Note 5 - Loans Receivable and Allowance for Loan Losses

9 Months Ended

Dec. 31, 2018

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

Note

Loans Receivable and Allowance for Loan Losses

Loans receivable, excluding loans held for sale, consist of the following at

December 31, 2018

and

March 31, 2018:

	December 31, 2018												March 31, 2018
	Legacy (1)			Acquired			Total Loans			% of Total			Legacy (1)			Acquired			Total Loans			% of Total
Real estate loans:
One-to four-family:
Residential (2)	$	83,117,881		$	66,255,260			149,373,141			40	%	$	85,248,184		$	72,749,066		$	157,997,250			41	%
Residential construction		3,430,203			-			3,430,203			1	%		5,450,827			-			5,450,827			1	%
Investor (3)		7,337,281			16,407,266			23,744,547			6	%		9,275,031			17,460,809			26,735,840			7	%
Commercial		105,755,786			9,289,784			115,045,570			31	%		100,403,769			11,762,485			112,166,254			29	%
Commercial construction		1,543,313			1,059,217			2,602,530			1	%		5,763,784			1,352,019			7,115,803			2	%
Total real estate loans		201,184,464			93,011,527			294,195,991			80	%		206,141,595			103,324,379			309,465,974			80	%
Commercial business (4)		35,276,493			1,706,509			36,983,002			10	%		38,302,739			1,841,226			40,143,965			10	%
Home equity loans		15,077,068			4,941,051			20,018,119			5	%		13,956,327			6,039,462			19,995,789			5	%
Consumer (5)		16,329,237			699,371			17,028,608			5	%		18,849,448			766,063			19,615,511			5	%
Total Loans		267,867,262			100,358,458			368,225,720			100	%		277,250,109			111,971,130			389,221,239			100	%
Net deferred loan origination fees and costs		(178,056	)		-			(178,056	)					(212,746	)		-			(212,746	)
Loan premium (discount)		1,708,908			(299,956	)		1,408,952						1,922,428			(510,036	)		1,412,392
	$	269,398,114		$	100,058,502		$	369,456,616					$	278,959,791		$	111,461,094		$	390,420,885

( 1 )	As a result of the acquisition of Fraternity Community Bancorp, Inc., the parent company of Fraternity Federal Savings and Loan, in May 2016 and Fairmount Bancorp, Inc., the parent company of Fairmount Bank, in September 2015, we have segmented the portfolio into two components, loans originated by Hamilton Bank "Legacy" and loans acquired from Fraternity Community Bancorp, Inc. and Fairmount Bancorp, Inc. "Acquired".
( 2 )	"Legacy" one -to four -family residential real estate loans at March 31, 2018 includes $19.2 million of various loan pools purchased in the second half of fiscal 2018.
( 3 )	"Investor" loans are residential mortgage loans secured by non-owner occupied one -to four -family properties.
( 4 )	"Legacy" commercial business loans at March 31, 2018 includes a $15.5 million pool of commercial lease loans purchased in June 2017 and $3.2 million in guaranteed SBA loans purchased in second half of fiscal 2018.
( 5 )	"Legacy" consumer loans at March 31, 2018 includes $19.9 million of purchased loan pools consisting of recreational vehicles that were purchased in August and December 2017.

Residential lending is generally considered to involve less risk than other forms of lending, although payment experience on these loans is dependent on economic and market conditions in the Bank's lending area. Construction loan repayments are generally dependent on the related properties or the financial condition of its borrower or guarantor. Accordingly, repayment of such loans can be more susceptible to adverse conditions in the real estate market and the regional economy.

A substantial portion of the Bank's loan portfolio is real estate loans secured by residential and commercial real estate properties located in the Baltimore metropolitan area. Loans are extended only after evaluation of a customer's creditworthiness and other relevant factors on a case-by-case basis. The Bank generally does

not

lend more than

75%

95%

of the appraised value of a property, depending on the type of loan, and requires private mortgage insurance on residential mortgages with loan-to-value ratios in excess of

80%.

In addition, the Bank generally obtains personal guarantees of repayment from borrowers and/or others for construction loans and disburses the proceeds of those and similar loans only as work progresses on the related projects.

Commercial business loans are made to provide funds for equipment and general corporate needs. Repayment of a loan primarily uses the funds obtained from the operation of the borrower’s business. Commercial loans also include lines of credit that are utilized to finance a borrower’s short-term credit needs and/or to finance a percentage of eligible receivables and inventory. The Company’s loan portfolio also includes equipment leases, which consists of leases for essential commercial equipment used by small to medium sized businesses.

The home equity loans consist of both conforming loans and revolving lines of credit to consumers which are secured by residential real estate. These loans are typically secured with

second

mortgages on the homes. Consumer loans include share loans, installment loans and, to a lesser extent, personal lines of credit. Share loans represent loans that are collateralized by a certificate of deposit or other deposit product. Installment loans are used by customers to purchase primarily automobiles; but

may

be used to also purchase boats and recreational vehicles.

The following table details activity in the allowance for loan losses by portfolio segment for the

three

and

nine

-month periods ended

December 31, 2018

and

2017.

The allowance for loan losses allocated to each portfolio segment is

not

necessarily indicative of future losses in any particular portfolio segment and does

not

restrict the use of the allowance to absorb losses in other portfolio segments.

Three Months Ended December 31, 2018	Residential Real Estate			Investor Real Estate			Commercial Real Estate			Commercial Construction			Commercial Business			Home Equity		Consumer			Unallocated		Total
Allowance for credit losses:
Beginning balance	$	665,676		$	314,571		$	1,312,441		$	12,390		$	532,611		$	72,831	$	98,676		$	21,733	$	3,030,929
Charge-offs		-			(32,909	)		-			-			(133,729	)		-		-			-		(166,638	)
Recoveries		41,059			33,609			-			-			10,880			-		1,267			-		86,815
Provision for credit losses		(24,321	)		(36,632	)		(31,557	)		(4,090	)		160,895			1,555		(4,214	)		18,364		80,000
Ending balance	$	682,414		$	278,639		$	1,280,884		$	8,300		$	570,657		$	74,386	$	95,729		$	40,097	$	3,031,106

Nine Months Ended December 31, 2018	Residential Real Estate			Investor Real Estate			Commercial Real Estate			Commercial Construction			Commercial Business			Home Equity		Consumer			Unallocated		Total
Allowance for credit losses:
Beginning balance	$	608,723		$	51,690		$	1,253,383		$	33,430		$	673,982		$	69,459	$	131,236		$	-	$	2,821,903
Charge-offs		(13,769	)		(41,022	)		(31,320	)		-			(208,729	)		-		(2,465	)		-		(297,305	)
Recoveries		43,301			33,675			31,320			-			10,880			-		4,836			-		124,012
Provision for credit losses		44,159			234,296			27,501			(25,130	)		94,524			4,927		(37,878	)		40,097		382,496
Ending balance	$	682,414		$	278,639		$	1,280,884		$	8,300		$	570,657		$	74,386	$	95,729		$	40,097	$	3,031,106

Allowance allocated to:
Legacy Loans:
Individually evaluated for impairment	$	253,811		$	-		$	-		$	-		$	-		$	-	$	-		$	-	$	253,811
Collectively evaluated for impairment		276,937			50,593			1,241,051			7,254			566,217			59,952		95,516			40,097		2,337,617

Acquired Loans:
Individually evaluated for impairment	$	-		$	-		$	-		$	-		$	-		$	-	$	-		$	-	$	-
Collectively evaluated for impairment		151,666			228,046			39,833			1,046			4,440			14,434		213			-		439,678

Three Months Ended December 31, 2017	Residential Real Estate		Investor Real Estate			Commercial Real Estate			Commercial Construction		Commercial Business		Home Equity		Consumer			Unallocated		Total
Allowance for credit losses:
Beginning balance	$	528,288	$	52,255		$	1,360,433		$	12,074	$	327,130	$	62,570	$	128,241		$	-	$	2,470,991
Charge-offs		-		(111,360	)		(100,236	)		-		-		-		-			-		(211,596	)
Recoveries		3,937		-			-			-		171		-		1,034			-		5,142
Provision for credit losses		35,875		103,790			148,707			11,100		45,987		619		(1,078	)		-		345,000
Ending balance	$	568,100	$	44,685		$	1,408,904		$	23,174	$	373,288	$	63,189	$	128,197		$	-	$	2,609,537

Nine Months Ended December 31, 2017	Residential Real Estate			Investor Real Estate			Commercial Real Estate			Commercial Construction		Commercial Business		Home Equity			Consumer			Unallocated		Total
Allowance for credit losses:
Beginning balance	$	553,539		$	35,275		$	1,375,894		$	9,031	$	149,461	$	70,071		$	1,544		$	-	$	2,194,815
Charge-offs		(8,907	)		(126,482	)		(100,236	)		-		-		-			(486	)		-		(236,111	)
Recoveries		3,937			18,129			-			-		551		-			3,216			-		25,833
Provision for credit losses		19,531			117,763			133,246			14,143		223,276		(6,882	)		123,923			-		625,000
Ending balance	$	568,100		$	44,685		$	1,408,904		$	23,174	$	373,288	$	63,189		$	128,197		$	-	$	2,609,537

Allowance allocated to:
Legacy Loans:
Individually evaluated for impairment	$	272,707		$	-		$	-		$	-	$	-	$	-		$	-		$	-	$	272,707
Collectively evaluated for impairment		295,393			44,685			1,408,904			23,174		373,288		63,189			128,197			-		2,336,830

Acquired Loans:
Individually evaluated for impairment	$	-		$	-		$	-		$	-	$	-	$	-		$	-		$	-	$	-
Collectively evaluated for impairment		-			-			-			-		-		-			-			-		-

Our recorded investment in loans at

December 31, 2018

and

2017

related to each balance in the allowance for probable loan losses by portfolio segment and disaggregated on the basis of our impairment methodology was as follows:

December 31, 2018	Residential Real Estate		Investor Real Estate		Commercial Real Estate		Commercial Construction		Commercial Business		Home Equity		Consumer		Total
Legacy Loans:
Individually evaluated for impairment	$	1,773,176	$	31,752	$	4,139,177	$	-	$	743,160	$	6,785	$	91,662	$	6,785,712
Collectively evaluated for impairment		84,774,908		7,305,529		101,616,609		1,543,313		34,533,333		15,070,283		16,237,575		261,081,550
Ending balance	$	86,548,084	$	7,337,281	$	105,755,786	$	1,543,313	$	35,276,493	$	15,077,068	$	16,329,237	$	267,867,262

Acquired Loans:
Individually evaluated for impairment	$	440,242	$	261,659	$	-	$	-	$	-	$	164	$	55,492	$	757,557
Collectively evaluated for impairment		65,815,018		16,145,606		9,289,784		1,059,217		1,706,509		4,940,887		643,880		99,600,901
Ending balance	$	66,255,260	$	16,407,265	$	9,289,784	$	1,059,217	$	1,706,509	$	4,941,051	$	699,372	$	100,358,458

December 31, 2017	Residential Real Estate		Investor Real Estate		Commercial Real Estate		Commercial Construction		Commercial Business		Home Equity		Consumer		Total
Legacy Loans:
Individually evaluated for impairment	$	1,697,585	$	121,514	$	4,500,043	$	-	$	905,178	$	21,579	$	-	$	7,245,899
Collectively evaluated for impairment		85,532,435		7,254,483		96,357,409		3,995,441		38,083,051		13,780,512		20,075,548		265,078,879
Ending balance	$	87,230,020	$	7,375,997	$	100,857,452	$	3,995,441	$	38,988,229	$	13,802,091	$	20,075,548	$	272,324,778

Acquired Loans:
Individually evaluated for impairment	$	1,061,049	$	579,172	$	199,920	$	-	$	-	$	-	$	56,708	$	1,896,849
Collectively evaluated for impairment		73,640,662		17,629,734		11,960,924		856,970		1,928,232		6,874,136		728,392		113,619,050
Ending balance	$	74,701,711	$	18,208,906	$	12,160,844	$	856,970	$	1,928,232	$	6,874,136	$	785,100	$	115,515,899

Past due loans, segregated by age and class of loans, as of and for the

nine

months ended

December 31, 2018

and as of and for the year ended

March 31, 2018,

were as follows:

	December 31, 2018						March 31, 2018
	Legacy		Acquired		Total		Legacy		Acquired		Total
Current	$	262,125,497	$	99,620,976	$	361,746,473	$	270,807,643	$	109,972,473	$	380,780,116
Accruing past due loans:
30-59 days past due:
Real estate loans:
Residential		71,020		18,488		89,508		63,618		689,364		752,982
Investor		-		29,357		29,357		-		-		-
Commercial		-		-		-		-		-		-
Commercial construction		-		-		-		-		-		-
Commercial business		120,418		-		120,418		135,502		-		135,502
Home equity loans		-		68		68		-		-		-
Consumer		23,357		25,753		49,110		148,876		-		148,876
Total 30-59 days past due		214,795		73,666		288,461		347,996		689,364		1,037,360

60-89 days past due:
Real estate loans:
Residential		72,377		121,223		193,600		70,291		-		70,291
Investor		-		-		-		-		-		-
Commercial		-		-		-		-		-		-
Commercial construction		-		-		-		-		-		-
Commercial business		460,762		-		460,762		134,524		-		134,524
Home equity loans		-		-		-		-		-		-
Consumer		5,233		-		5,233		28,300		-		28,300
Total 60-89 days past due		538,372		121,223		659,595		233,115		-		233,115

90 or more days past due:
Real estate loans:
Residential		-		-		-		-		-		-
Investor		222,485		113,029		335,514		734,818		471,423		1,206,241
Commercial		-		-		-		-		-		-
Commercial construction		-		-		-		-		-		-
Commercial business		-		-		-		-		-		-
Home equity loans		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total 90 or more days past due		222,485		113,029		335,514		734,818		471,423		1,206,241
Total accruing past due loans		975,652		307,918		1,283,570		1,315,929		1,160,787		2,476,716

Non-accruing loans:
Real estate loans:
Residential		365,610		300,530		666,140		526,584		338,060		864,644
Investor		31,752		128,937		160,689		60,949		300,872		361,821
Commercial		4,139,177		-		4,139,177		4,356,264		198,938		4,555,202
Commercial construction		-		-		-		-		-		-
Commercial business		143,145		-		143,145		165,285		-		165,285
Home equity loans		-		97		97		12,605		-		12,605
Consumer		86,429		-		86,429		4,850		-		4,850
Non-accruing loans:		4,766,113		429,564		5,195,677		5,126,537		837,870		5,964,407
Total Loans	$	267,867,262	$	100,358,458	$	368,225,720	$	277,250,109	$	111,971,130	$	389,221,239


Nonaccrual interest not accrued:
Real estate loans:
Residential	$	2,289	$	7,237	$	9,526	$	8,250	$	53,120	$	61,370
Investor		2,066		6,490		8,556		8,513		15,604		24,117
Commercial		252,381		-		252,381		294,619		-		294,619
Commercial construction		-		-		-		-		-		-
Commercial business		8,796		-		8,796		12,891		-		12,891
Home equity loans		-		-		-		436		-		436
Consumer		1,459		-		1,459		385		-		385
Total nonaccrual interest not accrued	$	266,991	$	13,727	$	280,718	$	325,094	$	68,724	$	393,818

Impaired loans as of and for the

three

and

nine

months ended

December 31, 2018

and

2017,

and the year ended

March 31, 2018,

was as follows:

	Impaired Loans at December 31, 2018						Three months ended December 31, 2018				Nine months ended December 31, 2018
	Unpaid
	Contractual						Average		Interest		Average		Interest
	Principal		Recorded		Related		Recorded		Income		Recorded		Income
	Balance		Investment		Allowance		Investment		Recognized		Investment		Recognized
Legacy:
With no related allowance recorded:
Real estate loans:
Residential	$	706,098	$	538,723	$	-	$	558,414	$	3,719	$	538,965	$	7,666
Investor		-		-		-		-		-		-		-
Commercial		6,375,413		4,139,177		-		4,309,168		-		4,280,325		53,278
Commercial construction
Commercial business		1,369,695		743,160		-		863,260		25,781		925,694		70,558
Home equity loans		33,287		6,785		-		7,036		1,910		7,293		2,043
Consumer		91,745		91,662		-		92,474		2,542		92,822		2,542
With an allowance recorded:
Real estate loans:
Residential	$	1,248,874	$	1,234,453	$	253,811	$	1,237,197	$	12,337	$	1,246,235	$	37,255
Investor		57,831		31,752		-		32,427		1,108		32,291		1,108
Commercial		-		-		-		-		-		-		-
Commercial construction		-		-		-		-		-		-		-
Commercial business		-		-		-		-		-		-		-
Home equity loans		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-
Total legacy impaired		9,882,943		6,785,712		253,811		7,099,976		47,397		7,123,625		174,450

Acquired (1):
With no related allowance recorded:
Real estate loans:
Residential		456,272		440,242		-		439,495		5,457		425,256		7,179
Investor		405,538		261,659		-		263,562		4,722		246,751		13,859
Commercial
Commercial construction
Commercial business
Home equity loans		37,858		164		-		238		1,851		79		2,501
Consumer		88,545		55,492		-		56,249		1,401		57,957		3,949
With an allowance recorded:
Real estate loans:
Residential		-		-		-		-		-		-		-
Investor		-		-		-		-		-		-		-
Commercial		-		-		-		-		-		-		-
Commercial construction		-		-		-		-		-		-		-
Commercial business		-		-		-		-		-		-		-
Home equity loans		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-
Total acquired impaired		988,213		757,557		-		759,544		13,431		730,043		27,488
Total impaired	$	10,871,156	$	7,543,269	$	253,811	$	7,859,520	$	60,828	$	7,853,668	$	201,938

(

)

Generally accepted accounting principles require that we record acquired loans at fair value at acquisition, which includes a discount for loans with credit impairment. These purchased credit impaired loans are

not

performing according to their contractual terms and meet the definition of an impaired loan. Although we do

not

accrue interest income at the contractual rate on these loans, we do recognize an accretable yield as interest income to the extent such yield is supported by cash flow analysis of the underlying loans.

	Impaired Loans at December 31, 2017						Three months ended December 31, 2017				Nine months ended December 31, 2017
	Unpaid
	Contractual						Average		Interest		Average		Interest
	Principal		Recorded		Related		Recorded		Income		Recorded		Income
	Balance		Investment		Allowance		Investment		Recognized		Investment		Recognized
Legacy:
With no related allowance recorded:
Real estate loans:
Residential	$	513,736	$	371,312	$	-	$	376,225	$	280	$	387,772	$	1,451
Investor		127,420		121,514				122,576		-		123,362		3,772
Commercial		6,487,088		4,500,043		-		4,689,502		-		4,703,598		1,077
Commercial construction		-		-		-		-		-		-		-
Commercial business		1,303,000		905,178		-		937,594		24,038		894,330		75,926
Home equity loans		48,218		21,579		-		22,072		76		23,100		316
Consumer		-		-		-		-		-		-		-
With an allowance recorded:
Real estate loans:
Residential		1,354,169		1,326,273		272,707		1,330,015		13,248		1,341,584		39,333
Investor		-		-		-		-		-		-		-
Commercial		-		-		-		-		-		-		-
Commercial construction		-		-		-		-		-		-		-
Commercial business		-		-		-		-		-		-		-
Home equity loans		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-
Total legacy impaired		9,833,631		7,245,899		272,707		7,477,984		37,642		7,473,746		121,875

Acquired (1):
With no related allowance recorded:
Real estate loans:
Residential		1,211,254		1,061,049		-		1,063,445		4,247		1,077,738		26,087
Investor		687,849		579,172		-		663,538		2,893		697,174		34,582
Commercial		249,920		199,920		-		200,589		1,888		202,263		5,700
Commercial construction		-		-		-		-		-		-		-
Commercial business		-		-		-		-		-		-		-
Home equity loans		42,583		-		-		-		-		-		600
Consumer		99,349		56,708		-		58,084		1,338		62,234		4,464
With an allowance recorded:
Real estate loans:
Residential		-		-		-		-		-		-		-
Investor		-		-		-		-		-		-		-
Commercial		-		-		-		-		-		-		-
Commercial construction		-		-		-		-		-		-		-
Commercial business		-		-		-		-		-		-		-
Home equity loans		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-
Total acquired impaired		2,290,955		1,896,849		-		1,985,656		10,366		2,039,409		71,433
Total impaired	$	12,124,586	$	9,142,748	$	272,707	$	9,463,640	$	48,008	$	9,513,155	$	193,308

(

)

not

performing according to their contractual terms and meet the definition of an impaired loan. Although we do

not

	Impaired Loans at March 31, 2018						For the Year Ended March 31, 2018
	Unpaid
	Contractual						Average		Interest
	Principal		Recorded		Related		Recorded		Income
	Balance		Investment		Allowance		Investment		Recognized
Legacy:
With no related allowance recorded:
Real estate loans:
Residential	$	665,051	$	517,600	$	-	$	548,636	$	9,257
Investor		126,389		60,949				118,175		3,772
Commercial		6,487,088		4,356,264		-		4,634,504		1,077
Commercial construction		-		-		-		-		-
Commercial business		1,562,756		795,410		-		1,082,773		103,474
Home equity loans		47,650		20,595		-		22,604		392
Consumer		48,115		34,266		-		38,514		1,576
With an allowance recorded:
Real estate loans:
Residential		1,336,078		1,309,440		266,256		1,328,919		51,928
Investor		-		-		-		-		-
Commercial		-		-		-		-		-
Commercial construction		-		-		-		-		-
Commercial business		-		-		-		-		-
Home equity loans		-		-		-		-		-
Consumer		-		-		-		-		-
Total legacy impaired		10,273,127		7,094,524		266,256		7,774,125		171,476

Acquired (1):
With no related allowance recorded:
Real estate loans:
Residential		1,082,484		922,252		-		945,602		26,437
Investor		682,045		444,254		-		659,246		37,368
Commercial		248,938		198,938		-		201,519		7,336
Commercial construction		-		-		-		-		-
Commercial business		-		-		-		-		-
Home equity loans		40,473		-		-		-		1,329
Consumer		95,986		60,371		-		64,013		6,062
With an allowance recorded:
Real estate loans:
Residential		-		-		-		-		-
Investor		-		-		-		-		-
Commercial		-		-		-		-		-
Commercial construction		-		-		-		-		-
Commercial business		-		-		-		-		-
Home equity loans		-		-		-		-		-
Consumer		-		-		-		-		-
Total acquired impaired		2,149,926		1,625,815		-		1,870,380		78,532
Total impaired	$	12,423,053	$	8,720,339	$	266,256	$	9,644,505	$	250,008

(

)

not

performing according to their contractual terms and meet the definition of an impaired loan. Although we do

not

The following table documents changes in the carrying amount of acquired impaired loans (Purchased Credit Impaired or “PCI”) for the

nine

months ended

December 31, 2018

and

2017,

along with the outstanding balance at the end of the period:

	December 31, 2018			December 31, 2017

Recorded investment at beginning of period	$	1,021,424		$	1,341,935
Accretion		2,505			25,964
Reductions for payments		(649,168	)		(324,806	)
Recorded investment at end of period	$	374,761		$	1,043,093
Oustanding principal balance at end of period	$	470,368		$	1,297,471

A summary of changes in the accretable yield for PCI loans for the

nine

months ended

December 31, 2018

and

2017

is as follows:

	December 31, 2018			December 31, 2017

Accretable yield, beginning of period	$	31,895		$	59,639
Accretion		(2,505	)		(25,964	)
Reclassification from nonaccretable difference		-			-
Accretable yield, end of period	$	29,390		$	33,675

Impaired loans also include certain loans that have been modified in troubled debt restructurings (TDRs) where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Bank's loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Generally, nonaccrual loans that are modified and considered TDRs are classified as nonperforming at the time of restructure and

may

only be returned to performing status after considering the borrower's sustained repayment performance for a reasonable period, generally

six

months.

A summary of TDRs at

December 31, 2018

and

March 31, 2018

follows:

	Number of
December 31, 2018	contracts		Performing		Nonperforming		Total
Real estate loans:
Residential		16	$	1,295,469	$	226,119	$	1,521,588
Investor		-		-		-		-
Commercial		2		-		1,195,421		1,195,421
Commercial construction		-		-		-		-
Commercial business		1		600,016		-		600,016
Home equity loans		-		-		-		-
Consumer		-		-		-		-
		19	$	1,895,485	$	1,421,540	$	3,317,025

	Number of
March 31, 2018	contracts		Performing		Nonperforming		Total
Real estate loans:
Residential		15	$	1,230,166	$	312,964	$	1,543,130
Investor		-		-		-		-
Commercial		2		-		1,195,421		1,195,421
Commercial construction		-		-		-		-
Commercial business		1		605,488		-		605,488
Home equity loans		-		-		-		-
Consumer		-		-		-		-
		18	$	1,835,654	$	1,508,385	$	3,344,039

The following table presents the number of contracts and the dollar amount of TDRs that were added during the

three

and

nine

-month periods ended

December

31,

2018

and

2017.

There were

TDRs added during the

three

-month period ended

December 31, 2018.

The amount shown reflects the outstanding loan balance at the time of the modification. There are

commitments to extend credit under existing TDRs as of

December 31, 2018.

Loans Modified as a TDR for the Three Months Ended

December 31, 2018

December 31, 2017

Number of

Outstanding recorded

Number of

Outstanding recorded

Troubled Debt Restructurings

contracts

investment

contracts

investment

Real estate loans:

Residential

50,432

Loans Modified as a TDR for the nine months ended

December 31, 2018

December 31, 2017

Number of

Outstanding recorded

Number of

Outstanding recorded

Troubled Debt Restructurings

contracts

investment

contracts

investment

Real estate loans:

One-to four-family

20,565

52,363

There were

TDRs that defaulted in the

three

nine

months ended

December 31, 2018

and

2017.

Payment default under a TDR is defined as any TDR that is

days or more past due following the time that the loan was modified or the inability of the TDR to make the required payment subsequent to the modification.

In calculating the allowance for loan losses, individual TDRs are evaluated for impairment. TDRs are evaluated for impairment based upon either the present value of cash flows or, if collateral dependent, the lower of cost or fair value of the underlying collateral. If it is determined that the cash flows or underlying collateral is less than the carrying amount of the loan, the difference in value will be charged-off through earnings, unless the TDR is performing, in which case a specific reserve

may

be set-up for that TDR.

Credit quality indicators

As part of the ongoing monitoring of the credit quality of the Bank's loan portfolio, management tracks certain credit quality indicators including trends related to the risk grade of loans, the level of classified loans, net charge offs, nonperforming loans, and the general economic conditions in the Bank's market.

The Bank utilizes a risk grading matrix to assign a risk grade to each of its loans. A description of the general characteristics of loans characterized as watch list or classified is as follows:

Pass

A pass loan is considered of sufficient quality to preclude a special mention or an adverse rating. Pass assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral.

Special Mention

A special mention loan has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses

may

result in deterioration of the repayment prospects for the loan or in the Bank's credit position at some future date. Special mention loans are

not

adversely classified and do

not

expose the Bank to sufficient risk to warrant adverse classification.

Loans that would primarily fall into this notational category could have been previously classified adversely, but the deficiencies have since been corrected. Management should closely monitor recent payment history of the loan and value of the collateral.

Borrowers

may

exhibit poor liquidity and leverage positions resulting from generally negative cash flow or negative trends in earnings. Access to alternative financing

may

be limited to finance companies for business borrowers and

may

be unavailable for commercial real estate borrowers.

Substandard

A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness, or weaknesses, that jeopardize the collection or liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are

not

corrected. This will be the measurement for determining if a loan is impaired.

Borrowers

may

exhibit recent or unexpected unprofitable operations, an inadequate debt service coverage ratio, or marginal liquidity and capitalization. These loans require more intense supervision by Bank management.

Doubtful

A doubtful loan has all the weaknesses inherent as a substandard loan 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. A loan classified as doubtful exhibits loss potential. However, there is still sufficient reason to permit the loan to remain on the books. A doubtful classification could reflect the deterioration of the primary source of repayment and serious doubt exists as to the quality of the secondary source of repayment.

Doubtful classifications should be used only when a distinct and known possibility of loss exists. When identified, adequate loss should be recorded for the specific assets. The entire asset should

not

be classified as doubtful if a partial recovery is expected, such as liquidation of the collateral or the probability of a private mortgage insurance payment is likely.

Loss

Loans classified as loss are considered uncollectable and of such little value that their continuance as loans is unjustified. A loss classification does

not

mean a loan has absolutely

value; partial recoveries

may

be received in the future. When loans or portions of a loan are considered a loss, it will be the policy of the Bank to write-off the amount designated as a loss. Recoveries will be treated as additions to the allowance for loan losses.

The following tables present the

December 31, 2018

and

March 31, 2018,

balances of classified loans based on the risk grade. Classified loans include Special Mention, Substandard, Doubtful, and Loss loans. The Bank had

loans classified as Doubtful or Loss as of

December 31, 2018

March 31, 2018.

	December 31, 2018						March 31, 2018
	LEGACY		ACQUIRED		TOTAL		LEGACY		ACQUIRED		TOTAL
Risk Rating:
Rating - Pass:
Real estate loans:
Residential	$	83,743,323	$	64,856,380	$	148,599,703	$	87,863,805	$	70,901,293	$	158,765,098
Investor		7,305,529		15,873,106		23,178,635		9,214,082		16,719,346		25,933,428
Commercial		101,616,609		9,289,784		110,906,393		92,955,370		11,563,547		104,518,917
Commercial construction		1,543,313		1,059,217		2,602,530		5,763,784		1,352,019		7,115,803
Commercial Business		34,835,870		1,706,509		36,542,379		37,978,293		1,841,226		39,819,519
Home Equity		15,070,123		4,805,766		19,875,889		13,935,732		5,928,787		19,864,519
Consumer		16,227,625		669,618		16,897,243		18,733,489		733,669		19,467,158
Total Pass		260,342,392		98,260,380		358,602,772		266,444,555		109,039,887		375,484,442

Rating - Special Mention:
Real estate loans:
Residential		2,327,412		958,638		3,286,050		2,365,652		925,521		3,291,173
Investor		-		273,806		273,806		-		297,209		297,209
Commercial		-		-		-		3,092,135		-

Hamilton Bancorp, Inc. 10-Q