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Section 1: 10-Q (FORM 10-Q)

sbtb20170930_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

[X]

QUARTERLY Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2017

or

[  ]

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act OF 1934

 

For the transition period from _______ to __________

 

Commission File Number: 000-51832

 

SBT Bancorp, Inc.
(Exact Name of Registrant as Specified in Its Charter)

 

Connecticut   20-4346972  

(State or Other Jurisdiction of 

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 
       
86 Hopmeadow Street, Weatogue, CT   06089  
(Address of Principal Executive Offices)   (Zip Code)  

 

(860) 408-5493
(Registrant's Telephone Number, Including Area Code)

 


(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]     No [   ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]     No [   ]

 

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

 

Large accelerated filer [  ]

Accelerated filer [  ]

   
Non-accelerated filer [  ] Smaller reporting company [X]
(Do not check if a smaller reporting company)  
  Emerging growth company [  ]

               

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ]     No [X]

 

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

 

As of October 26, 2017, the registrant had 1,373,118 shares of its Common Stock, no par value per share, outstanding.

 

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table of contents

 

SBT Bancorp, Inc. and Subsidiary

 

   

Page No.

     
 

PART I - FINANCIAL INFORMATION

 
     

Item 1.  Financial Statements

 
     
 

Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016

4

     
 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2017  and 2016 (unaudited)

5

     
 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016 (unaudited)

6

     
 

Consolidated Statements of Changes in Stockholders' Equity for the Nine Months Ended September 30, 2017 and 2016 (unaudited)

7

     
 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016 (unaudited)

8-9

     
 

Notes to Consolidated Financial Statements – (unaudited)

10-27

     

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

28-42

     

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

42

     

Item 4.  Controls and Procedures

42

     
 

PART II - OTHER INFORMATION

 
   

Item 1.  Legal Proceedings

43

 

Item 1A.  Risk Factors

43

     

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

43

     

Item 3.  Defaults Upon Senior Securities

43

     

Item 4.  Mine Safety Disclosures

43

     

Item 5.  Other Information

43

     

Item 6.  Exhibits

44

     

SIGNATURES

45

     

EXHIBIT INDEX

46

 

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

SBT BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for share amounts)

 

   

9/30/17

   

12/31/16

 
   

(Unaudited)

         
ASSETS                

Cash and due from banks

  $ 8,209     $ 10,976  

Interest-bearing deposits with the Federal Reserve Bank and Federal Home Loan Bank

    27,119       9,786  

Money market mutual funds

    24       95  

Federal funds sold

    150       150  

Cash and cash equivalents

    35,502       21,007  
                 

Certificates of deposit

    1,250       1,250  
                 

Investments in available-for-sale securities, at fair value

    54,647       58,728  

Federal Home Loan Bank stock, at cost

    861       2,896  
                 

Loans held-for-sale

    4,289       2,801  
                 

Loans

    402,893       409,164  

Less: allowance for loan losses

    4,077       3,753  

Loans, net

    398,816       405,411  
                 

Premises and equipment, net

    1,948       1,905  

Accrued interest receivable

    1,272       1,301  

Bank-owned life insurance

    9,310       9,130  

Other assets

    6,355       5,570  

Total assets

  $ 514,250     $ 509,999  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Deposits:

               

Demand deposits

  $ 127,156     $ 134,341  

Savings and NOW deposits

    271,384       212,835  

Time deposits

    69,088       66,588  

Total deposits

    467,628       413,764  
                 

Securities sold under agreements to repurchase

    2,862       2,694  

Federal Home Loan Bank advances

    2,318       54,058  

Long-term subordinated debt

    7,274       7,252  

Other liabilities

    2,292       1,944  

Total liabilities

    482,374       479,712  

Stockholders' equity:

               

Common stock, no par value; authorized 2,000,000 shares; issued and outstanding 1,373,532 shares and 1,373,118 shares, respectively, at September 30, 2017 and 1,372,394 shares and 1,371,980 shares, respectively, at December 31, 2016

    19,168       19,133  

Retained earnings

    13,106       12,017  

Treasury stock, 414 shares

    (7 )     (7 )

Unearned compensation-restricted stock awards

    (192 )     (293 )

Accumulated other comprehensive loss

    (199 )     (563 )

Total stockholders' equity

    31,876       30,287  

Total liabilities and stockholders' equity

  $ 514,250     $ 509,999  

 

See accompanying notes to the unaudited consolidated financial statements.

 

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SBT BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except for share and per share amounts)

 

   

For the three months ended

   

For the nine months ended

 
   

9/30/2017

   

9/30/2016

   

9/30/2017

   

9/30/2016

 

Interest and dividend income:

                               

Interest and fees on loans

  $ 3,949     $ 3,433     $ 11,421     $ 9,814  

Investment securities

    330       359       1,011       1,130  

Interest-bearing deposits

    137       26       196       65  

Total interest and dividend income

    4,416       3,818       12,628       11,009  

Interest expense:

                               

Interest on deposits

    415       271       954       619  

Interest on securities sold under agreements to repurchase

    2       2       5       5  

Interest on Federal Home Loan Bank advances

    52       36       260       134  

Interest on long-term subordinated debt

    137       137       406       379  

Total interest expense

    606       446       1,625       1,137  

Net interest and dividend income

    3,810       3,372       11,003       9,872  
                                 

Provision for loan losses

    235       305       570       606  
                                 

Net interest and dividend income after provision for loan losses

    3,575       3,067       10,433       9,266  

Noninterest income:

                               

Service charges on deposit accounts

    86       98       269       278  

(Loss) gain on sales of available-for-sale securities, net of writedowns

    (1 )     23       (2 )     93  

Other service charges and fees

    215       293       636       733  

Increase in cash surrender value of life insurance policies

    60       64       180       177  

Mortgage banking activities, net

    444       648       982       898  

Investment services fees and commissions

    69       53       143       133  

Other income

    21       11       93       41  

Total noninterest income

    894       1,190       2,301       2,353  

Noninterest expense:

                               

Salaries and employee benefits

    1,823       1,949       5,263       5,700  

Occupancy expense

    322       387       1,067       1,147  

Equipment expense

    145       111       375       317  

Advertising and promotions

    148       213       453       508  

Forms and supplies

    27       86       84       160  

Professional fees

    166       142       564       345  

Directors’ fees

    57       53       168       160  

Correspondent charges

    74       83       223       228  

FDIC assessment

    107       70       325       223  

Data processing

    244       219       698       628  

Internet banking costs

    71       75       161       221  

Other expenses

    438       338       1,162       1,001  

Total noninterest expense

    3,622       3,726       10,543       10,638  

Income before income taxes

    847       531       2,191       981  

Income tax provision

    245       100       519       93  

Net income

  $ 602     $ 431     $ 1,672     $ 888  

Net income available to common stockholders

  $ 602     $ 431     $ 1,672     $ 888  

Weighted average shares outstanding, basic

    1,359,549       1,352,263       1,358,913       1,350,725  

Earnings per common share, basic

  $ 0.44     $ 0.32     $ 1.23     $ 0.66  

Weighted average shares outstanding, assuming dilution

    1,364,293       1,354,362       1,362,349       1,352,887  

Earnings per common share, assuming dilution

  $ 0.44     $ 0.32     $ 1.23     $ 0.66  
                                 

Dividends declared per common share

  $ 0.15     $ 0.14     $ 0.43     $ 0.42  

 

See accompanying notes to the unaudited consolidated financial statements.

 

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SBT BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 (Unaudited)

(Dollars in thousands)

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2017

   

2016

   

2017

   

2016

 
                                 

Net income

  $ 602     $ 431     $ 1,672       888  

Other comprehensive income (loss), net of tax:

                               

Net change in unrealized holding gain/loss on securities available-for-sale

    92       (186 )     552       1,270  

Reclassification adjustment for realized losses (gains) in net income

    1       (23 )     2       (93 )

Other comprehensive income (loss), before tax

    93       (209 )     554       1,177  

Income tax (expense) benefit

    (33 )     72       (190 )     (401 )

Other comprehensive income (loss), net of tax

    60       (137 )     364       776  

Comprehensive income

  $ 662     $ 294     $ 2,036     $ 1,664  

 

See accompanying notes to the unaudited consolidated financial statements.

 

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SBT BANCORP, INC. AND SUBSIDIARY

 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 (Unaudited)

 (Dollars in thousands)

 

                           

Unearned

   

Accumulated

         
                           

Compensation-

   

Other

         
   

Common

   

Retained

   

Treasury

   

Restricted

   

Comprehensive

         
   

Stock

   

Earnings

   

Stock

   

Stock Awards

   

(Loss) Income

   

Total

 

Balance, December 31, 2015

  $ 18,856     $ 11,288     $ (7 )   $ (206 )   $ (189 )   $ 29,742  

Net income

    -       888       -       -       -       888  

Other comprehensive income, net of tax

    -       -       -       -       776       776  

Stock-based compensation

    14       -       -       99       -       113  

Forfeited restricted stock awards

    (12 )     -       -       12       -       -  

Common stock issued

    29       -       -       -       -       29  

Dividends declared on common stock ($.42 per share)

    -       (567 )     -       -       -       (567 )

Balance September 30, 2016

  $ 18,887     $ 11,609     $ (7 )   $ (95 )   $ 587     $ 30,981  
                                                 

Balance, December 31, 2016

  $ 19,133     $ 12,017     $ (7 )   $ (293 )   $ (563 )   $ 30,287  

Net income

    -       1,672       -       -       -       1,672  

Other comprehensive income, net of tax

    -       -       -       -       364       364  

Stock-based compensation

    7       -       -       101       -       108  

Common stock issued

    28       1       -       -       -       29  

Dividends declared on common stock ($.43 per share)

    -       (584 )     -       -       -       (584 )

Balance, September 30, 2017

  $ 19,168     $ 13,106     $ (7 )   $ (192 )   $ (199 )   $ 31,876  

 

See accompanying notes to the unaudited consolidated financial statements.

 

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SBT BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

   

For the nine months ended

 
   

9/30/2017

   

9/30/2016

 

Cash flows from operating activities:

               

Net income

  $ 1,672     $ 888  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                

Amortization of securities, net

    247       279  

Loss (gain) on available-for-sale securities, net of writedowns

    2       (93 )

Change in deferred origination costs, net

    73       (107 )

Provision for loan losses

    570       606  

Loans originated for sale

    (56,793 )     (73,391 )

Proceeds from sales of loans originated for sale

    56,027       68,534  

Gain on sales of loans

    (722 )     (1,214 )

Loss on sale of other real estate owned

    13       -  

Depreciation and amortization

    317       284  

Amortization of long-term subordinated debt issuance costs

    22       22  

Increase in other assets

    (671 )     (358 )

Decrease (increase) in interest receivable

    29       (89 )

(Increase) decrease in taxes receivable

    (304 )     107  

Increase in cash surrender value of bank owned life insurance

    (180 )     (177 )

Stock-based compensation

    108       113  

Disposal of fixed assets

    55       11  

Increase in other liabilities

    359       159  

Decrease in interest payable

    (11 )     (56 )
                 

Net cash provided by (used in) operating activities

    813       (4,482 )
                 

Cash flows from investing activities:

               

Purchases of certificates of deposit

    -       (250 )

Purchases of available-for-sale securities

    (2,772 )     (6,103 )

Proceeds from maturities of available-for-sale securities

    7,158       13,009  

Proceeds from sales of available-for-sale securities

    -       1,991  

Purchases of Federal Home Loan Bank stock

    (1,618 )     (1,772 )

Redemption of Federal Home Loan Bank stock

    3,653       1,842  

Loan originations and principal collections, net

    5,370       (32,580 )

Loans purchased

    -       (36,880 )

Recoveries of loans previously charged off

    12       7  

Proceeds from sale of other real estate owned

    557       -  

Purchase of bank-owned life insurance

    -       (1,500 )

Capital expenditures

    (415 )     (871 )
                 

Net cash provided by (used in) investing activities

    11,945       (63,107 )

 

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SBT BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

(continued)

   

For the nine months ended

 
   

9/30/2017

   

9/30/2016

 

Cash flows from financing activities:

               

Net increase in demand deposits, NOW and savings accounts

    51,364       52,202  

Net increase in time deposits

    2,500       7,821  

Net increase in securities sold under agreements to repurchase

    168       1,278  

Net change in short-term Federal Home Loan Bank (FHLB) advances

    (52,000 )     (2,500 )

Proceeds from long-term FHLB advances

    260       -  

Proceeds from issuance of common stock

    29       29  

Increase in subordinated debt issuance fees

    -       (7 )

Dividends paid - common stock

    (584 )     (567 )
                 

Net cash provided by financing activities

    1,737       58,256  
                 

Net increase (decrease) in cash and cash equivalents

    14,495       (9,333 )

Cash and cash equivalents at beginning of period

    21,007       28,890  

Cash and cash equivalents at end of period

  $ 35,502     $ 19,557  
                 

Supplemental disclosures of cash flow information:

               

Interest paid

  $ 1,614     $ 1,193  

Income taxes paid

    823       200  

Supplemental disclosures of non-cash transactions:

               

Loans transferred to other real estate owned

    570       -  

 

See accompanying notes to the unaudited consolidated financial statements.

 

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SBT BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

(Dollars in thousands)

 

NOTE 1 – BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and, accordingly, do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all necessary adjustments, consisting of only normal recurring accruals, to present fairly the financial position, results of operations, cash flows and changes in stockholders’ equity of SBT Bancorp, Inc. (the “Company”) for the periods presented. The Company’s only business is its investment in The Simsbury Bank & Trust Company, Inc. (the “Bank”), which is a community-oriented financial institution providing a variety of banking and investment services. The Bank offers investment products to customers through SBT Investment Services, Inc., a wholly-owned subsidiary of the Bank, and through its affiliation with the securities broker/dealer, LPL Financial Corporation. In May of 2010, the Bank formed NERE Holdings, Inc., a subsidiary to hold real estate primarily acquired through foreclosure. In January of 2011, the Bank formed Simsbury Bank Passive Investment Company, a subsidiary Passive Investment Company (PIC). Under current State of Connecticut statutes, Simsbury Bank Passive Investment Company is not subject to Connecticut corporation business taxes. In preparing the interim financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated balance sheets and revenues and expenses for the periods presented. Actual results could differ significantly from those estimates. The interim results of operations are not necessarily indicative of the results to be expected for the full year ending December 31, 2017. Material estimates that are particularly susceptible to significant change in the near-term include the determination of the allowance for loan losses, and the valuation and potential other-than-temporary impairment (“OTTI”) of available-for-sale securities.

 

While management believes that the disclosures presented are adequate so as to not make the information misleading, it is suggested that these unaudited consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in the Company’s Form 10-K for the year ended December 31, 2016.

 

NOTE 2 – STOCK-BASED COMPENSATION

 

At September 30, 2017, the Company maintained a stock-based employee compensation plan. The Company recognizes the cost resulting from all share-based payment transactions in the consolidated financial statements and establishes fair value as the measurement objective in accounting for share-based payment arrangements. During the nine months ended September 30, 2017, the Company recognized $108 thousand in stock-based employee compensation expense. During the nine months ended September 30, 2016, the Company recognized $113 thousand in stock-based employee compensation expense.

 

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

 

In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU requires entities to present separately in other comprehensive income that portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. It also requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, thus eliminating eligibility for the current available-for-sale category. The ASU will take effect for public companies for fiscal years beginning after December 15, 2017. The Company has no equity investments at the report date, therefore management believes there will be no material impact to the consolidated financial statements upon adoption. 

 

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In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new guidance will be effective for public entities for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption of ASU 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently reviewing this ASU to determine the impact on its consolidated financial statements.

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 significantly changes the way impairment of financial instruments is recognized by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of financial instruments. The main provisions of ASU 2016-13 include (1) replacing the “incurred loss” approach under current GAAP with an “expected loss” model for instruments measured at amortized cost; (2) requiring entities to record an allowance for available-for-sale debt securities rather than reducing the carrying amount of the investments, as is required by the other-than-temporary-impairment model under current GAAP; and (3) a simplified accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted. The Company is currently assessing the impact that adoption of ASU 2016-13 will have on its consolidated financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." Current GAAP is unclear or does not include specific guidance on how to classify certain transactions in the statement of cash flows. This ASU is intended to reduce diversity in practice on how eight particular transactions are classified in the statement of cash flows. ASU No. 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, provided that all of the amendments are adopted in the same period. Entities will be required to apply the guidance retrospectively. If it is impracticable to apply the guidance retrospectively for an issue, the amendments related to that issue would be applied prospectively. As this guidance only affects the classification within the statement of cash flows, ASU No. 2016-15 is not expected to have a material impact on the Company's consolidated financial statements.

    

In March 2017, the FASB issued ASU No. 2017-08, “Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the provisions of ASU No. 2017-08 to determine the potential impact that the new standard will have on the Company’s consolidated financial statements.

 

In May 2017, the FASB issued ASU No. 2017-09, “Stock Compensation, Scope of Modification Accounting.” This ASU clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Companies will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. The new guidance should reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications, as the guidance will allow companies to make certain non-substantive changes to awards without accounting for them as modifications. It does not change the accounting for modifications. ASU No. 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017; early adoption is permitted. ASU No. 2017-09 is not expected to have a material impact on the Company’s consolidated financial statements.

 

In August 2017, the FASB issued ASU No. 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” This ASU’s objectives are (1) to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities; and (2) to reduce the complexity of and simplify the application of hedge accounting by preparers. ASU No. 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The Company currently does not designate any derivative financial instruments as formal hedging relationships and therefore does not utilize hedge accounting. However, the Company is currently evaluating this ASU to determine whether its provisions will enhance the Company’s ability to employ risk management strategies, while improving the transparency and understanding of those strategies for financial statement users.

 

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In May 2014, the the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The FASB and the International Accounting Standards Board (the “IASB”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and International Financial Reporting Standards. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company's current evaluation indicates that the new standard will not impact the timing or measurement of its revenue recognition. The Company continues to evaluate the presentation of certain costs as either operating expenses or net against noninterest income; consequently, there may be an insignificant change in the consolidated financial statements for the presentation of these costs. Overall, the Company does not expect the new accounting standard to have a material impact on its consolidated financial statements.

 

NOTE 4 – FAIR VALUE MEASUREMENTS

 

Accounting Standards Codification (ASC) 820-10, “Fair Value Measurement - Overall,” provides a framework for measuring fair value under generally accepted accounting principles. This guidance also allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement of certain financial assets and liabilities on a contract-by-contract basis.

 

In accordance with ASC 820-10, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

 

Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury securities that are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

 

Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.

 

Level 3 - Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, which are not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.

 

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company did not have any significant transfers of assets between Level 1 and Level 2 of the fair value hierarchy during the three and nine months ended September 30, 2017.

 

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value at September 30, 2017 and December 31, 2016.

 

The Company’s investments in obligations of states and municipalities, mortgage-backed securities and other debt securities available-for-sale are generally classified within Level 2 of the fair value hierarchy. For these securities, the Company obtains fair value measurements from independent pricing services. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information, and the instrument’s terms and conditions.

 

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalization and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows.

 

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The Company’s impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 2 inputs based upon appraisals of similar properties obtained from a third party. For Level 3 inputs, fair values are based on management estimates.

 

Other real estate owned values are estimated using Level 2 inputs based upon appraisals of similar properties obtained from a third party. For Level 3 inputs, fair values are based on management estimates.

 

The following summarizes assets measured at fair value at September 30, 2017 and December 31, 2016.

 

Assets Measured at Fair Value on a Recurring Basis

 

           

Fair Value Measurements at Reporting Date Using:

 
           

Quoted Prices in

   

Significant

   

Significant

 
           

Active Markets for

   

Other Observable

   

Unobservable

 
           

Identical Assets

   

Inputs

   

Inputs

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 
   

(In Thousands)

 

September 30, 2017:

                               

Debt securities issued by U.S. government corporations and agencies

  $ 4,518     $ -     $ 4,518     $ -  

Obligations of states and municipalities

    13,872       -       13,872       -  

Mortgage-backed securities

    35,365       -       35,365       -  

SBA loan pools

    892       -       892       -  

Totals

  $ 54,647     $ -     $ 54,647     $ -  
                                 

December 31, 2016:

                               

Debt securities issued by U.S. government corporations and agencies

  $ 4,253     $ -     $ 4,253     $ -  

Obligations of states and municipalities

    14,352       -       14,352       -  

Mortgage-backed securities

    39,140       -       39,140       -  

SBA loan pools

    983       -       983       -  

Totals

  $ 58,728     $ -     $ 58,728     $ -  

 

Under certain circumstances, the Company makes adjustments to fair value for its assets and liabilities although these assets and liabilities are not measured at fair value on an ongoing basis. There were no significant assets or liabilities at December 31, 2016 that were measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded. The following table presents assets carried on the consolidated balance sheet by caption and by level in the fair value hierarchy at September 30, 2017 for which a nonrecurring change in fair value has been recorded.

 

ASSETS MEASURED AT FAIR VALUE ON A NONRECURRING BASIS

 

           

Fair Value Measurements at Reporting Date Using:

 
           

Quoted Prices in

   

Significant

   

Significant

 
           

Active Markets for

   

Other Observable

   

Unobservable

 
           

Identical Assets

   

Inputs

   

Inputs

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 
    (In Thousands)         

September 30, 2017:

                               

Impaired Loans

  $ 96     $ -     $ -     $ 96  
                                 
    $ 96     $ -     $ -     $ 96  

 

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The estimated fair values of the Company’s financial instruments, all of which are held or issued for purposes other than trading, were as follows as of September 30, 2017 and December 31, 2016:

 

   

September 30, 2017

 
   

Carrying

   

Fair Value

 
   

Amount

   

Level 1

   

Level 2

   

Level 3

   

Total

 
   

(In Thousands)

 

Financial assets:

                                       

Cash and cash equivalents

  $ 35,502     $ 35,502     $ -     $ -     $ 35,502  

Certificates of deposit

    1,250       1,250       -       -       1,250  

Available-for-sale securities

    54,647       -       54,647       -       54,647  

Federal Home Loan Bank stock

    861       -       861       -       861  

Loans held-for-sale

    4,289       -       -       4,350       4,350  

Loans, net

    398,816       -       -       395,705       395,705  

Mortgage servicing rights

    2,157       -       -       4,043       4,043  

Accrued interest receivable

    1,272       1,272       -       -       1,272  

Bank owned life insurance

    9,310       -       9,310       -       9,310  
       Derivative assets     90       -       -       90       90  
                                         

Financial liabilities:

                                       

Deposits

    467,628       386,269       68,855       -       455,124  

Securities sold under agreements to repurchase

    2,862       -       2,862       -       2,862  

Federal Home Loan Bank advances

    2,318       -       2,044       -       2,044  

Long-term subordinated debt

    7,274       -       7,291       -       7,291  
       Derivative liabilities     57       -       -       57       57  

 

 

   

December 31, 2016

 
   

Carrying

       
   

Amount

   

Level 1

   

Level 2

   

Level 3

   

Total

 
   

(In Thousands)

 

Financial assets:

                                       

Cash and cash equivalents

  $ 21,007     $ 21,007     $ -     $ -     $ 21,007  

Certificates of deposit

    1,250       1,250       -       -       1,250  

Available-for-sale securities

    58,728       -       58,728       -       58,728  

Federal Home Loan Bank stock

    2,896       -       2,896       -       2,896  

Loans held-for-sale

    2,801       -       -       2,818       2,818  

Loans, net

    405,411       -       -       401,008       401,008  

Mortgage servicing rights

    1,996       -       -       2,432       2,432  

Accrued interest receivable

    1,301       1,301       -       -       1,301  

Bank owned life insurance

    9,130       -       9,130       -       9,130  
                                         

Financial liabilities:

                                       

Deposits

    413,764       347,176       66,504       -       413,680  

Securities sold under agreements to repurchase

    2,694       -       2,694       -       2,694  

Federal Home Loan Bank advances

    54,058       -       53,767       -       53,767  

Long-term subordinated debt

    7,252       -       7,268       -       7,268  

 

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NOTE 5 – EARNINGS PER COMMON SHARE

 

Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

 

The following information was used in the computation of EPS on both a basic and diluted basis for the three and nine months ended September 30, 2017 and 2016:

 

   

For the three months ended

 
   

9/30/17

   

9/30/16

 
   

(In Thousands, except share and per share data)

 

Basic earnings per share computation:

               

Net income available to common shareholders

  $ 602     $ 431  
                 

Weighted average shares outstanding, basic

    1,359,549       1,352,263  
                 

Basic earnings per share

  $ 0.44     $ 0.32  
                 

Diluted earnings per share computation:

               

Net income available to common shareholders

  $ 602     $ 431  
                 

Weighted average shares outstanding, before dilution

    1,359,549       1,352,263  

Dilutive potential shares

    4,744       2,099  

Weighted average shares outstanding, assuming dilution

    1,364,293       1,354,362  
                 

Diluted earnings per share

  $ 0.44     $ 0.32  

 

   

For the nine months ended

 
   

9/30/17

   

9/30/16

 
   

(In Thousands, except share and per share data)

 

Basic earnings per share computation:

               

Net income available to common shareholders

  $ 1,672     $ 888  
                 

Weighted average shares outstanding, basic

    1,358,913       1,350,725  
                 

Basic earnings per share

  $ 1.23     $ 0.66  
                 

Diluted earnings per share computation:

               

Net income available to common shareholders

  $ 1,672     $ 888  
                 

Weighted average shares outstanding, before dilution

    1,358,913       1,350,725  

Dilutive potential shares

    3,436       2,162  

Weighted average shares outstanding, assuming dilution

    1,362,349       1,352,887  
                 

Diluted earnings per share

  $ 1.23     $ 0.66  

 

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NOTE 6 – INVESTMENT SECURITIES

 

The following tables summarize the amounts and distribution of the Company’s investment securities held as of September 30, 2017 and December 31, 2016:

 

   

INVESTMENT PORTFOLIO

 
   

(Dollars In Thousands)

 
                                         
   

September 30, 2017

 
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

         
   

Cost

   

Gains

   

Losses

   

Value

   

Yield

 
                                         

AVAILABLE-FOR-SALE SECURITIES

                                       

Debt securities issued by U.S. government corporations and agencies

                                       

Due within one year

  $ 2,000     $ -       1       1,999       1.26

%

Due after one to five years

    2,516       7       4       2,519       1.69

%

Total U.S. government corporations and agencies

    4,516       7       5       4,518       1.50

%

Obligations of states and municipalities

                                       

Due within one year

    -       -       -       -       -

%

Due after one to five years

    1,679       18       -       1,697       1.78

%

Due after five to ten years

    8,455       89       39       8,505       1.75

%

Due after ten to fifteen years

    3,601       70       1       3,670       2.43

%

Total obligations of states and municipalities

    13,735       177       40       13,872       1.93

%

Mortgage-backed securities

                                       

Due after one to five years

    746       4       4       746       1.57

%

Due after five to ten years

    6,192       15       44       6,163       2.03

%

Due after ten to fifteen years

    17,386       10       254       17,142       2.20

%

Due beyond fifteen years

    11,491       15       192       11,314       2.46

%

Total mortgage-backed securities

    35,815       44       494       35,365       2.24

%

SBA loan pools

                                       

Due after five to ten years

    881       11       -       892       2.79

%

Total SBA loan pools

    881       11       -       892       2.79

%

                                         

Total available-for-sale securities

  $ 54,947     $ 239     $ 539     $ 54,647       2.11

%

 

 

-16-

 

 

   

INVESTMENT PORTFOLIO

 
   

(Dollars In Thousands)

 
                                         
   

December 31, 2016

 
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

         
   

Cost

   

Gains

   

Losses

   

Value

   

Yield

 
                                         

AVAILABLE-FOR-SALE SECURITIES

                                       

Debt securities issued by U.S. government corporations and agencies

                                       

Due within one year

  $ 1,000     $ 1     $ -     $ 1,001       1.00

%

Due after one to five years

    3,250       6       4       3,252       1.24

%

Total obligations of states and municipalities

    4,250       7       4       4,253       1.18

%

Obligations of states and municipalities

                                       

Due after one to five years

    250       1       -       251       4.00

%

Due after five to ten years

    6,253       100       41       6,312       2.91

%

Due after ten to fifteen years

    7,417       78       100       7,395       2.76

%

Due beyond fifteen years

    389       5       -       394       3.30

%

Total obligations of states and municipalities

    14,309       184       141       14,352       2.86

%

Mortgage-backed securities

                                       

Due after one to five years

    718       7       4       721       2.25

%

Due after five to ten years

    3,480       13       21       3,472       1.80

%

Due after ten to fifteen years

    20,272       9       539       19,742       1.69

%

Due beyond fifteen years

    15,580       11       386       15,205       2.00

%

Total mortgage-backed securities

    40,050       40       950       39,140       1.83

%

SBA loan pools

                                       

Due after five to ten years

    973       13       3       983       3.30

%

Total SBA loan pools

    973       13       3       983       3.30

%

                                         

Total available-for-sale securities

  $ 59,582     $ 244     $ 1,098     $ 58,728       2.33

%

 

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The aggregate fair value and unrealized losses of securities that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more, and are not other than temporarily impaired, were as follows as of September 30, 2017 and December 31, 2016:

 

   

Less than 12 Months

   

12 Months or Longer

   

Total

 
   

Fair

   

Unrealized

   

Fair

   

Unrealized

   

Fair

   

Unrealized

 
   

Value

   

Losses

   

Value

   

Losses

   

Value

   

Losses

 
   

(In Thousands)

 

September 30, 2017:

                                               

Debt securities issued by U.S. Government corporations and agencies

  $ 1,746     $ 4     $ 499     $ 1     $ 2,245     $ 5  

Obligations of states and municipalities

    1,840       29       489       11       2,329       40  

Mortgage-backed securities

    18,655       218       11,809       250       30,464       468  

Total temporarily impaired securities

    22,241       251       12,797       262       35,038       513  
                                                 
                                                 

Other-than-temporarily impaired securities:

                                               

Mortgage-backed securities

    -       -       130       26       130       26  

Total temporarily impaired and other-than-temporarily impaired securities

  $ 22,241     $ 251     $ 12,927     $ 288     $ 35,168     $ 539  
                                                 
                                                 

December 31, 2016:

                                               

Debt securities issued by U.S. Government corporations and agencies

  $ 1,246     $ 4     $ -     $ -     $ 1,246     $ 4  

SBA loan pools

    743       3       -       -       -       743  

Obligations of states and municipalities

    5,934       141       -       -       5,934       141  

Mortgage-backed securities

    32,817       788       2,890       136       35,707       924  

Total temporarily impaired securities

    40,740       936       2,890       136       43,630       1,072  
                                                 

Other-than-temporarily impaired securities:

                                               

Mortgage-backed securities

    9       -       158       26       167       26  

Total temporarily impaired and other-than-temporarily impaired securities

  $ 40,749     $ 936     $ 3,048     $ 162     $ 43,797     $ 1,098  

  

The securities in the Company’s investment portfolio that were temporarily impaired as of September 30, 2017 consisted of debt securities issued by states of the United States, political subdivisions of the states, and U.S. government corporations and agencies as well as mortgage-backed securities. The Company’s management anticipates that the fair value of securities that are currently impaired will recover to cost basis. The gross unrealized losses are primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. As the Company has the ability and intent to hold securities for the foreseeable future, and it is more likely than not that the Company will not be required to sell the investment securities before recovery of their amortized cost basis, no declines are deemed to be other than temporary, unless otherwise noted above.

   

During the three and nine months ended September 30, 2017, there were no sales of available-for-sale securities.

 

During the three months ended September 30, 2016, there were proceeds of $1.0 million from sales of available-for-sale securities. Gross realized gains on these sales amounted to $25 thousand. The tax expense applicable to these gross realized gains amounted to $9 thousand. During the nine months ended September 30, 2016, there were proceeds of $2.0 million from sales of available-for-sale securities. Gross realized gains on these sales amounted to $94 thousand. The tax expense applicable to these gross realized gains amounted to $32 thousand. 

 

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NOTE 7 – LOAN INFORMATION

 

Loans consisted of the following as of September 30, 2017 and December 31, 2016:

 

   

September 30, 2017

   

December 31, 2016

 
   

(In Thousands)

 

Real estate - residential

  $ 138,928     $ 143,212  

Real estate - commercial

    76,875       79,629  

Real estate - municipal

    9,294       8,733  

Real estate - residential construction and land development

    1,472       2,932  

Real estate - commercial construction and land development

    20,390       15,960  

Home equity

    48,267       48,876  

Commercial and industrial

    77,949       69,254  

Municipal

    2,924       4,215  

Consumer

    25,425       34,911  

Total loans

    401,524       407,722  

Allowance for loan losses

    (4,077 )     (3,753 )

Deferred costs, net

    1,369       1,442  

Net loans

  $ 398,816     $ 405,411  

 

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

 

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

 

General component:

 

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction and land development, home equity, commercial and consumer. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses during the three and nine months ended September 30, 2017.

 

The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

 

Residential real estate and home equity: The Company generally does not originate loans with a loan-to-value ratio greater than 80 percent without obtaining private mortgage insurance for any amounts over 80% and does not grant subprime loans. Substantially all loans in these segments are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

 

Commercial real estate: Loans in this segment are primarily income-producing properties throughout the Farmington Valley and surrounding communities in Connecticut. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which, in turn, will have an effect on the credit quality in this segment. Management periodically obtains rent rolls and continually monitors the cash flows of these loans.

 

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Construction and land development loans: Loans in this segment primarily include speculative real estate development loans for which payment is derived from the sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.

 

Commercial loans: Loans in this segment are made to businesses and are generally secured by the assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

 

Consumer loans: Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

 

Allocated component:

 

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan-by-loan basis for commercial, commercial real estate and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan are lower than the carrying value of that loan. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential real estate loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement.

 

A loan is considered impaired when, based on current information and events, it is probable that the Company 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 Company may periodically agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring ("TDR"). All TDRs are initially classified as impaired.

 

Unallocated component:

 

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

 

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

 

   

Real Estate:

                                 
   

Residential

   

Commercial

   

Construction &

Land

Development

   

Home Equity

   

Commercial & Industrial

   

Consumer

   

Unallocated

   

Total

 
   

(In Thousands)

 

September 30, 2017:

                                                               

Allowance for loan losses:

                                                               

Beginning balance

  $ 990     $ 1,076     $ 258     $ 381     $ 1,010     $ 181     $ 28     $ 3,924  

Charge-offs

    -       -       -       -       (74 )     (10 )     -       (84 )

Recoveries

    -       -       -       -       2       -       -       2  

Provision (benefit)

    8       90       7       (6 )     108       (7 )     35       235  

Ending balance

  $ 998     $ 1,166     $ 265     $ 375     $ 1,046     $ 164     $ 63     $ 4,077  

 

   

Real Estate:

                                 
   

Residential

   

Commercial

   

Construction & Land

Development

   

Home Equity

   

Commercial & Industrial

   

Consumer

   

Unallocated

   

Total

 
   

(In Thousands)

 

September 30, 2016:

                                                               

Allowance for loan losses:

                                                               

Beginning balance

  $ 1,065     $ 862     $ 258     $ 325     $ 576     $ 240     $ 3     $ 3,329  

Charge-offs

    -       -       -       -       -       (5 )     -       (5 )

Recoveries

    1       -       -       -       1       -       -       2  

Provision (benefit)

    3       85       41       8       103       61       4       305  

Ending balance

  $ 1,069     $ 947     $ 299     $ 333     $ 680     $ 296     $ 7     $ 3,631  

 

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

 

   

Real Estate:

                                 
   

Residential

   

Commercial

   

Construction &

Land

Development

   

Home Equity

   

Commercial & Industrial

   

Consumer

   

Unallocated

   

Total

 
   

(In Thousands)

 

September 30, 2017:

                                                               

Allowance for loan losses:

                                                               

Beginning balance

  $ 1,057     $ 1,044     $ 212     $ 346     $ 824     $ 249     $ 21     $ 3,753  

Charge-offs

    (36 )     -       -       (99 )     (82 )     (41 )     -       (258 )

Recoveries

    -       -       -       -       10       2       -       12  

Provision (benefit)

    (23 )     122       53       128       294       (46 )     42       570  

Ending balance

  $ 998     $ 1,166     $ 265     $ 375     $ 1,046     $ 164     $ 63     $ 4,077  

 

   

Real Estate:

                                 
   

Residential

   

Commercial

   

Construction &

Land

Development

   

Home Equity

   

Commerical & Industrial

   

Consumer

   

Unallocated

   

Total

 
   

(In Thousands)

 

September 30, 2016:

                                                               

Allowance for loan losses: