13			-			22			22
Total Interest-earning assets		(99	)		(36	)		(135	)		30			(26	)		4
Interest paid on:
Demand deposits		(1	)		-			(1	)		-			-			-
Savings deposits		-			-			-			-			-			-
Time deposits		(5	)		(3	)		(8	)		-			-			-
Total interest-bearing liabilities		(6	)		(3	)		(9	)		-			-			-
Net interest income	$	(93	)	$	(33	)	$	(126	)	$	30		$	(26	)	$	4

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	Nine months ended September 30, 2019 compared to 2018									Nine months ended September 30, 2018 compared to 2017
	Increase (decrease) due to									Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Net			Volume			Rate			Net
Interest earned on:
Loans	$	(270	)	$	15		$	(255	)	$	125		$	(109	)	$	16
Investment securities		(6	)		1			(5	)		(7	)		2			(5	)
Federal funds sold		(47	)		24			(23	)		1			46			47
Interest bearing balances with other banks		63			3			66			8			14			22
Total Interest-earning assets		(260	)		43			(217	)		127			(47	)		80
Interest paid on:
Demand deposits		(2	)		(1	)		(3	)		-			1			1
Savings deposits		-			-			-			-			-			-
Time deposits		(11	)		(3	)		(14	)		-			6			6
Total interest-bearing liabilities		(13	)		(4	)		(17	)		-			7			7
Net interest income	$	(247	)	$	47		$	(200	)	$	127		$	(54	)	$	73

For the quarter ended September 30, 2019 compared to the same period in 2018, there was a decrease in net interest income of approximately $93,000 due to changes in volume combined with a decrease of approximately $33,000 due to changes in rate. The decrease in volume is related to the decrease in loans during the period.  The decrease in rate is related to the increase in nonaccrual loans.  For the nine months ended September 30, 2019 compared to the same period in 2018, there was a decrease in net interest income of approximately $247,000 due to changes in volume partially offset by an increase of approximately $47,000 due to changes in rate, again, primarily related to the increase in nonaccrual loans coupled with payoffs/paydowns.

Provision for Loan Losses

There was a (credit) provision for loan losses of ($10,000) and $20,000 respectively, for the quarters ended September 30, 2019 and 2018, respectively.  There was a credit for loan losses of $32,000 for the nine months ended September 30, 2019 compared to a provision of $45,000 for the same period in 2018. The decrease in the provision is primarily related to a reduction in outstanding loan balances. In general, provision requirements are based on credit losses inherent in the loan portfolio and the review and analysis of the loan portfolio in accordance with the Bank’s Allowance for Loan Loss policies and procedures. (Refer to Allowance for Loan Losses above for discussion and analysis of credit quality.) 

Noninterest Income

The amount of the Bank's noninterest income generally reflects the volume of the transactional and other accounts handled by the Bank and includes such fees and charges as low balance account fees, overdrafts, account analysis, ATM fees, SBA loan related income and other customer service fees.  Noninterest income decreased approximately $157,000, or 40.01% for the quarter ended September 30, 2019 compared to the same quarter in 2018 primarily the result of a reduction in the net change in fair value of financial instruments of $6,000 for the quarter ended September 30, 2019 compared to a net increase for the same quarter in 2018 of $83,000.    Noninterest income increased approximately $1,370,000, or 147.79%, for the nine months ended September 30, 2019 compared to the same period in 2018 primarily due to the receipt of a $2.5 million economic stimulus grant from the City of Philadelphia, partially offset by a fair value decrease of approximately $832,000 fair value as a result of an increased level of defaulted SBA loans held at fair value.

There were no sales of loans during the quarter ended September 30, 2019 which compares to gains recognized on the sale of loans of approximately $41,000 for the same quarter in 2018.  The Bank’s origination of SBA loans has declined as the Bank focuses its attention on collections of defaulted loans.  For the nine months ended September 30, 2019, the gain on the sale of loans decreased approximately $184,000, or 69.26%, compared to the same period in 2018. There was a loss of approximately $716,000 for the nine months ended September 30, 2019 on SBA loans that were held-for-sale and held-at-fair value and accounted for at fair value under ASC 825, Financial Instruments compared to income of approximately $117,000 for the same period in 2018.  The losses in 2019 were the result of an increase in defaults on SBA loans for which management is developing collection plans to mitigate permanent declines in value.

Loan syndication fees decreased $35,000, or 35%, for the quarter and nine months ended September 30, 2019 compared to the same periods in 2018.  The Comcast loan syndication engagement was delayed to the fourth quarter of 2019. This engagement began in the third quarter of 2018.

Servicing fees on loans increased approximately $11,000, or 39.62%, for the quarter ended September 30, 2019 compared to the same quarter in 2018.   Service fees on loans increased approximately $51,000, or 91.49% for the nine months ended September 30, 2019 compared to the same period in 2018.   In 2019, the Bank began servicing its SBA loans without the assistance of a lender service provider for which it paid half of the 2% servicing fee in prior years.

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Noninterest Expense

Salaries and benefits expense decreased approximately $57,000, or 15.39% for the quarter ended September 30, 2019 compared to 2018 and decreased approximately $175,000, or 15.20%, for the nine months ended September 30, 2019 compared to 2018 primarily as a result of the Mount Airy branch closure in October 2018 and related employee attrition. 

Occupancy and equipment expense increased approximately $2,000 or 0.93%, for the quarter ended September 30, 2019 compared to 2018  decreased approximately $38,000, or 5.09%, for the nine months ended September 30, 2019 compared to the same period in 2018 primarily because of the Mount Airy branch closure and related operating expense reduction.  While the branch was closed in 2018, the lease expired in December 2019; therefore, lease payments continued to be made throughout 2019.

Office operations and supplies expense decreased by approximately $11,000, or 17.91%, for the quarter ended September 30, 2019 compared to 2018 and decreased by approximately $50,000, or 24.98% primarily because of the Mount Airy branch closure as well as a reduction in the utilization of paper in favor of digital reports and storage.

Marketing and public relations expense was relatively unchanged  for the quarter ended September 30 2019 compared to 2018 but decreased approximately $12,000, or 55.10%, for the nine months ended September 30, 2019 compared to the same period in 2018 because the bank did not engage in a formal marketing program during 2019 but instead utilized referral relationships.

Professional services expense decreased approximately $15,000, or 23.51%, for the quarter ended September 30, 2019 compared to 2018.  Professional fees increased approximately $23,000 or 16.67% for the nine months ended September 30, 2019 compared to the same period in 2018 due to the engagement of a new external audit firm.

Federal deposit insurance assessments were unchanged for the quarter ended September 30, 2019 compared to 2018 at $24,000 and decreased approximately $17,000, or 22.80%, for the nine months ended September 30, 2019 when compared to 2018 which was the result of an assessment credit of approximately $16,000 received in 2019. Assessments are based on many factors including the Bank’s deposit size and composition and its current regulatory ratings. 

Net other real estate expenses decreased approximately $7,000, or 52.48%, for the quarter ended September 30, 2019 compared to 2018 and decreased approximately $17,000, or 43.08%, for the nine months ended September 30, 2019 compared to 2018.  The decrease was primarily related a reduction in the number of properties owned.

Loan and collection expenses increased approximately $23,000, or 44.28%, for the quarter ended September 30, 2019 compared to 2018 and increased $138,000, or 118.70% for the nine months ended September 30, 2019 compared to 2018.  This increase is the result of a deterioration in asset quality late in 2018 that has resulted in increased legal, appraisal and other collection-related expenses.

Dividend Restrictions

The Company has never declared or paid any cash or stock dividends.  The Pennsylvania Banking Code of 1965, as amended, provides that cash dividends may be declared and paid only from accumulated net earnings and that, prior to the declaration of any dividend, if the surplus of a bank is less than the amount of its capital, the bank shall, until surplus is equal to such amount, transfer to surplus an amount which is at least ten percent (10%) of the net earnings of the bank for the period since the end of the last fiscal year or any shorter period since the declaration of a dividend.  If the surplus of a bank is less than fifty percent (50%) of the amount of its capital, no dividend may be declared or paid by the Bank without the prior approval of the Pennsylvania Department of Banking.

Under the Federal Reserve Act, the Federal Reserve Board has the power to prohibit the payment of cash dividends by a bank holding company if it determines that such a payment would be an unsafe or unsound practice or constitutes a serious risk to the financial soundness or stability of the subsidiary bank.  As a result of these laws and regulations, the Bank, and therefore the Company, whose only source of income is dividends from the Bank, will be unable to pay any dividends while an accumulated deficit exists.  The Company does not anticipate that dividends will be paid for the foreseeable future.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

The management of the Company, including the Chief Executive Officer and the Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 as of the end of the period covered by this Report (the “Evaluation Date”). A control system, no matter how well designed and operated, can provide only reasonable, not absolute insurance, that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic and annual reports. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this report due to the material weakness described below.

(b) Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation under the framework, management has concluded that our internal control over financial reporting was not effective as of June 30, 2017 due to the material weakness described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of interim or annual financial statements will not be prevented or detected on a timely basis by the company’s internal controls. Based on our evaluation under the framework, management has concluded that material weaknesses existed in the internal controls as of June 30, 2017 in connection with credit administration matters and the timeliness of financial reporting related to the identification and support for asset quality matters that could have a material effect on the consolidated financial statements.

In June 2017, to address the material weaknesses, we have established the following procedures: (1) Implement a new credit administration monitoring system for items requiring follow-up/annual reviews; (2) Implement an appraisal monitoring procedure for all impaired loans; and (3) Together with credit administration in conjunction with monthly Asset Quality Committee Meetings, identify and provide appropriate supporting documentation for material asset quality-related matters that could affect the consolidated financial statements of the Company. Management believes that this change will address material weaknesses in the financial controls. Additional changes will be implemented as determined necessary.

Although our remediation efforts have been implemented, our material weaknesses will not be considered remediated until new internal controls are operational for a period of time and are tested, and management concludes that these controls are operating effectively.

(c) Changes in Internal Control Over Financial Reporting.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the final fiscal quarter of the year to which this Report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s report was not subject to attestation by our registered public accounting firm pursuant to the Dodd-Frank Act which permits small reporting companies, such as the Company, to provide only management’s report in this annual report.

41

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Bank is a defendant in certain claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial condition of the Company.

Item 1A. Risk Factors.

There have not been any material changes to the risk factors disclosed in the Company’s 2017 Annual Report on Form 10-K except as disclosed below. The risk factors disclosed in the Company’s 2017 Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Failure to Comply with the FDIC and Pennsylvania Department of Banking Consent Orders

The Bank has entered into Consent Orders with the FDIC and the Department which, among other provisions, require the Bank to increase its tier one leverage capital ratio to 8.50% and its total risk-based capital ratio to 12.50%. As of September 30, 2018, the Bank’s tier one leverage capital ratio was 4.77% and its total risk-based capital ratio was 9.20%. Refer to the Regulatory Orders section. The Bank’s failure to comply with the terms of the Consent Orders could result in additional regulatory supervision and/or actions. The ability of the Bank to continue as a going concern is dependent on many factors, including achieving required capital levels, earnings and fully complying with the Consent Orders. The Consent Orders raise substantial doubt about the Bank’s ability to continue as a going concern.

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

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

None

Item 5. Other Information.

None

42

Item 6. Exhibits.

a) Exhibits.

Exhibit 31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

43

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.

	UNITED BANCSHARES, INC.
Date: November 8, 2022	/s/ Evelyn F. Smalls
	Evelyn F. Smalls
	President & Chief Executive Officer
Date: November 8, 2022	/s/ Brenda M. Hudson-Nelson
	Brenda Hudson-Nelson
	Executive Vice President/Chief Financial Officer

44

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Evelyn F. Smalls, certify that:

1.	I have reviewed this Report on Form 10-Q of United Bancshares, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a‑15(e) and 15)(d)-15(e)) and internal control 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 subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedure and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer'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 November 8, 2022	/s/
	Evelyn F. Smalls,
	Chief Executive Officer, Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Brenda Hudson-Nelson, certify that:

1.	I have reviewed this Report on Form 10-Q of United Bancshares, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a‑15(e) and 15)(d)-15(e)) and internal control 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 subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedure and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer'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 November 8, 2022	/s/
	Brenda Hudson-Nelson,
	Chief Financial Officer, Principal Executive Officer

EX-32.1

EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of United Bancshares, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Evelyn F. Smalls, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. '1350, as adopted pursuant to '906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(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 financial condition and result of operations of the Company.

/s/ Evelyn F. Smalls

Evelyn F. Smalls

Chief Executive Officer

November 8, 2022

EX-32.2

EXHIBIT 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of United Bancshares, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brenda M. Hudson-Nelson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. '1350, as adopted pursuant to '906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(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 financial condition and result of operations of the Company.

/s/ Brenda M. Hudson-Nelson

Brenda M. Hudson-Nelson

Executive Vice President

Principal Financial Officer

November 8, 2022

XML

Cover - shares	9 Months Ended
	Sep. 30, 2019	Oct. 24, 2022
Cover [Abstract]
Entity Registrant Name	UNITED BANCSHARES INC /PA
Entity Central Index Key	0000944792
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	No
Document Period End Date	Sep. 30, 2019
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019
Entity Common Stock Shares Outstanding		843,050
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	0-25976
Entity Incorporation State Country Code	PA
Entity Tax Identification Number	23-2802415
Entity Address State Or Province	PA
Entity Address Postal Zip Code	19102
Entity Address City Or Town	Philadelphia
City Area Code	215
Local Phone Number	351-4600
Entity Address Address Line 1	30 S. 15th Street
Entity Address Address Line 2	Suite 1200
Entity Interactive Data Current	Yes

XML

CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Assets:
Cash and due from banks	$ 1,569,933	$ 2,003,085
Interest-bearing deposits with banks	5,449,578	3,360,937
Federal funds sold and other cash equivalents	5,468,524	3,074,021
Cash and cash equivalents	12,488,035	8,438,043
Investment securities available-for-sale, at fair value	4,431,700	4,580,610
Loans held for sale	8,426,558	10,072,777
Loans held at fair value	5,886,789	5,420,004
Loans, net of unearned discounts and deferred fees	17,365,120	20,542,863
Less allowance for loan losses	(218,910)	(278,095)
Net loans	17,146,210	20,264,768
Operating lease right of use asset	1,644,806	0
Bank premises and equipment, net	106,172	163,124
Accrued interest receivable	167,303	152,953
Other real estate owned	235,571	391,571
Servicing asset	253,738	313,489
Prepaid expenses and other assets	448,561	397,284
Total assets	51,235,442	50,194,623
Liabilities:
Demand deposits, noninterest-bearing	16,788,603	16,216,607
Demand deposits, interest-bearing	14,170,026	13,599,641
Savings deposits	10,555,548	10,589,054
Time deposits, under $250,000	3,372,630	3,467,732
Time deposits, $250,000 and over	1,504,397	4,399,159
Total deposits	46,391,204	48,272,193
Operating lease liability	1,750,369	0
Accrued interest payable	6,100	17,376
Accrued expenses and other liabilities	164,429	145,308
Total liabilities	48,277,091	48,434,877
Shareholders' equity:
Common stock, $0.01 par value; 2,000,000 shares authorized; 826,921 issued and outstanding	8,269	8,269
Additional paid-in-capital	15,677,626	15,677,626
Accumulated deficit	(12,748,217)	(13,834,625)
Accumulated other comprehensive income (loss)	19,662	(92,535)
Total shareholders' equity	2,958,351	1,759,746
Total liabilities and shareholders' equity	51,235,442	50,194,623
Series B Preferred Stocks [Member]
Shareholders' equity:
Noncumulative, 6%, $0.01 par value, 500,000 shares authorized; 99,342 issued and outstanding	18	18
Series A Preferred Stocks [Member]
Shareholders' equity:
Noncumulative, 6%, $0.01 par value, 500,000 shares authorized; 99,342 issued and outstanding	$ 993	$ 993

XML

CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	2,000,000	2,000,000
Common stock, shares issued (in shares)	826,921	826,921
Common stock, shares Outstanding (in shares)	826,921	826,921
Under deposit	$ 250,000
Over deposit	$ 250,000
Series B Preferred Stocks [Member]
Preferred Stock, par value	$ 0.01	$ 0.01
Preferred Stock, Authorized	7,000	7,000
Preferred stock, Issued	1,850	1,850
Preferred stock, Outstanding	1,850	1,850
Series A Preferred Stocks [Member]
Preferred Stock, par value	$ 0.01	$ 0.01
Preferred Stock, Authorized	500,000	500,000
Preferred stock, Issued	99,342	99,342
Preferred stock, Outstanding	99,342	99,342
Series A Preferred Stock [Member]
Preferred Stock, par value	$ 0.01	$ 0.01
Preferred Stock, Authorized	500,000	500,000

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Interest income:
Interest and fees on loans	$ 451,587	$ 600,438	$ 1,489,830	$ 1,745,278
Interest on investment securities	26,407	28,394	82,322	86,743
Interest on federal funds sold	30,459	27,531	92,545	115,980
Interest on interest bearing deposits with other banks	35,291	21,950	89,315	22,690
Total interest income	543,744	678,313	1,754,012	1,970,691
Interest expense:
Interest on time deposits	3,189	10,787	21,289	35,064
Interest on demand deposits	5,855	6,675	17,432	19,708
Interest on savings deposits	1,320	1,395	3,906	4,234
Total interest expense	10,364	18,857	42,627	59,006
Net interest income	533,380	659,456	1,711,385	1,911,685
(Credit) provision for loan losses	(10,000)	20,000	(32,000)	45,000
Net interest income after (credit) provision for loan losses	543,380	639,456	1,743,385	1,866,685
Noninterest income:
Customer service fees	104,134	106,909	290,042	309,849
ATM fee income	24,628	24,777	73,288	76,134
Gain on sale of loans	0	41,204	81,475	265,022
Net change in fair value of financial instruments	(6,196)	83,278	(715,621)	103,794
Gain (loss) on sale of other real estate	0	16	(18,723)	(11,588)
Loan syndication fees	65,000	100,000	65,000	100,000
Grant income	0	0	2,500,000	0
Service fees on loans	38,180	27,345	106,303	55,515
Other income	9,689	8,902	32,364	28,828
Total noninterest income	235,435	392,431	2,414,128	927,554
Noninterest expense:
Salaries, wages and employee benefits	315,293	372,642	979,050	1,154,522
Occupancy and equipment	247,143	244,865	707,993	746,000
Office operations and supplies	51,060	62,202	150,663	200,825
Marketing and public relations	5,490	1,742	9,809	27,069
Professional services	50,089	65,481	160,717	137,753
Data processing	111,014	98,878	324,908	307,735
Deposit insurance assessments	24,000	24,000	56,353	73,000
Other real estate expense	6,581	13,850	21,989	38,629
Loan and collection expense	73,543	50,974	253,623	115,968
Other operating	118,675	154,132	356,540	399,689
Total noninterest expense	1,002,887	1,088,766	3,021,644	3,201,190
Net (loss) income before income taxes	(224,072)	(56,879)	1,135,869	(406,951)
Provision for income taxes	0	0	0	0
Net (loss) income	$ (224,072)	$ (56,879)	$ 1,135,869	$ (406,951)
Net (loss) income per common share-basic and diluted	$ (0.27)	$ (0.07)	$ 1.37	$ (0.49)
Weighted average number of common shares outstanding	826,921	826,921	826,921	826,921
Comprehensive (loss) income:
Net (loss) income	$ (224,072)	$ (56,879)	$ 1,135,869	$ (406,951)
Unrealized gains (losses) on available for sale securities, net of taxes	13,401	(26,040)	112,196	(96,179)
Total comprehensive (loss) income	$ (210,671)	$ (82,919)	$ 1,248,065	$ (503,130)

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) - USD ($)	Total	Series B, Preferred Stock	Common Stock	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit)	Accumulated other comprehensive loss	Series A, Preferred Stocks
Balance, shares at Dec. 31, 2017		1,850	826,921				99,342
Balance, amount at Dec. 31, 2017	$ 3,280,522	$ 18	$ 8,269	$ 15,677,626	$ (12,348,988)	$ (57,396)	$ 993
Net loss	(198,026)	0	0	0	(198,026)	0
Other comprehensive loss, net of tax	(53,879)	$ 0	$ 0	0	0	(53,879)
Balance, shares at Mar. 31, 2018		1,850	826,921				99,342
Balance, amount at Mar. 31, 2018	3,028,617	$ 18	$ 8,269	15,677,626	(12,547,014)	(111,275)	$ 993
Balance, shares at Dec. 31, 2017		1,850	826,921				99,342
Balance, amount at Dec. 31, 2017	3,280,522	$ 18	$ 8,269	15,677,626	(12,348,988)	(57,396)	$ 993
Net loss	(406,951)
Net income	1,911,685
Balance, shares at Sep. 30, 2018		1,850	826,921				99,342
Balance, amount at Sep. 30, 2018	2,777,392	$ 18	$ 8,269	15,677,626	(12,755,939)	(153,575)	$ 993
Balance, shares at Mar. 31, 2018		1,850	826,921				99,342
Balance, amount at Mar. 31, 2018	3,028,617	$ 18	$ 8,269	15,677,626	(12,547,014)	(111,275)	$ 993
Net loss	(152,046)	0	0	0	(152,046)	0
Other comprehensive loss, net of tax	(16,259)	$ 0	$ 0	0	0	(16,259)
Balance, shares at Jun. 30, 2018		1,850	826,921				99,342
Balance, amount at Jun. 30, 2018	2,860,312	$ 18	$ 8,269	15,677,626	(12,699,060)	(127,534)	$ 993
Net loss	(56,879)	0	0	0	(56,879)	0
Other comprehensive loss, net of tax	(26,041)	$ 0	$ 0	0	0	(26,041)
Net income	659,456
Balance, shares at Sep. 30, 2018		1,850	826,921				99,342
Balance, amount at Sep. 30, 2018	2,777,392	$ 18	$ 8,269	15,677,626	(12,755,939)	(153,575)	$ 993
Balance, shares at Dec. 31, 2018		1,850	826,921				99,342
Balance, amount at Dec. 31, 2018	1,759,746	$ 18	$ 8,269	15,677,626	(13,834,625)	(92,535)	$ 993
Net loss	(227,508)	0	0	0	(227,508)	0	0
Other comprehensive loss, net of tax	57,890	$ 0	$ 0	0	0	57,890	$ 0
Cumulative effect of adoption of ASU 2016-02, Leases (Topic 842)	(49,460)				(49,460)
Balance, shares at Mar. 31, 2019		1,850	826,921				99,342
Balance, amount at Mar. 31, 2019	1,540,668	$ 18	$ 8,269	15,677,626	(14,111,593)	(34,645)	$ 993
Balance, shares at Dec. 31, 2018		1,850	826,921				99,342
Balance, amount at Dec. 31, 2018	1,759,746	$ 18	$ 8,269	15,677,626	(13,834,625)	(92,535)	$ 993
Net loss	1,135,869
Net income	1,711,385
Balance, shares at Sep. 30, 2019		1,850	826,921				99,342
Balance, amount at Sep. 30, 2019	2,958,351	$ 18	$ 8,269	15,677,626	(12,748,217)	19,662	$ 993
Balance, shares at Mar. 31, 2019		1,850	826,921				99,342
Balance, amount at Mar. 31, 2019	1,540,668	$ 18	$ 8,269	15,677,626	(14,111,593)	(34,645)	$ 993
Other comprehensive loss, net of tax	40,905	0	0	0	0	40,905	0
Net income	1,587,448	$ 0	$ 0	0	1,587,448	0	$ 0
Balance, shares at Jun. 30, 2019		1,850	826,921				99,342
Balance, amount at Jun. 30, 2019	3,169,021	$ 18	$ 8,269	15,677,626	(12,524,145)	6,260	$ 993
Net loss	(224,072)	0	0	0	(224,072)	0	0
Other comprehensive loss, net of tax	13,402	$ 0	$ 0	0	0	13,402	$ 0
Net income	533,380
Balance, shares at Sep. 30, 2019		1,850	826,921				99,342
Balance, amount at Sep. 30, 2019	$ 2,958,351	$ 18	$ 8,269	$ 15,677,626	$ (12,748,217)	$ 19,662	$ 993

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net income (loss)	$ 1,135,869	$ (406,951)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Credit) provision for loan losses	(32,000)	45,000
Amortization of premiums on investments, net	4,203	5,360
Loss on disposition of other real estate	18,723	11,588
Write-down of other real estate	0	5,000
Amortization of servicing asset	24,198	91,919
Depreciation on fixed assets	60,233	137,032
Net change in fair value of financial instruments	715,621	(103,794)
Gain on sale of loans	(81,475)	(265,022)
Proceeds from the sale of loans held-for-sale	1,144,073	3,098,258
Loans originated for sale	(598,785)	(5,747,443)
Increase in accrued interest receivable and other assets	(30,074)	(115,552)
Increase (decrease) in accrued interest payable and other liabilities	28,937	(100,436)
Net cash provided by (used in) operating activities	2,389,523	(3,345,041)
Cash flows from investing activities:
Proceeds from maturity and principal reductions of available-for-sale investment securities	256,903	457,629
Purchase of securities available-for-sale	0	(1,765)
Net decrease in loans	3,150,558	3,627,344
Proceeds from sale of other real estate	137,277	217,911
Purchase of bank premises and equipment	(3,281)	(20,086)
Net cash provided by investing activities	3,541,457	4,281,031
Cash flows from financing activities:
Net decrease in deposits	(1,880,989)	(4,385,667)
Net cash used in financing activities	(1,880,990)	(4,385,667)
Net increase (decrease) in cash and cash equivalents	4,049,992	(3,449,677)
Cash and cash equivalents at beginning of period	8,438,043	11,671,253
Cash and cash equivalents at end of period	12,488,035	8,221,576
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	53,903	61,390
Transfer of investment to other cash equivalents	0	133,296
Transfer of loans from held-for-sale to held at fair value	1,580,482	731,625
Non-cash addition of operating lease right of use asset	(1,644,806)	0
Non-cash addition of operating lease liability	$ 1,750,369	$ 0

XML

Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Significant Accounting Policies

SIGNIFICANT ACCOUNTING POLICIES

1. Significant Accounting Policies

United Bancshares, Inc. (the "Company") is a bank holding company registered under the Bank Holding Company Act of 1956.  The Company's principal activity is the ownership and management of its wholly owned subsidiary, United Bank of Philadelphia (the "Bank").

During interim periods, the Company follows the accounting policies set forth in its Annual Report on Form 10-K filed with the Securities and Exchange Commission.  Readers are encouraged to refer to the Company's Form 10-K for the fiscal year ended December 31, 2018 when reviewing this Form 10-Q.  Because this report is based on an interim period, certain information and footnote disclosures normally included in the Annual Report on Form 10-K have been condensed or omitted. Quarterly results reported herein are not necessarily indicative of results to be expected for other quarters.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the Company's consolidated financial position as of September 30, 2019 and December 31, 2018 and the consolidated results of its operations and its cash flows for the three and nine months ended September 30, 2019 and 2018.

Management’s Use of Estimates

The preparation of the financial statements has been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities, the determination of the allowance for loan losses, the fair value of loans held for sale and at fair value, valuation allowance for deferred tax assets, the carrying value of other real estate owned, the determination of other than temporary impairment for securities.

Commitments

In the general course of business, there are various outstanding commitments to extend credit, such as letters of credit and un-advanced loan commitments, which are not reflected in the accompanying financial statements. Management does not anticipate any material losses as a result of these commitments.

Contingencies

The Company is from time to time a party to routine litigation in the normal course of its business. Management does not believe that the resolution of any such litigation will have a material adverse effect on the financial condition or results of operations of the Company. However, the ultimate outcome of any such litigation, as with litigation generally, is inherently uncertain and it is possible that some litigation matters may be resolved adversely to the Company.

Loans Held for Sale

The Bank originates SBA loans for which the guaranteed portion is intended to be sold within a short period of time in the secondary market.  These loans are carried at fair value based on a loan-by-loan valuation using actual market bids.  Any change in the balance of the loan and its fair value is recorded as income or expense in each reporting period.  When the guaranteed portion of the loan is sold, the gain on the sale is reduced by the income previously recognized as part of the fair value adjustment.

Loans Held at Fair Value

The Bank originates SBA loans for which the un-guaranteed portion is retained after the guaranteed portion is sold in the secondary market.  Management has elected to carry these loans at fair value in accordance with the irrevocable option permitted under Accounting Standards Codification (“ASC”) 825-10-25 Financial Instruments.  Fair value of these loans is estimated based on the present value of future cash flows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries. When a SBA loan held at fair value becomes nonperforming, the fair value estimate is based on the net liquidation value of collateral or the present value of future cashflows.

Loans

The Bank has both the positive intent and ability to hold the majority of its loans to maturity.  These loans are stated at the amount of unpaid principal, reduced by net unearned discount and an allowance for loan losses.  Interest income on loans is recognized as earned based on contractual interest rates applied to daily principal amounts outstanding and accretion of discount.   

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses.  Loans that are determined to be uncollectible are charged against the allowance account, and subsequent recoveries, if any, are credited to the allowance.  When evaluating the adequacy of the allowance, an assessment of the loan portfolio will typically include changes in the composition and volume of the loan portfolio, overall portfolio quality and past loss experience, review of specific problem loans, current economic conditions which may affect borrowers’ ability to repay, and other factors which may warrant current recognition.  Such periodic assessments may, in management’s judgment, require the Bank to recognize additions or reductions to the allowance. 

Various regulatory agencies periodically review the adequacy of the Bank’s allowance for loan losses as an integral part of their examination process.  Such agencies may require the Bank to recognize additions or reductions to the allowance based on their evaluation of information available to them at the time of their examination.  It is reasonably possible that the above factors may change significantly and, therefore, affects management’s determination of the allowance for loan losses in the near term.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers non-impaired loans and is based on historical charge-off experience, other qualitative factors, and adjustments made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.  The Bank does not allocate reserves for unfunded commitments to fund lines of credit.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Bank will identify and assess loans that may be impaired through any of the following processes:

· During regularly scheduled meetings of the Asset Quality Committee

· During regular reviews of the delinquency report

· During the course of routine account servicing, annual review, or credit file update

· Upon receipt of verifiable evidence of a material reduction in the value of collateral to a level that creates a less than desirable Loan-to-Value ratio

Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller, homogeneous loans, including consumer installment and home equity loans, 1-4 family residential mortgages, and student loans are evaluated collectively for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures.

Non-accrual and Past Due Loans.

Loans are considered past due if the required principal and interest payments have not been received within 30 days as of the date such payments were due.  The Bank generally places a loan on non-accrual status when interest or principal is past due 90 days or more.  If it otherwise appears doubtful that the loan will be repaid, management may place the loan on nonaccrual status before the lapse of 90 days. Interest on loans past due 90 days or more ceases to accrue except for loans that are well collateralized and in the process of collection.  When a loan is placed on nonaccrual status, previously accrued and unpaid interest is reversed out of income.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Income Taxes

Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities.  Deferred tax assets are subject to management’s judgment based upon available evidence that future realization is more likely than not.   For financial reporting purposes, a valuation allowance of 100% of the net deferred tax asset, other than the asset/liability related to the available for sale investment, has been recognized to offset the net deferred tax assets related to cumulative temporary differences and tax loss carryforwards.  If management determines that the Company may be able to realize all or part of the deferred tax asset in the future, an income tax benefit may be required to increase the recorded value of the net deferred tax asset to the expected realizable amount.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more-likely-than not recognition threshold is measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits, if any, would be recognized in income tax expense in the consolidated statements of operations.

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Net (Loss) Income Per Share

9 Months Ended

Sep. 30, 2019

Net (Loss) Income Per Share

Net (Loss) Income Per Share

2. Net (Loss) Income Per Share

The calculation of net (loss) income per share follows:

	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018			Nine Months Ended September 30, 2019		Nine Months Ended September 30, 2018
Basic:
Net (loss) income available to common shareholders	$	(224,072	)	$	(56,879	)	$	1,135,869	$	(406,951	)
Average common shares outstanding-basic		826,921			826,921			826,921		826,921
Net (loss) income per share-basic	$	(0.27	)	$	(0.07	)	$	1.37	$	(0.49	)
Diluted:
Average common shares-diluted		826,921			826,921			826,921		826,921
Net (loss) income per share-diluted	$	(0.27	)	$	(0.07	)	$	1.37	$	(0.49	)

The preferred stock is non-cumulative and the Company is restricted from paying dividends.  Therefore, no effect of the preferred stock is included in the (loss) income per share calculations.

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Changes in Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2019

Changes in Accumulated Other Comprehensive Income (Loss)

Changes in Accumulated Other Comprehensive Income (Loss)

3. Changes in Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss) which is solely comprised of the unrealized gain or loss of available for sale investment securities:

	Three Months Ended September 30, 2019
	Before tax		Deferred			Net of tax
(in (000’s)	Amount		Taxes			Amount
Beginning balance	$	8	$	(2	)	$	6
Unrealized gain on securities:
Unrealized holding gain arising during period		18		(4	)		14
Other comprehensive income, net		18		(4	)		14
Ending balance	$	26	$	(6	)	$	20

	Three Months Ended September 30, 2018
	Before tax			Deferred		Net of tax
(in (000’s)	Amount			Taxes		Amount
Beginning balance	$	(161	)	$	34	$	(127	)
Unrealized loss on securities:
Unrealized holding loss arising during period		(32	)		6		(26	)
Other comprehensive loss, net		(32	)		6		(26	)
Ending balance	$	(193	)	$	40	$	(153	)

	Nine Months Ended September 30, 2019
	Before tax			Deferred			Net of tax
(in (000’s)	Amount			Taxes			Amount
Beginning balance	$	(117	)	$	25		$	(92	)
Unrealized gain on securities:
Unrealized holding gain arising during period		143			(31	)		112
Other comprehensive gain, net		143			(31	)		112
Ending balance	$	26		$	(6	)	$	20

	Nine Months Ended September 30, 2018
	Before tax			Deferred		Net of tax
(in (000’s)	Amount			Taxes		Amount
Beginning balance	$	(73	)	$	16	$	(57	)
Unrealized loss on securities:
Unrealized holding loss arising during period		(120	)		24		(96	)
Other comprehensive loss, net		(120			24		(96	)
Ending balance	$	(193	)	$	40	$	(153	)

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New Authoritative Accounting Guidance

9 Months Ended

Sep. 30, 2019

New Authoritative Accounting Guidance

New Authoritative Accounting Guidance

4. New Authoritative Accounting Guidance

Adoption of Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. Additionally, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) — Targeted Improvements , which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted ASU 2016-02 and its related amendments as of January 1, 2019, which resulted in the recognition of operating right-of-use assets totaling $1,824,729, as well as operating lease liabilities totaling $1,931,239 estimate of credit losses that are expected to occur over the remaining life of a financial asset.  The Company elected to adopt the transition relief provisions from ASU 2018-11 and recorded the impact of adoption as of January 1, 2019, without restating any prior-year amounts or disclosures. The related policy elections made by the Company and the additional lease disclosures can be found in Note 8. The cumulative effect adjustment to retained earnings was a reduction of $49,460.

Effect of Upcoming Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.  The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset.  The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.  The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements.  The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  This Update is not expected to have a significant impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications to ease the financial reporting burdens of the expected market transition from LIBOR to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. The Company has identified its LIBOR exposure across product categories and is analyzing the risks associated with the LIBOR transition. However, it is too early to predict whether a new rate index replacement and the adoption of this ASU will have a material impact on the Company’s financial statements.

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Investment Securities

9 Months Ended

Sep. 30, 2019

Investment Securities

Investment Securities

5.  Investment Securities

The following is a summary of the Company's investment portfolio: 

(In 000’s)	September 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-sale:
U.S. Government agency securities	$	2,349	$	-	$	(3	)	$	2,346
Government Sponsored Enterprises residential mortgage-backed securities		2,057		31		(3	)		2,085
	$	4,406	$	31	$	(6	)	$	4,431

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-sale:
U.S. Government agency securities	$	2,349	$	-	$	(72	)	$	2,277
Government Sponsored Enterprises residential mortgage-backed securities		2,349		9		(54	)		2,304
	$	4,698	$	9	$	(126	)	$	4,581

The amortized cost and fair value of debt securities classified as available-for-sale by contractual maturity as of September 30, 2019, are as follows:

(In 000’s)	Amortized Cost		Fair Value
Due in one year	$	-	$	-
Due after one year through five years		-		-
Due after five years through ten years		2,349		2,346
Government Sponsored Enterprises residential mortgage-backed securities		2,057		2,085
	$	4,406	$	4,431

Expected maturities will differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without any penalties.

There were no sales of securities during the three and nine months ended September 30, 2019 and 2018.

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at September 30, 2019:

(in 000’s)	Number		Less than 12 months					12 months or longer					Total
Description of	of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	Securities		Value		Losses			Value		losses			Value		Losses
U.S. Government agency securities		4	$	749	$	(1	)	$	747	$	(2	)	$	1,496	$	(3	)
Government Sponsored Enterprises residential mortgage-backed securities		3		491		(3	)		-		-			491		(3	)
Total temporarily impaired investment Securities		7	$	1,240	$	(4	)	$	747	$	(2	)	$	1,987	$	(6	)

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2018:

(in 000’s)	Number		Less than 12 months					12 months or longer					Total
Description of	of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	securities		Value		Losses			Value		losses			Value		Losses
U.S. Government agency securities		7	$	-	$	-		$	2,277	$	(72	)	$	2,277	$	(72	)
Government Sponsored Enterprises residential mortgage-backed securities		14		718		(10	)		1,299		(44	)		2,017		(54	)
Total temporarily impaired investment Securities		21	$	718	$	(10	)	$	3,576	$	(116	)	$	4,294	$	(126	)

Government Sponsored Enterprises residential mortgage-backed securities. Unrealized losses on the Company’s investment in Government Sponsored Enterprises residential mortgage-backed securities were caused by market interest rate increases. The Company purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company’s investments. Because the decline in fair value is attributable to changes in market interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired.

U.S. Government and Agency Securities. Unrealized losses on the Company's investments in direct obligations of U.S. government agencies were caused by market interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired.

The Company has a process in place to identify debt securities that could potentially have a credit impairment that is other than temporary.  This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.  On a quarterly basis, the Company reviews all securities to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. The Company considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, the intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, the Company’s ability and intent to hold the security for a period of time that allows for the recovery in value. 

As of September 30, 2019 and December 31, 2018, investment securities with a carrying value of $774,000 and $3,668,000, respectively, were pledged as collateral to secure public deposits and contingent borrowing at the Federal Reserve Discount Window.

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Loans and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2019

Loans and Allowance for Loan Losses

Loans and Allowance for Loan Losses

6. Loans and Allowance for Loan Losses

The composition of the Bank’s loan portfolio is as follows:

(in 000’s)	September 30, 2019		December 31, 2018
Commercial and industrial	$	1,340	$	1,545
Commercial real estate		14,293		17,038
Consumer real estate		1,083		1,226
Consumer loans other		649		734
Total loans	$	17,365	$	20,543

At September 30, 2019 and December 31, 2018, there was no unearned discount. 

The determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance is the accumulation of three components that are calculated based on various independent methodologies that are based on management’s estimates.  The three components are as follows:

· Specific Loan Evaluation Component – Includes the specific evaluation of impaired loans.

· Historical Charge-Off Component – Applies an eight-quarter rolling historical charge-off rate to all portfolio segments of non-classified loans.

· Qualitative Factors Component – The loan portfolio is broken down into portfolio segments, upon which multiple factors (such as delinquency trends, economic conditions, concentrations, growth/volume trends, and management/staff ability) are evaluated, resulting in an allowance amount for each of the sub classifications. The sum of these amounts comprises the Qualitative Factors Component.

All of these factors may be susceptible to significant change.  During the nine months ended September 30, 2019, the Bank did not change any of its qualitative factors in any segment of the loan portfolio; however, the average historical loss factor increased significantly for commercial and industrial loans because of net charge-offs that resulted in an increase in general reserves. Credits to the provision for the nine months ended September 30, 2019 were primarily related to decreases in the balance of commercial real estate loans as well as the origination of SBA loans that are accounted for at fair value and are not included in the calculation of the allowance for loan losses. During the nine months, ended September 30, 2019, there was an increase in the commercial real estate reserve allocation because of the modification of an impaired commercial industrial loan to become secured by real estate.  Specific reserves allocated to this loan were reclassified to commercial real estate. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods.  The following table presents an analysis of the allowance for loan losses.

(in 000's)	For the Three months ended September 30, 2019
	Commercial and industrial			Commercial real estate			Consumer real estate			Consumer loans Other			Unallocated			Total
Beginning balance	$	49		$	185		$	2		$	-		$	-		$	236
(Credit) provision for loan losses		(11	)		3			(1	)		-			(1	)		(10	)
Charge-offs		-			(20	)		-			(1	)		-			(21	)
Recoveries		-			12			-			1			1			14
Net charge-offs		-			(8	)		-			-			1			(7	)
Ending balance	$	38		$	180		$	1		$	-		$	-		$	219

(in 000's)	For the Three months ended September 30, 2018
	Commercial and industrial		Commercial real Estate			Consumer real estate		Consumer loans Other			Unallocated			Total
Beginning balance	$	3	$	150		$	4	$	8		$	15		$	180
Provision (credit) for loan losses		80		(37	)		-		(8	)		(15	)		20
Charge-offs		-		-			-		(1	)		-			(1	)
Recoveries		1		1			-		1			-			3
Net recoveries		1		1			-		-			-			2
Ending balance	$	84	$	114		$	4	$	-		$	-		$	202

(in 000's)	For the Nine months ended September 30, 2019
	Commercial and industrial			Commercial real estate			Consumer real estate			Consumer loans Other			Unallocated			Total
Beginning balance	$	102		$	139		$	4		$	-		$	33		$	278
Provision (credit) for loan losses		(48	)		62			(12	)		(1	)		(33	)		(32	)
Charge-offs		(19	)		(41	)		(12	)		(7	)		-			(79	)
Recoveries		3			20			21			8			-			52
Net (charge-offs) recoveries		(16	)		(21	)		9			1			-			(27	)
Ending balance	$	38		$	180		$	1		$	-		$	-		$	219

(in 000's)	For the Nine months ended September 30, 2018
	Commercial and industrial			Commercial real estate			Consumer real estate			Consumer loans Other			Unallocated		Total
Beginning balance	$	7		$	155		$	10		$	8		$	-	$	180
Provision (credit) for loan losses		84			(26	)		(6	)		(7	)				45
Charge-offs		(10	)		(18	)		-			(8	)		-		(36	)
Recoveries		3			3			-			7			-		13
Net charge-offs		(7	)		(15	)		-			(1	)		-		(23	)
Ending balance	$	84		$	114		$	4		$	-		$	-	$	202

(in 000's)	September 30, 2019
	Commercial and industrial		Commercial real Estate		Consumer real estate		Consumer loans Other		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$	-	$	81	$	-	$	-	$	-	$	81
Loans collectively evaluated for impairment		38		99		1		-		-		138
	$	38	$	180	$	1	$	-	$	-	$	219
Loans, ending balance:
Loans individually evaluated for impairment	$	76	$	1,249	$	-	$	-	$	-	$	1,325
Loans collectively evaluated for impairment		1,264		13,044		1,083		649		-		16,040
Total	$	1,340	$	14,293	$	1,083	$	649	$	-	$	17,365

(in 000's)	December 31, 2018
	Commercial and industrial		Commercial real Estate		Consumer real estate		Consumer loans Other		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$	95	$	44	$	-	$	-	$	-	$	139
Loans collectively evaluated for impairment		7		95		4		-		33		139
	$	102	$	139	$	4	$	-	$	33	$	278
Loans, ending balance:
Loans individually evaluated for impairment	$	289	$	1,148	$	-	$	-	$	-	$	1,437
Loans collectively evaluated for impairment		1,256		15,890		1,226		734		-		19,106
Total	$	1,545	$	17,038	$	1,226	$	734	$	-	$	20,543

Nonperforming and Nonaccrual and Past Due Loans

An age analysis of past due loans, segregated by class of loans, as of September 30, 2019 is as follows:

			Accruing		Nonaccrual
	Loans		Loans 90 or		Loans 90 or
(In 000's)	30-89 Days		More Days		More Days		Total Past		Current
	Past Due		Past Due		Past Due		Due Loans		Loans		Total Loans
Commercial and industrial:
Commercial	$	-	$	-	$	-	$	-	$	1,039	$	1,039
SBA loans		-		-		-		-		-		-
Asset-based		-		-		76		76		225		301
Total Commercial and industrial		-		-		76		76		1,264		1,340
Commercial real estate:
Commercial mortgages		-		-		1,010		1,010		6,358		7,368
SBA loans		-		-		60		60		175		235
Construction		-		-		-		-		-		-
Religious organizations		369		-		179		548		6,142		6,690
Total Commercial real estate		369		-		1,249		1,618		12,675		14,293
Consumer real estate:
Home equity loans		-		148		240		388		151		539
Home equity lines of credit		-		-		-		-		13		13
1-4 family residential mortgages		-		-		-		-		531		531
Total consumer real estate		-		148		240		388		695		1,083
Total real estate		369		148		1,489		2,006		13,370		15,376
Consumer and other:
Student loans		6		5		-		11		553		564
Other		1		-		-		1		84		85
Total consumer and other		7		5		-		12		637		649
Total loans	$	376	$	153	$	1,565	$	2,094	$	15,271	$	17,365

An age analysis of past due loans, segregated by class of loans, as of December 31, 2018 is as follows:

			Accruing		Nonaccrual
	Loans		Loans 90 or		Loans 90 or
	30-89 Days		More Days		More Days		Total Past		Current
(In 000's)	Past Due		Past Due		Past Due		Due Loans		Loans		Total Loans
Commercial and industrial:
Commercial	$	-	$	-	$	-	$	-	$	1,055	$	1,055
SBA Loans		-		-		18		18		-		18
Asset-based		-		-		76		76		396		472
Total Commercial and industrial		-		-		94		94		1,451		1,545
Commercial real estate:
Commercial mortgages		-		45		902		947		8,585		9,532
SBA loans		-		-		69		69		179		248
Construction		-		-		-		-		-		-
Religious organizations		-		-		179		179		7,078		7,257
Total Commercial real estate		-		45		1,150		1,195		15,843		17,038
Consumer real estate:
Home equity loans		-		150		281		431		197		628
Home equity lines of credit		-		-		-		-		15		15
1-4 family residential mortgages		-		-		85		85		498		583
Total consumer real estate		-		150		366		516		710		1,226
Total real estate		-		195		1,516		1,711		16,553		18,264
Consumer and other:
Student loans		14		57		-		71		551		622
Other		1		-		-		1		111		112
Total consumer and other		15		57		-		72		662		734
Total loans	$	15	$	252	$	1,661	$	1,928	$	18,615	$	20,543

Loan Origination/Risk Management. The Bank has lending policies and procedures in place to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with periodic reports related to loan origination, asset quality, concentrations of credit, loan delinquencies and non-performing and emerging problem loans. Diversification in the portfolio is a means of managing risk with fluctuations in economic conditions.

Credit Quality Indicators. For commercial loans, management uses internally assigned risk ratings as the best indicator of credit quality. Each loan’s internal risk weighting is assigned at origination and updated at least annually and more frequently if circumstances warrant a change in risk rating. The Bank uses a 1 through 8 loan grading system that follows regulatory accepted definitions as follows:

· Risk ratings of “1” through “3” are used for loans that are performing and meet and are expected to continue to meet all of the terms and conditions set forth in the original loan documentation and are generally current on principal and interest payments. Loans with these risk ratings are reflected as “Good/Excellent” and “Satisfactory” in the following table.

· Risk ratings of “4” are assigned to “Pass/Watch” loans which may require a higher degree of regular, careful attention. Borrowers may be exhibiting weaker balance sheets and positive but inconsistent cash flow coverage. Borrowers in this classification generally exhibit a higher level of credit risk and are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Loans with this rating would not normally be acceptable as new credits unless they are adequately secured and/or carry substantial guarantors. Loans with this rating are reflected as “Pass” in the following table.

· Risk ratings of “5” are assigned to “Special Mention” loans that do not presently expose the Bank to a significant degree of risks, but have potential weaknesses/deficiencies deserving Management’s closer attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. No loss of principal or interest is envisioned. Borrower is experiencing adverse operating trends, which potentially could impair debt, services capacity and may necessitate restructuring of credit. Secondary sources of repayment are accessible and considered adequate to cover the Bank's exposure. However, a restructuring of the debt should result in repayment. The asset is currently protected, but is potentially weak. This category may include credits with inadequate loan agreements, control over the collateral or an unbalanced position in the balance sheet which has not reached a point where the liquidation is jeopardized but exceptions are considered material. These borrowers would have limited ability to obtain credit elsewhere.

· Risk ratings of “6” are assigned to “Substandard” loans which are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets must have a well-defined weakness. They are characterized by the distinct possibility that some loss is possible if the deficiencies are not corrected. The borrower’s recent performance indicated an inability to repay the debt, even if restructured. Primary source of repayment is gone or severely impaired and the Bank may have to rely upon the secondary source. Secondary sources of repayment (e.g., guarantors and collateral) should be adequate for a full recovery. Flaws in documentation may leave the bank in a subordinated or unsecured position when the collateral is needed for the repayment.

· Risk ratings of “7” are assigned to “Doubtful” loans which have all the weaknesses inherent in those classified “Substandard” with the added characteristic that the weakness makes the collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. The borrower's recent performance indicates an inability to repay the debt. Recovery from secondary sources is uncertain. The possibility of a loss is extremely high, but because of certain important and reasonably- specific pending factors, its classification as a loss is deferred.

· Risk rating of “8” are assigned to “Loss” loans which are considered non-collectible and do not warrant classification as active assets. They are recommended for charge-off if attempts to recover will be long term in nature. This classification does not mean that an asset has no recovery or salvage value, but rather, that it is not practical or desirable to defer writing off the loss, although a future recovery may be possible. Loss should always be taken in the period in which they surface and are identified as non-collectible as a result there is no tabular presentation.

For consumer and residential mortgage loans, management uses performing versus nonperforming as the best indicator of credit quality. Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being in default for a period of 90 days or more or when the ability to collect principal and interest according to contractual terms is in doubt as well as loans that are 90 days or more past due and have not been placed on nonaccrual. These credit quality indicators are updated on an ongoing basis. A loan is placed on nonaccrual status as soon as management believes there is doubt as to the ultimate ability to collect interest on a loan.

The tables below detail the Bank’s loans by class according to their credit quality indicators discussed above.

(In 000's)	Commercial Loans September 30, 2019
	Good/ Excellent		Satisfactory		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial:
Commercial	$	250	$	578	$	-	$	-	$	211	$	-	$	1,039
SBA loans		-		-		-		-		-		-		-
Asset-based		-		225		-		-		-		76		301
		250		803		-		-		211		76		1,340
Commercial real estate:
Commercial mortgages		-		4,864		1,705		-		613		186		7,368
SBA Loans		-		175		-		-		60		-		235
Construction		-		-		-		-		-		-		-
Religious organizations		8		4,469		2,034		-		179		-		6,690
		8		9,508		3,739		-		852		186		14,293
Total commercial loans	$	258	$	10,311	$	3,739	$	-	$	1,063	$	262	$	15,633

	Residential Mortgage and Consumer Loans September 30, 2019
	Performing		Nonperforming		Total
Consumer Real Estate:
Home equity	$	151	$	388	$	539
Home equity line of credit		13		-		13
1-4 family residential mortgages		291		-		531
		455		388		1,083
Consumer Other:
Student loans		559		5		564
Other		85		-		85
		644		5		649
Total  consumer loans	$	1,099	$	393	$	1,732

(In 000's)	Commercial Loans,  December 31, 2018
	Good/ Excellent		Satisfactory		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial:
Commercial	$	250	$	592	$	-	$	-	$	213	$	-	$	1,055
SBA loans		-		-		-		-		-		-		18
Asset-based		-		272		124		-		18		76		472
		250		864		124		-		231		76		1,545
Commercial real estate:
Commercial mortgages		-		5,814		2,759		52		703		204		9,532
SBA Loans		-		179		-		-		69		-		248
Construction		-		-		-		-		-		-		-
Religious organizations		24		5,041		2,013		-		180		-		7,258
		24		11,034		4,772		52		952		204		17,038
Total commercial loans	$	274	$	11,898	$	4,896	$	52	$	1,183	$	280	$	18,583

	Residential Mortgage and Consumer Loans December 31, 2018
	Performing		Nonperforming		Total
Consumer Real Estate:
Home equity	$	197	$	431	$	628
Home equity line of credit		15		-		15
1-4 family residential mortgages		498		85		583
		710		516		1,226
Consumer Other:
Student loans		565		57		622
Other		112		-		112
		677		57		734
Total  consumer loans	$	1,387	$	573	$	1,960

Impaired Loans. The Bank identifies a loan as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement. The Bank recognizes interest income on impaired loans under the cash basis when the collateral on the loan is sufficient to cover the outstanding obligation to the Bank.   If these factors do not exist, the Bank will record interest payments on the cost recovery basis.

In accordance with guidance provided by ASC 310-10, Accounting by Creditors for Impairment of a Loan, management employs one of three methods to determine and measure impairment: The Present Value of Future Cash Flow Method; the Fair Value of Collateral Method; or the Observable Market Price of a Loan Method.  To perform an impairment analysis, the Company reviews a loan’s internally assigned grade, its outstanding balance, guarantors, collateral, strategy, and a current report of the action being implemented. Based on the nature of the specific loans, one of the impairment methods is chosen for the respective loan and any impairment is determined, based on criteria established in ASC 310-10.  

The Company makes partial charge-offs of impaired loans when the impairment is deemed permanent and is considered a loss.  Specific reserves are allocated to cover “other-than-permanent” impairment for which the underlying collateral value may fluctuate with market conditions.  There were no partial charge-offs for the nine months ended September 30, 2019.

Consumer real estate and other loans are not individually evaluated for impairment, but collectively evaluated, because they are pools of smaller balance homogeneous loans.  

Impaired loans as of September 30, 2019 are set forth in the following table.

(In 000's)	Unpaid Contractual		Recorded Investment		Recorded Investment		Total
	Principal		With No		With		Recorded		Related
	Balance		Allowance		Allowance		Investment		Allowance
Commercial and industrial:
Commercial	$	-	$	-	$	-	$	-	$	-
SBA loans		-		-		-		-		-
Asset-based		76		76		-		76		-
Total commercial and industrial		76		76		-		76		-
Commercial real estate:
Commercial mortgages		1,010		799		211		1,010		81
SBA Loans		60		60		-		60		-
Religious organizations		179		179		-		179		-
Total commercial real estate		1,249		1,038		211		1,249		81
Total loans	$	1,325	$	1,114	$	211	$	1,325	$	81

Impaired loans as of December 31, 2018 are set forth in the following table.

(In 000's)	Unpaid Contractual		Recorded  Investment		Recorded  Investment		Total
	Principal		With No		With		Recorded		Related
	Balance		Allowance		Allowance		Investment		Allowance
Commercial and industrial:
Commercial	$	213	$	-	$	213	$	213	$	81
SBA		-		-		-		-		-
Asset based		76		-		76		76		14
Total Commercial and industrial		289		-		289		289		95
Commercial real estate:
Commercial mortgages		898		739		159		898		13
SBA  Loans		71		71		-		71		-
Religious Organizations		179		-		179		179		31
Total Commercial real estate		1,148		810		338		1,148		44
Total loans	$	1,437	$	810	$	627	$	1,437	$	139

The Bank recognizes interest income on impaired loans under the cash basis when the collateral on the loan is sufficient to cover the outstanding obligation to the Bank.   If these factors do not exist, the Bank will record interest payments on the cost recovery basis. The following tables present additional information about impaired loans.

(In 000's)	Three Months Ended  September 30, 2019				Three Months Ended  September 30, 2018
	Average		Interest recognized		Average		Interest recognized
	Recorded		on impaired		Recorded		on impaired
	Investment		Loans		Investment		Loans
Commercial and industrial:
Commercial	$	-	$	-	$	25	$	-
SBA  loans		-		-		-		-
Asset-based		76		-		76		-
Total commercial and industrial		76		-		101		-
Commercial real estate:
Commercial mortgages		1,104		5		936		1
SBA loans		62		-		73		-
Religious organizations		179		-		180		-
Total commercial real estate		1,345		5		1,189		-
Total loans	$	1,421	$	5	$	1,290	$	1

(In 000's)	Nine Months Ended  September 30, 2019				Nine Months Ended  September 30, 2018
	Average		Interest recognized		Average		Interest recognized
	Recorded		on impaired		Recorded		on impaired
	Investment		Loans		Investment		Loans
Commercial and industrial:
Commercial	$	183	$	-	$	8	$	2
SBA  loans		-		-		-		-
Asset-based		76		-		76		-
Total commercial and industrial		259		-		84		2
Commercial real estate:
Commercial mortgages		847		-		946		1
SBA loans		65		-		76		-
Religious organizations		179		-		182		-
Total commercial real estate		1,091		-		1,204		-
Total loans	$	1,350	$	-	$	1,288	$	3

Troubled debt restructurings (“TDRs”).  TDRs occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider, such as a below market interest rate, extending the maturity of a loan, or a combination of both. The Company made modifications to certain loans in its commercial loan portfolio that included the term out of lines of credit to begin the amortization of principal.  The terms of these loans do not include any financial concessions and are not consistent with the current market.  Management reviews all loan modifications to determine whether the modification qualifies as a troubled debt restructuring (i.e. whether the creditor has been granted a concession or is experiencing financial difficulties).  Based on this review and evaluation, none of the modified loans met the criteria of a troubled debt restructuring.  Therefore, the Company had no troubled debt restructurings at September 30, 2019 and December 31, 2018.

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Other Real Estate Owned

9 Months Ended

Sep. 30, 2019

Other Real Estate Owned

Other Real Estate Owned

7. Other Real Estate Owned

Other real estate owned (“OREO”) consists of properties acquired as a result of deed in-lieu-of foreclosure and foreclosures. Properties or other assets are classified as OREO and are reported at the lower of carrying value or fair value, less estimated costs to sell. Costs relating to the development or improvement of assets are capitalized, and costs relating to holding the property are charged to expense. Activity in other real estate owned for the periods was as follows: 

(in 000's)	Three  Months Ended		Three  Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2019		September 30, 2018			September 30, 2019			September 30, 2018
Beginning balance	$	236	$	402		$	392		$	626
Additions, transfers from loans		-		-			-			-
Sales		-		(10	)		(156	)		(229	)
		236		392			236			397
Write-ups (downs)		-		-			-			(5	)
Ending Balance	$	236	$	392		$	236		$	392

There were no loans in the process of foreclosure at September 30, 2019 and December 31, 2018.

The following schedule reflects the components of other real estate owned:

(in 000's)	September 30, 2019		December 31, 2018
Commercial real estate	$	161	$	168
Residential real estate		75		224
Total	$	236	$	392

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Lease Commitments

9 Months Ended

Sep. 30, 2019

Lease Commitments

Lease Commitments

8.   Lease Commitments

Due to the adoption of ASU 2016-02, Leases (Topic 842) , the Company completed a comprehensive review and analysis of all its property contracts. As a result of this review, it was determined that the Company leases two office locations and office equipment under operating leases. Several assumptions and judgments were made when applying the requirements of Topic 842 to the Company’s existing lease commitments, including the allocation of consideration in the contracts between lease and non-lease components, determination of the lease term, and determination of the discount rate used in calculating the present value of the lease payments.

The Company has elected to account for the variable non-lease components, such as common area maintenance charges, utilities, real estate taxes, and insurance, separately from the lease component. Such variable non-lease components are reported in net occupancy expense on the Consolidated Statements of Operations when paid. These variable non-lease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they are not included in the right-of-use assets and lease liabilities reported on the Consolidated Balance Sheets. The following table presents the lease cost associated with both operating and financing leases for the three-month period ending March 31, 2019 (in thousands). Total operating rent expense recorded during the three-month period ended September 30, 2019 and 2018 was $134,000 and $119,000, respectively. Total operating rent expense recorded during the nine-month period ended September 30, 2019 and 2018 was $385,000 and $354,000, respectively.

Certain of the Company’s leases contain options to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the positive performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease as of January 1, 2019. The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at September 30, 2019.

	Operating
Weighted-average remaining term (years)		4.62
Weighted-average discount rate		3.50	%

The following table presents the undiscounted cash flows due related to operating and financing leases as of September 30, 2019, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets.

	Operating
Undiscounted cash flows due:
Within 1 year	$	433
After 1 year but within 2 years		438
After 2 years but within 3 years		447
After 3 years but within 4 years		455
After 4 years but within 5 years		92
After 5 years		133
Total undiscounted cash flows		1,998
Discount on cash flows		(248	)
Total lease liabilities	$	1,750

Under Topic 842, the lessee can elect to not record on the Consolidated Balance Sheets a lease whose term is twelve months or less and does not include a purchase option that the lessee is reasonably certain to exercise. As of September 30, 2019, the Company had one lease for its Mount Airy branch that had a term of twelve months or less that did not include a purchase option.  This lease is excluded from total lease liabilities.

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Fair Value

9 Months Ended

Sep. 30, 2019

Fair Value

FAIR VALUE MEASUREMENTS

9.  Fair Value 

Fair Value Measurement

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of ASC 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance in FASB ASC 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried at fair value in three levels as follows:

Level 1

· Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2

· Quoted prices for similar assets or liabilities in active markets.

· Quoted prices for identical or similar assets or liabilities in markets that are not active.

· Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (e.g., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.”

Level 3

· Prices or valuation techniques that require inputs that are both unobservable (i.e., supported by little or no market activity) and that are significant to the fair value of the assets or liabilities.

· These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Fair Value on a Recurring Basis

Securities Available for Sale (“AFS”): Where quoted prices are available in an active market, securities would be classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow models. Level 2 securities include U.S. agency securities and mortgage backed agency securities.

Loans Held for Sale. Fair values are estimated by using actual indicative market bids on a loan by loan basis.

Loans Held at Fair Value. Fair values for loans for which the guaranteed portion is intended to be sold are estimated by using actual quoted market bids on a loan by loan basis. Fair values for the un-guaranteed portion of SBA loans are estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries.

Servicing Assets. Fair values for servicing assets related to SBA loans are estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries. 

Assets on the consolidated balance sheets measured at fair value on a recurring basis are summarized below.

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets Measured at Fair Value at September 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$	2,346	$	-	$	2,346	$	-
Government Sponsored Enterprises residential mortgage-backed securities		2,085		-		2,085		-
Total	$	4,431		-	$	4,431		-
Loans held for sale	$	8,426	$	-	$	8,426	$	-
Loans held at fair value	$	5,887	$	-	$	-	$	5,887
Servicing asset	$	254	$	-	$	-	$	254

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets Measured at Fair Value at December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$	2,277	$	-	$	2,277	$	-
Government Sponsored Enterprises residential mortgage-backed securities		2,304		-		2,304		-
Total	$	4,581	$	-	$	4,581	$	-
Loans held for sale	$	10,073	$	-	$	10,073	$	-
Loans held at fair value	$	5,420	$	-	$	-	$	5.420
Servicing asset	$	313	$	-	$	-	$	313

The fair value of the Bank’s AFS securities portfolio was approximately $4,431,000 and $4,581,000 at September 30, 2019 and December 31, 2018, respectively. All the residential mortgage-backed securities were issued or guaranteed by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corporation (“FHLMC”).  The underlying loans for these securities are residential mortgages that are geographically dispersed throughout the United States.  The valuation of AFS securities using Level 2 inputs was primarily determined using the market approach, which uses quoted prices for similar instruments and all relevant information.  There were no transfers between Level 1 and Level 2 assets during the periods ended September 30, 2019 and 2018.

When estimating the fair value of Level 3 financial instruments, management uses various observable and unobservable inputs.  These inputs include estimated cashflows, prepayment speeds, average projected default rate and discount rates as follows:

(in 000’s)

Assets measured at fair value	September 30, 2019 Fair value		December 31, 2018 Fair Value		Principal valuation techniques	Significant observable inputs	September 30, 2019 Range of inputs	December 31, 2018 Range of inputs
Loans held at fair value	$	5,887	$	5,420	Discounted cash flow	Constant prepayment rate	0% to 23.24%	0% to 16.5%
						Discount rate	7.95% to 10.37%	5.49% to 9.76%
						Weighted average life	1.69 yrs. to 4.42 yrs.	2.04 yrs. to 6.89 yrs.
						Projected default rate	2.22% to 11.59%	1.07% to 10.12%

 (in 000’s)

Assets measured at fair value	September 30, 2019 Fair value		December 31, 2018 Fair Value		Principal valuation techniques	Significant observable inputs	September 30, 2019 Range of inputs	December 31, 2018 Range of inputs
Servicing asset	$	254	$	313	Discounted cash flow	Constant prepayment rate	7.24% to 21.96%	4.94% to 15.92 %
						Discount rate	8.71% to 26.59%	11.38% to 19.61%
						Weighted average life	1.52 yrs. to 4.42 yrs.	2.04 yrs. to 6.77 yrs.

Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, fair value as determined by management may fluctuate from period to period.

The following table summarizes additional information about assets measured at fair value on a recurring basis for which level 3 inputs were utilized to determine fair value:

(in 000’s)	Loans held at fair value			Servicing Asset
Balance at December 31, 2018	$	5,420		$	313
Origination of loans/transfers		1,822			17
Principal repayments/amortization		(742	)		(24	)
Change in fair value of financial instruments		(613	)		(52	)
Balance at September 30, 2019	$	5,887		$	254

Fair Value on a Nonrecurring Basis

Certain assets are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  The following table presents the assets carried on the consolidated balance sheet by level within the hierarchy as of September 30, 2019 and December 31, 2018, for which a nonrecurring change in fair value has been recorded during the nine months ended September 30, 2019 and year ended December 31, 2018.

Carrying Value at September 30, 2019:

(in 000’s)	Total		Quoted Prices in Active markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Impaired loans	$	131	$	-	$	-	$	131
Other real estate owned (“OREO”)	$	236	$	-	$	-	$	236

Carrying Value at December 31, 2018:

(in 000’s)	Total		Quoted Prices in Active markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans	$	324	$	-	$	-	$	324
Other real estate owned (“OREO”)	$	392	$	-	$	-	$	392

The Company has measured impairment on impaired loans generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value of the collateral dependent loan is less than the carrying amount of the loan a specific reserve for the loan is made in the allowance for loan losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the table above as a Level 3 measurement. If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not included in the table above as it is not currently being carried at its fair value. At September 30, 2019 and December 31, 2018, the fair values shown above exclude estimated selling costs of $28,500 and $15,000, respectively.

OREO is carried at the lower of cost or fair value, which is measured at the foreclosure date. If the fair value of the collateral exceeds the carrying amount of the loan, no charge-off or adjustment is necessary, the loan is not considered to be carried at fair value, and is therefore not included in the table above. If the fair value of the collateral is less than the carrying amount of the loan, management will charge the loan down to its estimated realizable value. The fair value of OREO is based on the appraised value of the property, which is generally unadjusted by management and is based on comparable sales for similar properties in the same geographic region as the subject property, and is included in the above table as a Level 2 measurement. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. In these cases, the loans are categorized in the above table as Level 3 measurement since these adjustments are considered to be unobservable inputs. Income and expenses from operations and further declines in the fair value of the collateral subsequent to foreclosure are included in net expenses from OREO.

Fair Value of Financial Instruments

FASB ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.  

The fair value of assets and liabilities not previously disclosed are depicted below:

		September 30, 2019				December 31, 2018
(in 000’s)	Level in	Carrying		Fair		Carrying		Fair
	Value Hierarchy	Amount		Value		Amount		Value
(Dollars in thousands)
Assets:
Cash and cash equivalents	Level 1	$	12,488	$	12,488	$	8,438	$	8,438
Loans, net of allowance for loan losses	(1)		17,146		17,196		20,265		21,979
Accrued interest receivable	Level 1		167		167		153		153
Liabilities:
Demand deposits	Level 1		30,959		30,959		29,816		29,816
Savings deposits	Level 1		10,556		10,556		10,589		10,589
Time deposits	(2)		4,877		4,814		7,867		7,757
Accrued interest payable	Level 1		6		6		17		17

(1) Level 2 for non-impaired loans; Level 3 for impaired loans.

(2) Level 1 for variable rate instruments, level 3 for fixed rate instruments.

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Revenue Recognition

9 Months Ended

Sep. 30, 2019

Revenue Recognition

REVENUE RECOGNITION

10. Revenue Recognition

Management determined that the primary sources of revenue associated with financial instruments, including interest income on loans and investments, along with certain noninterest revenue sources including gains on the sale of loans, the change in fair value of financial instruments, are not within the scope of Topic 606.

The significant components of noninterest income within the scope of Topic 606 are as follows:

Customer Service Fees and ATM Fees — The Company has contracts with its deposit account customers where fees are charged for certain items or services. Service charges include account analysis fees, monthly service fees, overdraft fees, and other deposit account related fees. Additionally, the Company collects revenue when outside customers utilize the Bank’s ATM machines for transactions.  Revenue related to account analysis fees, ATM transactions and service fees is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. Fees attributable to specific performance obligations of the Company (i.e. overdraft fees, etc.) are recognized at a defined point in time based on completion of the requested service or transaction.

Loan Syndication Fees – The Company contracts with certain corporate entities as an arranging institution for loan syndications whereby a fee is earned by the Company for soliciting, assembling, and obtaining commitments from other lenders related to certain facilities of the corporate entity.  A portion of the fee is paid as an up-front payment for acting as the arranger, which is earned and recognized on the date the contract is signed without further commitment.  Another portion of the fee is earned, and generally paid, upon completion of the loan syndication arrangement which is the performance obligation for that portion of the fee.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine months ended September 30, 2019 and 2018.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
(Dollars in thousands)
Noninterest income:
In-scope of Topic 606
Customer Service Fees	$	104		$	107	$	290		$	310
ATM Fee Income		24			25		73			76
Loan Syndication Fees		65			100		65			100
Other income		48			36		2,638			84
Noninterest income (in-scope of Topic 606)		241			268		3,066			570
Noninterest income (out-of-scope of Topic 606)		(6	)		124		(652	)		358
Total noninterest income	$	235		$	392	$	2,414		$	928

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Regulatory

9 Months Ended

Sep. 30, 2019

Regulatory

Regulatory

11. Regulatory

On April 25, 2018, the Bank entered into stipulations consenting to the issuance of amended and restated Consent Orders with the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking (“Department”) which serve as a prescriptive Restoration Plan providing benchmarks for capital, earnings and asset quality. The material terms of the Consent Orders are identical. The requirements and status of items included in the Orders are as follows:

The Orders will remain in effect until modified or terminated by the FDIC and the Department and do not restrict the Bank from transacting its normal banking business. The Bank will continue to serve its customers in all areas including making loans, establishing lines of credit, accepting deposits and processing banking transactions. Customer deposits remain fully insured to the highest limits set by the FDIC. The FDIC and the Department did not impose or recommend any monetary penalties in connection with the Consent Orders. The Board of Directors is optimistic about the Bank’s ability to achieve the requirements as stated. These Orders represent a more tailored approach by regulators to strengthen and preserve minority-owned financial institutions like United Bank of Philadelphia. The priority for the Board of Directors and management is to comply with the Order promptly. The requirements of the Orders are as follows:

· Increase participation of the Bank’s board of directors in the Bank’s affairs by having the board assume full responsibility for approving the Bank’s policies and objectives and for supervising the Bank’s management;

· Have and retain qualified management, and notify the FDIC and the Department of any changes in the Bank’s board of directors or senior executive officers. Add two additional board members with banking experience.

· Complete audited financial statements for 2016, 2017, and 2018.

· Formulate and implement a Restoration/Strategic Plan to increase profitability reduce expenses and improve operating performance and related ratios.

· Develop and implement a Strategic Plan for each year during which the orders are in effect, to be revised Develop a written capital plan detailing the manner in which the Bank will meet and maintain a ratio of Tier 1 capital to total assets (“leverage ratio”) of at least 8.5% and a ratio of qualifying total capital to risk-weighted assets (total risk-based capital ratio) of at least 12.5%, by September 2019;

· Formulate a written plan to improve asset quality and reduce the Bank’s risk positions in assets classified as “Doubtful” or “Substandard” at its regulatory examination;

· Eliminate all assets classified as “Loss” at its current regulatory examination;

· Refrain from accepting any brokered deposits; Prepare and submit quarterly reports to the FDIC and the Department detailing the actions taken to secure compliance with the Orders.

· Refrain from paying cash dividends without prior approval of the FDIC and the Department;

As of September 30, 2019 and December 31, 2018, the Bank’s tier one leverage capital ratio was 5.37% and 3.00%, respectively, and its total risk-based capital ratio was 11.96%and 6.34%, respectively. These ratios are below the levels required by the Consent Orders. Management is in the process of addressing all matters outlined in the Consent Orders. The net loss during the quarter resulted in a decrease in the capital ratios. Management has developed and submitted a Capital Plan that focuses on the following:

· Core Profitability from Bank operations—Core profitability is essential to stop the erosion of capital.

· External equity investments—During 2017, the Company received external investments of $925,000 and from other financial institutions. In May 2021, the Company received a $600,000 capital investment from another financial institution.

· Performance grants---Management has developed a performance grant strategy to attract funding based on economic impact and job creation/retention. The goal is to obtain grant funding from local entities that are seeking a “return on impact”. In April 2019, the Bank received a $2.5 million economic stimulus grant from the City of Philadelphia.

· Other grants---In September 2020, the Bank received a grant totaling $3.4 million from the Pennsylvania CDFI Network to provide financial assistance related to potential losses related to the COVID-19 pandemic. Approximately $2.8 million of this grant was recorded as grant revenue and $617,000 was recorded as deferred revenue. The deferred revenue portion of the grant was allocated to be used to make principal and interest payments for up to six months for struggling small businesses in the Bank’s loan portfolio.

· Further, in August 2021, the Bank was awarded a grant totaling $1,286,000 from the US Treasury’s CDFI Rapid Response Program that was geared to strengthen the Bank as the economy recovers from the effects of the COVID-19 pandemic. This grant resulted in further improvement in the Bank’s capital ratios.

As a result of the above actions, management believes that the Bank has and will be able to comply with the terms and conditions of the Orders.  At June 30, 2022, the Bank’s Tier 1 leverage ratio was 9.50% and its total risk-based capital ratio was 21.92% which is considered “well capitalized” under the regulatory framework for prompt and corrective action.

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Going Concern

9 Months Ended

Sep. 30, 2019

Going Concern

Going Concern

12.  Going Concern

The Company’s consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in its consolidated financial statements, the Company reported a net loss of approximately $224,000 for the quarter ended September 30, 2019 and net loss of approximately $57,000 for the same quarter in 2018. Additionally, the Company reported net income of $1,136,000 for the nine months ended September 30, 2019 and a net loss of $407,000 for the nine months ended September 30, 2018.  Further, the Company has entered into Consent Orders with the FDIC and the Department which, among other provisions, require the Bank to increase its tier one leverage capital ratio to 8.50% and its total risk-based capital ratio to 12.50%.  As of September 30, 2019, the Bank’s tier one leverage capital ratio was 5.37% and its total risk-based capital ratio was 11.96%.  The Bank’s failure to comply with the terms of the Consent Orders could result in additional regulatory supervision and/or actions.  The ability of the Bank to continue as a going concern is dependent on many factors, including achieving required capital levels, earnings and fully complying with the Consent Orders.  The Consent Orders raise substantial doubt about the Company’s ability to continue as a going concern.

Management has developed a plan to alleviate the substantial doubt about the Company’s ability to continue as a going concern.  This plan is primarily based on the following:

· Increase earnings: Core profitability is essential to stop the erosion of capital. Noninterest income will continue to be an important element of the Bank’s earnings enhancement plan, specifically noninterest income from SBA loans will continue to be an important income strategy for the Bank. In addition, management will seek to reduce noninterest expense by reducing targeted areas of overhead including the closure of the Mount Airy branch in 2018 as well as the projected recovery of SBA loan fair value write-downs and other cost reduction strategies. During 2018 and in 2019, there were SBA fair value write-downs on defaulted loans that totaled approximately $1.2 million. Management has developed forbearance agreements and implemented other collection strategies including the sale of underlying collateral to mitigate the exposure on these loans that management believes will result in the recovery of some fair value write-downs.

· Strengthen Capital: A concentrated effort will continue to be made to stabilize and strengthen the Bank’s capital. Management has identified potential sources of external capital that have been received in 2020 and 2021. This capital will be used to further strengthen the Bank’s balance sheet. At June 30, 2022, the Bank’s Tier 1 leverage ratio was 9.50% and its total risk-based capital ratio was 21.92% which is considered “well capitalized”.

· Comply with the Consent Orders: Management has developed a Restoration Plan to address matters outlined in the Consent Orders including strengthening management, asset quality, profitability and capital. This plan received a “non-objection” from the Bank’s primary regulators. Management plans to implement the Restoration Plan in an attempt to comply with the terms and conditions of the Orders.

Based on management’s assessment of the Company’s ability to alleviate the substantial doubt about the its ability to continue as a going concern, these consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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Subsequent Events

9 Months Ended

Sep. 30, 2019

Subsequent Events

Subsequent Events

13.  Subsequent Events

Beginning in March 2020, the onset of the COVID-19 pandemic has had an adverse economic effect on a global, national, and local level. Following the outbreak, market interest rates have declined significantly, as the 10-year Treasury bond fell below 1.00% in early March 2020 that could lead to a reduction in the Bank’s net interest margin.  In addition, this event may adversely affect asset quality related to the Company’s small business loan customers that have been affected by a reduction in their business operations because of government-imposed restrictions.  As a result, the Company has deferred loan payments as necessary for those customers that have been impacted by the pandemic.  The pandemic has also affected the way that the Company is conducting business. Since notice of the pandemic, the Company has temporarily closed its Center City branch office and consolidated all customer service activity at its Progress Plaza branch.  In addition, the Company has maintained limited on-site presence of four employees or less in the Lending Department while all other employees work remotely in an effort to slow the spread of the pandemic. The full extent of the effect of the pandemic is not yet known.

In September 2020, the Bank received a grant totaling $3.4 million from the Pennsylvania CDFI Network to provide financial assistance related to potential losses related to the COVID-19 pandemic. Approximately $2.8 million of this grant was recorded as noninterest income and $617,000 was recorded as deferred revenue. The deferred revenue portion of the grant was allocated to be used to make principal and interest payments for up to six months for struggling small businesses in the Bank’s loan portfolio.

In May 2021, the Company received an external investment of $600,000 from another financial institution from the issuance of a combination of Common voting and Series C Preferred Stock. Further, in August 2021, the Bank was awarded a grant totaling $1,286,000 from the US Treasury’s CDFI Rapid Response Program that was geared to strengthen the Bank as the economy recovers from the effects of the COVID-19 pandemic.

At June 30, 2022, the Bank’s Tier 1 leverage ratio was 9.50% and its total risk-based capital ratio was 21.92% which is considered “well capitalized” under the regulatory framework for prompt and corrective action.

On October 31, 2022, the Board of Directors unanimously approved an Offer of Settlement with the Securities and Exchange Commission over the Company’s failure to comply with the Exchange Act Section 12(a) and Rules 13a-1 and 13a-13 thereunder because it has not filed periodic reports with the Commission since the period ended December 31, 2018.  The Offer of Settlement revokes the registration of each class of the Company’s securities registered pursuant to Section 12 of the Exchange Act as of the effective date of the Offer of Settlement until there are two consecutive timely filings. There is currently no financial impact related to the revocation; however, management is working to remedy the matter to avoid further action.

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Significant Accounting Policies

Management's Use of Estimates

The preparation of the financial statements has been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities, the determination of the allowance for loan losses, the fair value of loans held for sale and at fair value, valuation allowance for deferred tax assets, the carrying value of other real estate owned, the determination of other than temporary impairment for securities.

Commitments

In the general course of business, there are various outstanding commitments to extend credit, such as letters of credit and un-advanced loan commitments, which are not reflected in the accompanying financial statements. Management does not anticipate any material losses as a result of these commitments.

Contingencies

The Company is from time to time a party to routine litigation in the normal course of its business. Management does not believe that the resolution of any such litigation will have a material adverse effect on the financial condition or results of operations of the Company. However, the ultimate outcome of any such litigation, as with litigation generally, is inherently uncertain and it is possible that some litigation matters may be resolved adversely to the Company.

Loans Held for Sale

The Bank originates SBA loans for which the guaranteed portion is intended to be sold within a short period of time in the secondary market.  These loans are carried at fair value based on a loan-by-loan valuation using actual market bids.  Any change in the balance of the loan and its fair value is recorded as income or expense in each reporting period.  When the guaranteed portion of the loan is sold, the gain on the sale is reduced by the income previously recognized as part of the fair value adjustment.

Loans Held at Fair Value

The Bank originates SBA loans for which the un-guaranteed portion is retained after the guaranteed portion is sold in the secondary market.  Management has elected to carry these loans at fair value in accordance with the irrevocable option permitted under Accounting Standards Codification (“ASC”) 825-10-25 Financial Instruments.  Fair value of these loans is estimated based on the present value of future cash flows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries. When a SBA loan held at fair value becomes nonperforming, the fair value estimate is based on the net liquidation value of collateral or the present value of future cashflows.

Loans

The Bank has both the positive intent and ability to hold the majority of its loans to maturity.  These loans are stated at the amount of unpaid principal, reduced by net unearned discount and an allowance for loan losses.  Interest income on loans is recognized as earned based on contractual interest rates applied to daily principal amounts outstanding and accretion of discount.   

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses.  Loans that are determined to be uncollectible are charged against the allowance account, and subsequent recoveries, if any, are credited to the allowance.  When evaluating the adequacy of the allowance, an assessment of the loan portfolio will typically include changes in the composition and volume of the loan portfolio, overall portfolio quality and past loss experience, review of specific problem loans, current economic conditions which may affect borrowers’ ability to repay, and other factors which may warrant current recognition.  Such periodic assessments may, in management’s judgment, require the Bank to recognize additions or reductions to the allowance. 

Various regulatory agencies periodically review the adequacy of the Bank’s allowance for loan losses as an integral part of their examination process.  Such agencies may require the Bank to recognize additions or reductions to the allowance based on their evaluation of information available to them at the time of their examination.  It is reasonably possible that the above factors may change significantly and, therefore, affects management’s determination of the allowance for loan losses in the near term.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers non-impaired loans and is based on historical charge-off experience, other qualitative factors, and adjustments made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.  The Bank does not allocate reserves for unfunded commitments to fund lines of credit.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Bank will identify and assess loans that may be impaired through any of the following processes:

· During regularly scheduled meetings of the Asset Quality Committee

· During regular reviews of the delinquency report

· During the course of routine account servicing, annual review, or credit file update

· Upon receipt of verifiable evidence of a material reduction in the value of collateral to a level that creates a less than desirable Loan-to-Value ratio

Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller, homogeneous loans, including consumer installment and home equity loans, 1-4 family residential mortgages, and student loans are evaluated collectively for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures.

Non-accrual and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received within 30 days as of the date such payments were due.  The Bank generally places a loan on non-accrual status when interest or principal is past due 90 days or more.  If it otherwise appears doubtful that the loan will be repaid, management may place the loan on nonaccrual status before the lapse of 90 days. Interest on loans past due 90 days or more ceases to accrue except for loans that are well collateralized and in the process of collection.  When a loan is placed on nonaccrual status, previously accrued and unpaid interest is reversed out of income.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Income Taxes

Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities.  Deferred tax assets are subject to management’s judgment based upon available evidence that future realization is more likely than not.   For financial reporting purposes, a valuation allowance of 100% of the net deferred tax asset, other than the asset/liability related to the available for sale investment, has been recognized to offset the net deferred tax assets related to cumulative temporary differences and tax loss carryforwards.  If management determines that the Company may be able to realize all or part of the deferred tax asset in the future, an income tax benefit may be required to increase the recorded value of the net deferred tax asset to the expected realizable amount.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more-likely-than not recognition threshold is measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits, if any, would be recognized in income tax expense in the consolidated statements of operations.

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Net (Loss) Income Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Net (Loss) Income Per Share

Schedule of calculation of net (loss) income per share

	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018			Nine Months Ended September 30, 2019		Nine Months Ended September 30, 2018
Basic:
Net (loss) income available to common shareholders	$	(224,072	)	$	(56,879	)	$	1,135,869	$	(406,951	)
Average common shares outstanding-basic		826,921			826,921			826,921		826,921
Net (loss) income per share-basic	$	(0.27	)	$	(0.07	)	$	1.37	$	(0.49	)
Diluted:
Average common shares-diluted		826,921			826,921			826,921		826,921
Net (loss) income per share-diluted	$	(0.27	)	$	(0.07	)	$	1.37	$	(0.49	)

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Changes in Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2019

Changes in Accumulated Other Comprehensive Income (Loss)

Schedule of changes in accumulated other comprehensive income

	Three Months Ended September 30, 2019
	Before tax		Deferred			Net of tax
(in (000’s)	Amount		Taxes			Amount
Beginning balance	$	8	$	(2	)	$	6
Unrealized gain on securities:
Unrealized holding gain arising during period		18		(4	)		14
Other comprehensive income, net		18		(4	)		14
Ending balance	$	26	$	(6	)	$	20

	Three Months Ended September 30, 2018
	Before tax			Deferred		Net of tax
(in (000’s)	Amount			Taxes		Amount
Beginning balance	$	(161	)	$	34	$	(127	)
Unrealized loss on securities:
Unrealized holding loss arising during period		(32	)		6		(26	)
Other comprehensive loss, net		(32	)		6		(26	)
Ending balance	$	(193	)	$	40	$	(153	)

	Nine Months Ended September 30, 2019
	Before tax			Deferred			Net of tax
(in (000’s)	Amount			Taxes			Amount
Beginning balance	$	(117	)	$	25		$	(92	)
Unrealized gain on securities:
Unrealized holding gain arising during period		143			(31	)		112
Other comprehensive gain, net		143			(31	)		112
Ending balance	$	26		$	(6	)	$	20

	Nine Months Ended September 30, 2018
	Before tax			Deferred		Net of tax
(in (000’s)	Amount			Taxes		Amount
Beginning balance	$	(73	)	$	16	$	(57	)
Unrealized loss on securities:
Unrealized holding loss arising during period		(120	)		24		(96	)
Other comprehensive loss, net		(120			24		(96	)
Ending balance	$	(193	)	$	40	$	(153	)

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2019

Investment Securities

Schedule of summary of Company Investment Portfolio

(In 000’s)	September 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-sale:
U.S. Government agency securities	$	2,349	$	-	$	(3	)	$	2,346
Government Sponsored Enterprises residential mortgage-backed securities		2,057		31		(3	)		2,085
	$	4,406	$	31	$	(6	)	$	4,431

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-sale:
U.S. Government agency securities	$	2,349	$	-	$	(72	)	$	2,277
Government Sponsored Enterprises residential mortgage-backed securities		2,349		9		(54	)		2,304
	$	4,698	$	9	$	(126	)	$	4,581

Schedule of debt securities classified as available-for-sale by contractual

(In 000’s)	Amortized Cost		Fair Value
Due in one year	$	-	$	-
Due after one year through five years		-		-
Due after five years through ten years		2,349		2,346
Government Sponsored Enterprises residential mortgage-backed securities		2,057		2,085
	$	4,406	$	4,431

Schedule of length of time individual securities

(in 000’s)	Number		Less than 12 months					12 months or longer					Total
Description of	of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	Securities		Value		Losses			Value		losses			Value		Losses
U.S. Government agency securities		4	$	749	$	(1	)	$	747	$	(2	)	$	1,496	$	(3	)
Government Sponsored Enterprises residential mortgage-backed securities		3		491		(3	)		-		-			491		(3	)
Total temporarily impaired investment Securities		7	$	1,240	$	(4	)	$	747	$	(2	)	$	1,987	$	(6	)

(in 000’s)	Number		Less than 12 months					12 months or longer					Total
Description of	of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	securities		Value		Losses			Value		losses			Value		Losses
U.S. Government agency securities		7	$	-	$	-		$	2,277	$	(72	)	$	2,277	$	(72	)
Government Sponsored Enterprises residential mortgage-backed securities		14		718		(10	)		1,299		(44	)		2,017		(54	)
Total temporarily impaired investment Securities		21	$	718	$	(10	)	$	3,576	$	(116	)	$	4,294	$	(126	)

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Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2019

Loans and Allowance for Loan Losses

Schedule of Composition of Net Loans

(in 000’s)	September 30, 2019		December 31, 2018
Commercial and industrial	$	1,340	$	1,545
Commercial real estate		14,293		17,038
Consumer real estate		1,083		1,226
Consumer loans other		649		734
Total loans	$	17,365	$	20,543

Schedule of allowances for loan losses

(in 000's)	For the Three months ended September 30, 2019
	Commercial and industrial			Commercial real estate			Consumer real estate			Consumer loans Other			Unallocated			Total
Beginning balance	$	49		$	185		$	2		$	-		$	-		$	236
(Credit) provision for loan losses		(11	)		3			(1	)		-			(1	)		(10	)
Charge-offs		-			(20	)		-			(1	)		-			(21	)
Recoveries		-			12			-			1			1			14
Net charge-offs		-			(8	)		-			-			1			(7	)
Ending balance	$	38		$	180		$	1		$	-		$	-		$	219

(in 000's)	For the Three months ended September 30, 2018
	Commercial and industrial		Commercial real Estate			Consumer real estate		Consumer loans Other			Unallocated			Total
Beginning balance	$	3	$	150		$	4	$	8		$	15		$	180
Provision (credit) for loan losses		80		(37	)		-		(8	)		(15	)		20
Charge-offs		-		-			-		(1	)		-			(1	)
Recoveries		1		1			-		1			-			3
Net recoveries		1		1			-		-			-			2
Ending balance	$	84	$	114		$	4	$	-		$	-		$	202

(in 000's)	For the Nine months ended September 30, 2019
	Commercial and industrial			Commercial real estate			Consumer real estate			Consumer loans Other			Unallocated			Total
Beginning balance	$	102		$	139		$	4		$	-		$	33		$	278
Provision (credit) for loan losses		(48	)		62			(12	)		(1	)		(33	)		(32	)
Charge-offs		(19	)		(41	)		(12	)		(7	)		-			(79	)
Recoveries		3			20			21			8			-			52
Net (charge-offs) recoveries		(16	)		(21	)		9			1			-			(27	)
Ending balance	$	38		$	180		$	1		$	-		$	-		$	219

(in 000's)	For the Nine months ended September 30, 2018
	Commercial and industrial			Commercial real estate			Consumer real estate			Consumer loans Other			Unallocated		Total
Beginning balance	$	7		$	155		$	10		$	8		$	-	$	180
Provision (credit) for loan losses		84			(26	)		(6	)		(7	)				45
Charge-offs		(10	)		(18	)		-			(8	)		-		(36	)
Recoveries		3			3			-			7			-		13
Net charge-offs		(7	)		(15	)		-			(1	)		-		(23	)
Ending balance	$	84		$	114		$	4		$	-		$	-	$	202

(in 000's)	September 30, 2019
	Commercial and industrial		Commercial real Estate		Consumer real estate		Consumer loans Other		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$	-	$	81	$	-	$	-	$	-	$	81
Loans collectively evaluated for impairment		38		99		1		-		-		138
	$	38	$	180	$	1	$	-	$	-	$	219
Loans, ending balance:
Loans individually evaluated for impairment	$	76	$	1,249	$	-	$	-	$	-	$	1,325
Loans collectively evaluated for impairment		1,264		13,044		1,083		649		-		16,040
Total	$	1,340	$	14,293	$	1,083	$	649	$	-	$	17,365

(in 000's)	December 31, 2018
	Commercial and industrial		Commercial real Estate		Consumer real estate		Consumer loans Other		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$	95	$	44	$	-	$	-	$	-	$	139
Loans collectively evaluated for impairment		7		95		4		-		33		139
	$	102	$	139	$	4	$	-	$	33	$	278
Loans, ending balance:
Loans individually evaluated for impairment	$	289	$	1,148	$	-	$	-	$	-	$	1,437
Loans collectively evaluated for impairment		1,256		15,890		1,226		734		-		19,106
Total	$	1,545	$	17,038	$	1,226	$	734	$	-	$	20,543

Schdule of past due loans

			Accruing		Nonaccrual
	Loans		Loans 90 or		Loans 90 or
(In 000's)	30-89 Days		More Days		More Days		Total Past		Current
	Past Due		Past Due		Past Due		Due Loans		Loans		Total Loans
Commercial and industrial:
Commercial	$	-	$	-	$	-	$	-	$	1,039	$	1,039
SBA loans		-		-		-		-		-		-
Asset-based		-		-		76		76		225		301
Total Commercial and industrial		-		-		76		76		1,264		1,340
Commercial real estate:
Commercial mortgages		-		-		1,010		1,010		6,358		7,368
SBA loans		-		-		60		60		175		235
Construction		-		-		-		-		-		-
Religious organizations		369		-		179		548		6,142		6,690
Total Commercial real estate		369		-		1,249		1,618		12,675		14,293
Consumer real estate:
Home equity loans		-		148		240		388		151		539
Home equity lines of credit		-		-		-		-		13		13
1-4 family residential mortgages		-		-		-		-		531		531
Total consumer real estate		-		148		240		388		695		1,083
Total real estate		369		148		1,489		2,006		13,370		15,376
Consumer and other:
Student loans		6		5		-		11		553		564
Other		1		-		-		1		84		85
Total consumer and other		7		5		-		12		637		649
Total loans	$	376	$	153	$	1,565	$	2,094	$	15,271	$	17,365

			Accruing		Nonaccrual
	Loans		Loans 90 or		Loans 90 or
	30-89 Days		More Days		More Days		Total Past		Current
(In 000's)	Past Due		Past Due		Past Due		Due Loans		Loans		Total Loans
Commercial and industrial:
Commercial	$	-	$	-	$	-	$	-	$	1,055	$	1,055
SBA Loans		-		-		18		18		-		18
Asset-based		-		-		76		76		396		472
Total Commercial and industrial		-		-		94		94		1,451		1,545
Commercial real estate:
Commercial mortgages		-		45		902		947		8,585		9,532
SBA loans		-		-		69		69		179		248
Construction		-		-		-		-		-		-
Religious organizations		-		-		179		179		7,078		7,257
Total Commercial real estate		-		45		1,150		1,195		15,843		17,038
Consumer real estate:
Home equity loans		-		150		281		431		197		628
Home equity lines of credit		-		-		-		-		15		15
1-4 family residential mortgages		-		-		85		85		498		583
Total consumer real estate		-		150		366		516		710		1,226
Total real estate		-		195		1,516		1,711		16,553		18,264
Consumer and other:
Student loans		14		57		-		71		551		622
Other		1		-		-		1		111		112
Total consumer and other		15		57		-		72		662		734
Total loans	$	15	$	252	$	1,661	$	1,928	$	18,615	$	20,543

Schdule of Bank loan by class according to their credit quality indicators

(In 000's)	Commercial Loans September 30, 2019
	Good/ Excellent		Satisfactory		Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial:
Commercial	$	250	$	578	$	-	$	-	$	211	$	-	$	1,039
SBA loans		-		-		-		-		-		-		-
Asset-based		-		225		-		-		-		76		301
		250		803		-		-		211		76		1,340
Commercial real estate:
Commercial mortgages		-		4,864		1,705		-		613		186		7,368
SBA Loans		-		175		-		-		60		-		235
Construction		-		-		-		-		-		-		-
Religious organizations		8		4,469		2,034		-		179		-		6,690
		8		9,508		3,739		-		852		186		14,293
Total commercial loans	$	258	$	10,311	$	3,739	$	-	$	1,063	$	262	$	15,633

	Residential Mortgage and Consumer Loans September 30, 2019
	Performing		Nonperforming		Total
Consumer Real Estate:
Home equity	$	151	$	388	$	539
Home equity line of credit		13		-		13
1-4 family residential mortgages		291		-		531
		455		388		1,083
Consumer Other:
Student loans		559		5		564
Other		85		-		85
		644		5		649
Total  consumer loans	$	1,099	$	393	$	1,732

	Residential Mortgage and Consumer Loans December 31, 2018
	Performing		Nonperforming		Total
Consumer Real Estate:
Home equity	$	197	$	431	$	628
Home equity line of credit		15		-		15
1-4 family residential mortgages		498		85		583
		710		516		1,226
Consumer Other:
Student loans		565		57		622
Other		112		-		112
		677		57		734
Total  consumer loans	$	1,387	$	573	$	1,960

Schedule of Impaired Loan

(In 000's)	Unpaid Contractual		Recorded Investment		Recorded Investment		Total
	Principal		With No		With		Recorded		Related
	Balance		Allowance		Allowance		Investment		Allowance
Commercial and industrial:
Commercial	$	-	$	-	$	-	$	-	$	-
SBA loans		-		-		-		-		-
Asset-based		76		76		-		76		-
Total commercial and industrial		76		76		-		76		-
Commercial real estate:
Commercial mortgages		1,010		799		211		1,010		81
SBA Loans		60		60		-		60		-
Religious organizations		179		179		-		179		-
Total commercial real estate		1,249		1,038		211		1,249		81
Total loans	$	1,325	$	1,114	$	211	$	1,325	$	81

(In 000's)	Unpaid Contractual		Recorded  Investment		Recorded  Investment		Total
	Principal		With No		With		Recorded		Related
	Balance		Allowance		Allowance		Investment		Allowance
Commercial and industrial:
Commercial	$	213	$	-	$	213	$	213	$	81
SBA		-		-		-		-		-
Asset based		76		-		76		76		14
Total Commercial and industrial		289		-		289		289		95
Commercial real estate:
Commercial mortgages		898		739		159		898		13
SBA  Loans		71		71		-		71		-
Religious Organizations		179		-		179		179		31
Total Commercial real estate		1,148		810		338		1,148		44
Total loans	$	1,437	$	810	$	627	$	1,437	$	139

(In 000's)	Three Months Ended  September 30, 2019				Three Months Ended  September 30, 2018
	Average		Interest recognized		Average		Interest recognized
	Recorded		on impaired		Recorded		on impaired
	Investment		Loans		Investment		Loans
Commercial and industrial:
Commercial	$	-	$	-	$	25	$	-
SBA  loans		-		-		-		-
Asset-based		76		-		76		-
Total commercial and industrial		76		-		101		-
Commercial real estate:
Commercial mortgages		1,104		5		936		1
SBA loans		62		-		73		-
Religious organizations		179		-		180		-
Total commercial real estate		1,345		5		1,189		-
Total loans	$	1,421	$	5	$	1,290	$	1

(In 000's)	Nine Months Ended  September 30, 2019				Nine Months Ended  September 30, 2018
	Average		Interest recognized		Average		Interest recognized
	Recorded		on impaired		Recorded		on impaired
	Investment		Loans		Investment		Loans
Commercial and industrial:
Commercial	$	183	$	-	$	8	$	2
SBA  loans		-		-		-		-
Asset-based		76		-		76		-
Total commercial and industrial		259		-		84		2
Commercial real estate:
Commercial mortgages		847		-		946		1
SBA loans		65		-		76		-
Religious organizations		179		-		182		-
Total commercial real estate		1,091		-		1,204		-
Total loans	$	1,350	$	-	$	1,288	$	3

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Other Real Estate Owned (Tables)

9 Months Ended

Sep. 30, 2019

Other Real Estate Owned

Summary Of the Change in Other Real Estate Owned

(in 000's)	Three  Months Ended		Three  Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2019		September 30, 2018			September 30, 2019			September 30, 2018
Beginning balance	$	236	$	402		$	392		$	626
Additions, transfers from loans		-		-			-			-
Sales		-		(10	)		(156	)		(229	)
		236		392			236			397
Write-ups (downs)		-		-			-			(5	)
Ending Balance	$	236	$	392		$	236		$	392

Schedule Of Components Of Other Real Estate

(in 000's)	September 30, 2019		December 31, 2018
Commercial real estate	$	161	$	168
Residential real estate		75		224
Total	$	236	$	392

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Lease Commitments (Tables)

9 Months Ended

Sep. 30, 2019

Lease Commitments

Scheduled Of weighted-average remaining lease term and discount rate

	Operating
Weighted-average remaining term (years)		4.62
Weighted-average discount rate		3.50	%

Scheduled Of undiscounted cash flows due related to operating and financing leases

	Operating
Undiscounted cash flows due:
Within 1 year	$	433
After 1 year but within 2 years		438
After 2 years but within 3 years		447
After 3 years but within 4 years		455
After 4 years but within 5 years		92
After 5 years		133
Total undiscounted cash flows		1,998
Discount on cash flows		(248	)
Total lease liabilities	$	1,750

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value

Schdule of asset measured at fair value on recurring basis

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets Measured at Fair Value at September 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$	2,346	$	-	$	2,346	$	-
Government Sponsored Enterprises residential mortgage-backed securities		2,085		-		2,085		-
Total	$	4,431		-	$	4,431		-
Loans held for sale	$	8,426	$	-	$	8,426	$	-
Loans held at fair value	$	5,887	$	-	$	-	$	5,887
Servicing asset	$	254	$	-	$	-	$	254

(in 000’s)	Fair Value Measurements at Reporting Date Using:
	Assets Measured at Fair Value at December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$	2,277	$	-	$	2,277	$	-
Government Sponsored Enterprises residential mortgage-backed securities		2,304		-		2,304		-
Total	$	4,581	$	-	$	4,581	$	-
Loans held for sale	$	10,073	$	-	$	10,073	$	-
Loans held at fair value	$	5,420	$	-	$	-	$	5.420
Servicing asset	$	313	$	-	$	-	$	313

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

Assets measured at fair value	September 30, 2019 Fair value		December 31, 2018 Fair Value		Principal valuation techniques	Significant observable inputs	September 30, 2019 Range of inputs	December 31, 2018 Range of inputs
Loans held at fair value	$	5,887	$	5,420	Discounted cash flow	Constant prepayment rate	0% to 23.24%	0% to 16.5%
						Discount rate	7.95% to 10.37%	5.49% to 9.76%
						Weighted average life	1.69 yrs. to 4.42 yrs.	2.04 yrs. to 6.89 yrs.
						Projected default rate	2.22% to 11.59%	1.07% to 10.12%

Assets measured at fair value	September 30, 2019 Fair value		December 31, 2018 Fair Value		Principal valuation techniques	Significant observable inputs	September 30, 2019 Range of inputs	December 31, 2018 Range of inputs
Servicing asset	$	254	$	313	Discounted cash flow	Constant prepayment rate	7.24% to 21.96%	4.94% to 15.92 %
						Discount rate	8.71% to 26.59%	11.38% to 19.61%
						Weighted average life	1.52 yrs. to 4.42 yrs.	2.04 yrs. to 6.77 yrs.

(in 000’s)	Loans held at fair value			Servicing Asset
Balance at December 31, 2018	$	5,420		$	313
Origination of loans/transfers		1,822			17
Principal repayments/amortization		(742	)		(24	)
Change in fair value of financial instruments		(613	)		(52	)
Balance at September 30, 2019	$	5,887		$	254

Schedule of Assets and Liabilities Measured on a Nonrecurring Basis

(in 000’s)	Total		Quoted Prices in Active markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Impaired loans	$	131	$	-	$	-	$	131
Other real estate owned (“OREO”)	$	236	$	-	$	-	$	236

Carrying Value at December 31, 2018:

(in 000’s)	Total		Quoted Prices in Active markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans	$	324	$	-	$	-	$	324
Other real estate owned (“OREO”)	$	392	$	-	$	-	$	392

Schedule of Fair Value of Financial Instruments not Previously Disclosed

		September 30, 2019				December 31, 2018
(in 000’s)	Level in	Carrying		Fair		Carrying		Fair
	Value Hierarchy	Amount		Value		Amount		Value
(Dollars in thousands)
Assets:
Cash and cash equivalents	Level 1	$	12,488	$	12,488	$	8,438	$	8,438
Loans, net of allowance for loan losses	(1)		17,146		17,196		20,265		21,979
Accrued interest receivable	Level 1		167		167		153		153
Liabilities:
Demand deposits	Level 1		30,959		30,959		29,816		29,816
Savings deposits	Level 1		10,556		10,556		10,589		10,589
Time deposits	(2)		4,877		4,814		7,867		7,757
Accrued interest payable	Level 1		6		6		17		17

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Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2019

Revenue Recognition

Disaggregation of Revenue

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
(Dollars in thousands)
Noninterest income:
In-scope of Topic 606
Customer Service Fees	$	104		$	107	$	290		$	310
ATM Fee Income		24			25		73			76
Loan Syndication Fees		65			100		65			100
Other income		48			36		2,638			84
Noninterest income (in-scope of Topic 606)		241			268		3,066			570
Noninterest income (out-of-scope of Topic 606)		(6	)		124		(652	)		358
Total noninterest income	$	235		$	392	$	2,414		$	928

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Net (Loss) Income Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic:
Net (loss) income available to common shareholders	$ (224,072)	$ (56,879)	$ 1,135,869	$ (406,951)
Average common shares outstanding-basic	826,921	826,921	826,921	826,921
Net (loss) income per share-basic	$ (0.27)	$ (0.07)	$ 1.37	$ (0.49)
Diluted:
Average common shares-diluted	826,921	826,921	826,921	826,921
Net (loss) income per share-diluted	$ (0.27)	$ (0.07)	$ 1.37	$ (0.49)

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Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2017
Changes in Accumulated Other Comprehensive Income (Loss) (Details)
Other Comprehensive Income, Before Tax Amount	$ 8	$ (161)	$ (117)	$ (73)
Other Comprehensive Income, Taxes	(2)	34	25	16
Other Comprehensive Income, Begining Net of Tax Amount	6	(127)	(92)	(57)
Unrealized holding gain arising during period Before tax Amount	18	(32)	143	(120)
Unrealized holding gain arising during period, taxes	(4)	6	(31)	24
Unrealized holding gain arising during period, net of tax amount	14	(26)	112	(96)
Other comprehensive loss, net, before tax amount	18	(32)	143	(120)
Other comprehensive income loss, net, tax (expense) benefit	(4)	6	(31)	24
Other comprehensive income loss, net, net after tax amount	14	(26)	112	(96)
Other Comprehensive Income, Before Tax Amount Ending Before tax amount	26	(193)	26	(193)
Other Comprehensive Income, Ending Taxes	(6)	40	(6)	40
Other Comprehensive Income, Ending Net of Tax Amount	$ 20	$ (153)	$ 20	$ (153)

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New Authoritative Accounting Guidance (Details Narrative)	Sep. 30, 2019 USD ($)
Operating Lease Right Of UseAsset	$ 1,824,729
Operating Lease Liability	1,931,239
Retained Earnings Accumulated Deficit	$ 49,460

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Investment Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
U.S. Government agency securities [Member]
Available-for-sale securities, Gross unrealized gains	$ 0	$ 0
Available-for-sale securities, Gross unrealized losses	3	72
Available-for-sale securities, Amortized cost	2,349	2,349
Available-for-sale securities, Fair Value	2,346	2,277
Government Sponsored Enterprises residential mortgage-backed securities [Member]
Available-for-sale securities, Gross unrealized gains	(31)	(9)
Available-for-sale securities, Gross unrealized losses	3	54
Available-for-sale securities, Amortized cost	2,057	2,349
Available-for-sale securities, Fair Value	2,085	2,304
Other Debt Obligations [Member]
Available-for-sale securities, Gross unrealized gains	(31)	(9)
Available-for-sale securities, Gross unrealized losses	6	126
Available-for-sale securities, Amortized cost	4,406	4,698
Available-for-sale securities, Fair Value	$ 4,431	$ 4,581

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Investment Securities (Details 1) $ in Thousands	Dec. 31, 2018 USD ($)
Amortized Cost [Member]
Due after one year through five years	$ 0
Due after five years through ten years	2,349
Due in one year or less	0
Government-sponsored enterprises residential mortgage-backed securities	2,057
Total	4,406
Fair Value, Recurring [Member]
Due after five years through ten years	2,346
Due after one year through five years	0
Due in one year or less	0
Government-sponsored enterprises residential mortgage-backed securities	2,085
Total	$ 4,431

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Investment Securities (Details 2) - USD ($) shares in Thousands	Sep. 30, 2019	Dec. 31, 2018
Available-for-sale securities, fair value	$ 4,431,700	$ 4,580,610
U.S. Government agency securities [Member]
Available-for-sale securities, greater than 12 months, fair value	747,000	2,277,000
Available-for-sale securities, greater than 12 months, gross unrealized losses	2,000	72,000
Available-for-sale securities, less than 12 months, fair value	749,000	0
Available-for-sale securities, less than 12 months, gross unrealized losses	1,000	0
Available-for-sale securities, fair value	1,496,000	2,277,000
Available-for-sale securities, gross unrealized losses	$ 3,000	$ 72,000
Number of Securities	4	7
Other Debt Obligations [Member]
Available-for-sale securities, greater than 12 months, fair value	$ 747,000	$ 3,576,000
Available-for-sale securities, greater than 12 months, gross unrealized losses	2,000	116,000
Available-for-sale securities, less than 12 months, fair value	1,240,000	718,000
Available-for-sale securities, less than 12 months, gross unrealized losses	4,000	10,000
Available-for-sale securities, fair value	1,987,000	4,294,000
Available-for-sale securities, gross unrealized losses	$ 6,000	$ 126,000
Number of Securities	7	21
Mortgages-backed Securities [Member]
Available-for-sale securities, greater than 12 months, fair value	$ 0	$ 1,299,000
Available-for-sale securities, greater than 12 months, gross unrealized losses	0	44,000
Available-for-sale securities, less than 12 months, fair value	491,000	718,000
Available-for-sale securities, less than 12 months, gross unrealized losses	3,000	10,000
Available-for-sale securities, fair value	491,000	2,017,000
Available-for-sale securities, gross unrealized losses	$ 3,000	$ 54,000
Number of Securities	3	14

XML

Investment Securities (Details Narrative) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Investment securities with a carrying value	$ 774,000	$ 3,668,000

XML

Loans and Allowance for Loan Losses (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Commercial And Industrials [Member]
Loans, net	$ 1,340	$ 1,545
Commercial Real Estate [Member]
Loans, net	14,293	17,038
Consumer Real Estate [Member]
Loans, net	1,083	1,226
Consumer And Other [Member]
Loans, net	649	734
Fair Value, Recurring [Member]
Loans, net	$ 17,365	$ 20,543

XML

Loans and Allowance for Loan Losses (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Allowance for loan lossses, Beginning balance	$ 236	$ 180	$ 278	$ 180
Provision (credit) for loan losses	(10)	20	(32)	45
Charge-offs	(21)	(1)	(79)	(36)
Recoveries	14	3	52	13
Net (charge-offs) recoveries	(7)	2	(27)	(23)
Allowance for loan lossses, Ending balance	219	202	219	202
Consumer Real Estate [Member]
Allowance for loan lossses, Beginning balance	2	4	4	10
Provision (credit) for loan losses	(1)	0	(12)	(6)
Charge-offs	0	0	(12)	0
Recoveries	0	0	21	0
Net (charge-offs) recoveries	0	0	9	0
Allowance for loan lossses, Ending balance	1	4	1	4
Consumer loans other [Member]
Allowance for loan lossses, Beginning balance	0	8	0	8
Provision (credit) for loan losses	0	(8)	(1)	(7)
Charge-offs	(1)	(1)	(7)	(8)
Recoveries	1	1	8	7
Net (charge-offs) recoveries	0	0	1	(1)
Allowance for loan lossses, Ending balance	0	0	0	0
Commercial And Industrial [Member]
Allowance for loan lossses, Beginning balance	49	3	102	7
Provision (credit) for loan losses	(11)	80	(48)	84
Charge-offs	0	0	(19)	(10)
Recoveries	0	1	3	3
Net (charge-offs) recoveries	0	1	(16)	(7)
Allowance for loan lossses, Ending balance	38	84	38	84
Commercial Real Estates [Member]
Allowance for loan lossses, Beginning balance	185	150	139	155
Provision (credit) for loan losses	3	(37)	62	(26)
Charge-offs	(20)	0	(41)	(18)
Recoveries	12	1	20	3
Net (charge-offs) recoveries	(8)	1	(21)	(15)
Allowance for loan lossses, Ending balance	180	114	180	114
Unallocated [Member]
Allowance for loan lossses, Beginning balance	0	15	33	0
Provision (credit) for loan losses	(1)	(15)	(33)
Charge-offs	0	0	0	0
Recoveries	1	0	0	0
Net (charge-offs) recoveries	1	0	0	0
Allowance for loan lossses, Ending balance	$ 0	$ 0	$ 0	$ 0

XML

Loans and Allowance for Loan Losses (Details 2) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Loans individually evaluated for impairment	$ 81,000	$ 139,000
Loans collectively evaluated for impairment	138,000	139,000
Total Loans	219,000	278,000
Loans individually evaluated for impairment ending	1,325,000	1,437,000
Loans collectively evaluated for impairment ending	16,040,000	19,106,000
Total Loans ending balance	17,365,000	20,543,000
Loans individually evaluated for impairment	218,910	278,095
Commercial real estate loan [Member]
Total Loans	180,000	139,000
Loans individually evaluated for impairment ending	1,249,000	1,148,000
Loans collectively evaluated for impairment ending	13,044,000	15,890,000
Total Loans ending balance	14,293,000	17,038,000
Loans individually evaluated for impairment	81,000	44,000
Loans collectively evaluated for impairment	99,000	95,000
Unallocated Loans [Member]
Loans collectively evaluated for impairment	0	33,000
Total Loans	0	33,000
Loans individually evaluated for impairment ending	0	0
Loans collectively evaluated for impairment ending	0	0
Total Loans ending balance	0	0
Loans individually evaluated for impairment	0	0
Consumer Real Estate Loan [Member]
Loans collectively evaluated for impairment	1,000	4,000
Total Loans	1,000	4,000
Loans individually evaluated for impairment ending	0	0
Loans collectively evaluated for impairment ending	1,083,000	1,226,000
Total Loans ending balance	1,083,000	1,226,000
Loans individually evaluated for impairment	0	0
Consumer loans other loan [Member]
Loans collectively evaluated for impairment	0	0
Total Loans	0	0
Loans individually evaluated for impairment ending	0	0
Loans collectively evaluated for impairment ending	649,000	734,000
Total Loans ending balance	649,000	734,000
Loans individually evaluated for impairment	0	0
Commercial and industrial loans [Member]
Loans individually evaluated for impairment	0	95,000
Loans collectively evaluated for impairment	38,000	7,000
Total Loans	38,000	102,000
Loans individually evaluated for impairment ending	76,000	289,000
Loans collectively evaluated for impairment ending	1,264,000	1,256,000
Total Loans ending balance	$ 1,340,000	$ 1,545,000

XML

Loans and Allowance for Loan Losses (Details 3) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Loans, net	$ 17,365	$ 20,543
Accruing Loans 90 or More Days Past Due [Member]
Loans, net	153,000	252,000
Nonaccrual [Member]
Loans, net	1,565,000	1,661,000
Total Past Due Loans [Member]
Loans, net	2,094,000	1,928,000
Current Loans [Member]
Loans, net	15,271,000	18,615,000
Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	376,000	15,000
Commercial Real Estate [Member]
Loans, net	14,293,000	17,038,000
Commercial Real Estate [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	45,000
Commercial Real Estate [Member] | Nonaccrual [Member]
Loans, net	1,249,000	1,150,000
Commercial Real Estate [Member] | Total Past Due Loans [Member]
Loans, net	1,618,000	1,195,000
Commercial Real Estate [Member] | Current Loans [Member]
Loans, net	12,675,000	15,843,000
Commercial Real Estate [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	369,000	0
Consumer Real Estate [Member]
Loans, net	1,083,000	1,226,000
Consumer Real Estate [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	148,000	150,000
Consumer Real Estate [Member] | Nonaccrual [Member]
Loans, net	240,000	366,000
Consumer Real Estate [Member] | Total Past Due Loans [Member]
Loans, net	388,000	516,000
Consumer Real Estate [Member] | Current Loans [Member]
Loans, net	695,000	710,000
Consumer Real Estate [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
Consumer Real Estate [Member] | Home Equity Loans [Member]
Loans, net	539,000	628,000
Consumer Real Estate [Member] | Home Equity Loans [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	148,000	150,000
Consumer Real Estate [Member] | Home Equity Loans [Member] | Nonaccrual [Member]
Loans, net	240,000	281,000
Consumer Real Estate [Member] | Home Equity Loans [Member] | Total Past Due Loans [Member]
Loans, net	388,000	431,000
Consumer Real Estate [Member] | Home Equity Loans [Member] | Current Loans [Member]
Loans, net	151,000	197,000
Consumer Real Estate [Member] | Home Equity Loans [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
Consumer Real Estate [Member] | Home Equity Lines of Credit [Member]
Loans, net	13,000	15,000
Consumer Real Estate [Member] | Home Equity Lines of Credit [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
Consumer Real Estate [Member] | Home Equity Lines of Credit [Member] | Nonaccrual [Member]
Loans, net	0	0
Consumer Real Estate [Member] | Home Equity Lines of Credit [Member] | Total Past Due Loans [Member]
Loans, net	0	0
Consumer Real Estate [Member] | Home Equity Lines of Credit [Member] | Current Loans [Member]
Loans, net	13,000	15,000
Consumer Real Estate [Member] | Home Equity Lines of Credit [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
Consumer Real Estate [Member] | 1-4 Family Residential Mortgages [Member]
Loans, net	531,000	583,000
Consumer Real Estate [Member] | 1-4 Family Residential Mortgages [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
Consumer Real Estate [Member] | 1-4 Family Residential Mortgages [Member] | Nonaccrual [Member]
Loans, net	0	85,000
Consumer Real Estate [Member] | 1-4 Family Residential Mortgages [Member] | Total Past Due Loans [Member]
Loans, net	0	85,000
Consumer Real Estate [Member] | 1-4 Family Residential Mortgages [Member] | Current Loans [Member]
Loans, net	531,000	498,000
Consumer Real Estate [Member] | 1-4 Family Residential Mortgages [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
Consumer And Other [Member]
Loans, net	649,000	734,000
Consumer And Other [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	5,000	57,000
Consumer And Other [Member] | Nonaccrual [Member]
Loans, net	0	0
Consumer And Other [Member] | Total Past Due Loans [Member]
Loans, net	12,000	72,000
Consumer And Other [Member] | Current Loans [Member]
Loans, net	637,000	662,000
Consumer And Other [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	7,000	15,000
Consumer And Other [Member] | Student Loans [Member]
Loans, net	564,000	622,000
Consumer And Other [Member] | Student Loans [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	5,000	57,000
Consumer And Other [Member] | Student Loans [Member] | Nonaccrual [Member]
Loans, net	0	0
Consumer And Other [Member] | Student Loans [Member] | Total Past Due Loans [Member]
Loans, net	11,000	71,000
Consumer And Other [Member] | Student Loans [Member] | Current Loans [Member]
Loans, net	553,000	551,000
Consumer And Other [Member] | Student Loans [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	6,000	14,000
Consumer And Other [Member] | Other [Member]
Loans, net	85,000	112,000
Consumer And Other [Member] | Other [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
Consumer And Other [Member] | Other [Member] | Nonaccrual [Member]
Loans, net	0	0
Consumer And Other [Member] | Other [Member] | Total Past Due Loans [Member]
Loans, net	1,000	1,000
Consumer And Other [Member] | Other [Member] | Current Loans [Member]
Loans, net	84,000	111,000
Consumer And Other [Member] | Other [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	1,000	1,000
Total Real Estate [Member]
Loans, net	17,365,000	20,543,000
Total Real Estate Accruing Loans 90 or More Days [Member]
Loans, net	148,000	195,000
Total Real Estate Non Accrual Loans 90 or More Days [Member]
Loans, net	1,489,000	1,516,000
Total Real Estate Past Due Laons [Member]
Loans, net	2,006,000	1,711,000
Total Real Estate Current Loans [Member]
Loans, net	13,370,000	16,553,000
Total Real Estate Loans [Member]
Loans, net	15,376,000	18,264,000
Commercial And Industrials [Member]
Loans, net	1,340,000	1,545,000
Commercial And Industrials [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
Commercial And Industrials [Member] | Nonaccrual [Member]
Loans, net	76,000	94,000
Commercial And Industrials [Member] | Total Past Due Loans [Member]
Loans, net	76,000	94,000
Commercial And Industrials [Member] | Current Loans [Member]
Loans, net	1,264,000	1,451,000
Commercial And Industrials [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
Asset-Based [Member] | Commercial And Industrials [Member]
Loans, net	301,000	472,000
Asset-Based [Member] | Commercial And Industrials [Member] | Totals [Member]
Loans, net	301,000	472,000
Asset-Based [Member] | Commercial And Industrials [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
Asset-Based [Member] | Commercial And Industrials [Member] | Nonaccrual [Member]
Loans, net	76,000	76,000
Asset-Based [Member] | Commercial And Industrials [Member] | Total Past Due Loans [Member]
Loans, net	76,000	76,000
Asset-Based [Member] | Commercial And Industrials [Member] | Current Loans [Member]
Loans, net	225,000	396,000
Asset-Based [Member] | Commercial And Industrials [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
Commercial Mortgages [Member] | Commercial Real Estate [Member]
Loans, net	7,368,000	9,532,000
Commercial Mortgages [Member] | Commercial Real Estate [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	45,000
Commercial Mortgages [Member] | Commercial Real Estate [Member] | Nonaccrual [Member]
Loans, net	1,010,000	902,000
Commercial Mortgages [Member] | Commercial Real Estate [Member] | Total Past Due Loans [Member]
Loans, net	1,010,000	947,000
Commercial Mortgages [Member] | Commercial Real Estate [Member] | Current Loans [Member]
Loans, net	6,358,000	8,585,000
Commercial Mortgages [Member] | Commercial Real Estate [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
SBA Loans [Member] | Commercial Real Estate [Member]
Loans, net	235,000	248,000
SBA Loans [Member] | Commercial Real Estate [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
SBA Loans [Member] | Commercial Real Estate [Member] | Nonaccrual [Member]
Loans, net	60,000	69,000
SBA Loans [Member] | Commercial Real Estate [Member] | Total Past Due Loans [Member]
Loans, net	60,000	69,000
SBA Loans [Member] | Commercial Real Estate [Member] | Current Loans [Member]
Loans, net	175,000	179,000
SBA Loans [Member] | Commercial Real Estate [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
SBA Loans [Member] | Commercial And Industrials [Member]
Loans, net	0	18,000
SBA Loans [Member] | Commercial And Industrials [Member] | Loans 30-89 Days Past Due [Member]
Loans, net	0	0
SBA Loans [Member] | Commercial And Industrials [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
SBA Loans [Member] | Commercial And Industrials [Member] | Nonaccrual [Member]
Loans, net	0	18,000
SBA Loans [Member] | Commercial And Industrials [Member] | Total Past Due Loans [Member]
Loans, net	0	18,000
SBA Loans [Member] | Commercial And Industrials [Member] | Current Loans [Member]
Loans, net	0	0
Construction Portfolio [Member] | Commercial Real Estate [Member]
Loans, net	0	0
Construction Portfolio [Member] | Commercial Real Estate [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
Construction Portfolio [Member] | Commercial Real Estate [Member] | Nonaccrual [Member]
Loans, net	0	0
Construction Portfolio [Member] | Commercial Real Estate [Member] | Total Past Due Loans [Member]
Loans, net	0	0
Construction Portfolio [Member] | Commercial Real Estate [Member] | Current Loans [Member]
Loans, net	0	0
Construction Portfolio [Member] | Commercial Real Estate [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
Religious Organizations [Member] | Commercial Real Estate [Member]
Loans, net	6,690,000	7,257,000
Religious Organizations [Member] | Commercial Real Estate [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
Religious Organizations [Member] | Commercial Real Estate [Member] | Nonaccrual [Member]
Loans, net	179,000	179,000
Religious Organizations [Member] | Commercial Real Estate [Member] | Total Past Due Loans [Member]
Loans, net	548,000	179,000
Religious Organizations [Member] | Commercial Real Estate [Member] | Current Loans [Member]
Loans, net	6,142,000	7,078,000
Religious Organizations [Member] | Commercial Real Estate [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	369,000	0
Commercial [Member] | Commercial And Industrials [Member]
Loans, net	1,039,000	1,055,000
Commercial [Member] | Commercial And Industrials [Member] | Accruing Loans 90 or More Days Past Due [Member]
Loans, net	0	0
Commercial [Member] | Commercial And Industrials [Member] | Nonaccrual [Member]
Loans, net	0	0
Commercial [Member] | Commercial And Industrials [Member] | Total Past Due Loans [Member]
Loans, net	0	0
Commercial [Member] | Commercial And Industrials [Member] | Current Loans [Member]
Loans, net	1,039,000	1,055,000
Commercial [Member] | Commercial And Industrials [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Loans, net	0	0
Total Loan 30-89 Days[Member]
Loans, net	$ 369,000	$ 0

XML

Loans and Allowance for Loan Losses (Details 4) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Total of Commercial and industrial	$ 1,340	$ 1,545
Commercial Real Estate [Member]
Total	14,293	17,038
Construction [Member]
Total	0	0
SBA Loans [Member]
Total	0	18
Asset-Based [Member]
Total	301	472
Commercial Real Estate Commercial Mortgage [Member]
Total	7,368	9,532
SBA Loans 1 [Member]
Total	235	248
Religious Organizations [Member]
Total	6,690	7,258
Commercial [Member]
Total	1,039	1,055
Total[Member]
Total commercial loans	15,633	18,583
Good / Excellentl [Member]
Total commercial loans	258	274
Good / Excellentl [Member] | Commercial Real Estate Construction [Member]
Loans receivable	0	0
Good / Excellentl [Member] | Commercial And Industrial Of Commercial [Member]
Total	250	250
Loans receivable	250	250
Good / Excellentl [Member] | Commercial And Industrial Of SBA Loans [Member]
Loans receivable	0	0
Good / Excellentl [Member] | Commercial Real Estate Commercial Mortgage [Member]
Loans receivable	0	0
Good / Excellentl [Member] | Commercial Real Estate SBA Loans [Member]
Loans receivable	0	0
Total	8	24
Good / Excellentl [Member] | Commercial Real Estate Religious Organizations [Member]
Loans receivable	8	24
Good / Excellentl [Member] | Commercial And Industrial Of Asset Based [Member]
Loans receivable	0	0
Satisfactory [Member]
Total commercial loans	10,311	11,898
Satisfactory [Member] | Construction [Member]
Total	0	0
Satisfactory [Member] | Commercial And Industrial Of Commercial [Member]
Total	803	864
Loans receivable	578	592
Satisfactory [Member] | Commercial And Industrial Of SBA Loans [Member]
Loans receivable	0	0
Satisfactory [Member] | Commercial Real Estate Commercial Mortgage [Member]
Loans receivable	4,864	5,814
Satisfactory [Member] | Commercial Real Estate SBA Loans [Member]
Loans receivable	175	179
Satisfactory [Member] | Commercial Real Estate Religious Organizations [Member]
Loans receivable	4,469	5,041
Total	9,508	11,034
Satisfactory [Member] | Commercial And Industrial Of Asset Based [Member]
Loans receivable	225	272
Pass [Member]
Total commercial loans	3,739	4,896
Pass [Member] | Commercial Real Estate Construction [Member]
Loans receivable	0	0
Pass [Member] | Commercial And Industrial Of Commercial [Member]
Loans receivable	0	0
Pass [Member] | Commercial And Industrial Of SBA Loans [Member]
Loans receivable	0	0
Total	0	124
Pass [Member] | Commercial Real Estate Commercial Mortgage [Member]
Loans receivable	1,705	2,759
Pass [Member] | Commercial Real Estate SBA Loans [Member]
Loans receivable	0	0
Pass [Member] | Commercial Real Estate Religious Organizations [Member]
Loans receivable	2,034	2,013
Total	3,739	4,772
Pass [Member] | Commercial And Industrial Of Asset Based [Member]
Loans receivable	0	124
Special Mention [Member]
Loans receivable	0	52
Special Mention [Member] | Commercial Real Estate Construction [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial And Industrial Of SBA Loans Member [Member]
Loans receivable	0	0
Total	0	0
Special Mention [Member] | Commercial Real Estate Commercial Mortgage [Member]
Loans receivable	0	52
Special Mention [Member] | Commercial Real Estate SBA Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Real Estate Religious Organizations [Member]
Total	0	52
Loans receivable	0	0
Special Mention [Member] | Commercial And Industrial Of Commerciall [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial And Industrial Of Asset Based [Member]
Loans receivable	0	0
Substandard [Member]
Total commercial loans	1,063	1,183
Substandard [Member] | Commercial Real Estate Construction [Member]
Loans receivable	0	0
Total	852	952
Substandard [Member] | Commercial And Industrial Of Commercial [Member]
Loans receivable	211	213
Substandard [Member] | Commercial And Industrial Of SBA Loans Member [Member]
Loans receivable	0	0
Total	211	231
Substandard [Member] | Commercial Real Estate Commercial Mortgage [Member]
Loans receivable	613	703
Substandard [Member] | Commercial Real Estate Religious Organizations [Member]
Loans receivable	179	180
Substandard [Member] | Commercial And Industrial Of Asset Based [Member]
Loans receivable	0	18
Substandard [Member] | Commercial Real EState SBA Loans [Member]
Loans receivable	60	69
Doubtful [Member]
Total commercial loans	262	280
Doubtful [Member] | Commercial Real Estate Construction [Member]
Loans receivable	0	0
Total	186	204
Doubtful [Member] | Commercial And Industrial Of Commercial [Member]
Loans receivable	0	0
Total	76	76
Doubtful [Member] | Commercial And Industrial Of SBA Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Real Estate Commercial Mortgage [Member]
Loans receivable	186	204
Doubtful [Member] | Commercial Real Estate SBA Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Real Estate Religious Organizations [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial And Industrial Of Asset Based [Member]
Loans receivable	$ 76	$ 76

XML

Loans and Allowance for Loan Losses (Details 5) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Consumer Other [Member]
Acquired with deteriorated credit quality	$ 649	$ 734
Total Consumer Loans [Member]
Acquired with deteriorated credit quality	1,732	1,960
Performing [Member]
Acquired with deteriorated credit quality	1,099	1,387
Performing [Member] | Consumer Other [Member]
Acquired with deteriorated credit quality	644	677
Nonperforming Financial Instruments [Member]
Acquired with deteriorated credit quality	393	573
Nonperforming Financial Instruments [Member] | Consumer Other [Member]
Acquired with deteriorated credit quality	5	57
Student Loans [Member] | NonPerforming Financial Instruments [Member] | Conusmer Other [Member]
Acquired with deteriorated credit quality	5	57
Other [Member] | Consumer Other [Member]
Acquired with deteriorated credit quality	85	112
Other [Member] | Performing [Member] | Consumer Other [Member]
Acquired with deteriorated credit quality	85	112
Other [Member] | Nonperforming Financial Instruments [Member] | Consumer Other [Member]
Acquired with deteriorated credit quality	0	0
Student Loan [Member] | Performing [Member] | Consumer Other [Member]
Acquired with deteriorated credit quality	559	565
Consumer Real Estate [Member] | Home Equity Loans [Member]
Acquired with deteriorated credit quality	539	628
Consumer Real Estate [Member] | Home Equity Lines of Credit [Member]
Acquired with deteriorated credit quality	13	15
Consumer Real Estate [Member] | 1-4 Family Residential Mortgages [Member]
Acquired with deteriorated credit quality	531	583
Consumer And Other [Member] | Student Loans [Member]
Acquired with deteriorated credit quality	564	622
Consumer Real Estate [Member]
Acquired with deteriorated credit quality	1,083	1,226
Consumer Real Estate [Member] | Performing [Member]
Acquired with deteriorated credit quality	455	710
Consumer Real Estate [Member] | Performing [Member] | Home Equity [Member]
Acquired with deteriorated credit quality	151	197
Consumer Real Estate [Member] | Nonperforming Financial Instruments [Member]
Acquired with deteriorated credit quality	388	516
Consumer Real Estate [Member] | Nonperforming Financial Instruments [Member] | Home Equity [Member]
Acquired with deteriorated credit quality	388	431
Home equity line of credit [Member] | Performing Financial Instruments [Member] | Consumer Real Estates [Member]
Acquired with deteriorated credit quality	13	15
Home equity line of credit [Member] | Nonperforming Financial Instruments [Member]
Acquired with deteriorated credit quality	0	0
Residential 1 - 4 Family Residential Mortgage [Member] | Performing Financial Instruments [Member]
Acquired with deteriorated credit quality	291	498
Residential 1 - 4 Family residential mortgages [Member] | Nonperforming Financial Instruments [Member] | Concumer Real Estate [Member]
Acquired with deteriorated credit quality	$ 0	$ 85

XML

Loans and Allowance for Loan Losses (Details 6) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Total Recorded Investment [Member]
Loans, Impaired			$ 1,325,000		$ 1,437,000
Total Recorded Investment [Member] | Commercial Real Estate [Member]
Loans, Impaired			1,249,000		1,148,000
Total Recorded Investment [Member] | Commercial And Industrials [Member]
Loans, Impaired			76,000		289,000
Related Allowance [Member]
Loans, Impaired			81,000		139,000
Related Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			81,000		44,000
Related Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		95,000
Recorded Investment With No Allowance [Member]
Loans, Impaired			1,114,000		810,000
Recorded Investment With No Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			1,038,000		810,000
Recorded Investment With No Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			76,000		0
Interest recognized on impaired loans [Member] | Commercial Real Estate [Member]
Loans, Impaired	$ 0	$ 0	0	$ 0
Interest recognized on impaired loans [Member] | Commercial And Industrials [Member]
Loans, Impaired			0	2,000
Recorded Investment With Allowance [Member]
Loans, Impaired			211,000		627,000
Recorded Investment With Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			211,000		338,000
Recorded Investment With Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		289,000
Unpaid Contractual Principal Balance [Member]
Loans, Impaired			1,325,000		1,437,000
Unpaid Contractual Principal Balance [Member] | Commercial Real Estate [Member]
Loans, Impaired			1,249,000		1,148,000
Unpaid Contractual Principal Balance [Member] | Commercial And Industrials [Member]
Loans, Impaired			76,000		289,000
Asset-Based [Member] | Total Recorded Investment [Member] | Commercial And Industrials [Member]
Loans, Impaired			76,000		76,000
Asset-Based [Member] | Related Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		14,000
Asset-Based [Member] | Recorded Investment With No Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			76,000		0
Asset-Based [Member] | Interest recognized on impaired loans [Member] | Commercial And Industrials [Member]
Loans, Impaired			0
Asset-Based [Member] | Recorded Investment With Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		76,000
Asset-Based [Member] | Unpaid Contractual Principal Balance [Member] | Commercial And Industrials [Member]
Loans, Impaired			76,000		76,000
SBA Loans [Member] | Total Recorded Investment [Member] | Commercial Real Estate [Member]
Loans, Impaired			60,000		71,000
SBA Loans [Member] | Total Recorded Investment [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		0
SBA Loans [Member] | Related Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			0		0
SBA Loans [Member] | Related Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		0
SBA Loans [Member] | Recorded Investment With No Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			60,000		71,000
SBA Loans [Member] | Recorded Investment With No Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		0
SBA Loans [Member] | Interest recognized on impaired loans [Member] | Commercial Real Estate [Member]
Loans, Impaired			0		10,000
SBA Loans [Member] | Interest recognized on impaired loans [Member] | Commercial And Industrials [Member]
Loans, Impaired			0
SBA Loans [Member] | Recorded Investment With Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			0		0
SBA Loans [Member] | Recorded Investment With Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		0
SBA Loans [Member] | Unpaid Contractual Principal Balance [Member] | Commercial Real Estate [Member]
Loans, Impaired			60,000		71,000
SBA Loans [Member] | Unpaid Contractual Principal Balance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		0
Religious Organizations [Member] | Total Recorded Investment [Member] | Commercial Real Estate [Member]
Loans, Impaired			179,000		179,000
Religious Organizations [Member] | Related Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			0		31,000
Religious Organizations [Member] | Recorded Investment With No Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			179,000		0
Religious Organizations [Member] | Interest recognized on impaired loans [Member] | Commercial Real Estate [Member]
Loans, Impaired	0	0	0	0
Religious Organizations [Member] | Recorded Investment With Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			0		179,000
Religious Organizations [Member] | Unpaid Contractual Principal Balance [Member] | Commercial Real Estate [Member]
Loans, Impaired			179,000		179,000
Commercial [Member] | Total Recorded Investment [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		213,000
Commercial [Member] | Related Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		81,000
Commercial [Member] | Recorded Investment With No Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		0
Commercial [Member] | Interest recognized on impaired loans [Member] | Commercial And Industrials [Member]
Loans, Impaired	0	0	0	2,000
Commercial [Member] | Recorded Investment With Allowance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		213,000
Commercial [Member] | Unpaid Contractual Principal Balance [Member] | Commercial And Industrials [Member]
Loans, Impaired			0		213,000
Commercial Mortgages [Member] | Total Recorded Investment [Member] | Commercial Real Estate [Member]
Loans, Impaired			1,010,000		898,000
Commercial Mortgages [Member] | Related Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			81,000		13,000
Commercial Mortgages [Member] | Recorded Investment With No Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			799,000		739,000
Commercial Mortgages [Member] | Interest recognized on impaired loans [Member] | Commercial Real Estate [Member]
Loans, Impaired	$ 5,000	$ 1,000	0	$ 1,000
Commercial Mortgages [Member] | Recorded Investment With Allowance [Member] | Commercial Real Estate [Member]
Loans, Impaired			211,000		159,000
Commercial Mortgages [Member] | Unpaid Contractual Principal Balance [Member] | Commercial Real Estate [Member]
Loans, Impaired			$ 1,010,000		$ 898,000

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Loans and Allowance for Loan Losses (Details 7) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Interest recognized on impaired loans [Member] | Commercial And Industrials [Member]
Loans, Impaired			$ 0	$ 2,000
Average Recorded Investment [Member]
Loans, Impaired	$ 1,421,000	$ 1,290,000	1,350,000	1,288,000
Average Recorded Investment [Member] | Commercial And Industrials [Member]
Loans, Impaired	76,000	101,000	259,000	84,000
Commercial [Member] | Interest recognized on impaired loans [Member] | Commercial And Industrials [Member]
Loans, Impaired	0	0	0	2,000
Commercial [Member] | Average Recorded Investment [Member] | Commercial And Industrials [Member]
Loans, Impaired	0	25,000	183,000	8,000
Asset-Based [Member] | Interest recognized on impaired loans [Member] | Commercial And Industrials [Member]
Loans, Impaired			0
Asset-Based [Member] | Average Recorded Investment [Member] | Commercial And Industrials [Member]
Loans, Impaired	76,000	76,000	76,000	76,000
SBA Loans [Member] | Interest recognized on impaired loans [Member] | Commercial And Industrials [Member]
Loans, Impaired			0
SBA Loans [Member] | Average Recorded Investment [Member] | Commercial And Industrials [Member]
Loans, Impaired	5,000	5,000	0	3,000
Commercial Real Estate [Member] | Interest recognized on impaired loans [Member]
Loans, Impaired	0	0	0	0
Commercial Real Estate [Member] | Average Recorded Investment [Member]
Loans, Impaired	1,345,000	1,189,000	1,091,000	1,204,000
Commercial Real Estate [Member] | Commercial Mortgages [Member] | Interest recognized on impaired loans [Member]
Loans, Impaired	5,000	1,000	0	1,000
Commercial Real Estate [Member] | Commercial Mortgages [Member] | Average Recorded Investment [Member]
Loans, Impaired	1,104,000	936,000	847,000	946,000
Commercial Real Estate [Member] | Religious Organizations [Member] | Interest recognized on impaired loans [Member]
Loans, Impaired	0	0	0	0
Commercial Real Estate [Member] | Religious Organizations [Member] | Average Recorded Investment [Member]
Loans, Impaired	179,000	180,000	179,000	182,000
Commercial Real Estate [Member] | SBA Loans [Member] | Interest recognized on impaired loans [Member]
Loans, Impaired			0		$ 10,000
Commercial Real Estate [Member] | SBA Loans [Member] | Average Recorded Investment [Member]
Loans, Impaired	$ 62,000	$ 73,000	$ 65,000	$ 76,000

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Other Real Estate Owned (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Other Real Estate Owned (Details)
Beginning Balance	$ 236	$ 402	$ 392	$ 626
Additions, transfers from loans	0	0	0	0
Sales	0	(10)	(156)	(229)
Other real estate subtotal	236	392	236	397
Write-downs	0	0	0	(5)
Real Estates	$ 236	$ 392	$ 236	$ 392

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Other Real Estate Owned (Details 1) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Total	$ 236	$ 236	$ 392	$ 402	$ 626
Commercial Real Estate [Member]
Total	161		168
Residential Real Estate [Member]
Total	$ 75		$ 224

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Lease Commitments (Details)	9 Months Ended
	Sep. 30, 2019
Lease Commitments (Details)
Weighted average remaining term years	4 years 7 months 13 days
Weighted average discount rate	3.50%

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Lease Commitments (Details 1) $ in Thousands	Sep. 30, 2019 USD ($)
Lease Commitments (Details)
Within 1 year	$ 433
After 1 year but within 2 years	438
After 2 years but within 3 years	447
After 3 years but within 4 years	455
After 4 years but within 5 years	92
After 5 years	133
Total undiscounted cash flows	1,998
Discount on cash flows	(248)
Total lease liabilities	$ 1,750

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Lease Commitments (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Lease Commitments (Details)
Operating rent expenses	$ 134,000	$ 119,000	$ 385,000	$ 354,000

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Fair Value (Details ) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Loans held at fair value	$ 5,886,789	$ 5,420,004
Government Sponsored Enterprises residential mortgage-backed securities [Member]
Securities, available-for-sale	2,085,000	2,304,000
Fair Value, Inputs, Level 1 [Member]
Loans held at fair value	17,196,000	21,979,000
Fair Value, Recurring [Member]
Securities, available-for-sale	4,431,000	4,581,000
Loans held for sale	8,426,000	10,073,000
Loans held at fair value	5,887,000	5,420,000
Servicing asset	254,000	313,000
Fair Value, Recurring [Member] | U.S. Government agency securities [Member]
Securities, available-for-sale	2,346,000	2,277,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Loans held for sale	0	0
Loans held at fair value	0	0
Servicing asset	0	0
Total	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | U.S. Government agency securities [Member]
Securities, available-for-sale	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Government Sponsored Enterprises residential mortgage-backed securities [Member]
Securities, available-for-sale	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities, available-for-sale	4,431,000	4,581,000
Loans held for sale	8,426,000	10,073,000
Loans held at fair value	0	0
Servicing asset	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | U.S. Government agency securities [Member]
Securities, available-for-sale	2,346,000	2,277,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Government Sponsored Enterprises residential mortgage-backed securities [Member]
Securities, available-for-sale	2,085,000	2,304,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities, available-for-sale	0	0
Loans held for sale	0	0
Loans held at fair value	5,887,000	5,420
Servicing asset	254,000	313,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | U.S. Government agency securities [Member]
Securities, available-for-sale	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Government Sponsored Enterprises residential mortgage-backed securities [Member]
Securities, available-for-sale	$ 0	$ 0

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Fair Value (Details 1) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Loans Held At Fair Value [Member]
Balance at end of year	$ 5,887	$ 5,420
Loans Held At Fair Value [Member] | Maxiimum [Member]
Constant repayment rate	23.24%	16.50%
Discount rate	10.37%	9.76%
Weighted average life	4 years 5 months 1 day	6 years 10 months 20 days
Project default rate	11.59%	10.12%
Minimum [Member] | Loans Held At Fair Value [Member]
Constant repayment rate	0.00%	0.00%
Discount rate	7.95%	5.49%
Weighted average life	1 year 8 months 8 days	2 years 14 days
Project default rate	2.22%	1.07%
Fair Value, Inputs, Level 3 [Member] | Servicing Assets [Member]
Balance at end of year	$ 254	$ 313
Fair Value, Inputs, Level 3 [Member] | Servicing Assets [Member]
Balance at end of year	$ 254	$ 313
Fair Value, Inputs, Level 3 [Member] | Minimum [Member] | Servicing Assets [Member]
Constant repayment rate	7.24%	4.94%
Discount rate	8.71%	11.38%
Weighted average life	1 year 6 months 7 days	2 years 14 days
Fair Value, Inputs, Level 3 [Member] | Maximum [Member] | Servicing Assets [Member]
Constant repayment rate	21.96%	15.92%
Discount rate	26.59%	19.61%
Weighted average life	4 years 5 months 1 day	6 years 9 months 7 days

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Fair Value (Details 2) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Loans Held At Fair Value [Member]
Balance at beginning of year	$ 5,420
Origination of loans	1,822
Principal repayments	(742)
Change in fair value	(613)
Balance at end of year	5,887
Fair Value, Inputs, Level 3 [Member] | Servicing Assets [Member]
Balance at beginning of year	313
Origination of loans	17
Principal repayments	(24)
Change in fair value	(52)
Balance at end of year	$ 254

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Fair Value (Details 3) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Other real estate owned	$ 236	$ 236	$ 392	$ 402	$ 626
Fair Value, Recurring [Member]
Impairment loans	131		324
Other real estate owned	236		392
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Impairment loans	0		0
Other real estate owned	0		0
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Impairment loans	0		0
Other real estate owned	0		0
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Impairment loans	131		324
Other real estate owned	$ 236		$ 392

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Fair Value (Details 4) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Loans, net of allowance for loan losses, fair value	$ 5,886,789	$ 5,420,004
Accrued interest Payable, Carrying value	167,303	152,953
Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents, Carrying value	12,488,000	8,438,000
Cash and cash equivalents, fair value	12,488,000	8,438,000
Loans, net of allowance for loan losses, Carrying value	17,146,000	20,265,000
Loans, net of allowance for loan losses, fair value	17,196,000	21,979,000
Fair Value, Inputs, Level 2 [Member]
Accrued interest receivable, Carrying value	167,000	153,000
Accrued interest receivable, fair value	167,000	153,000
Demand deposits, Carrying value	30,959,000	29,816,000
Demand deposits, fair value	30,959,000	29,816,000
Savings deposits, Carrying value	10,556,000	10,589,000
Savings deposits, fair value	10,556,000	10,589,000
Time deposits, Carrying value	4,877,000	7,867,000
Time deposits, fair value	4,814,000	7,757,000
Accrued interest Payable, Carrying value	6,000	17,000
Accrued interest Payable, fair value	$ 6,000	$ 17,000

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Fair Value (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair Value
Fair value vailable for sale	$ 4,431,000	$ 4,581,000
Estimated selling cost	$ 28,500	$ 15,000

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Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Noninterest income (in-scope of Topic 606)	$ 241	$ 268	$ 3,066	$ 570
Noninterest income (out-of-scope of Topic 606)	(6)	124	(652)	358
Total non-interest income	235	392	2,414	928
Other Income [Member]
Revenues	480	360	26,380	840
Customer Service Fees [Member]
Revenues	1,040	1,070	2,900	3,100
ATM Fee Income [Member]
Revenues	24	25	73	76
Loan Syndication Fees [Member]
Revenues	$ 650	$ 1,000	$ 650	$ 1,000

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Regulatory (Details Narrative)	1 Months Ended		9 Months Ended
	Aug. 31, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2022	May 31, 2021 USD ($)	Dec. 31, 2018
Leverage capital ratio			5.37	9.50		3.00
Risk-weighted assets description			Tier 1 capital to total assets (“leverage ratio”) of at least 8.5% and a ratio of qualifying total capital to risk-weighted assets (total risk-based capital ratio) of at least 12.5%, by September 2019
Capital investment					$ 600,000
External investments			$ 925,000
Risk-based capital ratio			11.96	21.92		6.34
Other grants [Member]
Grant	$ 1,286,000	$ 3,400,000
Grant revenue		2,800,000
Deferred revenue		617,000
City of Philadelphia [Member]
Bank received		$ 2,500,000

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Going Concern (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2022
Going Concern (Details Narrative)
Leverage capital ratio	5.37%		9.50%
net loss of approximately	$ 224,000	$ 57,000
Net Loss	$ 1,136,000	$ (407,000)
Description of consent orders		Further, the Company has entered into Consent Orders with the FDIC and the Department which, among other provisions, require the Bank to increase its tier one leverage capital ratio to 8.50% and its total risk-based capital ratio to 12.50%
Risk based capital ratio	11.96%		21.92%
Write down of loans held at fair value	$ 1,200,000	$ 1,200,000.0

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Subsequent Events (Details Narrative) - USD ($)	1 Months Ended
	May 31, 2021	Sep. 30, 2020	Mar. 31, 2020	Jun. 30, 2022	Aug. 31, 2021	Sep. 30, 2019
Leverage capital ratio				9.50%		5.37%
Risk based capital ratio				21.92%		11.96%
Subsequent Event [Member]
Leverage capital ratio				9.50%
Total grants awarded					$ 1,286,000
External investment received	$ 600,000
Covid 19 pandemic effect description			Beginning in March 2020, the onset of the COVID-19 pandemic has had an adverse economic effect on a global, national, and local level. Following the outbreak, market interest rates have declined significantly, as the 10-year Treasury bond fell below 1.00% in early March 2020 that could lead to a reduction in the Bank’s net interest margin
Grant received		$ 3,400,000
Noninterest grant income		2,800,000
Deferred Revenue		$ 617,000
Risk based capital ratio				21.92%