NOTE C - LOANS

The composition of the loan portfolio at June 30 was as follows:

(in thousands)	2017			2016

Residential real estate
One- to four-family	$	197,936		$	186,125
Multi-family		15,678			15,559
Construction		2,398			2,809
Land		1,304			1,186
Farm		2,062			1,735
Nonresidential real estate		29,211			27,138
Commercial and industrial		2,540			1,847
Consumer and other
Loans on deposits		1,607			1,813
Home equity		6,853			6,155
Automobile		42			69
Unsecured		400			552
		260,031			244,988

Undisbursed portion of loans in process		(296	)		(5,118	)
Deferred loan origination costs, net		42			113
Allowance for loan losses		(1,533	)		(1,515	)
	$	258,244		$	238,468

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio class and based on impairment method as of June 30, 2017 and 2016. There were $1.7 million and $2.3 million in loans acquired with deteriorated credit quality at June 30, 2017 and 2016, respectively.

June 30, 2017:

(in thousands)	Loans individually evaluated		Loans acquired with deteriorated credit quality*		Ending loans balance		Ending allowance attributed to loans		Unallocated allowance		Total allowance
Loans individually evaluated for impairment:
Residential real estate:
One- to four-family	$	3,706	$	1,676	$	5,382	$	--	$	--	$	--
Nonresidential real estate		131		--		131		--		--		--
		3,837		1,676		5,513		--		--		--

Loans collectively evaluated for impairment:
Residential real estate:
One- to four-family					$	192,554	$	773	$	--	$	773
Multi-family						15,678		243		--		243
Construction						2,398		6		--		6
Land						1,304		4		--		4
Farm						2,062		9		--		9
Nonresidential real estate						29,080		270		--		270
Commercial and industrial						2,540		6		--		6
Consumer and other
Loans on deposits						1,607		4		--		4
Home equity						6,853		17		--		17
Automobile						42		--		--		--
Unsecured						400		1		--		1
Unallocated						--		--		200		200
						254,518		1,333		200		1,533
					$	260,031	$	1,333	$	200	$	1,533

* These loans were evaluated at acquisition date at their estimated fair value and there has been no subsequent deterioration since acquisition.

June 30, 2016:

(in thousands)	Loans individually evaluated		Loans acquired with deteriorated credit quality*		Ending loans balance		Ending allowance attributed to loans		Unallocated allowance		Total allowance
Loans individually evaluated for impairment:
Residential real estate:
One- to four-family	$	3,400	$	2,146	$	5,546	$	--	$	--	$	--
Nonresidential real estate		--		164		164		--		--		--
		3,400		2,310		5,710		--		--		--

Loans collectively evaluated for impairment:
Residential real estate:
One- to four-family					$	180,579	$	862	$	--	$	862
Multi-family						15,559		192		--		192
Construction						2,809		5		--		5
Land						1,186		2		--		2
Farm						1,735		3		--		3
Nonresidential real estate						26,974		217		--		217
Commercial and industrial						1,847		18		--		18
Consumer and other
Loans on deposits						1,813		4		--		4
Home equity						6,155		11		--		11
Automobile						69		--		--		--
Unsecured						552		1		--		1
Unallocated						--		--		200		200
						239,278		1,315		200		1,515
					$	244,988	$	1,315	$	200	$	1,515

* These loans were evaluated at acquisition date at their estimated fair value and there has been no subsequent deterioration since acquisition.

The following tables present impaired loans by class of loans as of and for the years ended June 30, 2017 and 2016:

June 30, 2017:

(in thousands)	Unpaid Principal Balance and Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized

With no related allowance recorded:
Residential real estate:
One- to four-family	$	5,382	$	--	$	5,653	$	71	$	71
Nonresidential real estate		131		--		131		--		--
Total	$	5,513	$	--	$	5,784	$	71	$	71

June 30, 2016:

(in thousands)	Unpaid Principal Balance and Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized

With no related allowance recorded:
Residential real estate:
One- to four-family	$	5,546	$	--	$	5,135	$	70	$	70
Land		--		--		330		27		27
Nonresidential real estate		164		--		401		--		--
Consumer and other
Unsecured		--		--		7		--		--
Total	$	5,710	$	--	$	5,873	$	97	$	97

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual status by class of loans as of June 30, 2017 and 2016. The tables include loans acquired with deteriorated credit quality. At June 30, 2017, the table below includes approximately $566,000 of loans on nonaccrual and $486,000 of loans past due over 90 days and still accruing of loans acquired with deteriorated credit quality, while at June 30, 2016, approximately $1.1 million of loans on nonaccrual and $712,000 of loans past due over 90 days and still accruing represent such loans.

	June 30, 2017				June 30, 2016
(in thousands)	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Nonaccrual		Loans Past Due Over 90 Days Still Accruing

One- to four-family residential real estate	$	4,870	$	1,770	$	4,785	$	2,166
Nonresidential real estate		151		--		173		--
Consumer		8		11		11		--
	$	5,029	$	1,781	$	4,969	$	2,166

Troubled Debt Restructurings:

During the year ended June 30, 2017, the terms of a single one- to four family residential real estate loan totaling $99,000 was modified as a troubled debt restructuring (“TDR.”) The loan was modified to extend the loan term, because the borrower was exhibiting financial difficulty in making the original debt payments. Because the restructured loan bears interest at the same rate offered to other such borrowers and the repayment period was extended slightly, the borrower is expected to be able to service the debt as restructured.

During the year ended June 30, 2016, the terms of two one- to four family residential real estate loans totaling $282,000 was modified as TDRs. The loans were modified because the borrowers each were exhibiting financial difficulty in making the original debt payments.

In order to determine whether a borrower is experiencing financial difficulty, we consider the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

The following table presents loans classified as TDRs as of June 30, 2017 and 2016, and their performance, by modification type:

(Dollars in thousands)	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms

June 30, 2017:
Residential Real Estate:
1-4 Family		31	$	1,970	$	1,533	$	657	$	876

June 30, 2016
Residential Real Estate:
1-4 Family		35	$	2,136	$	1,835	$	1,318	$	517

The Company had no allocated specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2017 or 2016. At June 30, 2017 and 2016, TDR loans on nonaccrual status totaled $1.2 million and $1.5 million, respectively. The Company had no commitments to lend additional amounts as of June 30, 2017 and 2016, to customers with outstanding loans that are classified as troubled debt restructurings. The Company had no TDR loans default during fiscal 2017 or 2016.

The following tables present the aging of the principal balance outstanding in past due loans as of June 30, 2017 and 2016, by class of loans. The tables include loans acquired with deteriorated credit quality. At June 30, 2017, the table below includes $25,000 of loans 30-89 days past due and approximately $1.0 million of loans past due over 90 days that were acquired with deteriorated credit quality, while at June 30, 2016, the table below includes no loans 30-89 days past due and approximately $514,000 of loans past due over 90 days of such loans.

June 30, 2017:

(in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total

Residential real estate:
One-to four-family	$	5,193	$	4,496	$	9,689	$	188,247	$	197,936
Multi-family		--		--		--		15,678		15,678
Construction		--		--		--		2,398		2,398
Land		--		--		--		1,304		1,304
Farm		539		--		539		1,523		2,062
Nonresidential real estate		635		133		768		28,443		29,211
Commercial and industrial		--		--		--		2,540		2,540
Consumer and other:
Loans on deposits		--		--		--		1,607		1,607
Home equity		17		11		28		6,825		6,853
Automobile		--		--		--		42		42
Unsecured		13		--		13		387		400
Total	$	6,397	$	4,640	$	11,037	$	248,994	$	260,031

June 30, 2016:

(in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total

Residential real estate:
One-to four-family	$	5,712	$	4,377	$	10,089	$	176,036	$	186,125
Multi-family		--		--		--		15,559		15,559
Construction		548		--		548		2,261		2,809
Land		--		--		--		1,186		1,186
Farm		--		--		--		1,735		1,735
Nonresidential real estate		--		153		153		26,985		27,138
Commercial and industrial		--		--		--		1,847		1,847
Consumer and other:
Loans on deposits		--		--		--		1,813		1,813
Home equity		37		--		37		6,118		6,155
Automobile		--		--		--		69		69
Unsecured		9		--		9		543		552
Total	$	6,306	$	4,530	$	10,836	$	234,152	$	244,988

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on an annual basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Loans listed that are not rated are included in groups of homogeneous loans and are evaluated for credit quality based on performing status. See the aging of past due loan table above. As of June 30, 2017, and 2016, and based on the most recent analysis performed, the risk category of loans by class of loans was as follows:

June 30, 2017:

(in thousands)	Pass		Special Mention		Substandard		Doubtful		Not rated

Residential real estate:
One- to four-family	$	--	$	6,110	$	9,883	$	--	$	181,943
Multi-family		14,541		--		1,137		--		--
Construction		2,398		--		--		--		--
Land		1,304		--		--		--		--
Farm		1,523		--		539		--		--
Nonresidential real estate		29,061		--		150		--		--
Commercial and industrial		2,513		27		--		--		--
Consumer and other:
Loans on deposits		1,607		--		--		--		--
Home equity		6,744		93		16		--		--
Automobile		42		--		--		--		--
Unsecured		396		--		4		--		--
Total	$	60,129	$	6,230	$	11,729	$	--	$	181,943

June 30, 2016:

(in thousands)	Pass		Special Mention		Substandard		Doubtful		Not rated

Residential real estate:
One- to four-family	$	--	$	6,387	$	11,970	$	--	$	167,768
Multi-family		15,220		--		339		--		--
Construction		2,809		--		--		--		--
Land		1,186		--		--		--		--
Farm		1,735		--		--		--		--
Nonresidential real estate		26,061		904		173		--		--
Commercial and industrial		1,817		30		--		--		--
Consumer and other:
Loans on deposits		1,813		--		--		--		--
Home equity		6,149		--		6		--		--
Automobile		69		--		--		--		--
Unsecured		552		--		--		--		--
Total	$	57,411	$	7,321	$	12,488	$	--	$	167,768

The activity in the allowance for loan losses is summarized as follows for the years ended June 30:

(in thousands)	2017			2016

Balance at beginning of year	$	1,515		$	1,568
Provision for losses on loans		242			15
Charge-offs, net		(224	)		(68	)
Balance at end of year	$	1,533		$	1,515

The following tables present the activity in the allowance for loan losses by portfolio segment for the years ended June 30, 2017 and 2016:

June 30, 2017:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off			Recoveries		Ending balance

Residential real estate:
One- to four-family	$	862	$	132		$	(226	)	$	5	$	773
Multi-family		192		51			--			--		243
Construction		5		1			--			--		6
Land		2		2			--			--		4
Farm		3		6			--			--		9
Nonresidential real estate		217		53			--			--		270
Commercial and industrial		18		(12	)		--			--		6
Consumer and other:
Loans on deposits		4		--			--			--		4
Home equity		11		6			--			--		17
Unsecured		1		3			(5	)		2		1
Unallocated		200		--			--			--		200
Totals	$	1,515	$	242		$	(231	)	$	7	$	1,533

June 30, 2016:

(in thousands)	Beginning balance		Provision for loan losses			Loans charged off			Recoveries		Ending balance

Residential real estate:
One- to four-family	$	1,059	$	(129	)	$	(80	)	$	12	$	862
Multi-family		94		98			--			--		192
Construction		21		(16	)		--			--		5
Land		7		(5	)		--			--		2
Farm		9		(6	)		--			--		3
Nonresidential real estate		121		96			--			--		217
Commercial and industrial		10		8			--			--		18
Consumer and other:
Loans on deposits		13		(9	)		--			--		4
Home equity		31		(20	)		--			--		11
Automobile		--		--			--			--		--
Unsecured		3		(2	)		--			--		1
Unallocated		200		--			--			--		200
Totals	$	1,568	$	15		$	(80	)	$	12	$	1,515

Purchased Loans:

The Company purchased loans during the fiscal year ended June 30, 2013 for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans, net of a credit quality component of $388,000 and $464,000, at June 30, 2017 and 2016, respectively, is as follows:

(in thousands)	2017		2016

Residential real estate:
One- to four-family	$	1,676	$	2,146
Land		--		--
Nonresidential real estate		--		164
Outstanding balance	$	1,676	$	2,310

Accretable yield, or income expected to be collected, for the years ended June 30 was as follows:

(in thousands)	2017			2016

Balance at beginning of year	$	981		$	1,021
Accretion of income		(159	)		(164	)
Reclassifications from nonaccretable difference		60			124
Disposals		(162	)		--
Balance at end of year	$	720		$	981

For those purchased loans disclosed above, the Company made no increase in allowance for loan losses for the years ended June 30, 2017 or 2016, nor were any allowance for loan losses reversed during those years.