Company Quick10K Filing
Quick10K
Cincinnati Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$16.10 2 $29
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
8-K 2019-08-21 Amend Bylaw, Exhibits
8-K 2019-07-17 Officers, Other Events, Exhibits
8-K 2019-05-23 Shareholder Vote
8-K 2018-10-12 Officers, Amend Bylaw, Exhibits
8-K 2018-10-12 Other Events, Exhibits
8-K 2018-09-26 Other Events, Exhibits
8-K 2018-08-20 Other Events, Exhibits
8-K 2018-05-24 Shareholder Vote
8-K 2018-04-18 Enter Agreement, Regulation FD, Other Events, Exhibits
ACXM Acxiom 2,740
GOV Government Properties Income Trust 790
VIBI Vilacto Bio 55
SPND Spindletop Oil & Gas 27
SMDM Singing Machine 11
UCC Union Carbide 0
USRM US Stem Cell 0
OBMP OncBioMune 0
BBII Brisset Beer 0
ARGQ Argentum 47 0
CNNB 2019-06-30
Part I. - Financial Information
Item 1.Financial Statements
Note 1:Nature of Operations and Summary of Significant Account Policies
Note 2:Merger
Note 3:Securities
Note 4:Loans and Allowance for Loan Losses
Note 5:Earnings per Common Share
Note 6:Regulatory Matters
Note 7:Disclosure About Fair Values of Assets and Liabilities
Note 8:Commitments and Credit Risk
Note 9:Accumulated Other Comprehensive Loss
Note 10:Equity Incentive Plan
Note 11:Recent Accounting Pronouncements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II - Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
EX-31.1 tv527017_ex31-1.htm
EX-31.2 tv527017_ex31-2.htm
EX-32 tv527017_ex32.htm

Cincinnati Bancorp Earnings 2019-06-30

CNNB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 tv527017_10q.htm FORM 10-Q

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

xQuarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2019

 

OR

 

¨Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from _______________ to _______________

 

Commission File No. 000-55529

 

Cincinnati Bancorp

(Exact name of registrant as specified in its charter)

 

Federal   47-4931771

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

     
6581 Harrison Avenue, Cincinnati, Ohio   45247
(Address of Principal Executive Offices)   (Zip Code)

 

(513) 574-3025

(Registrant’s telephone number)

 

N/A

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

 

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

 

         
Title of Each Class  

Trading

Symbol(s)

  Name of Each Exchange on Which
Registered

 

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

YES x     NO ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES x     NO ¨

 

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.

 

Large accelerated filer ¨   Accelerated filer ¨
Non-accelerated filer x   Smaller reporting company x
    Emerging growth company x

 

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

 

As of August 12, 2019, 1,816,517 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding, of which 1,008,969 shares were owned by CF Mutual Holding Company.

 

 

 

   

 

 

Cincinnati Bancorp

Form 10-Q

 

Index

 

    Page
     
  Part I. Financial Information  
     
Item 1. Condensed Consolidated Financial Statements 1
     
  Condensed Consolidated Balance Sheets as of June 30, 2019 (Unaudited) and December 31, 2018 1
     
  Condensed Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2019 and 2018 (Unaudited) 2
     
  Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2019 and 2018 (Unaudited) 3
     
  Condensed Consolidated Statement of Stockholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018 (Unaudited) 4
     
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (Unaudited) 6
     
  Notes to Condensed Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 47
     
Item 4. Controls and Procedures 47
     
  Part II. Other Information  
     
Item 1. Legal Proceedings 47
     
Item 1A. Risk Factors 47
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 47
     
Item 3. Defaults upon Senior Securities 47
     
Item 4. Mine Safety Disclosures 47
     
Item 5. Other Information 47
     
Item 6. Exhibits 48
     
  Signature Page 49

 

   

 

 

Part I. – Financial Information

 

Item 1.Financial Statements

 

Cincinnati Bancorp

Condensed Consolidated Balance Sheets

June 30, 2019 (Unaudited) and December 31, 2018

 

   June 30,   December 31, 
   2019   2018 
   (Unaudited)     
         
Assets          
Cash and due from banks  $2,428,381   $2,620,309 
Interest-bearing demand deposits in banks   7,063,240    4,107,880 
Federal funds sold   1,656,000    4,361,000 
           
Cash and cash equivalents   11,147,621    11,089,189 
           
Interest-bearing time deposits   200,000    200,000 
Available-for-sale securities   427,338    630,361 
Loans held for sale   4,128,092    1,282,000 
Loans, net of allowance for loan losses of  $1,404,988 and $1,405,072, respectively   176,159,596    170,365,031 
Premises and equipment, net   3,398,213    3,407,185 
Federal Home Loan Bank stock   2,657,400    2,583,100 
Foreclosed assets held for sale   -    102,098 
Interest receivable   611,126    569,659 
Mortgage servicing rights   1,398,293    1,252,740 
Federal Home Loan Bank lender risk account receivable   1,583,550    1,703,276 
Bank-owned life insurance   4,042,150    3,997,242 
Other assets   581,022    512,180 
           
Total assets  $206,334,401   $197,694,061 
           
Liabilities and Stockholders' Equity          
Liabilities          
Deposits          
Demand  $27,963,967   $29,308,448 
Savings   34,732,283    32,534,398 
Certificates of deposit   75,959,432    80,548,910 
Total deposits   138,655,682    142,391,756 
           
Federal Home Loan Bank advances   41,315,752    28,580,438 
Advances from borrowers for taxes and insurance   1,056,672    1,799,419 
Interest payable   76,894    53,945 
Directors deferred compensation   610,506    571,186 
Other liabilities   1,098,604    1,155,894 
           
Total liabilities   182,814,110    174,552,638 
           
 Commitments and Contingent Liabilities          
           
Temporary Equity          
ESOP Shares subject to mandatory redemption   209,202    180,563 
           
Stockholders' Equity          
Preferred stock - authorized 1,000,000 shares, $0.01 par value, none issued   -    - 
Common stock - authorized 9,000,000 shares, $0.01 par value, 1,816,517 and 1,816,329 issued and outstanding at June 30, 2019 and December 31, 2018, respectively   29,593    29,593 
Additional paid-in capital   7,488,899    7,458,745 
Unearned ESOP shares   (471,779)   (494,245)
Retained earnings - substantially restricted   16,531,264    16,219,209 
Accumulated other comprehensive loss   (266,888)   (252,442)
           
Total stockholders' equity   23,311,089    22,960,860 
           
Total liabilities, temporary equity, and stockholders' equity  $206,334,401   $197,694,061 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 1 

 

 

Cincinnati Bancorp

Condensed Consolidated Statements of Income

Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2019   2018   2019   2018 
   (Unaudited)   (Unaudited) 
Interest and Dividend Income                    
Loans, including fees  $2,073,974   $1,639,322   $4,023,086   $3,197,269 
Securities   2,685    4,014    6,415    7,598 
Dividends on Federal Home Loan Bank stock and other   83,542    42,728    163,258    82,767 
Total interest and dividend income   2,160,201    1,686,064    4,192,759    3,287,634 
                     
Interest Expense                    
Deposits   484,508    336,295    932,103    640,805 
Federal Home Loan Bank advances   223,753    152,645    398,239    288,184 
Total interest expense   708,261    488,940    1,330,342    928,989 
                     
Net Interest Income   1,451,940    1,197,124    2,862,417    2,358,645 
                     
Provision for Loan Losses   -    15,000    -    30,000 
                     
Net Interest Income After Provision for Loan Losses   1,451,940    1,182,124    2,862,417    2,328,645 
                     
Noninterest Income                    
Gain on sales of loans   538,256    464,765    716,207    804,525 
Mortgage servicing fees   78,214    43,639    167,925    179,674 
Other   228,039    176,383    413,397    373,965 
Total noninterest income   844,509    684,787    1,297,529    1,358,164 
                     
Noninterest Expense                    
Salaries and employee benefits   1,067,211    827,902    2,057,042    1,645,791 
Occupancy and equipment   132,828    108,244    289,697    240,109 
Directors compensation   50,500    42,250    104,560    84,500 
Data processing   207,112    141,896    382,139    292,354 
Professional fees   71,661    59,158    144,997    150,588 
Franchise tax   51,527    38,857    100,298    77,857 
Deposit insurance premiums   13,607    12,808    28,406    25,385 
Advertising   20,542    37,163    60,823    72,712 
Software licenses   28,126    21,352    56,957    43,557 
Loan costs   80,265    121,215    159,861    217,152 
Net gains on sales of foreclosed assets   (54,474)   -    (54,474)   - 
Merger-related expenses   -    59,873    18,000    82,193 
Other   244,593    152,497    456,705    284,599 
Total noninterest expense   1,913,498    1,623,215    3,805,011    3,216,797 
                     
Income Before Income Taxes   382,951    243,696    354,935    470,012 
                     
Provision for Income Taxes   62,795    58,139    42,880    105,135 
                     
Net Income  $320,156   $185,557   $312,055   $364,877 
                     
Earnings per common share - basic  $0.18   $0.11   $0.18   $0.21 
Earnings per common share - diluted  $0.18   $0.11   $0.18   $0.21 
Weighted-average shares outstanding - basic   1,747,946    1,675,414    1,747,314    1,673,741 
Weighted-average shares outstanding - diluted   1,762,019    1,676,561    1,759,269    1,673,741 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 2 

 

 

Cincinnati Bancorp

Condensed Consolidated Statements of Comprehensive Income

Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2019   2018   2019   2018 
   (Unaudited)   (Unaudited) 
                 
Net Income  $320,156   $185,557   $312,055   $364,877 
                     
Other Comprehensive Income (Loss):                    
Net unrealized gains on available-for-sale securities   1,277    3,653    2,036    1,744 
Tax expense   (268)   (767)   (428)   (366)
Changes in directors' retirement plan prior service costs   (10,161)   (2,664)   (20,322)   (5,328)
Tax benefit   2,134    560    4,268    1,597 
Other comprehensive income (loss)   (7,018)   782    (14,446)   (2,353)
                     
Comprehensive Income  $313,138   $186,339   $297,609   $362,524 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 3 

 

 

Cincinnati Bancorp

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended June 30, 2019 and 2018 (Unaudited)

 

                   Accumulated     
       Additional   Unearned       Other   Total 
   Common   Paid-in   ESOP   Retained   Comprehensive   Stockholders' 
   Stock   Capital   Shares   Earnings   Loss   Equity 
For the Six Months Ended June 30, 2019:                              
                               
Balance, January 1, 2019  $29,593   $7,458,745   $(494,245)  $16,219,209   $(252,442)  $22,960,860 
                               
ESOP shares subject to mandatory redemption   -    (28,639)   -    -    -    (28,639)
                               
ESOP shares earned   -    7,212    22,466    -    -    29,678 
                               
Stock based compensation expense   -    51,581    -    -    -    51,581 
                               
Net income   -    -    -    312,055    -    312,055 
                               
Other comprehensive loss   -    -    -    -    (14,446)   (14,446)
                               
Balance, June 30, 2019  $29,593   $7,488,899   $(471,779)  $16,531,264   $(266,888)  $23,311,089 

 

                   Accumulated     
       Additional   Unearned        Other   Total 
   Common   Paid-in   ESOP   Retained   Comprehensive   Stockholders' 
   Stock   Capital   Shares   Earnings   Loss   Equity 
For the Six Months Ended June 30, 2018:                              
                               
Balance, January 1, 2018  $17,192   $6,172,924   $(539,176)  $13,877,826   $(203,985)  $19,324,781 
                               
Cumulative effect of adoption of ASU 2018-02   -    -    -    40,060    (40,060)   - 
                               
ESOP shares subject to mandatory redemption   -    (22,465)   -    -    -    (22,465)
                               
ESOP shares earned   -    1,965    22,466    -    -    24,431 
                               
Stock based compensation expense   -    51,581    -    -    -    51,581 
                               
Net income   -    -    -    364,877    -    364,877 
                               
Other comprehensive loss   -    -    -    -    (2,693)   (2,693)
                               
Balance, June 30, 2018  $17,192   $6,204,005   $(516,710)  $14,282,763   $(246,738)  $19,740,512 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 4 

 

 

Cincinnati Bancorp

Condensed Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

                   Accumulated     
       Additional   Unearned       Other   Total 
   Common   Paid-in   ESOP   Retained   Comprehensive   Stockholders' 
   Stock   Capital   Shares   Earnings   Loss   Equity 
For the Three Ended June 30, 2019:                              
                               
Balance, April 1, 2019  $29,593   $7,474,341   $(483,012)  $16,211,108   $(259,878)  $22,972,152 
                               
ESOP shares subject to mandatory redemption   -    (15,333)   -    -    -    (15,333)
                               
ESOP shares earned   -    4,101    11,233    -    -    15,334 
                               
Stock based compensation expense   -    25,790    -    -    -    25,790 
                               
Net income   -    -    -    320,156    -    320,156 
                               
Other comprehensive loss   -    -    -    -    (7,010)   (7,010)
                               
Balance, June 30, 2019  $29,593   $7,488,899   $(471,779)  $16,531,264   $(266,888)  $23,311,089 

 

                   Accumulated     
       Additional   Unearned       Other   Total 
   Common   Paid-in   ESOP   Retained   Comprehensive   Stockholders' 
   Stock   Capital   Shares   Earnings   Loss   Equity 
For the Three Ended June 30, 2018:                              
                               
Balance, April 1, 2018  $17,192   $6,188,335   $(527,943)  $14,097,206   $(247,410)  $19,527,380 
                               
                               
ESOP shares subject to mandatory redemption   -    (11,230)   -    -    -    (11,230)
                               
ESOP shares earned   -    1,107    11,233    -    -    12,340 
                               
Stock based compensation expense   -    25,793    -    -    -    25,793 
                               
Net income   -    -    -    185,557    -    185,557 
                               
Other comprehensive loss   -    -    -    -    672    672 
                               
Balance, June 30, 2018  $17,192   $6,204,005   $(516,710)  $14,282,763   $(246,738)  $19,740,512 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 5 

 

 

Cincinnati Bancorp

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

   Six Months Ended June 30, 
   2019   2018 
   (Unaudited) 
         
Operating Activities          
Net income  $312,055   $364,877 
Items not requiring (providing) cash:          
Depreciation and amortization   95,685    67,583 
Provision for loan losses   -    30,000 
Amortization of premiums and discounts on securities, net   7,410    5,306 
Amortization of deferred prepayment penalty on Federal          
Home Loan Bank advances   2,314    2,313 
Change in deferred income taxes   21,225    (37,424)
Gain on sale of loans   (716,207)   (804,525)
Proceeds from the sale of loans held for sale   33,439,389    28,767,731 
Origination of loans held for sale   (35,569,274)   (27,625,130)
Earnings on cash surrender value of bank-owned life insurance   (44,908)   (36,908)
Stock-based compensation expense   51,581    51,581 
ESOP shares earned   29,678    24,431 
Gain on sale of foreclosed assets   (54,474)   - 
Changes in:          
Interest receivable   (41,467)   79,866 
Mortgage servicing rights   (145,553)   (174,833)
Federal Home Loan Bank lender risk account receivable   119,726    102,241 
Other assets   (68,842)   (64,843)
Interest payable   22,949    17,412 
Other liabilities   (55,677)   24,167 
Net cash (used in) provided by operating activities   (2,594,390)   793,845 
           
Investing Activities          
Proceeds from maturities of available-for-sale securities   197,649    144,978 
Purchase of Federal Home Loan Bank stock   (74,300)   (18,700)
Net change in loans   (5,842,692)   (6,140,204)
Purchase of premises and equipment   (86,713)   (11,986)
Proceeds from sale of foreclosed assets   204,699    - 
Net cash used in investing activities   (5,601,357)   (6,025,912)
           
Financing Activities          
Net (decrease) increase in deposits   (3,736,074)   2,517,348 
Proceeds from Federal Home Loan Bank advances   75,636,000    72,991,000 
Repayment of Federal Home Loan Bank advances   (62,903,000)   (68,335,000)
Net decrease in advances from borrowers for taxes and insurance   (742,747)   (554,954)
Net cash provided by financing activities   8,254,179    6,618,394 
           
Increase in Cash and Cash Equivalents   58,432    1,386,327 
Cash and Cash Equivalents, Beginning of Period   11,089,189    10,266,824 
Cash and Cash Equivalents, End of Period  $11,147,621   $11,653,151 
           
Supplemental Cash Flows Information          
Interest paid  $1,307,393   $911,577 
Income taxes paid   -    182,229 
Real estate acquired in settlement of loans   48,127    - 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 6 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 1:Nature of Operations and Summary of Significant Account Policies

 

Nature of Operations

 

Cincinnati Bancorp (“Company”) is the mid-tier holding company for Cincinnati Federal (the “Bank”), a federally chartered stock savings and loan association that is primarily engaged in providing a full range of banking and financial services to individual and corporate customers. Our business operations are conducted in the larger Greater Cincinnati/Northern Kentucky metropolitan area which includes Hamilton, Warren, Butler and Clermont Counties in Ohio, Boone, Kenton and Campbell Counties in Kentucky, and Dearborn County, Indiana. On October 14, 2015, the Bank reorganized into the mutual holding company structure. As part of the reorganization, the Company sold 773,663 shares of common stock at a price of $10.00 per share in a public offering and issued 945,587 shares of common stock to CF Mutual Holding Company, the Company’s parent mutual holding company. The Company is subject to competition from other financial institutions. The Company is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

 

Revenue Recognition

 

On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2014-09 "Revenue from Contracts with Customers" (Accounting Standards Codification (ASC) 606) and all subsequent ASUs that modified ASC 606. ASC 606 provides that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Interest income, net securities gains (losses), gains from the sale of mortgage loans and bank-owned life insurance are not included within the scope of ASC 606. For the revenue streams in the scope of ASC 606, service charges on deposits and electronic banking fees, there are no significant judgments related to the amount and timing of revenue recognition. All of the Company’s revenue from contracts with customers is recognized within noninterest income.

 

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

 

Interchange income: The Company earns interchange income from cardholder transactions conducted through the various payment networks. Interchange income from cardholder transactions represents a percentage of the underlying transaction value and is recognized daily, concurrently with the transaction processing services provided to the cardholder. The gross amount of these fees is processed through noninterest income. Interchange fees are recorded in other noninterest income.

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements as of June 30, 2019 and December 31, 2018 and for the three months and six months ended June 30, 2019 and 2018 include the accounts of Cincinnati Bancorp and the Bank. All significant intercompany items have been eliminated.

 

 7 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Interim Financial Statements

 

The interim financial statements as of June 30, 2019, and for the three months and six months ended June 30, 2019 and 2018 are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments contained in the interim financial statements. The results of operations for the three months and six months ended June 30, 2019, are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 2019, or any other period.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, loan servicing rights, lender reserve account and fair values of financial instruments.

 

 8 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 2:Merger

 

On April 18, 2018, Cincinnati Federal and Kentucky Federal Savings and Loan Association (“Kentucky Federal”) signed an Agreement and Plan of Merger, pursuant to which Kentucky Federal merged with and into Cincinnati Federal effective October 12, 2018.

 

On the effective date of the merger, the Company issued from its authorized but unissued shares of common stock, 63,382 shares of common stock to CF Mutual Holding Company. The number of shares issued was in consideration of Kentucky Federal’s appraised value. At closing, Kentucky Federal Director, Philip Wehrman, was added to the Boards of Directors of CF Mutual Holding Company, Cincinnati Bancorp and Cincinnati Federal.

 

The merger with Kentucky Federal was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid were recorded at their estimated fair values as of the merger date. The following table summarizes the fair value recorded as of October 12, 2018:

 

   Amount   Fair Value   Fair Value 
   Recorded   Adjustments   Recorded 
             
Consideration Paid:               
                
Fair value of total consideration transferred (common shares issued)  $1,240,001   $-   $1,240,001 
                
Identifiable Assets Acquired:               
                
Cash and cash equivalents   2,224,645    -    2,224,645 
Interest-bearing time deposits   3,580,000    -    3,580,000 
Investment securities   5,280,000    (280,107)   4,999,893 
Federal Home Loan Bank Stock   1,543,300    -    1,543,300 
Net loans receivable   16,159,521    164,074    16,323,595 
Premises & Equipment, net   194,202    772,700    966,902 
Core deposit and other intangibles   -    221,193    221,193 
Other real estate owned   132,590    (33,000)   99,590 
Other assets   895,044    (35,718)   859,326 
                
Total identifiable assets acquired   30,009,302    809,142    30,818,444 
                
Liabilities Assumed:               
                
Deposits   26,475,279    3,739    26,479,018 
Federal Home Loan Bank advances   343,242    -    343,242 
Deferred taxes   41,947    176,636    218,583 
Other Liabilities   345,260    -    345,260 
                
Total liabilities assumed   27,205,728    180,375    27,386,103 
                
Total identified net assets acquired   2,803,574    628,767    3,432,341 
                
Gain on merger  $1,563,573   $628,767   $2,192,340 

 

As permitted by ASC No. 805-10-25, Business Combinations, the above estimates may be adjusted up to one year after closing date of the acquisition to reflect any new information obtained about facts and circumstances existing at the acquisition date. Any changes in the estimated fair values will be recognized in the period the adjustment is identified.

 

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their fair values as of October 12, 2018 based on management’s best estimate using the information available at acquisition date. The application of purchase accounting resulted in a bargain purchase gain of approximately $2.2 million. The primary reason for the bargain purchase gain is the mutual ownership structure of Kentucky Federal. The number of institutions that could merge with Kentucky Federal was limited and the mutual holding company structure of Cincinnati Bancorp allowed the merger to occur.

 

 9 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The fair values of loans acquired from Kentucky Federal were estimated using cash flow projections based on remaining maturity and repricing terms. Cash flows were adjusted by estimated future credit losses and the rate of prepayments. Projected monthly cash flows were discounted to present value using a risk-adjusted market rate for similar loans. There was no carryover of Kentucky Federal’s allowance for loan losses associated with the loans that were acquired, as the loans were initially recorded at fair value on October 12, 2018. The Company acquired various loans in the acquisition for which none had evidence of deterioration of credit quality since origination. The fair value of assets includes loans with a fair value of $16,323,595. The gross principal and contractual interest due under the contracts is $16,419,786, of which $251,369 is expected to be uncollectible.

 

The core deposit intangible asset recognized of $221,193 is being amortized over its estimated life of approximately 10 years using the straight-line method and is included in other assets in the condensed consolidated balance sheets.

 

Direct acquisition and integration costs were expensed as incurred and totaled approximately $18,000 for the six months ended June 30, 2019 and $82,000 for the year ended December 31, 2018. These items were recorded as merger-related expenses on the consolidated statements of income.

 

NOTE 3:Securities

 

Available-for-sale securities are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

 

For debt securities with fair value below amortized cost when the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.

 

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

 

  

Amortized

Cost

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

   Fair Value 
Available-for-Sale Securities:                    
                     
June 30, 2019 (unaudited):                    
Mortgage-backed securities of government sponsored entities  $424,388   $4,095   $(1,145)  $427,338 
                     
December 31, 2018:                    
Mortgage-backed securities of government sponsored entities  $629,447   $3,806   $(2,892)  $630,361 

 

 10 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The Company had no sales of investment securities during the three month and six month periods ended June 30, 2019 and 2018. The Company had not pledged any of its investment securities as of June 30, 2019 or December 31, 2018.

 

The amortized cost and fair value of available-for-sale securities at June 30, 2019 and December 31, 2018, by contractual maturity, if applicable, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties, as is the case with mortgage-backed securities included in the following table:

 

   June 30, 2019   December 31, 2018 
   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value 
                     
Mortgage-backed securities of government sponsored entities  $424,388   $427,338   $629,447   $630,361 

 

Certain investments in debt securities have fair values at an amount less than their historical cost. The total fair value of these investments at June 30, 2019 and December 31, 2018 was $264,226 and $512,303, respectively, which was approximately 62% and 81%, respectively, of the Company’s investment portfolio at those respective dates.

 

The following tables show the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment class and length of time that the individual securities have been in continuous unrealized loss position at June 30, 2019 and December 31, 2018:

 

   Less than 12 Months   12 Months or More   Total 
   Fair Value  

Unrealized

Losses

   Fair Value  

Unrealized

Losses

   Fair Value  

Unrealized

Losses

 
                         
June 30, 2019:                              
Mortgage-backed securities of government sponsored entities  $-   $-   $264,226   $(1,145)  $264,226   $(1,145)
                               
December 31, 2018:                              
Mortgage-backed securities of government sponsored entities  $-   $-   $512,303   $(2,892)  $512,303   $(2,892)

  

 11 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 4:Loans and Allowance for Loan Losses

 

Categories of loans at June 30, 2019 and December 31, 2018 include:

 

   June 30,   December 31, 
   2019   2018 
   (Unaudited)     
         
One to four family mortgage loans -owner occupied  $96,939,145   $93,659,520 
One to four family - investment   14,200,487    14,242,563 
Multi-family mortgage loans   28,936,519    27,140,014 
Nonresidential mortgage loans   18,310,267    18,930,426 
Construction and land loans   8,268,086    7,293,737 
Real estate secured lines of credit   11,365,518    11,373,975 
Commercial loans   374,657    415,730 
Other consumer loans   777,144    796,051 
Total loans   179,171,823    173,852,016 
           
Less:          
Net deferred loan costs   (525,850)   (491,331)
Undisbursed portion of loans   2,133,089    2,573,244 
Allowance for loan losses   1,404,988    1,405,072 
           
Net loans  $176,159,596   $170,365,031 

 

 12 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The following tables present the activity in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method for the three and six months ended June 30, 2019 and 2018 and the year ended December 31, 2018:

 

   At or For the Six Months Ended June 30, 2019 (Unaudited) 
  

One- to Four-

Family

Mortgage

Loans Owner

Occupied

  

One- to Four-

Family

Mortgage

Loans

Investment

  

Multi-Family

Mortgage

Loans

  

Nonresidential

Mortgage

Loans

  

Construction

& Land

Loans

  

Real Estate

Secured

Lines of

Credit

  

Commercial

Loans

  

Other

Consumer

Loans

   Total 
                                     
Allowance for loan losses:                                             
Balance, beginning of period  $456,630   $123,017   $224,384   $182,338   $100,187   $296,873   $9,001   $12,642   $1,405,072 
Provision (credit) charged to expense   -    -    -    -    -    -    -    -    - 
Losses charged off   -    -    -    -    -    -    -    (84)   (84)
Recoveries   -    -    -    -    -    -    -    -    - 
Balance, end of period  $456,630   $123,017   $224,384   $182,338   $100,187   $296,873   $9,001   $12,558   $1,404,988 
                                              
Ending balance:                                             
Individually evaluated for impairment  $-   $27,790   $-   $-   $-   $-   $-   $-   $27,790 
                                              
Ending balance:                                             
Collectively evaluated for impairment  $456,630   $95,227   $224,384   $182,338   $100,187   $296,873   $9,001   $12,558   $1,377,198 
Loans:                                             
Ending balance  $96,939,145   $14,200,487   $28,936,519   $18,310,267   $8,268,086   $11,365,518   $374,657   $777,144   $179,171,823 
                                              
Ending balance:                                             
Individually evaluated for impairment  $936,099   $756,142   $510,973   $75,852   $-   $86,897   $-   $-   $2,365,963 
                                              
Ending balance:                                             
Collectively evaluated for impairment  $96,003,046   $13,444,345   $28,425,546   $18,234,415   $8,268,086   $11,278,621   $374,657   $777,144   $176,805,860 

 

   Three Months Ended June 30, 2019 (Unaudited) 
  

One- to Four-

Family

Mortgage

Loans Owner

Occupied

  

One- to Four-

Family

Mortgage

Loans

Investment

  

Multi-Family

Mortgage

Loans

  

Nonresidential

Mortgage

Loans

  

Construction

& Land

Loans

  

Real Estate

Secured

Lines of

Credit

  

Commercial

Loans

  

Other

Consumer

Loans

   Total 
                                     
Allowance for loan losses:                                             
Balance, beginning of period  $456,630   $123,017   $224,384   $182,338   $100,187   $296,873   $9,001   $12,642   $1,405,072 
Provision (credit) charged to expense   -    -    -    -    -    -    -    -    - 
Losses charged off   -    -    -    -    -    -    -    (84)   (84)
Recoveries   -    -    -    -    -    -    -    -    - 
Balance, end of year  $456,630   $123,017   $224,384   $182,338   $100,187   $296,873   $9,001   $12,558   $1,404,988 

 

 

 13 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

   Six Months Ended June 30, 2018 (Unaudited) 
  

One- to Four-

Family

Mortgage

Loans Owner

Occupied

  

One- to Four-

Family

Mortgage

Loans

Investment

  

Multi-Family

Mortgage

Loans

  

Nonresidential

Mortgage

Loans

  

Construction

& Land

Loans

  

Real Estate

Secured

Lines of

Credit

  

Commercial

Loans

  

Other

Consumer

Loans

   Total 
                                     
Allowance for loan losses:                                             
Balance, beginning of period  $338,697   $171,674   $240,896   $196,811   $82,669   $312,638   $6,934   $9,753   $1,360,072 
Provision (credit) charged to expense   84,745    (69,588)   11,940    11,436    (7,458)   (355)   (724)   4    30,000 
Losses charged off   -    -    -    -    -    -    -    -    - 
Recoveries   -    -    -    -    -    -    -    -    - 
Balance, end of period  $423,442   $102,086   $252,836   $208,247   $75,211   $312,283   $6,210   $9,757   $1,390,072 

 

   Three Months Ended June 30, 2018 (Unaudited) 
  

One- to Four-

Family

Mortgage

Loans Owner

Occupied

  

One- to Four-

Family

Mortgage

Loans

Investment

  

Multi-Family

Mortgage

Loans

  

Nonresidential

Mortgage

Loans

  

Construction

& Land

Loans

  

Real Estate

Secured

Lines of

Credit

  

Commercial

Loans

  

Other

Consumer

Loans

   Total 
                                     
Allowance for loan losses:                                             
Balance, beginning of period  $389,394   $113,952   $270,465   $208,007   $66,449   $308,133   $8,849   $9,823   $1,375,072 
Provision (credit) charged to expense   34,048    (11,866)   (17,629)   240    8,762    4,150    (2,639)   (66)   15,000 
Losses charged off   -    -    -    -    -    -    -    -    - 
Recoveries   -    -    -    -    -    -    -    -    - 
Balance, end of period  $423,442   $102,086   $252,836   $208,247   $75,211   $312,283   $6,210   $9,757   $1,390,072 

 

 14 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

   At or For the Year Ended December 31, 2018 
   One- to Four-
Family
Mortgage
Loans Owner
Occupied
   One- to Four-
Family
Mortgage
Loans
Investment
   Multi-Family
Mortgage
Loans
   Nonresidential
Mortgage
Loans
   Construction
& Land
Loans
   Real Estate
Secured
Lines of
Credit
   Commercial
Loans
   Other
Consumer
Loans
   Total 
                                     
Allowance for loan losses:                                             
Balance, beginning of year  $338,697   $171,674   $240,896   $196,811   $82,669   $312,638   $6,934   $9,753   $1,360,072 
Provision (credit) charged to expense   117,933    (48,657)   (16,512)   (14,473)   17,518    (15,765)   2,067    2,889    45,000 
Losses charged off   -    -    -    -    -    -    -    -    - 
Recoveries   -    -    -    -    -    -    -    -    - 
Balance, end of year  $456,630   $123,017   $224,384   $182,338   $100,187   $296,873   $9,001   $12,642   $1,405,072 
                                              
Ending balance:                                             
Individually evaluated for impairment  $-   $33,683   $9,055   $-   $-   $-   $-   $-   $42,738 
                                              
Ending balance:                                             
Collectively evaluated for impairment  $456,630   $89,334   $215,329   $182,338   $100,187   $296,873   $9,001   $12,642   $1,362,334 
Loans:                                             
Ending balance  $93,659,520   $14,242,563   $27,140,014   $18,930,426   $7,293,737   $11,373,975   $415,730   $796,051   $173,852,016 
                                              
Ending balance:                                             
Individually evaluated for impairment  $966,592   $699,630   $621,757   $151,096   $-   $48,467   $-   $-   $2,487,542 
                                              
Ending balance:                                             
Collectively evaluated for impairment  $92,692,928   $13,542,933   $26,518,257   $18,779,330   $7,293,737   $11,325,508   $415,730   $796,051   $171,364,474 

 

 

 15 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The Company has adopted a standard grading system for all loans.

 

Definitions are as follows:

 

Prime (1) loans are of superior quality with excellent credit strength and repayment ability proving a nominal credit risk.

 

Good (2) loans are of above average credit strength and repayment ability proving only a minimal credit risk.

 

Satisfactory (3) loans are of reasonable credit strength and repayment ability proving an average credit risk due to one or more underlying weaknesses.

 

Acceptable (4) loans are of the lowest acceptable credit strength and weakened repayment ability providing a cautionary credit risk due to one or more underlying weaknesses. New borrowers are typically not underwritten within this classification.

 

Special Mention (5) loans have 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 Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Ordinarily, special mention credits have characteristics which corrective management action would remedy.

 

Substandard (6) loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

 

Doubtful (7) loans have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable and improbable.

 

Loss (8) loans are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off even though partial recovery may be realized in the future.

 

 

 16 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of June 30, 2019 and December 31, 2018:

 

   June 30, 2019 (Unaudited) 
                                     
   One- to Four-
Family Mortgage
Loans - Owner
Occupied
   One- to Four-
Family Mortgage
Loans -
Investment
   Multi-Family
Mortgage Loans
   Nonresidential
Mortgage Loans
   Construction &
Land Loans
   Real Estate
Secured Lines of
Credit
   Commercial
Loans
   Other Consumer
Loans
   Total 
                                     
Pass  $96,431,659   $13,389,763   $28,425,546   $17,707,942   $8,268,086   $11,180,178   $374,657   $777,144   $176,554,975 
Special mention   -    617,505    137,035    602,325    -    23,999    -    -    1,380,864 
Substandard   507,486    193,219    373,938    -    -    161,341    -    -    1,235,984 
Doubtful   -    -    -    -    -    -    -    -    - 
Loss   -    -    -    -    -    -    -    -    - 
                                              
Total  $96,939,145   $14,200,487   $28,936,519   $18,310,267   $8,268,086   $11,365,518   $374,657   $777,144   $179,171,823 

 

   December 31, 2018 
                                     
   One- to Four-
Family Mortgage
Loans - Owner
Occupied
   One- to Four-
Family Mortgage
Loans -
Investment
   Multi-Family
Mortgage Loans
   Nonresidential
Mortgage Loans
   Construction &
Land Loans
   Real Estate
Secured Lines of
Credit
   Commercial
Loans
   Other Consumer
Loans
   Total 
                                     
Pass  $92,776,661   $13,010,425   $26,509,203   $18,234,663   $7,293,737   $11,225,481   $415,730   $795,523   $170,261,423 
Special mention   -    1,101,684    138,723    627,934    -    26,000    -    -    1,894,341 
Substandard   882,859    130,454    492,088    67,829    -    122,494    -    528    1,696,252 
Doubtful   -    -    -    -    -    -    -    -    - 
Loss   -    -    -    -    -    -    -    -    - 
                                              
Total  $93,659,520   $14,242,563   $27,140,014   $18,930,426   $7,293,737   $11,373,975   $415,730   $796,051   $173,852,016 

 

Pass portfolio within the tables above consists of loans graded Prime (1) through Acceptable (4).

 

The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the three or six months ended June 30, 2019.

 

 17 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The following tables present the loan portfolio aging analysis of the recorded investment in loans as of June 30, 2019 and December 31, 2018:

 

   June 30, 2019 (Unaudited) 
                             
   30-59 Past
Due
   60-89 Days
Past Due
  

90 Days and
Greater

Past Due

   Total Past
Due
   Current   Total Loans
Receivable
   Total Loans >
90 Days Past
Due &
Accruing
 
One to Four-family mortgage loans  $134,960   $-   $53,367   $188,327   $96,750,818   $96,939,145   $- 
One to Four Family - Investment   -    -    127,577    127,577    14,072,910    14,200,487    - 
Multi-family mortgage loans   -    -    -    -    28,936,519    28,936,519    - 
Nonresidential mortgage loans   -    -    -    -    18,310,267    18,310,267    - 
Construction & land loans   -    -    -    -    8,268,086    8,268,086    - 
Real estate secured lines of credit   27,795    -    -    27,795    11,337,723    11,365,518    - 
Commercial Loans   -    -    -    -    374,657    374,657    - 
Other consumer loans   -    -    -    -    777,144    777,144    - 
                                    
Total  $162,755   $-   $180,944   $343,699   $178,828,124   $179,171,823   $- 

 

   December 31, 2018 
                             
   30-59 Past
Due
   60-89 Days
Past Due
   90 Days and
Greater
Past Due
   Total Past
Due
   Current   Total Loans
Receivable
   Total Loans >
90 Days Past
Due &
Accruing
 
One to Four-family mortgage loans  $158,932   $86,900   $676,024   $921,856   $92,737,664   $93,659,520   $- 
One to Four Family - Investment   -    -    -    -    14,242,563    14,242,563    - 
Multi-family mortgage loans   -    -    -    -    27,140,014    27,140,014    - 
Nonresidential mortgage loans   -    -    67,829    67,829    18,862,597    18,930,426    - 
Construction & land loans   -    -    -    -    7,293,737    7,293,737    - 
Real estate secured lines of credit   9,634    -    -    9,634    11,364,341    11,373,975    - 
Commercial Loans   -    -    -    -    415,730    415,730    - 
Other consumer loans   -    -    528    528    795,523    796,051    - 
                                    
Total  $168,566   $86,900   $744,381   $999,847   $172,852,169   $173,852,016   $- 

 

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310, Receivables), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans and also include loans modified in troubled debt restructurings (“TDRs”).

 

 18 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The following tables present impaired loans at June 30, 2019, June 30, 2018 and December 31, 2018:

 

               For the Three Months Ended   For the Six Months Ended 
   At June 30, 2019 (Unaudited)   June 30, 2019   June 30, 2019 
   Recorded
Balance
   Unpaid
Principal
Balance
   Specific
Allowance
   Average
Investment
in Impaired
Loans
   Interest Income
Recognized
   Average
Investment
in Impaired
Loans
   Interest Income
Recognized
 
               (Unaudited)         
Loans without a specific valuation allowance                                   
                                    
One- to four-family mortgage loans  $936,099   $936,099   $-   $958,009    18,858   $963,335   $26,902 
One to Four family - Investment   435,881    435,881    -    437,462    5,439    439,385    10,152 
Multi-family mortgage loans   510,973    510,973    -    511,843    9,742    512,891    16,769 
Nonresidential mortgage loans   75,852    75,852    -    77,662    1,182    79,530    2,415 
Construction & Land loans   -    -    -    -    -    -    - 
Real estate secured lines of credit   86,897    86,897    -    87,695    1,854    88,486    2,563 
Commercial Loans   -    -    -    -    -    -    - 
Other consumer loans   -    -    -    -    -    -    - 
Loans with a specific valuation allowance                       -           
One- to four-family mortgage loans   -    -    -    -    -    -    - 
One to Four family - Investment   320,261    348,051    27,790    351,960    5,289    354,016    10,786 
Multi-family mortgage loans   -    -    -    -    -    -    - 
Nonresidential mortgage loans   -    -    -    -    -    -    - 
Construction & Land loans   -    -    -    -    -    -    - 
Real estate secured lines of credit   -    -    -    -    -    -    - 
Commercial Loans   -    -    -    -    -    -    - 
Other consumer loans   -    -    -    -    -    -    - 
                                    
   $2,365,963   $2,393,753   $27,790  $2,424,631   $42,364   $2,437,643   $69,587 

 

               For the Three Months Ended   For the Six Months Ended 
   At June 30, 2018 (Unaudited)   June 30, 2018   June 30, 2018 
   Recorded
Balance
   Unpaid
Principal
Balance
   Specific
Allowance
   Average
Investment
in Impaired
Loans
   Interest Income
Recognized
   Average
Investment
in Impaired
Loans
   Interest Income
Recognized
 
               (Unaudited)         
Loans without a specific valuation allowance                                   
One- to four-family mortgage loans  $1,016,064   $1,016,064   $-   $1,017,590    7,229   $1,019,702   $15,804 
One to Four family - Investment   553,450    553,450    -    556,401    7,832    559,589    15,132 
Multi-family mortgage loans   519,393    519,393    -    520,383    9,902    521,264    17,239 
Nonresidential mortgage loans   239,901    239,901    -    241,474    2,914    190,212    5,877 
Construction & Land loans   -    -    -    -    -    -    - 
Real estate secured lines of credit   50,858    50,858    -    51,362    651    51,579    1,417 
Commercial Loans   -    -    -    -    -    -    - 
Other consumer loans   -    -    -    -    -    -    - 
Loans with a specific valuation allowance                       -           
One- to four-family mortgage loans   -    -    -    -    -    -    - 
One to Four family - Investment   438,278    476,391    38,113    479,153    6,018    481,712    11,755 
Multi-family mortgage loans   108,503    117,558    9,055    117,962    1,735    118,250    3,453 
Nonresidential mortgage loans   -    -    -    -    -    -    - 
Construction & Land loans   -    -    -    -    -    -    - 
Real estate secured lines of credit   -    -    -    -    -    -    - 
Commercial Loans   -    -    -    -    -    -    - 
Other consumer loans   -    -    -    -    -    -    - 
                                    
   $2,926,447   $2,973,615   $47,168  $2,984,325   $36,281   $2,942,308   $70,677 

 

 19 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

   December 31, 2018 
   Recorded
Balance
   Unpaid
Principal
Balance
   Specific
Allowance
   Average
Investment
in Impaired
Loans
   Interest Income
Recognized
 
Loans without a specific valuation allowance                         
One- to four-family mortgage loans  $966,592   $966,592   $-   $975,511   $33,914 
One to Four family - Investment   315,393    315,393    -    322,564    39,833 
Multi-family mortgage loans   514,993    514,993    -    519,339    47,559 
Nonresidential mortgage loans   151,096    151,096    -    165,871    5,996 
Construction & land loans   -    -    -    -    - 
Real estate secured lines of credit   48,467    48,467    -    50,820    3,114 
Commercial loans   -    -    -    -    - 
Other consumer loans   -    -    -    -    - 
Loans with a specific valuation allowance                         
One- to four-family mortgage loans   -    -    -    -    - 
One to Four family - Investment   384,237    417,920    33,683    427,874    22,775 
Multi-family mortgage loans   106,764    115,819    9,055    117,578    8,499 
Nonresidential mortgage loans   -    -    -    -    - 
Construction & land loans   -    -    -    -    - 
Real estate secured lines of credit   -    -    -    -    - 
Commercial loans   -    -    -    -    - 
Other consumer loans   -    -    -    -    - 
                          
   $2,487,542   $2,530,280   $42,738   $2,579,557   $161,690 

 

Income recognized on a cash basis was not materially different than interest income recognized on an accrual basis. The following table presents the nonaccrual loans at June 30, 2019 and December 31, 2018. This table excludes performing TDRs.

 

   June 30,   December 31, 
   2019   2018 
   (Unaudited)     
         
One- to four-family mortgage loans  $176,286   $676,024 
One to four family - Investment   127,577    - 
Multi-family mortgage loans   -    - 
Nonresidential mortgage loans   -    67,829 
Construction and land loans   -    - 
Real estate secured lines of credit   -    - 
Commercial Loans   -    - 
Other consumer loans   -    528 
           
Total  $303,863   $744,381 

 

At June 30, 2019, the Company had no loans that were modified in TDRs and impaired.

 

At December 31, 2018, the Company had no loans that were modified in TDRs and impaired and there were no troubled debt restructurings during the year.

 

 

 20 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

There were two newly classified TDRs during the three and six months ended June 30, 2019. The following tables present the new classified TDRs at June 30, 2019:

 

   June 30, 2019 (Unaudited) 
   Loans   Modification   Recorded Balance 
Mortgage loans on real estate:               
Residential 1-4 family - Owner Occupied   2   $114,018   $143,173 
Residential 1-4 family - Investment   -    -    - 
Multifamily   -    -    - 
Nonresidential mortgage loans   -    -    - 
Construction & land loans   -    -    - 
Real estate secured lines of credit   -    -    - 
Commercial Loans   -    -    - 
Consumer loans   -    -    - 
                
    2   $114,018   $143,173 

 

Newly restructured loans by type of modification are as follows for the six months ended June 30, 2019:

 

   June 30, 2019 (Unaudited) 
   Interest Only   Term   Combination   Total
Modification
 
Mortgage loans on real estate:                    
Residential 1-4 family - Owner Occupied  $-   $-   $102,340   $102,340 
Residential 1-4 family - Investment   -    -    -    - 
Multifamily   -    -    -    - 
Nonresidential mortgage loans   -    -    -    - 
Construction & land loans   -    -    -    - 
Real estate secured lines of credit   40,833    -    -    40,833 
Commercial Loans   -    -    -    - 
Consumer loans   -    -    -    - 
                     
   $40,833   $-   $102,340   $143,173 

 

There were no TDRs modified during the three months ended June 30, 2019 that subsequently defaulted. As of June 30, 2019, borrowers with loans designated as TDRs totaling $707,000 of residential real estate loans and $511,000 of multifamily loans, met the criteria for placement back on accrual status. This criteria is a minimum of six consecutive months of payment performance under existing or modified terms. As of June 30, 2019, the Company had no performing TDRs that did not meet the criteria for placement back on accrual status.

 

There were no foreclosed real estate properties at June 30, 2019. There were three foreclosed real estate properties at December 31, 2018 totaling $102,100, net of valuation allowances. There was one consumer mortgage loan in process of foreclosure at June 30, 2019 with a total net loan balance of $53,000.

 

 21 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 5:Earnings Per Common Share

 

Basic earnings per common share (“EPS”) excludes dilution and is calculated by dividing net income applicable to common stock by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Unallocated common shares held by the Company’s Employee Stock Ownership Plan (“ ESOP”) are shown as a reduction in stockholders’ equity and are excluded from weighted-average common shares outstanding for both basic and diluted EPS calculations until they are committed to be released. The computations for the three and six month periods ended June 30, 2019 and 2018 are as follows:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2019   2018   2019   2018 
   (Unaudited) 
                 
Net Income  $320,156   $185,557   $312,055   $364,877 
Less allocation of earnings to participating securities   3,263    3,651    3,376    6,486 
Net income allocated to common shareholders  $316,893    181,906   $308,679    358,391 
                     
Shares outstanding for basic earnings per share:                    
                     
Weighted-average shares outstanding:   1,796,251    1,728,211    1,795,058    1,726,785 
Less: Average unearned ESOP and unvested restricted stock:   48,305    52,797    47,744    53,044 
    1,747,946    1,675,414    1,747,314    1,673,741 
                     
Basic earnings per common share:  $0.18   $0.11   $0.18   $0.21 
                     
Effect of dilutive securities:                    
Stock options   14,073    1,147    11,955    - 
Weighted-average number of shares outstanding used in the calculation of diluted earnings per common share   1,762,019    1,676,561    1,759,269    1,673,741 
                     
Diluted earnings per share:  $0.18   $0.11   $0.18   $0.21 

 

The Company had 79,187 stock options outstanding that were not considered for computation of diluted earnings per share for the six months ended June 30, 2018, since the exercise prices were greater than the fair value of the shares at that date.

 

 22 

 

 

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)