UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

(Mark One)

 

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

 

For the quarterly period ended

December 31, 2016

 

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. 000-55356

MW BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

Maryland		47-2259704
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)
2110 Beechmont Avenue
Cincinnati, Ohio		45230
(Address of principal		(Zip Code)
executive office)

 

(513) 231-7871

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

 

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

Yes x       No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes     ¨ No

 

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

 

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

 

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 February 13, 2017, the latest practicable date, 891,209 shares of the registrant’s common stock, $.01 par value, were issued and outstanding.

 

MW Bancorp, Inc.

 

Index to Quarterly Report on Form 10-Q

 

PART I – FINANCIAL INFORMATION
	Item 1	Interim Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets as of December 31, 2016 and June 30, 2016	3
		Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31, 2016 and 2015	4
		Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended December 31, 2016 and 2015	5
		Condensed Consolidated Statements of Shareholders’ Equity for the Six Months Ended December 31, 2016 and 2015	6
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2016 and 2015	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	49
	Item 4	Controls and Procedures	49
PART II – OTHER INFORMATION
	Item 1	Legal Proceedings	50
	Item 1A	Risk Factors	50
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	50
	Item 3	Defaults Upon Senior Securities	50
	Item 4	Mine Safety Disclosures	50
	Item 5	Other Information	50
	Item 6	Exhibits	50
	SIGNATURES		52

 

 

Part I – Financial Information

Item 1. Financial Statements

MW Bancorp, Inc.

Condensed Consolidated Balance Sheets

December 31, 2016 and June 30, 2016

(In thousands, except share data)

 

		December 31,				June 30,
		2016				2016
		(Unaudited)
Assets
Cash and due from banks		$	364			$	258
Interest-bearing demand deposits			9,092				3,414
Cash and cash equivalents			9,456				3,672
Interest-bearing time deposits in other financial institutions			100				2,100
Available-for-sale securities			3,525				3,465
Held-to-maturity securities (fair value of $351 at December 31, 2016 and $996 at June 30, 2016)			349				986
Loans held for sale			79				1,763
Loans, net of allowance for loan losses of $1,636 at December 31, 2016 and $1,635 at June 30, 2016			107,235				99,946
Premises and equipment, net			1,781				1,158
Federal Home Loan Bank stock, at cost			1,192				1,192
Accrued interest receivable			365				292
Bank owned life insurance			3,516				3,469
Deferred federal income taxes			673				713
Other assets			250				251
Total assets		$	128,521			$	119,007
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand and money market		$	33,819			$	27,736
Savings			16,768				9,274
Time			34,501				40,204
Total deposits			85,088				77,214
Federal Home Loan Bank advances			26,286				25,319
Other liabilities			897				350
Total liabilities			112,271				102,883
Commitments and Contigent Liabilities
Shareholders' Equity
Preferred stock - authorized 1,000,000 shares, $0.01 par value, none issued			-				-
Common stock - authorized 30,000,000 shares, $0.01 par value, 905,473 and 904,973 shares issued at December 31, 2016 and June 30, 2016, respectively			9				9
Additional paid-in capital			7,881				7,835
Shares acquired by ESOP			(627	)			(666	)
Unearned compensation - restricted stock awards			(437	)			(429	)
Retained earnings			9,864				9,756
Accumulated other comprehensive loss			(138	)			(79	)
Treasury stock, 20,000 shares - at cost			(302	)			(302	)
Total shareholders' equity			16,250				16,124
Total liabilities and shareholders' equity		$	128,521			$	119,007

 

See Notes to Condensed Consolidated Financial Statements

 

 

MW Bancorp, Inc.

Condensed Consolidated Statements of Income

For the Three and Six Months Ended December 31, 2016 and 2015

(In thousands, except share data)

 

		Three Months Ended December 31,								Six Months Ended December 31,
		2016				2015				2016				2015
		(Unaudited)
Interest Income
Loans, including fees		$	1,053			$	937			$	2,071			$	1,842
Taxable securities			15				24				31				51
Interest-bearing deposits			28				32				59				64
Total interest income			1,096				993				2,161				1,957
Interest Expense
Deposits			195				222				390				430
Federal Home Loan Bank advances			88				85				176				166
Total interest expense			283				307				566				596
Net Interest Income			813				686				1,595				1,361
Provision for Loan Losses			-				8				-				13
Net Interest Income After Provision for Loan Losses			813				678				1,595				1,348
Noninterest Income
Gain on sale of loans			103				7				227				52
Income from Bank owned life insurance			24				23				47				46
Other operating			1				14				11				24
Total noninterest income			128				44				285				122
Noninterest Expense
Salaries, employee benefits and directors fees			486				401				933				784
Occupancy and equipment			67				51				133				89
Data processing			58				33				119				66
Franchise taxes			32				13				63				32
FDIC insurance premiums			1				18				21				35
Professional services			63				81				159				193
Advertising			12				12				27				34
Office supplies			14				15				27				26
Business entertainment			11				9				26				22
Other			69				66				142				119
Total noninterest expense			813				699				1,650				1,400
Income Before Federal Income Taxes			128				23				230				70
Federal Income Taxes			4				-				33				-
Net Income		$	124			$	23			$	197			$	70
Earnings per share
Basic		$	0.15			$	0.03			$	0.24			$	0.09
Diluted		$	0.15			$	0.03			$	0.24			$	0.09
Weighted-average shares outstanding
Basic			818,927				806,108				818,405				806,089
Diluted			827,667				806,108				825,772				806,089

 

See Notes to Condensed Consolidated Financial Statements

 

 

MW Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income

For the Three and Six Months Ended December 31, 2016 and 2015

(In thousands)

 

		Three Months Ended December 31,								Six Months Ended December 31,
		2016				2015				2016				2015
		(Unaudited)
Net income		$	124			$	23			$	197			$	70
Other comprehensive loss:
Net unrealized holding losses on securities available for sale			(53	)			(11	)			(64	)			(19	)
Amortization of net unrealized holding loss on held-to-maturity securities			4				-				5				-
Net unrealized losses			(49	)			(11	)			(59	)			(19	)
Tax effect			-				-				-				-
Total other comprehensive loss			(49	)			(11	)			(59	)			(19	)
Comprehensive income		$	75			$	12			$	138			$	51

 

See Notes to Condensed Consolidated Financial Statements

 

 

MW Bancorp, Inc.

Condensed Consolidated Statements of Shareholders’ Equity

For the Six Months Ended December 31, 2016 and 2015

(In thousands)

 

Six Months Ended December 31, 2016
														Unearned								Accumulated
						Additional				Shares				Compensation -								Other
		Common				Paid-in				Acquired				Restricted				Retained				Comprehensive				Treasury
		Stock				Capital				by ESOP				Stock Awards				Earnings				Loss				Stock				Total
		(Unaudited)
Balance at July 1, 2016		$	9			$	7,835			$	(666	)		$	(429	)		$	9,756			$	(79	)		$	(302	)		$	16,124
Net income			-				-				-				-				197				-				-				197
Compensation expense related to stock options			-				24				-				-				-				-				-				24
Issuance of restricted stock awards			-				8				-				(8	)			-				-				-				-
Dividends paid, $0.10 per share			-				-				-				-				(89	)			-				-				(89	)
Amortization of ESOP			-				14				39				-				-				-				-				53
Other comprehensive loss			-				-				-				-				-				(59	)			-				(59	)
Balance at December 31, 2016		$	9			$	7,881			$	(627	)		$	(437	)		$	9,864			$	(138	)		$	(302	)		$	16,250

 

Six Months Ended December 31, 2015
														Unearned								Accumulated
						Additional				Shares				Compensation -								Other
		Common				Paid-in				Acquired				Restricted				Retained				Comprehensive				Treasury
		Stock				Capital				by ESOP				Stock Awards				Earnings				Loss				Stock				Total
		(Unaudited)
Balance at July 1, 2015		$	9			$	7,386			$	(701	)		$	-			$	9,067			$	(91	)		$	-			$	15,670
Net income			-				-				-				-				70				-				-				70
Amortization of ESOP			-				14				35				-				-				-				-				49
Other comprehensive loss			-				-				-				-				-				(19	)			-				(19	)
Balance at December 31, 2015		$	9			$	7,400			$	(666	)		$	-			$	9,137			$	(110	)		$	-			$	15,770

 

See Notes to Condensed Consolidated Financial Statements

 

 

MW Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended December 31, 2016 and 2015

(In thousands)

 

		Six Months Ended December 31,
		2016				2015
		(Unaudited)
Cash Flows from Operating Activities
Net income		$	197			$	70
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization			65				52
Amortization of premiums and discounts on securities, net			30				31
Accretion of deferred loan origination fees and costs, net			19				1
Provision for loan losses			-				13
Gain on sale of loans			(227	)			(52	)
Proceeds from sales of loans			12,037				2,264
Loans originated for sale			(10,186	)			(2,579	)
Compensation expense related to stock options			24				-
Amortization of ESOP			60				49
Net changes in:
Accrued interest receivable			(73	)			(39	)
Other assets			61				55
Cash surrender value of life insurance			(47	)			(46	)
Other liabilities			547				367
Deferred federal income taxes			33				-
Net cash provided by operating activities			2,540				186
Cash Flows from Investing Activities
Net change in interest-bearing deposits in other financial institutions			2,000				1,000
Purchase of available for sale securities			(617	)			-
Principal repayments of held-to-maturity securities			640				274
Principal repayments of available-for-sale mortgage-backed securities			465				401
Net change in loans			(7,308	)			(8,384	)
Purchase of premises and equipment			(688	)			(794	)
Payments for improvements to foreclosed assets			-				(8	)
Net cash used in investing activities			(5,508	)			(7,511	)
Cash Flows from Financing Activities
Net change in deposits			7,776				11,208
Proceeds from Federal Home Loan Bank advances			13,000				2,000
Repayment of Federal Home Loan Bank advances			(12,033	)			(1,275	)
Dividends paid			(89	)			-
Net cash provided by financing activities			8,654				11,933
Net Change in Cash and Cash Equivalents			5,686				4,608
Beginning Cash and Cash Equivalents			3,672				3,665
Ending Cash and Cash Equivalents		$	9,358			$	8,273
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest on deposits and borrowings		$	563			$	590
Supplemental Disclosure of Noncash Investing Activities
Transfers from loans to loans held for sale		$	-			$	5,058

 

See Notes to Condensed Consolidated Financial Statements

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1:

Basis of Presentation

 

MW Bancorp, Inc. (the “Company,” “we,” “us” or “our”), headquartered in Cincinnati, Ohio, was formed to serve as the stock holding company for Watch Hill Bank (the “Bank”) following its mutual-to-stock conversion. The conversion was completed effective January 29, 2015. The Company issued 876,163 shares at an offering price of $10.00 per share.

 

The accompanying unaudited condensed balance sheet of the Company as of June 30, 2016, which has been derived from audited financial statements, and unaudited condensed consolidated financial statements of the Company as of December 31, 2016 and for the three and six months ended December 31, 2016 and 2015, were prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. Accordingly, these condensed financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company as of and for the year ended June 30, 2016 included in the Company’s most recent Form 10-K. Reference is made to the accounting policies of the Company described in the Notes to the Financial Statements contained in the Form 10-K.

 

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited financial statements have been included to present fairly the financial position as of December 31, 2016 and the results of operations and cash flows for the three and six months ended December 31, 2016 and 2015. All interim amounts have not been audited and the results of operations for the three and six months ended December 31, 2016, herein are not necessarily indicative of the results of operations to be expected for the entire fiscal year.

 

Principles of Consolidation

 

The consolidated financial statements as of and for the periods ended December 31, 2016, include MW Bancorp, Inc. and its wholly owned subsidiary, Watch Hill Bank, together referred to as “the Company.” Intercompany transactions and balances have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. 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, valuation of deferred tax assets and fair values of financial instruments.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Note 2:

Securities

 

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
		(In thousands)
Available-for-sale Securities:
December 31, 2016
Municipal bonds		$	100			$	-			$	(4	)		$	96
Mortgage-backed securities of U.S. government sponsored entities -  residential			3,469				3				(43	)			3,429
		$	3,569			$	3			$	(47	)		$	3,525
June 30, 2016
Mortgage-backed securities of U.S. government sponsored entities - residential		$	3,445			$	36			$	(16	)		$	3,465

 

		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
		(In thousands)
Held-to-maturity Securities:
December 31, 2016
Mortgage-backed securities of U.S. government sponsored entities - residential		$	349			$	4			$	(2	)		$	351
June 30, 2016
Mortgage-backed securities of U.S. government sponsored entities - residential		$	986			$	11			$	(1	)		$	996

 

The amortized cost and fair value of available-for-sale securities and held-to-maturity securities at December 31, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

		December 31, 2016
		Available-for-sale								Held-to-maturity
		Amortized Cost				Fair Value				Amortized Cost				Fair Value
		(In thousands)
Municipal bonds
Due in three-to-five years		$	100			$	96			$	-			$	-
Mortgage-backed securities of U.S. government sponsored entities - residential - not due at a single maturity date			3,469				3,429				349				351
		$	3,569			$	3,525			$	349			$	351

 

The Company had no sales of investment securities during the three- and six-month periods ended December 31, 2016 and 2015.

 

The Company had pledged $1.2 million and $1.4 million of its investment securities at December 31, 2016 and June 30, 2016, respectively.

 

At December 31, 2016 and June 30, 2016, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of the Company’s equity.

 

On August 1, 2013, the Company reclassified its collateralized mortgage obligation portfolio to held-to-maturity from available-for sale because management intends to hold these securities to maturity. The securities had a total amortized cost of $2.925 million and a corresponding fair value of $2.894 million. The gross unrealized loss on these securities at the date of transfer was $31,000. The unrealized holding loss at the time of transfer continues to be reported in accumulated other comprehensive loss and is being amortized over the remaining lives of the securities as an adjustment to the yield. The amortization of the remaining holding loss reported in accumulated other comprehensive loss will offset the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of this loss was $7,000 at December 31, 2016.

 

The following tables show the Company’s investments’ 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 individual securities have been in a continuous unrealized loss position at December 31, 2016 and June 30, 2016:

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

		Less than 12 Months								12 Months or Longer								Total
Description of Securities		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
		(In thousands)
December 31, 2016
Available-for-sale Securities:
Municipal bonds		$	96			$	(4	)		$	-			$	-			$	96			$	(4	)
Mortgage-backed securities of U.S. government sponsored entities - residential			2,201				(28	)			685				(15	)			2,886				(43	)
Held-to-maturity Securities:
Mortgage-backed securities of U.S. government sponsored entities - residential			175				(2	)			-				-				175				(2	)
		$	2,472			$	(34	)		$	685			$	(15	)		$	3,157			$	(49	)
June 30, 2016
Available-for-sale Securities:
Mortgage-backed securities of U.S. government sponsored entities - residential		$	740			$	(9	)		$	486			$	(7	)		$	1,226			$	(16	)
Held-to-maturity Securities:
Mortgage-backed securities  of U.S. government sponsored entities - residential			-				-				256				(1	)			256				(1	)
		$	740			$	(9	)		$	742			$	(8	)		$	1,482			$	(17	)

 

Other-than-temporary Impairment

 

At December 31, 2016 and June 30, 2016, all of the mortgage-backed securities held by the Company were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Ginnie Mae - institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not have the intent, and it is likely that it will not be required, to sell these mortgage-backed securities before their anticipated recovery, the Company did not consider these securities to be other-than-temporarily impaired at December 31, 2016 and June 30, 2016.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Note 3:

Loans and Allowance for Loan Losses

 

Loans at December 31, 2016 and June 30, 2016 include:

 

		December 31,				June 30,
		2016				2016
		(In thousands)
Real estate loans
One- to four-family residential		$	67,297			$	65,294
Multi-family residential			8,385				9,076
Commercial			23,745				17,486
Construction			6,023				6,720
Commercial			3,117				2,397
Consumer and other			232				548
Total loans			108,799				101,521
Less:
Net deferred loan costs			(72	)			(60	)
Allowance for loan losses			1,636				1,635
Net loans		$	107,235			$	99,946

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

The following table presents, by portfolio segment, the activity in the allowance for loan losses for the three and six months ended December 31, 2016 and the recorded investment in loans and impairment method as of December 31, 2016:

 

		December 31, 2016
		1-4 Family				1-4 Family
		Owner				Non-Owner				Multi-
		Occupied				Occupied				family				Commercial				Construction				Consumer				Total
		(In thousands)
Three Months Ended December 31, 2016
Allowance for loan losses:
Balance, October 1, 2016		$	1,019			$	226			$	36			$	225			$	126				-			$	1,632
Provision for loan losses			(41	)			15				6				43				(22	)			(1	)			-
Charge-offs			-				-				-				-				-				-				-
Recoveries			3				-				-				-				-				1				4
Balance, December 31, 2016		$	981			$	241			$	42			$	268			$	104			$	-			$	1,636
Six Months Ended December 31, 2016
Allowance for loan losses:
Balance, July 1, 2016		$	1,004			$	282			$	66			$	167			$	116			$	-			$	1,635
Provision for loan losses			(26	)			(41	)			(24	)			101				(12	)			2				-
Charge-offs			-				-				-				-				-				(4	)			(4	)
Recoveries			3				-				-				-				-				2				5
Balance, December 31, 2016		$	981			$	241			$	42			$	268			$	104			$	-			$	1,636
Allowance for loan losses:
Ending balance, individually evaluated for impairment		$	44			$	33			$	22			$	-			$	-			$	-			$	99
Ending balance, collectively evaluated for impairment		$	937			$	208			$	20			$	268			$	104			$	-			$	1,537
Loans:
Ending balance		$	54,923			$	12,374			$	8,385			$	26,862			$	6,023			$	232			$	108,799
Ending balance; individually evaluated for impairment		$	841			$	348			$	107			$	141			$	-			$	-			$	1,437
Ending balance; collectively evaluated for impairment		$	54,082			$	12,026			$	8,278			$	26,721			$	6,023			$	232			$	107,362

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

The following table presents, by portfolio segment, the activity in the allowance for loan losses for the three and six months ended December 31, 2015:

 

		1-4 Family				1-4 Family
		Owner				Non-Owner				Multi-
		Occupied				Occupied				family				Commercial				Construction				Consumer				Total
		(In thousands)
Three Months Ended December 31, 2015
Allowance for loan losses:
Balance, October 1, 2015		$	1,159			$	258			$	2			$	127			$	64				-			$	1,610
Provision for loan losses			5				21				(1	)			(11	)			(4	)			(2	)			8
Charge-offs			-				-				-				-				-				-				-
Recoveries			-				-				-				-				-				2				2
Balance, December 31, 2015		$	1,164			$	279			$	1			$	116			$	60			$	-			$	1,620
Six Months Ended December 31, 2015
Allowance for loan losses:
Balance, July 1, 2015		$	1,130			$	287			$	3			$	124			$	58			$	-			$	1,602
Provision for loan losses			32				(8	)			(2	)			(8	)			2				(3	)			13
Charge-offs			-				-				-				-				-				-				-
Recoveries			2				-				-				-				-				3				5
Balance, December 31, 2015		$	1,164			$	279			$	1			$	116			$	60			$	-			$	1,620

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

The following table presents, by portfolio segment, the allowance for loan losses, the recorded investment in loans and impairment method as of June 30, 2016:

 

		1-4 Family				1-4 Family
		Owner				Non-Owner				Multi-
		Occupied				Occupied				family				Commercial				Construction				Consumer				Total
		(In thousands)
June 30, 2016
Allowance for loan losses:
Ending balance, individually evaluated for impairment		$	89			$	72			$	27			$	-			$	-			$	-			$	188
Ending balance, collectively evaluated for impairment		$	915			$	210			$	39			$	167			$	116			$	-			$	1,447
Loans:
Ending balance		$	53,060			$	12,234			$	9,076			$	19,883			$	6,720			$	548			$	101,521
Ending balance; individually evaluated for impairment		$	1,047			$	530			$	111			$	145			$	-			$	-			$	1,833
Ending balance; collectively evaluated for impairment		$	52,013			$	11,704			$	8,965			$	19,738			$	6,720			$	548			$	99,688

 

Internal Risk Categories

 

The Company has adopted a standard loan grading system for all loans. Loans are selected for a grading review based on certain characteristics, including credit concentrations, subprime criteria and delinquency of 90 days or more. The categories are as follows:

 

Pass: These are higher quality loans that do not fit any of the other categories described below.

 

Special Mention: The loans identified as special mention have an obvious flaw or a potential weakness that deserves special management attention, but which has not yet impacted collectibility. These flaws or weaknesses, if left uncorrected, may result in the deterioration of the prospects of repayment or of the Company’s credit position.

 

Substandard: These are loans with a well-defined weakness, where the Company has a serious concern about the borrower’s ability to make full repayment if the weaknesses are not corrected. The loan may contain a flaw, which could impact the borrower’s ability to repay, or the borrower’s continuance as a “going concern.” When collateral values are not sufficient to secure the loan and other weaknesses are present, the loan may be rated substandard. A loan will also be rated substandard when full repayment is expected, but it must come from the liquidation of collateral.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Doubtful: These are loans with major defined weaknesses, where future charge-off of a part of the credit is highly likely. The primary repayment source is no longer viable and the viability of the secondary source of repayment is in doubt. The amount of loss is uncertain due to circumstances within the credit that are not yet fully developed and the loan is rated “Doubtful” until the loss can be accurately estimated.

 

Loss: These are near term charge-offs. Loans classified as loss are considered uncollectible and of such little value that it is not appropriate to continue carrying them as assets on the Company’s financial statements, even though partial recovery may be possible at some future time.

 

The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of December 31, 2016 and June 30, 2016:

 

		December 31, 2016
		1-4 Family				1-4 Family
		Owner				Non-Owner				Multi-
		Occupied				Occupied				family				Commercial				Construction				Consumer				Total
		(In thousands)
Pass		$	54,281			$	11,992			$	8,278			$	26,765			$	6,023			$	232			$	107,571
Special mention			-				-				-				-				-				-				-
Substandard			642				382				107				97				-				-				1,228
Doubtful			-				-				-				-				-				-				-
Total		$	54,923			$	12,374			$	8,385			$	26,862			$	6,023			$	232			$	108,799

 

		June 30, 2016
		1-4 Family				1-4 Family
		Owner				Non-Owner				Multi-
		Occupied				Occupied				family				Commercial				Construction				Consumer				Total
		(In thousands)
Pass		$	52,224			$	11,558			$	9,076			$	19,883			$	6,720			$	548			$	100,009
Special mention			-				-				-				-				-				-				-
Substandard			836				676				-				-				-				-				1,512
Doubtful			-				-				-				-				-				-				-
Total		$	53,060			$	12,234			$	9,076			$	19,883			$	6,720			$	548			$	101,521

 

The Company has a portfolio of loans designated as subprime, defined as those loans made to borrowers with a credit score below 660. These loans are primarily secured by one-to four-family real estate, including both owner-occupied and non-owner-occupied properties. Subprime loans totaled $7.6 million and $6.5 million at December 31, 2016 and June 30, 2016, respectively.

 

The Company evaluates the loan risk grading system categories and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the past year.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of December 31, 2016 and June 30, 2016:

 

		December 31, 2016
																										Total Loans >
		30-59 Days				60-89 Days				Greater Than				Total								Total Loans				90 Days &
		Past Due				Past Due				90 Days				Past Due				Current				Receivable				Accruing
		(In thousands)
1-4 family owner-occupied		$	91			$	118			$	-			$	209			$	54,714			$	54,923			$	-
1-4 family non-owner occupied			36				-				-				36				12,338				12,374				-
Multi-family residential			-				-				-				-				8,385				8,385				-
Commercial			1,056				-				-				1,056				25,806				26,862				-
Construction			-				-				-				-				6,023				6,023				-
Consumer and other			-				-				-				-				232				232				-
Total		$	1,183			$	118			$	-			$	1,301			$	107,498			$	108,799			$	-

 

		June 30, 2016
																										Total Loans >
		30-59 Days				60-89 Days				Greater Than				Total								Total Loans				90 Days &
		Past Due				Past Due				90 Days				Past Due				Current				Receivable				Accruing
		(In thousands)
1-4 family owner-occupied		$	136			$	86			$	-			$	222			$	52,838			$	53,060			$	-
1-4 family non-owner occupied			379				-				-				379				11,855				12,234				-
Multi-family residential			-				-				-				-				9,076				9,076				-
Commercial			-				-				-				-				19,883				19,883				-
Construction			-				-				-				-				6,720				6,720				-
Consumer and other			-				-				-				-				548				548				-
Total		$	515			$	86			$	-			$	601			$	100,920			$	101,521			$	-

 

A loan is considered impaired 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 real estate and commercial loans, but also include loans modified in troubled debt restructurings.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

The following table presents impaired loan information as of, and for the three and six months ended, December 31, 2016:

 

														For the Three Months Ended								For the Six Months Ended
		As of December 31, 2016												December 31, 2016								December 31, 2016
						Unpaid				Allowance for Loan				Average				Interest				Average				Interest
		Recorded Investment				Principal Balance				Losses Allocated				Recorded Investment				Income Recognized				Recorded Investment				Income Recognized
		(In thousands)
Loans with no related allowance recorded:
Real estate
1-4 family owner-occupied		$	571			$	757			$	-			$	575			$	4				582			$	10
1-4 family non-owner occupied			112				147				-				113				-				115				-
Multi-family residential			-				-				-				-				-				-				-
Commercial			141				156				-				142				3				143				5
Construction			-				-				-				-				-				-				-
Consumer and other			-				-				-				-				-				-				-
Loans with an allowance recorded:
Real estate
1-4 family owner-occupied			270				337				44				272				-				277				-
1-4 family non-owner occupied			236				279				33				238				-				241				-
Multi-family residential			107				110				22				107				-				109				-
Commercial			-				-				-				-				-				-				-
Construction			-				-				-				-				-				-				-
Consumer and other			-				-				-				-				-				-				-
Totals		$	1,437			$	1,786			$	99			$	1,447			$	7			$	1,467			$	15

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

The following table presents impaired loan information as of June 30, 2016 and for the three and six months ended December 31, 2015:

 

														For the Three Months Ended								For the Six Months Ended
		As of June 30, 2016												December 31, 2015								December 31, 2015
						Unpaid				Allowance for Loan				Average				Interest				Average				Interest
		Recorded Investment				Principal Balance				Losses Allocated				Recorded Investment				Income Recognized				Recorded Investment				Income Recognized
		(In thousands)
Loans with no related allowance recorded:
1-4 family owner-occupied		$	682			$	881			$	-			$	773			$	6			$	805			$	12
1-4 family non-owner occupied			182				213				-				126				-				128				-
Multi-family residential			-				-				-				-				-				-				-
Commercial			145				160				-				150				2				150				5
Construction			-				-				-				-				-				-				-
Consumer and other			-				-				-				-				-				-				-
Loans with an allowance recorded:
1-4 family owner-occupied			365				451				89				376				-				380				-
1-4 family non-owner occupied			348				385				72				152				-				154				-
Multi-family residential			111				111				27				-				-				-				-
Commercial			-				-				-				-				-				-				-
Construction			-				-				-				-				-				-				-
Consumer and other			-				-				-				-				-				-				-
Totals		$	1,833			$	2,201			$	188			$	1,577			$	8			$	1,617			$	17

 

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

The following table presents the Company’s nonaccrual loans at December 31, 2016 and June 30, 2016. The table excludes performing troubled debt restructurings.

 

		December 31,				June 30,
		2016				2016
		(In thousands)
Real estate
1-4 family owner-occupied		$	453			$	568
1-4 family non-owner occupied			348				530
Multi-family residential			107				111
Commercial			-				-
Construction			-				-
Consumer and other			-				-
Total nonaccrual		$	908			$	1,209

 

At December 31, 2016 and June 30, 2016, the Company had certain loans that were modified in troubled debt restructurings and impaired. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan. The Company had loans modified in a troubled debt restructuring totaling $1.3 million at both December 31, 2016 and June 30, 2016. Troubled debt restructured loans had specific allowances totaling $42,000 and $58,000 at December 31, 2016 and June 30, 2016, respectively. At December 31, 2016, the Company had no commitments to lend additional funds to borrowers with troubled debt restructured loans.

 

No loans were modified as troubled debt restructurings during the three and six months ended December 31, 2016 or 2015.

 

The Company had no troubled debt restructurings modified during the twelve months ended December 31, 2016 or 2015 that subsequently defaulted during the six-month periods ended December 31, 2016 or 2015. A troubled debt restructured loan is considered to be in payment default once it is 30 days contractually past due under the loan’s modified terms.

 

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

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Note 4:

Regulatory Matters

 

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

 

Effective January 1, 2015, the Bank is subject to the capital requirements set forth by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule established a new common equity Tier 1 minimum capital requirement and assigned a higher risk weight (150%) to exposures that are more than 90 days past due, or are on nonaccrual status, and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements, unless a one-time opt-in or opt-out is exercised. The Bank has chosen to exclude unrealized gains and losses from regulatory capital. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective.

 

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total capital, Tier I capital and Common Equity (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital to total average assets (as defined). Management believes, as of December 31, 2016 and June 30, 2016, that the Bank met all capital adequacy requirements to which it is subject.

 

As of December 31, 2016 and June 30, 2016, the Bank was well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events that management believes have changed the Bank’s category.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

The Bank’s actual capital amounts and ratios as of December 31, 2016 and June 30, 2016, are presented in the following table:

 

		Actual								For Capital Adequacy Purposes								To Be Well Capitalized Under Prompt Corrective Action Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
		(Dollars in thousands)
As of December 31, 2016
Total Capital (to Risk-Weighted Assets)		$	15,787				18.1	%		$	6,994				8.0	%		$	8,742				10.0	%
Tier I Capital (to Risk-Weighted Assets)		$	14,685				16.8	%		$	5,245				6.0	%		$	6,994				8.0	%
Common Equity (to Risk-Weighted Assets)		$	14,685				16.8	%		$	3,934				4.5	%		$	5,682				6.5	%
Tier I Capital (to Average Assets)		$	14,685				11.7	%		$	5,032				4.0	%		$	6,290				5.0	%
As of June 30, 2016
Total Capital (to Risk-Weighted Assets)		$	15,250				19.7	%		$	6,204				8.0	%		$	7,756				10.0	%
Tier I Capital (to Risk-Weighted Assets)		$	14,269				18.4	%		$	4,653				6.0	%		$	6,204				8.0	%
Common Equity (to Risk-Weighted Assets)		$	14,269				18.4	%		$	3,490				4.5	%		$	5,041				6.5	%
Tier I Capital (to Average Assets)		$	14,269				12.1	%		$	4,727				4.0	%		$	5,909				5.0	%

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Note 5:

Disclosures about Fair Value of Assets and Liabilities

 

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

 

Level 1

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

 

Level 2

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3

Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

 

Recurring Measurements

 

The following table presents the fair value measurement of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fell at December 31, 2016 and June 30, 2016:

 

						Fair Value Measurement Using
		Fair  Value				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs  (Level 3)
		(In thousands)
December 31, 2016
U.S. Government agency bonds		$	96			$	-			$	96			$	-
Mortgage-backed securities of U.S. of government sponsored entities - residential			3,429				-				3,429				-
		$	3,525			$	-			$	3,525			$	-
June 30, 2016
Mortgage-backed securities of U.S. of government sponsored entities - residential		$	3,465			$	-			$	3,465			$	-

 

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There were no assets classified within Level 3 of the fair value hierarchy measured on a recurring basis. There were no transfers between Level 1 and Level 2 during the periods ended December 31, 2016 and 2015.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Available-for-sale Securities

 

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flow. Such securities are classified within Level 2 of the valuation hierarchy.

 

Nonrecurring Measurements

 

The Company had no assets measured at fair value on a non-recurring basis at December 31, 2016. The following table presents fair value measurements of assets measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which fair value measurements fell at June 30, 2016:

 

						Fair Value Measurement Using
		Fair Value				Quoted Prices in Active Markets for Identical Assets  (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
		(In thousands)
June 30, 2016
Impaired loans - residential
One-to-four family owner occupied		$	276			$	-			$	-			$	276
One-to-four family non-owner occupied			360				-				-				360

 

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

 

Impaired Loans (Collateral Dependent)

 

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

 

Unobservable (Level 3) Inputs

 

The following table presents quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements:

 

		Fair Value at June 30, 2016				Valuation Technique		Unobservable Inputs		Range (Weighted Average)
		(In thousands)
Impaired loans (collateral dependent) - one-to-four family owner occupied residential real estate		$	276			Sales comparison approach		Adjustment for differences between the comparable real estate sales			10	%
Impaired loans (collateral dependent) - one-to-four family non-owner occupied residential real estate		$	360			Sales comparison approach		Adjustment for differences between the comparable real estate sales			10	%

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Fair Value of Financial Instruments

 

The following table presents the carrying amount and estimated fair values of the Company’s financial instruments not carried at fair value and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and June 30, 2016.

 

						Fair Value Measurement Using
		Carrying Amount				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
		(In thousands)
December 31, 2016
Financial assets
Cash and cash equivalents		$	9,456			$	9,456			$	-			$	-			$	9,456
Interest-bearing time deposits			100				100				-				-				100
Held-to-maturity securities			349				-				351				-				351
Loans and loans held for sale			107,314				-				-				107,042				107,042
Federal Home Loan Bank stock			1,192				n/a				n/a				n/a				n/a
Accrued interest receivable			365				-				365				-				365
Financial liabilities
Deposits			85,088				50,587				34,612								85,199
Federal Home Loan Bank advances			26,286				-				26,927				-				26,927
Accrued interest payable			37				-				37				-				37
June 30, 2016
Financial assets
Cash and cash equivalents		$	3,672			$	3,672			$	-			$	-			$	3,672
Interest-bearing time deposits			2,100				2,100				-				-				2,100
Held-to-maturity securities			986				-				996				-				996
Loans and loans held for sale			101,709				-				-				102,480				102,480
Federal Home Loan Bank stock			1,192				n/a				n/a				n/a				n/a
Accrued interest receivable			292				-				292				-				292
Financial liabilities
Deposits			77,214				37,010				40,584				-				77,594
Federal Home Loan Bank advances			25,319				-				25,445				-				25,445
Accrued interest payable			33				-				33				-				33

 

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheets at amounts other than fair value.

 

Cash and Cash Equivalents and Interest-bearing Time Deposits

 

The carrying amount of cash, short-term instruments and time deposits approximate fair value and are classified as Level 1.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Held-to-Maturity Securities

 

The fair value of held-to-maturity securities was estimated by using pricing models that contain market pricing and information, quoted prices of securities with similar characteristics or discounted cash flows that use credit-adjusted discount rates, resulting in a Level 2 classification.

 

Loans

 

Fair values of loans are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values, resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality, resulting in a Level 3 classification. The methods utilized to estimate the fair values of loans do not necessarily represent an exit price.

 

Federal Home Loan Bank Stock

 

It is not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability.

 

Accrued Interest Receivable and Payable

 

The carrying amounts of accrued interest approximate fair value, resulting in a Level 2 classification.

 

Deposits

 

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

 

Federal Home Loan Bank Advances

 

The fair values of FHLB advances are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements, resulting in a Level 2 classification.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Off Balance Sheet Instruments

 

Fair values of off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

 

Note 6:

Accumulated Other Comprehensive Loss

 

Changes in accumulated other comprehensive loss by component, net of tax, for the three and six months ended December 31, 2016 and 2015 are as follows:

 

						Unrealized
		Unrealized				Gains and Losses
		Gains and Losses				on Securities
		on Available				Transferred from
		for Sale				Available for Sale to
		Securities				Held to Maturity				Total
		(In thousands)
Three Months Ended December 31, 2016
Balance, October 1, 2016		$	(78	)		$	(11	)		$	(89	)
Other comprehensive loss			(53	)			4				(49	)
Balance, December 31, 2016		$	(131	)		$	(7	)		$	(138	)
Three Months Ended December 31, 2015
Balance, October 1, 2015		$	(81	)		$	(18	)		$	(99	)
Other comprehensive income			(11	)			-				(11	)
Balance, December 31, 2015		$	(92	)		$	(18	)		$	(110	)

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

						Unrealized
		Unrealized				Gains and Losses
		Gains and Losses				on Securities
		on Available				Transferred from
		for Sale				Available for Sale to
		Securities				Held to Maturity				Total
		(In thousands)
Six Months Ended December 31, 2016
Balance, July 1, 2016		$	(67	)		$	(12	)		$	(79	)
Other comprehensive loss			(64	)			5				(59	)
Balance, December 31, 2016		$	(131	)		$	(7	)		$	(138	)
Six Months Ended December 31, 2015
Balance, July 1, 2015		$	(73	)		$	(18	)		$	(91	)
Other comprehensive income, net of tax			(19	)			-				(19	)
Balance, December 31, 2015		$	(92	)		$	(18	)		$	(110	)

 

There were no material items reclassified from accumulated other comprehensive loss to the statements of income for the three- and six-month periods ended December 31, 2016 and 2015.

 

Note 7:

Earnings Per Share

 

Basic earnings per 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 (the “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.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Earnings per share were computed as follows for the three- and six-month periods ended December 31, 2016.

 

		Three Months Ended December 31, 2016
						Weighted-
		Net				Average				Per Share
		Income				Shares				Amount
		(In thousands)
Net income		$	124
Basic earnings per share							818,927			$	0.15
Effect of dilutive securities
Stock options							4,385
Restricted stock awards							4,355
Diluted earnings per share							827,667			$	0.15

 

		Six Months Ended December 31, 2016
						Weighted-
		Net				Average				Per Share
		Income				Shares				Amount
		(In thousands)
Net income		$	197
Basic earnings per share							818,405			$	0.24
Effect of dilutive securities
Stock options							3,717
Restricted stock awards							3,650
Diluted earnings per share							825,772			$	0.24

 

Earnings per share for the three months ended December 31, 2015 was $0.03, calculated using 876,163 shares issued, less 70,055 weighted-average unallocated shares held by the ESOP. Earnings per share for the six months ended December 31, 2015 was $0.09, calculated using 876,163 shares issued, less 70,074 weighted-average unallocated shares held by the ESOP. The Company had no dilutive or potentially dilutive securities at December 31, 2015.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Note 8:

Employee Stock Ownership Plan

 

As part of the stock conversion, shares were purchased by the ESOP with a loan from MW Bancorp. All employees of the Bank meeting certain tenure requirements are entitled to participate in the ESOP. Compensation expense related to the ESOP was $21,000 and $35,000 for the three and six month periods ended December 31, 2016, respectively, and $15,000 and $28,000 for the three and six month periods ended December 31, 2015, respectively.

 

A summary of the unallocated share activity of the ESOP for the six months ended December 31, 2016 and 2015 is as follows:

 

		For the six months ended
		December 31,
		2016				2015
Beginning balance			66,589				70,093
New share purchases			-				-
Shares released to participants			-				-
Shares allocated to participants			(3,928	)			(3,504	)
Ending balance			62,661				66,589

 

The stock price at the formation date was $10.00. The aggregate fair value of the 62,661 unallocated shares was $1.2 million based on the $18.88 closing price of MW Bancorp’s common stock on December 31, 2016.

 

Note 9:

Equity Incentive Plan

 

In April 2016, the Company’s stockholders adopted the MW Bancorp, Inc. 2016 Equity Incentive Plan (the “2016 Plan”). No more than 122,662 shares of the Company’s common stock may be issued under the 2016 Plan, of which a maximum of 87,616 may be issued pursuant to the exercise of stock options and 35,046 may be issued pursuant to restricted stock awards, restricted stock units and unrestricted share awards. Stock options awarded to employees may be incentive stock options or non-qualified stock options. Shares subject to awards under the 2016 Plan may be authorized but unissued shares or treasury shares. The 2016 Plan permits the grant of incentive awards in the form of options, stock appreciation rights, restricted share and share unit awards, and performance share awards. The 2016 Plan contains annual and lifetime limits on certain types of awards to individual participants.

 

Awards may vest or become exercisable only upon the achievement of performance measures or based solely on the passage of time after award. Stock options and restricted stock awards provide for accelerated vesting if there is a change in control (as defined in the 2016 Plan).

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

In May 2016, the Company granted stock options for 60,150 shares to members of the Board of Directors and certain members of management. Each option has an exercise price of $14.88 as determined on the grant date and expires ten years from the grant date. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model, which resulted in a per share fair value of $4.67. The fair value was calculated for stock options using the following assumptions: expected volatility of 19.46%, a risk-free interest rate of 1.81%, an expected term of ten years and an expected dividend yield of 0.00%.

 

No options granted under the 2016 Plan were exercisable at December 31, 2016.

 

In May 2016, the Company awarded 28,810 restricted shares to members of the Board of Directors and certain members of management. In July 2016, the Company awarded an additional 500 shares of restricted stock to a member of management. The restricted stock awards have vesting periods ranging from three years to seven years. Shares of restricted stock granted to employees under the 2016 Plan are subject to vesting based on continuous employment for a specified time period following the date of grant. During the restricted period, the holder is entitled to full voting rights and dividends.

 

Total compensation cost recognized in the income statement for share-based payment arrangements during the three and six months ended December 31, 2016 was $31,000 and $61,000, respectively.

 

As of December 31, 2016, there was $650,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 6.0 years.

 

Note 10:

Recent Accounting Pronouncements

 

FASB ASU 2014-09, Revenue from Contracts with Customers. In May 2014, the FASB issued amended guidance on revenue recognition from contracts with customers. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most contract revenue recognition guidance, including industry-specific guidance. The core principle of the amended guidance is that an entity should recognize revenue to depict the transfer of promised goods or 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. The amended guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within the reporting period, and should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the amendments recognized at the date of initial application. Early adoption is prohibited. Management is currently in the process of evaluating the impact of the amended guidance on the Company’s financial statements.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

FASB ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. For public business entities, the amendments in this update include the elimination of the requirement to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, the requirement to use the exit price notion when measuring fair value of financial instruments for disclosure purposes, the requirement to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, the requirement for separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or accompanying notes to the financial statements, and the amendments clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.

 

For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the amendments in this update is not permitted, except that early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued or, by all other entities, that have not yet been made available for issuance are permitted as of the beginning of the fiscal year of adoption under certain circumstances. An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. An entity should apply the amendments to this update by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Management is currently evaluating the impact of adopting this guidance on the Company’s financial statements.

 

FASB ASU 2016-02, Leases. In February 2016 the FASB issued ASU 2016-02, Leases. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

 

●

A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and

 

●

A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

 

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

 

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

 

Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently evaluating the impact of adopting this guidance on the Company’s financial statements.

 

 

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

FASB ASU 2016-13 Financial Instruments-Credit Losses. In June 2016, the FASB issued ASU 2016-13. The amendments in this ASU replace the incurred loss model for recognition of credit losses with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations.

 

Note 11:

Change in Corporate Form

 

On January 29, 2015, the Bank converted into a stock savings bank structure with the establishment of a stock holding company, MW Bancorp, Inc., a Maryland corporation, as parent of the Bank.

 

The Bank converted to the stock form of ownership, followed by the issuance of all of the Bank’s outstanding stock to the Company. Pursuant to the Plan, the Bank determined the total offering value and number of shares of common stock based upon an independent appraiser’s valuation. The stock was priced at $10.00 per share. In addition, the Bank’s Board of Directors adopted ESOP, which subscribed for 8% of the common stock sold in the offering. Proceeds from the sale of shares totaled $8.8 million. The costs of issuing the common stock were deducted from the sales proceeds of the offering.

 

At the completion of the conversion to stock form, the Bank established a liquidation account in the amount of retained earnings contained in the final prospectus. The liquidation account will be maintained for the benefits of eligible savings account holders who maintain deposit accounts in the Bank after conversion.

 

The conversion was accounted for as a change in corporate form with the historic basis of the Bank’s assets, liabilities and equity unchanged as a result.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Management’s discussion and analysis of the financial condition at December 31, 2016 and results of operations for the three and six months ended December 31, 2016 and 2015, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto, appearing in Part I, Item 1 of this quarterly report on

Form 10-Q.

 

Forward-Looking Statements

 

This document contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and similar expressions. These forward-looking statements include: statements of goals, intentions and expectations, statements regarding prospects and business strategy, statements regarding asset quality and market risk, and estimates of future costs, benefits and results.

 

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following: (1) general economic conditions, (2) competitive pressure among financial services companies, (3) changes in interest rates, (4) deposit flows, (5) loan demand, (6) changes in legislation or regulation, (7) changes in accounting principles, policies and guidelines and (8) other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services.

 

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. We have no obligation to update or revise any forward-looking statements to reflect any changed assumptions, any unanticipated events or any changes in the future.

 

Critical Accounting Policies

 

The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical. The estimates and assumptions that we use are based on historical experience and various other factors we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities or our results of operations.

 

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following represent our critical accounting policies:

 

Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered necessary for probable incurred credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of our most critical accounting policies.

 

Management performs a quarterly evaluation of the allowance for loan losses. Consideration is given to a variety of factors in establishing this estimate, including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.

 

The analysis has two components-specific and general allowances. The specific allowance is for unconfirmed losses related to loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. If the fair value of the loan is less than its carrying value, a charge is recorded for the difference. The general allowance, which is for loans reviewed collectively, is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. The historical loss experience is determined by portfolio segment and is based on the Company’s actual loss history over the most recent twelve quarters. All periods are evenly weighted within the twelve quarter loss history. The methodology used in calculation of loss factors is consistently applied to all loan segments. This analysis establishes historical loss percentages and qualitative factors that are applied to the loan groups to determine the amount of the allowance for loan losses necessary for loans that are reviewed collectively. The qualitative component is critical in determining the allowance for loan losses as certain trends may indicate the need for changes to the allowance for loan losses based on factors beyond the historical loss history. Not incorporating a qualitative component could misstate the allowance for loan losses. Actual loan losses may be significantly more than the allowances we have established, which could result in a material adverse effect on our financial results.

 

Deferred Tax Assets. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Determining the proper valuation allowance for deferred taxes is critical in properly valuing the deferred tax asset and the related recognition of income tax expense or benefit. At each of December 31, 2016 and June 30, 2016, our deferred tax asset was reduced by a valuation allowance of $1.4 million.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company estimates the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, the Company estimates fair value. These estimates are subjective in nature and imprecision in estimating these factors can impact the amount of gain or loss recorded. A more detailed description of the fair values measured at each level of the fair value hierarchy and the methodology utilized by the Company can be found in Note 5 to this Form 10-Q — “Disclosures About Fair Value of Assets and Liabilities.”

 

Comparison of Financial Condition at December 31, 2016 and June 30, 2016

 

Total Assets. Total assets were $128.5 million at December 31, 2016, an increase of $9.5 million, or 8.0%, over the $119.0 million total at June 30, 2016. The increase was primarily comprised of a $7.3 million increase in net loans and a $5.8 million increase in cash and cash equivalents, which were partially offset by a decrease in interest-bearing deposits in other financial institutions of $2.0 million and a decrease in loans held for sale of $1.7 million.

 

Net Loans. Net loans, including loans held for sale, increased by $5.6 million, or 5.5%, to $107.3 million at December 31, 2016 from $101.7 million at June 30, 2016. During the six months ended December 31, 2016, we originated $30.9 million of loans, which represented approximately 30.5% of our total loan portfolio at June 30, 2016. These new loan originations were comprised primarily of $16.3 million of one- to four-family residential real estate loans, $8.6 million of commercial real estate loans, $2.6 million of construction loans and $1.7 of multi-family residential real estate loans. Of the loans we originated during the six months ended December 31, 2016, we sold $10.1 million of loans in the secondary market and had $79,000 in loans held for sale at December 31, 2016.

 

During the six months ended December 31, 2016, one- to four-family residential real estate loans increased $2.0 million, or 3.0%, to $67.3 million at December 31, 2016, from $65.3 million at June 30, 2016; commercial real estate loans increased $6.3 million, or 35.8%, to $23.7 million at December 31, 2016; multi-family residential real estate loans decreased $691,000, or 7.6%, to $8.4 million at December 31, 2016; and construction loans increased $697,000, or 10.4%, to $6.0 million at December 31, 2016.

 

Increases in loan balances reflect our strategy to grow and diversify our loan portfolio, with an emphasis on increasing commercial and multi-family residential loans, as we shift our strategy from our traditional focus on one-to four-family residential loans. Such growth has been achieved amid strong competition for commercial real estate, multi-family and one- to four-family residential mortgage loans in our market area in the current low interest rate environment.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

During the latter part of fiscal 2013, we initiated a program to sell certain fixed-rate, 30-year term mortgage loans in the secondary market. We have continued to sell loans on both a servicing released and servicing retained basis, to the Federal Home Loan Bank-Cincinnati (“FHLB”), through its mortgage purchase program, and to other investors. We sold $11.8 million of loans in the six months ended December 31, 2016. Total loans that had been sold with servicing retained through December 31, 2016 amounted to $23.2 million at December 31, 2016. Management intends to continue these sales activities in future periods.

 

Interest Bearing Deposits in Other Financial Institutions. Interest-bearing time deposits in other financial institutions decreased by $2.0 million, or 95.2%, to a total of $100,000 at December 31, 2016, compared to $2.1 million at June 30, 2016, due to maturities of these deposits. Management began to invest in certificates of deposit during the year ended June 30, 2013, to increase the yield on liquid assets beyond the rates available in overnight funds. As these deposits matured, the proceeds have been used primarily to fund new loan originations.

 

Investment Securities. Investment securities decreased $577,000, or 13.0%, to $3.9 million at December 31, 2016 from $4.5 million at June 30, 2016. The decrease consisted primarily of $1.1 million of principal repayments on mortgage-backed securities, partially offset by $617,000 in purchases of securities during the six months ended December 31, 2016.

 

The yield on our investment securities decreased to 1.56% for the six months ended December 31, 2016, compared to 1.84% for the six months ended December 31, 2015. At December 31, 2016, investment securities classified as available-for-sale and held-to-maturity consisted primarily of government-sponsored mortgage-backed securities.

 

Premises and Equipment, net. Premises and equipment increased $623,000, or 53.8%, to $1.8 million at December 31, 2016. The increase was due primarily to capitalized costs for construction of the Company’s new drive-through ATM/ITM facility adjacent to the Columbia Tusculum office location. The drive-through will offer customers convenient access to both automated teller machines and interactive teller machines. The ATM access became available in December 2016, while the ITM capability at this new facility is scheduled to open in February 2017.

 

Deposits. Deposits increased by $7.9 million, or 10.2%, to $85.1 million at December 31, 2016 from $77.2 million at June 30, 2016. Our core deposits, which consist of all deposit account types except certificates of deposit, increased $13.6 million, or 36.7%, to $50.6 million at December 31, 2016 from $37.0 million at June 30, 2016. Certificates of deposit decreased $5.7 million, or 14.2%, to $34.5 million at December 31, 2016 from $40.2 million at June 30, 2016. During the six months ended December 31, 2016, management continued its strategy of pursuing growth in demand accounts and other lower cost core deposits. Demand accounts were first offered by the Company during 2013 and totaled $33.8 million at December 31, 2016. Management intends to continue its efforts to increase core deposits, with a special emphasis on growth in consumer and business demand deposits.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Federal Home Loan Bank Advances. FHLB advances increased $967,000, or 3.8%, to $26.3 million at December 31, 2016 from $25.3 million at June 30, 2016. Management has pursued a strategy of periodically increasing these advances to take advantage of this low-cost source of funding during the low interest rate environment to grow the Company’s loan portfolio. The aggregate cost of these advances was 1.44% at December 31, 2016, compared to the Company’s cost of deposits of 0.90% at that date.

 

Shareholders’ Equity. Total shareholders’ equity increased $126,000, or 0.8%, to $16.3 million at December 31, 2016 compared to June 30, 2016. The increase was primarily attributable to net income of $197,000 for the six months ended December 31, 2016 and a $53,000 increase for allocation of ESOP shares, which were partially offset by dividends paid of $89,000 and a $59,000 increase in the accumulated other comprehensive loss.

 

Comparison of Operating Results for the Three-Month Periods Ended December 31, 2016 and 2015

 

General. Net income for the three months ended December 31, 2016 was $124,000, compared to $23,000 for the three months ended December 31, 2015, an increase of $101,000. The increase in net income was primarily due to a $127,000 increase in net interest income and an $84,000 increase in noninterest income, which were partially offset by a $114,000 increase in noninterest expenses.

 

Average Balance Sheets. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of net deferred costs, discounts and premiums that are accreted to interest income.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

		Three Months Ended December 31,
		2016												2015
		Average Outstanding Balance				Interest				Yield/      Rate				Average Outstanding Balance				Interest				Yield/  Rate
			(Dollars in thousands)
Interest-earning assets:
Loans		$	109,599			$	1,053				3.84	%		$	98,967			$	937				3.79	%
Investment securities			3,855				15				1.57	%			5,372				24				1.79	%
Other interest-earning assets (1)			8,072				28				1.38	%			9,400				32				1.36	%
Total interest-earning assets			121,526				1,096				3.61	%			113,739				993				3.49	%
Non-interest-earning assets			6,305												5,131
Allowance for loan losses			(1,635	)											(1,615	)
Total assets		$	126,196											$	117,255
Interest-bearing liabilities:
Interest-bearing demand		$	26,706				65				0.97	%		$	20,717				50				0.97	%
Money market accounts			2,923				5				0.68	%			2,774				5				0.72	%
Savings accounts			14,980				12				0.32	%			8,723				7				0.32	%
Certificates of deposit			34,993				113				1.29	%			42,943				160				1.49	%
Total deposits			79,602				195				0.98	%			75,157				222				1.18	%
FHLB advances			26,155				88				1.35	%			23,312				85				1.46	%
Total interest-bearing liabilities			105,757				283				1.07	%			98,469				307				1.25	%
Non-interest-bearing liabilities			4,259												3,070
Total liabilities			110,016												101,539
Equity			16,180												15,716
Total liabilities and equity		$	126,196											$	117,255
Net interest income						$	813											$	686
Net interest rate spread (2)											2.54	%											2.24	%
Net interest-earning assets (3)		$	15,769											$	15,270
Net interest margin (4)											2.68	%											2.41	%
Average interest-earning assets to interest-bearing liabilities			114.91	%											115.51	%

 

(1) Consists of stock in the FHLB and interest bearing demand and time deposits in other banks.

(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average total interest-earning assets.

 

Interest Income. Interest income increased $103,000, or 10.4%, to $1.1 million for the three months ended December 31, 2016 from $993,000 for the three months ended December 31, 2015. This increase was primarily attributable to a $116,000 increase in interest on loans receivable. The average balance of loans during the three months ended December 31, 2016 increased by $10.6 million, or 10.7%, from the balance for the three months ended December 31, 2015. The average yield on loans increased by five basis points to 3.84% for the three months ended December 31, 2016 from 3.79% for the three months ended December 31, 2015. The increase in average yield on loans was due to our growth in loans and the increase in interest rates in the economy during the current quarter.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The average balance of investment securities decreased $1.5 million to $3.9 million for the three months ended December 31, 2016 from $5.4 million for the three months ended December 31, 2015, while the average yield on investment securities decreased by 22 basis points, to 1.57% for the three months ended December 31, 2016 from 1.79% for the three months ended December 31, 2015. Interest income on other interest-earning assets, including certificates of deposit in other financial institutions, decreased $4,000, or 12.5%, for the three months ended December 31, 2016, due to a decrease in the average balance of $1.3 million period-to-period, partially offset by an increase in the average yield of two basis points, to 1.38% for the three months ended December 31, 2016. Interest income on other interest- earning assets included recognition of $9,000 of a $120,000 Bank Enterprise Award the Company received during fiscal 2015 from the U.S. Government-sponsored Community Development Financial Institutions Fund (“CDFI”) based on certificates of deposit placed with qualifying financial institutions participating in the program. The award was accreted into interest income over the remaining term of the certificates of deposit, which expired during the three months ended December 31, 2016.

 

Interest Expense. Total interest expense decreased $24,000, or 7.8%, to $283,000 for the three months ended December 31, 2016, from $307,000 for the three months ended December 31, 2015. Interest expense on deposit accounts decreased $27,000, or 12.2%, to $195,000 for the three months ended December 31, 2016, from $222,000 for the three months ended December 31, 2015. The decrease was primarily due to a decrease in the average cost of interest-bearing deposits of 20 basis points to 0.98% for the three months ended December 31, 2016 compared to the same quarter in 2015, partially offset by an increase of $4.4 million, or 5.9%, in the average balance of interest-bearing deposits to $79.6 million for the three months ended December 31, 2016.

 

Interest expense on FHLB advances increased $3,000, or 3.5%, to $88,000 for the three months ended December 31, 2016 from $85,000 for the three months ended December 31, 2015. The average balance of advances increased by $2.8 million, or 12.2%, to $26.2 million for the three months ended December 31, 2016 compared to the three months ended December 31, 2015, while the average cost of these advances decreased by 11 basis points to 1.35% from 1.46%. As noted above, management elected to increase outstanding advances as a source of low-cost funding.

 

Net Interest Income. Net interest income increased $127,000, or 18.5%, to $813,000 for the three months ended December 31, 2016, compared to $686,000 for the three months ended December 31, 2015. The increase reflected the increase in the interest rate spread to 2.54% for the three months ended December 31, 2016, compared to 2.24% for the three months ended December 31, 2015, and to a lesser extent an increase in the average net interest-earning assets of $500,000 period-to-period. Our net interest margin increased to 2.68% for the three months ended December 31, 2016 from 2.41% for the three months ended December 31, 2015.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies—Allowance for Loan Losses,” we did not record a provision for loan losses for the three months ended December 31, 2016, a decrease of $8,000 from the three months ended December 31, 2015. The allowance for loan losses was $1.6 million, or 1.50% of total loans, including loans held for sale, at December 31, 2016, compared to $1.6 million, or 1.58% of total loans at June 30, 2016. The absence of a provision for loan losses in the three months ended December 31, 2016, compared to the three months ended December 31, 2015, was due primarily to the overall low balances of delinquent and nonperforming loans and net loan charge-offs in the 2016 period. Total nonperforming loans were $907,000 at December 31, 2016, compared to $1.0 million at December 31, 2015. Classified loans totaled to $1.2 million at December 31, 2016, compared to $1.8 million at December 31, 2015, and total loans past due greater than 30 days were $1.3 million and $704,000 at those respective dates. Net recoveries totaled $4,000 for the three months ended December 31, 2016, compared to net recoveries of $2,000 for the three months ended December 31, 2015. As a percentage of nonperforming loans, the allowance for loan losses was 180.4% at December 31, 2016, compared to 158.4% at December 31, 2015.

 

The allowance for loan losses reflects the estimate we believe to be appropriate to cover probable incurred losses in the loan portfolio at December 31, 2016 and 2015. While we believe the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact our financial condition and results of operations. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.

 

Non-Interest Income. Non-interest income increased $84,000, or 190.9%, to $128,000 for the three months ended December 31, 2016 from $44,000 for the three months ended December 31, 2015. The increase was primarily due to a $96,000 increase in gains on sales of loans, due primarily to an increase in sales volume period-to-period.

 

Non-Interest Expense. Non-interest expense increased $114,000, or 16.3%, to $813,000 for the three months ended December 31, 2016 compared to $699,000 for the three months ended December 31, 2015. The increase was primarily attributable to an increase of $85,000, or 21.2%, in salaries, employee benefits and directors fees expense, a $16,000, or 31.4%, increase in occupancy and equipment and a $25,000, or 75.8% increase in data processing, which were partially offset by an $18,000 or 22.2%, decrease in professional services. The increase in salaries and benefits expense was due primarily to an increase in staffing levels, as the Company increased its staff by three full-time equivalent positions period-to-period, normal merit increases and the incremental expense associated with the stock-based compensation. The increase in occupancy and equipment was due primarily to expense associated with the new branch office location, which opened in September 2015. The increase in data processing was due primarily to cost increases implemented by the data processing provider, and the overall growth in loans and deposits and new product offerings period-to-period. The decrease in professional services resulted primarily from management’s efforts to control such costs.

 

Federal Income Taxes. Federal income taxes totaled $4,000 for the three-month period ended December 31, 2016, while the Company did not record a federal income tax provision for the three-month period ended December 31, 2015. Management did not record a federal income tax provision in the three months ended December 31, 2015, due to the net operating loss carryforward available as well as the full impairment valuation allowance maintained on the Company’s deferred tax assets. Management evaluated the deferred tax asset based upon a projection of future operating results and determined that valuation allowances of $1.4 million and $2.1 million were required at December 31, 2016 and 2015, respectively. The deferred tax asset will only be recognized in future periods when it is more likely than not that the net deferred tax asset can be realized, primarily through the generation of sustainable taxable income.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Comparison of Operating Results for the Six-Month Periods Ended December 31, 2016 and 2015

 

General. Net income for the six months ended December 31, 2016 was $197,000, compared to $70,000 for the six months ended December 31, 2015, an increase of $127,000. The increase in net income was primarily due to a $234,000 increase in net interest income, a $163,000 increase in noninterest income, and a $13,000 decrease in the provision for loan losses, which were partially offset by a $250,000 increase in noninterest expenses, and a $33,000 increase in federal income taxes.

 

Average Balance Sheets. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of net deferred costs, discounts and premiums that are accreted to interest income.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

		Six Months Ended December 31,
		2016												2015
		Average Outstanding Balance				Interest				Yield/ Rate				Average Outstanding Balance				Interest				Yield/ Rate
		(Dollars in thousands)
Interest-earning assets:
Loans		$	107,450			$	2,071				3.86	%		$	96,214			$	1,842				3.83	%
Investment securities			3,989				31				1.56	%			5,541				51				1.84	%
Other interest-earning assets(1)			7,014				59				1.68	%			8,744				64				1.46	%
Total interest-earning assets			118,453				2,161				3.65	%			110,499				1,957				3.54	%
Non-interest-earning assets			6,164												4,958
Allowance for loan losses			(1,635	)											(1,610	)
Total assets		$	122,982											$	113,847
Interest-bearing liabilities:
Interest-bearing demand		$	24,569				117				0.95	%		$	18,123				88				0.97	%
Money market accounts			2,803				8				0.57	%			2,764				8				0.58	%
Savings accounts			12,964				21				0.32	%			8,650				13				0.30	%
Certificates of deposit			36,492				244				1.34	%			42,936				321				1.50	%
Total deposits			76,828				390				1.02	%			72,473				430				1.19	%
FHLB advances			26,068				176				1.35	%			22,877				166				1.45	%
Total interest-bearing liabilities			102,896				566				1.10	%			95,350				596				1.25	%
Non-interest-bearing liabilities			3,899												2,808
Total liabilities			106,795												98,158
Equity			16,187												15,689
Total liabilities and equity		$	122,982											$	113,847
Net interest income						$	1,595											$	1,361
Net interest rate spread (2)											2.55	%											2.29	%
Net interest-earning assets (3)		$	15,557											$	15,149
Net interest margin (4)											2.69	%											2.46	%
Average interest-earning assets to interest-bearing liabilities			115.12	%											115.89	%

 

(1) Consists of stock in the FHLB and interest bearing demand and time deposits in other banks.

(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average total interest-earning assets.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Interest Income. Interest income increased $204,000, or 10.4%, to $2.2 million for the six months ended December 31, 2016 from $2.0 million for the six months ended December 31, 2015. This increase was primarily attributable to a $229,000, or 12.4%, increase in interest on loans receivable, which was partially offset by a $20,000, or 39.2%, decrease in interest on investment securities. The average balance of loans during the six months ended December 31, 2016 increased by $11.2 million, or 11.7%, from the balance for the six months ended December 31, 2015. The average yield on loans increased by three basis points to 3.86% for the six months ended December 31, 2016 from 3.83% for the six months ended December 31, 2015. The increase in average yield on loans was due to an overall increase in interest rates in the economy.

 

The average balance of investment securities decreased $1.6 million to $4.0 million for the six months ended December 31, 2016 from $5.5 million for the six months ended December 31, 2015, while the average yield on investment securities decreased by 28 basis points to 1.56% for the six months ended December 31, 2016 from 1.84% for the six months ended December 31, 2015.

 

Interest income on other interest-earning assets, including certificates of deposit in other financial institutions, decreased $5,000, or 7.8%, for the six months ended December 31, 2016, due to a decrease in the average balance of $1.7 million period-to-period, offset by an increase in the average yield of 22 basis points to 1.68% for the six months ended December 31, 2016. Interest income on other interest-earning assets included recognition of $21,000 and $26,000 for the six months ended December 31, 2016 and 2015, respectively, of a $120,000 Bank Enterprise Award the Company received during fiscal 2015 from the CDFI based on certificates of deposit placed with qualifying financial institutions participating in the program. The award was accreted into interest income over the remaining term of the certificates of deposit, which expired during the six months ended December 31, 2016.

 

Interest Expense. Total interest expense decreased $30,000, or 5.0%, to $566,000 for the six months ended December 31, 2016, from $596,000 for the six months ended December 31, 2015. Interest expense on deposit accounts decreased $40,000, or 9.3%, to $390,000 for the six months ended December 31, 2016, from $430,000 for the six months ended December 31, 2015. The decrease was primarily due to a decrease in the average cost of interest-bearing deposits of 17 basis points to 1.02% for the six months ended December 31, 2016 compared to 1.19% during the same period in 2015, which was partially offset by an increase of $4.4 million, or 6.0%, in the average balance of interest-bearing deposits to $76.8 million for the six months ended December 31, 2016.

 

Interest expense on FHLB advances increased $10,000, or 6.0%, to $176,000 for the six months ended December 31, 2016 from $166,000 for the six months ended December 31, 2015. The average balance of advances increased by $3.2 million, or 13.9%, to $26.1 million for the six months ended December 31, 2016 compared to the six months ended December 31, 2015, while the average cost of these advances decreased by 10 basis points to 1.35% for the six months ended December 31, 2016 compared to 1.45% for the same period in 2015. As noted above, management elected to increase outstanding advances as a source of low-cost funding.

 

Net Interest Income. Net interest income increased $234,000, or 17.2%, to $1.6 million for the six months ended December 31, 2016, compared to $1.4 million for the six months ended December 31, 2015. The increase reflected the increase in the interest rate spread to 2.55% for the six months ended December 31, 2016, compared to 2.29% for the six months ended December 31, 2015, and to a lesser extent an increase in the average net interest-earning assets of $408,000 period-to-period. Our net interest margin increased to 2.69% for the six months ended December 31, 2016 from 2.46% for the six months ended December 31, 2015.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies—Allowance for Loan Losses,” we did not record a provision for loan losses for the six months ended December 31, 2016, a decrease of $13,000 from the six months ended December 31, 2015. The allowance for loan losses was $1.6 million, or 1.50% of total loans, including loans held for sale, at December 31, 2016, compared to $1.6 million, or 1.58% of total loans at June 30, 2016. The absence of a provision for loan losses in the six months ended December 31, 2016, compared to the six months ended December 31, 2015, was due primarily to the overall low balances of delinquent and nonperforming loans and net loan charge-offs in the 2016 period. Total nonperforming loans were $907,000 at December 31, 2016, compared to $1.0 million at December 31, 2015. Classified loans totaled to $1.2 million at December 31, 2016, compared to $1.8 million at December 31, 2015, and total loans past due greater than 30 days were $1.3 million and $704,000 at those respective dates. Net recoveries totaled $1,000 for the six months ended December 31, 2016, compared to net recoveries of $5,000 for the six months ended December 31, 2015. As a percentage of nonperforming loans, the allowance for loan losses was 180.4% at December 31, 2016, compared to 158.4% at December 31, 2015.

 

The allowance for loan losses reflects the estimate we believe to be appropriate to cover probable incurred losses in the loan portfolio at December 31, 2016 and 2015. While we believe the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact our financial condition and results of operations. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.

 

Non-Interest Income. Non-interest income increased $163,000, or 133.6%, to $285,000 for the six months ended December 31, 2016 from $122,000 for the six months ended December 31, 2015. The increase was primarily due to a $175,000 increase in gain on sale of loans, due primarily to an increase in sales volume period-to-period.

 

Non-Interest Expense. Non-interest expense increased $250,000, or 17.9%, to $1.7 million for the six months ended December 31, 2016, compared to $1.4 million for the six months ended December 31, 2015. The increase was primarily attributable to an increase of $149,000, or 19.0%, in salaries, employee benefits and director’s fees expense, a $44,000 or 49.4%, increase in occupancy and equipment, and a $53,000, or 80.3%, increase in data processing, which were partially offset by a $34,000, or 17.6%, decrease in professional services. The increase in salaries and benefits expense was attributable to an increase in staffing levels as the Company increased its staff by three full-time equivalent positions period-to-period, normal merit increases and incremental expense associated with the stock-based compensation. The increase in occupancy and equipment was due primarily to expense associated with the new branch office location, which opened in September 2015. The increase in data processing was due primarily to cost increases implemented by the data processing provider, and the overall growth in loans and deposits and new product offerings period-to-period. The decrease in professional services resulted primarily from management’s efforts to control such costs.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Federal Income Taxes. Federal income taxes totaled $33,000 for the six-month period ended December 31, 2016, while the Company did not record a federal income tax provision for the six-month period ended December 31, 2015. The Company did not record federal income taxes in the six-month period ended December 31, 2015, due to the net operating loss carryforward available as well as the full impairment valuation allowance maintained on the Company’s deferred tax assets. Management evaluated the deferred tax asset based upon a projection of future operating results and determined that a valuation allowance of $1.4 million and $2.1 million was required at December 31, 2016 and 2015, respectively. The deferred tax asset will only be recognized in future periods when it is more likely than not that the net deferred tax asset can be realized, primarily through the generation of sustainable taxable income.

 

Liquidity and Capital Resources

 

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities, sales or calls of securities. We also have the ability to borrow from the FHLB. At December 31, 2016, in addition to our currently outstanding borrowings, we had the capacity to borrow approximately $22.1 million from the FHLB and have an additional $10.0 million on a line of credit with the FHLB. At December 31, 2016, we had $26.3 million outstanding in FHLB advances.

 

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments, including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

 

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $2.5 million and $186,000 for the six months ended December 31, 2016 and 2015, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, and proceeds from maturing securities and pay-downs on mortgage-backed securities, was $5.5 million and $7.5 million for the six months ended December 31, 2016 and 2015, respectively. Net cash provided by financing activities, consisting primarily of the activity in deposit accounts and FHLB advances, was $8.7 million and $11.9 million for the six months ended December 31, 2016 and 2015, respectively. These funding increases also reflected our strategy of borrowing at lower interest rates to fund loan originations.

 

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments.

 

 

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

At December 31, 2016, the Bank’s capital exceeded all of the Bank’s capital adequacy requirements and also exceeded all amounts necessary to be deemed well-capitalized under the prompt corrective action regulations. See Note 4 to the Financial Statements for more details.

 

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

 

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2016, we had outstanding commitments to originate loans of $13.1 million, including undisbursed funds on construction loans and funds available on undrawn lines of credit. We anticipate that we will have sufficient funds available to meet our current lending commitments. Certificates of deposit that are scheduled to mature in less than one year from December 31, 2016 totaled $18.1 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize FHLB advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

 

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for equipment and a branch location, and agreements with respect to borrowed funds and deposit liabilities.

 

  

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

ITEM 4

Controls and Procedures

 

(a)

Evaluation of disclosure controls and procedures.

 

Under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective.

 

(b)

Changes in internal controls.

 

There has been no change made in the Company’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

MW Bancorp, Inc.

Part II

Other Information

 

ITEM 1.

Legal Proceedings

 

We are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. At December 31, 2016, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

 

ITEM 1A.

Risk Factors

 

Not applicable.

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

(a)

There were no sales of unregistered securities during the period covered by this report.

 

(b)

Not applicable.

 

(c)

There were no issuer repurchases of securities during the period covered by this report.

 

ITEM 3.

Defaults Upon Senior Securities

 

None.

 

ITEM 4.

Mine Safety Disclosures

 

Not applicable.

 

ITEM 5.

Other Information

 

None.

 

ITEM 6.

Exhibits

 

Exhibit
Number		Description
3.1		Articles of Incorporation of MW Bancorp, Inc.
3.2		Bylaws of MW Bancorp, Inc.
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

 

MW Bancorp, Inc.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

				MW Bancorp, Inc.
Date:	February 14, 2017		By:	/s/Gregory P. Niesen
				Gregory P. Niesen
				President and Chief Executive Officer
Date:	February 14, 2017		By:	/s/Julie M. Bertsch
				Julie M. Bertsch
				Senior Vice President and Chief Financial Officer

 

  

INDEX TO EXHIBITS

 

Exhibit				Page
Number		Description		Reference
3.1		Articles of Incorporation of MW Bancorp, Inc.		Incorporated by reference to registrant's Form S-1 filed on September 10, 2014, Exhibit 3.1 (File No. 333-198668).
3.2		Bylaws of MW Bancorp, Inc.		Incorporated by reference to registrant's Form S-1 filed on September 10, 2014, Exhibit 3.2 (File No. 333-198668).
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Included herewith.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Included herewith.
32		Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Included herewith.
101.INS		XBRL Instance Document		Included herewith.
101.SCH		XBRL Taxonomy Extension Schema Document		Included herewith.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document		Included herewith.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document		Included herewith.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document		Included herewith.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document		Included herewith.