WCF Bancorp, Inc. - FORM 10-Q

Attached files

file	filename
EX-32 - EXHIBIT 32 - WCF Bancorp, Inc.	a2017wcfbancorpq2exhibit32.htm
EX-31.2 - EXHIBIT 31.2 - WCF Bancorp, Inc.	a2017wcfbancorpq2exhibit312.htm
EX-31.1 - EXHIBIT 31.1 - WCF Bancorp, Inc.	a2017wcfbancorpq2exhibit311.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


[X]	Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2017


[ ]	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. 001-37382

WCF Bancorp, Inc.

(Exact name of registrant as specified in its charter)



Iowa		81-2510023
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

401 Fair Meadow Drive, Webster City, Iowa		50595
(Address of Principal Executive Offices)		(Zip Code)

(515) 832-3071

(Registrant’s telephone number)

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 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES [ X ] 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.



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

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

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

YES [ ] NO [X]

As of August 10, 2017, the Registrant had 2,561,542 shares of its common stock, par value $0.01 per share, issued and outstanding.

WCF Bancorp, Inc.

Form 10-Q

Index



		Page
Part I - Financial Information

Item 1	Consolidated Financial Statements

	Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016	1

	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2017 and 2016 (unaudited)	2

	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2017 and 2016 (unaudited)	3

	Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2017 and 2016 (unaudited)	4

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016 (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	6

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4	Controls and Procedures	31

Part II - Other Information

Item 1	Legal Proceedings	33

Item 1A	Risk Factors	33

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3	Defaults upon Senior Securities	33

Item 4	Mine Safety Disclosures	33

Item 5	Other Information	33

Item 6	Exhibits	33

	Signature Page	34

Part I – Financial Information

Item 1 Financial Statements

WCF Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

June 30, 2017 (unaudited) and December 31, 2016



Assets	June 30, 2017			December 31, 2016
Cash and due from banks	$	1,717,061		$	1,716,578
Federal funds sold	2,180,000			1,306,000
Cash and cash equivalents	3,897,061			3,022,578
Time deposits in other financial institutions	5,036,473			5,037,068
Securities available-for-sale, at fair value	43,319,993			44,652,837
Loans receivable	62,210,430			61,063,501
Allowance for loan losses	(498,450		)	(487,114		)
Loans receivable, net	61,711,980			60,576,387
Federal Home Loan Bank (FHLB) stock, at cost	363,400			354,800
Bankers' Bank stock, at cost	147,500			147,500
Office property and equipment, net	3,900,287			4,041,525
Deferred taxes on income	814,780			934,579
Income taxes receivable	50,239			60,839
Accrued interest receivable	391,407			422,949
Goodwill	55,148			55,148
Bank-owned life insurance	3,088,587			3,021,501
Prepaid expenses and other assets	1,412,183			1,319,636
Total assets	$	124,189,038		$	123,647,347
Liabilities and Stockholders' Equity
Deposits	$	87,469,404		$	87,089,680
FHLB advances	5,500,000			5,500,000
Advance payments by borrowers for taxes and insurance	552,140			492,133
Accrued interest payable	12,861			3,196
Accrued expenses and other liabilities	1,622,852			1,715,358
Total liabilities	95,157,257			94,800,367
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 10,000,000 shares; issued none	—			—
Common stock, $0.01 par value. Authorized 30,000,000 shares; 2,561,542 issued and outstanding at June 30, 2017 and December 31, 2016	25,615			25,615
Additional paid-in capital	14,201,795			14,201,795
Retained earnings, substantially restricted	16,221,059			16,354,380
Accumulated other comprehensive income (loss)	(129,728		)	(420,466		)
Unearned ESOP Shares	(1,286,960		)	(1,314,344		)
Total stockholders' equity	29,031,781			28,846,980
Total liabilities and stockholders' equity	$	124,189,038		$	123,647,347

See notes to consolidated financial statements.

WCF Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

(unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Interest income:
Loans receivable	$	725,320		$	726,902		$	1,448,145		$	1,447,540
Investment securities - taxable	153,198			89,835			305,449			171,159
Investment securities - tax exempt	70,839			103,223			143,345			211,452
Other interest earning assets	22,263			21,809			41,828			36,422
Total interest income	971,620			941,769			1,938,767			1,866,573
Interest expense:
Deposits	148,731			144,561			298,104			289,736
FHLB advances	15,248			19,174			30,098			38,398
Total interest expense	163,979			163,735			328,202			328,134
Net interest income	807,641			778,034			1,610,565			1,538,439
Provision for losses on loans	18,000			20,000			36,000			20,000
Net interest income after provision for losses on loans	789,641			758,034			1,574,565			1,518,439
Noninterest income:
Fees and service charges	117,703			105,205			216,769			184,198
Gains on sale of securities available-for-sale, net	—			—			—			15,247
Increase in cash value - bank-owned life insurance	25,531			—			67,086			—
Other income	19,119			17,135			36,819			17,495
Total noninterest income	162,353			122,340			320,674			216,940
Noninterest expense:
Compensation, payroll taxes, and employee benefits	391,128			329,178			759,930			646,746
Advertising	25,587			28,128			44,334			41,815
Office property and equipment	107,596			126,846			231,403			264,851
Federal insurance premiums	8,966			21,865			16,915			39,071
Data processing services	118,130			104,174			226,134			182,481
Charitable contributions	5,600			—			6,505			—
Other real estate expenses, net	4,477			249			6,691			2,961
Dues and subscriptions	7,868			16,572			16,394			31,477
Accounting, regulatory and professional fees	192,986			106,908			335,929			219,683
Debit card expenses	2,210			2,325			4,407			16,515
Other expenses	90,838			82,974			182,594			190,334
Total noninterest expense	955,386			819,219			1,831,236			1,635,934
Earnings (loss) before taxes on income	(3,392		)	61,155			64,003			99,445
Tax benefit	(31,921		)	(19,919		)	(42,400		)	(49,071		)
Net income	$	28,529		$	81,074		$	106,403		$	148,516
Basic earnings per common share	$	0.01		$	0.03		$	0.04		$	0.06
Diluted earnings per common share	$	0.01		$	0.03		$	0.04		$	0.06

See notes to consolidated financial statements.

WCF Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net income	$	28,529		$	81,074		$	106,403		$	148,516

Other comprehensive income:
Net change in unrealized gains or losses on securities	436,172			263,771			460,169			375,850
Reclassification adjustment for net gain realized in net income	—			—			—			(15,247		)
Income tax expenses	(159,688		)	(100,107		)	(169,431		)	(134,872		)
Other comprehensive income	276,484			163,664			290,738			225,731
Comprehensive income	$	305,013		$	244,738		$	397,141		$	374,247

See notes to consolidated financial statements.

WCF Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(unaudited)



	Common stock		Additional paid-in capital			Retained earnings			Unearned ESOP shares			Accumulated other comprehensive income (loss)			Treasury stock			Total
Balance at December 31, 2015	$	433,448	$	9,633,893		$	16,635,039		$	—		$	93,177		$	(12,212,415	)	$	14,583,142
Net income	—		—			148,516			—			—			—			148,516
Other comprehensive income	—		—			—			—			225,731			—			225,731
Stock offering costs	—		(925,506		)	—			—			—			—			(925,506		)
Dividends paid on common stock, $0.06 per common share	—		—			(150,951		)	—			—			—			(150,951		)
Balance at June 30, 2016	$	433,448	$	8,708,387		$	16,632,604		$	—		$	318,908		$	(12,212,415	)	$	13,880,932

Balance at December 31, 2016	$	25,615	$	14,201,795		$	16,354,380		$	(1,314,344	)	$	(420,466	)	$	—		$	28,846,980
Net income	—		—			106,403			—			—			—			106,403
Other comprehensive income	—		—			—			—			290,738			—			290,738
Release of ESOP Shares	—		—			—			27,384			—			—			27,384
Dividends paid on common stock, $0.10 per common share	—		—			(239,724		)	—			—			—			(239,724		)
Balance at June 30, 2017	$	25,615	$	14,201,795		$	16,221,059		$	(1,286,960	)	$	(129,728	)	$	—		$	29,031,781

See notes to the consolidated financial statements.

WCF Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)



	Six Months Ended June 30,
	2017			2016
Cash flows from operating activities:
Net income	$	106,403		$	148,516
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	417,789			382,722
Provision for losses on loans	36,000			20,000
ESOP expenses	27,384			—
Deferred taxes on income	(49,632		)	(85,000		)
Gain on sales of securities	—			(15,247		)
Gain on sales of one-to-four family residential loans	(6,169		)	(10,159		)
Proceeds from sales of one-to-four family residential loans	271,296			847,000
Originations of one-to-four family residential loans	(265,127		)	(836,841		)
Gain on sale of other real estate owned	(7,995		)	—
Increase in cash value of bank-owned life insurance	(67,086		)	—
Change in:
Accrued interest receivable	31,542			(1,859		)
Prepaid expenses and other assets	(112,290		)	(68,805		)
Advance payments by borrowers for taxes and insurance	60,007			25,753
Accrued interest payable	9,665			2,674
Accrued expenses and other liabilities	(92,506		)	(91,939		)
Income tax receivable	10,600			(64,788		)
Net cash provided by (used in) operating activities	369,881			252,027
Cash flows from investing activities:
Proceeds from maturity of time deposits in other financial institutions	2,948,595			1,600,111
Purchase of time deposits in other financial institutions	(2,948,000		)	(1,715,000		)
Proceeds from calls and maturities of investment securities available-for-sale	3,646,681			2,668,141
Proceeds from sale of investment securities available-for-sale	—			7,291,396
Purchase of investment securities available-for-sale	(2,127,370		)	(12,100,079		)
Net change in loans receivable	(1,143,855		)	(1,457,437		)
Net change in FHLB stock	(8,600		)	37,900
Purchase of office property and equipment	(2,849		)	(32,911		)
Net cash provided by (used in) investing activities	364,602			(3,707,879		)
Cash flows from financing activities:
Net change in deposits	379,724			27,203,311
Net change in FHLB advances	—			(1,000,000		)
Dividends paid	(239,724		)	(150,951		)
Stock offering costs	—			(925,506		)
Net cash provided by (used in) financing activities	140,000			25,126,854
Net increase in cash and cash equivalents	874,483			21,671,002
Cash and cash equivalents at beginning of year	3,022,578			8,866,561
Cash and cash equivalents at end of quarter	$	3,897,061		$	30,537,563
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	318,537		$	325,460
Taxes on income	—			13,367
Noncash investing activities:
Transfers to other real estate owned from loans	39,357			32,611
Loans to finance the sale of other real estate owned	67,095			—

See notes to consolidated financial statements.

WCF Bancorp, Inc. and Subsidiaries

Form 10-Q

Notes to Consolidated Financial Statements (unaudited)


(1)	Basis of Presentation

The accompanying unaudited consolidated financial statements of WCF Bancorp, Inc. (the Company), and its wholly owned subsidiary WCF Financial Bank (the Bank), and Webster City Federal Service Corp, have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) for interim financial information and in accordance with Securities and Exchange Commission (SEC) rules and regulations. Accordingly, the statements do not include all the information and footnotes required by GAAP for complete financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto that were included in the Company’s annual report for the year ended December 31, 2016. The consolidated balance sheet of the Company as of December 31, 2016 has been derived from the audited consolidated balance sheet of the Company as of that date. All significant intercompany transactions are eliminated in consolidation. In the opinion of the Company’s management, all adjustments necessary (i) for a fair presentation of the financial statements for the interim periods included herein and (ii) to make such financial statements not misleading have been made and are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year.

In preparing the financial statements, management is required to make estimates and assumptions that affect the recorded amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period. Actual results could differ from the estimates. For further information with respect to significant accounting policies followed by the Company in preparation of the financial statements, refer to the Company’s annual report for the year ended December 31, 2016.

As an “emerging growth company,” as defined in Title 1 of Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, the consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. As of June 30, 2017, there is no significant difference in the comparability of the financial statements as a result of this extended transition period.

The Bank is a federally chartered stock savings bank and a member of the Federal Home Loan Bank (FHLB) system. The Bank maintains insurance on deposits accounts with the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (FDIC).

Organization and Business

WCF Bancorp, Inc. (the Company) is an Iowa-chartered corporation organized in 2016 to be the successor to Webster City Federal Bancorp, a federal corporation (Old Bancorp) upon completion of the second-step conversion of WCF Financial M.H.C. from the mutual holding company to the stock holding company form of organization. WCF Financial M.H.C. (the MHC) was the former mutual holding company for Old Bancorp prior to the completion of the second-step conversion. In conjunction with the second-step conversion, each of the MHC and Old Bancorp ceased to exist. The second-step conversion was completed on July 13, 2016 at which time the Company sold 2,139,231 shares of its common stock (including 171,138 shares purchased by the Bank's employee stock ownership plan, or ESOP) at $8.00 per share for gross proceeds of approximately $17.1 million. Expenses related to the

stock offering totaled $1.7 million and were netted against proceeds. As a part of the second-step conversion, each of the outstanding shares of common stock of Old Bancorp held by persons other than the MHC were converted into 0.8115 shares of Company common stock with cash paid in lieu of fractional shares. As a result, a total of 2,561,542 shares were issues in the second-step conversion. As a result of the second-step conversion, all share and per share information has subsequently been revised to reflect the 0.8115 exchange ratio unless otherwise noted.

The Company's principal business is the ownership and operation of the Bank. The Bank is a community bank and its deposits are insured by the FDIC. The primary business of the Bank is accepting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in real estate loans secured by one-to-four family residences. To a lesser extent, we also originate consumer loans and non owner-occupied one-to-four family residential real estate loans. On a limited basis we have also originated commercial real estate loans, but have deemphasized the origination, and intend to continue to deemphasize the origination, of this type of lending. We also invest in investment securities. Our primary lending area is broader than our primary deposit market area and includes north central and northeastern Iowa. Our revenues are derived principally from interest on loans and securities, and from loan origination and servicing fees. Our primary sources of funds are deposits, principal and interest payments on loans and securities and advances from the FHLB. As a federal savings bank, WCF Financial Bank is subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency (the OCC). As a savings and loan holding company, the Company is subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System (the Federal Reserve Board).

The primary business of WCF Financial Service Corp (the Service Corp) was the sale of credit life and disability insurance products that were previously disallowed by savings and loan regulations. Currently the Service Corp is inactive.

Investment Securities

Investment securities are classified based on the Company’s intended holding period. Securities that may be sold prior to maturity to meet liquidity needs, to respond to market changes, or to adjust the Company’s asset-liability position are classified as available-for-sale. Currently, all securities are classified as available-for-sale.

Securities available-for-sale are carried at fair value, with the aggregate unrealized gains or losses, net of the effect of taxes on income, reported as accumulated other comprehensive income or loss. Other-than-temporary impairment is recorded in net income. The Company’s net income reflects the full impairment (that is, the difference between the security’s amortized cost basis and fair value), if any, on debt securities that the Company intends to sell, or would more likely than not be required to sell, before the expected recovery of the amortized cost basis. For available-for-sale debt securities that management has no intent to sell, and believes that it will not more likely than not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in net income, while the rest of the fair value loss is recognized in other comprehensive income. The credit loss component recognized in net income is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected using the Company’s cash flow projections using its base assumptions.

A decline in the fair value of any available-for-sale security below cost and that is deemed to be other-than-temporary results in an impairment to reduce the carrying amount by fair value for the credit portion of the loss. The impairment is charged to net income and a new cost basis for the security is established. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability to hold and lack of intent to sell the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year-end, and the general market conditions.

Net realized gains or losses are shown in the consolidated statements of income in the noninterest income line using the specific identification method. There were no net realized gains for the three months ended June 30, 2017 and 2016, respectively and no net realized gains for the six months ended June 30, 2017 and $15,247 of net realized gains for the six months ended June 30, 2016.

Loans Receivable, Net

Loans receivable are stated at the amount of unpaid principal, reduced by the allowance for loan losses, deferred loan fees and discounts on loans purchased. Loans receivable are charged against the allowance when management believes collectability of principal is unlikely.

Interest on loans receivable is accrued and credited to operations based primarily on the principal amount outstanding. Certain loan balances include unearned discounts, which are recorded as income over the term of the loan.

Delinquencies are determined based on the payment terms of the individual loan agreements. The accrual of interest on past due and other impaired loans is generally discontinued at 90 days past due or when, in the opinion of management, the borrower may be unable to make all payments pursuant to contractual terms. Unless considered collectible, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income, if accrued in the current year, or charged to the allowance for loan losses, if accrued in the prior year. Generally, all payments received while a loan is on nonaccrual status are applied to the principal balance of the loan. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Under the Company’s credit policies, commercial loans are considered impaired when management believes it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Loan impairment is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate except, where more practical, at the observable market price of the loan or the fair value of the collateral, if the loan is collateral dependent.

Allowance for Loan Losses

The allowance for loan losses is based on management’s periodic evaluation of the loan portfolio and reflects an amount that, in management’s opinion, is appropriate to absorb probable losses in the existing portfolio. In evaluating the portfolio, management takes into consideration numerous factors, including current economic conditions, prior loan loss experience, the composition of the loan portfolio, value of underlying collateral, and management’s estimate of probable credit losses.

Taxes on Income

Deferred income taxes are provided under the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Interest and penalties on unrecognized tax benefits are classified as other noninterest expense.

Regulatory Environment

The Company is subject to regulations of certain state and federal agencies, including periodic examinations by those regulatory agencies. The Company and the Bank are also subject to minimum regulatory capital requirements. At June 30, 2017 and December 31, 2016, capital levels exceeded minimum capital requirements (see note 6).

Investment in Affiliate

The Company records its investment in an affiliate, New Castle Players, LLC, in which it has a 27.17% interest, using the equity method of accounting. The affiliate holds an investment in a local hotel in Webster City, Iowa. The Company records the value of its investment at year-end based on the affiliate’s most current available financial statements. The investment in affiliate is analyzed annually. If impairment is determined to be other-than-temporary, the carrying amount is written down to fair value. The investment is included as a component of prepaid expenses and other assets on the consolidated balance sheets, while the equity income earned is included as a component of other noninterest income on the consolidated statements of income. Summary unaudited financial information of the affiliate as of and for the six months ended June 30, 2017 and 2016 is presented below.



	As of and For the
	Six Months Ended June 30,
	2017		2016
Current assets	$	143,100	$	125,170
Long-term assets	1,713,871		1,741,202
Current liabilities	77,280		67,892
Total equity	1,779,691		1,798,480
Total revenue	414,080		422,714
Net income	60,751		97,818

Earnings per Common Share

The calculation of earnings per common share and diluted earnings per common share for the three and six months ended June 30, 2017 and 2016 is presented below.



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Net income	$	28,529	$	81,074	$	106,403	$	148,516

Weighted average common shares outstanding and diluted common shares outstanding (1)	2,404,096		2,449,923		2,404,096		2,449,923

Basic earnings per common share	$	0.01	$	0.03	$	0.04	$	0.06
Diluted earnings per common share	$	0.01	$	0.03	$	0.04	$	0.06

(1) Share and per share amounts related to periods prior to the date of completion of the Conversion (July 13, 2016) have been restated to give retroactive recognition to the exchange ratio applied to the Conversion (0.8115 to one)
Unearned Employee Stock Ownership Plan (ESOP) shares are not considered outstanding and are therefore not taken into account when computing earnings per share. Unearned ESOP shares are presented as a reduction to stockholders’ equity and represent shares to be allocated to ESOP participants in future periods for services provided to the Company. ESOP shares that have been committed to be released are considered outstanding and included for the purposes of computing basic and diluted earnings per share.

Employee Stock Ownership Plan

The Company established the ESOP on July 13, 2016 in connection with its common stock offering. In conjunction with the second-step conversion described in Note 1, the ESOP purchased 171,138 shares at $8.00 per share. To fund the purchase, the ESOP borrowed $1.4 million from the Company at a variable rate equal to the lowest Prime Rate published in The Wall Street Journal, to be repaid on a prorate basis in 25 substantially equal annual installments. The collateral for the loan is the common stock of the Company purchased by the ESOP.

The shares of stock purchased by the ESOP are held in a suspense account until they are released for allocation among participants. The shares will be released annually from the suspense account and the released shares will be allocated to the participants on the basis of each participant’s compensation for the year of allocation. As shares are released from collateral, the Company recognizes compensation expense equal to the average market price of the shares during the period and the shares will be outstanding for earnings-per-share purposes. The shares not released are reported as unearned ESOP shares in the stockholders’ equity section on the consolidated balance sheets. At June 30, 2017 there were 6,845 allocated shares and 164,293 unallocated shares. The fair value of unallocated ESOP shares at June 30, 2017 was approximately $1,684,000.

Subsequent Events

On July 21, 2017, the board of directors declared a $0.05 per share cash dividend payable on August 22, 2017 to shareholders of record as of August 7, 2017.

Current Accounting Developments

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 660): Summary and Amendments that Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40). The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the Codification. This update will be effective for interim and annual periods beginning after December 15, 2018. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements, but does not expect the guidance to have a material impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information by updating certain aspects or recognition, measurement, presentation and disclosure of financial instruments. Among other changes, the update includes requiring changes in fair value of equity securities with readily determinable fair value to be recognized in net income and clarifies that entities should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with entities other deferred tax assets. This update will be effective for interim and annual periods beginning after December 15, 2018, and is to be applied on a modified retrospective basis. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements, but does not expect the guidance to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. This is in contrast to existing guidance whereby credit losses generally are not recognized until they are incurred. This update will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU shorten the amortization period for certain callable debt securities purchased at a premium. Upon adoption of the standard, premiums on these qualifying callable debt securities will be amortized to the earliest call date. Discounts on purchased debt securities will continue to be accreted to maturity. The amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. Upon transition, entities should apply the guidance on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption and provide the disclosures required for a change in accounting principle. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.


(2)	Securities Available-for-Sale

Securities available-for-sale at June 30, 2017 and December 31, 2016 were as follows:



Description	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
June 30, 2017:
U.S. agency securities	$	249,729	$	—	$	5,888	$	243,841
Mortgage-backed securities*	30,673,832		7,055		350,164		30,330,723
Municipal bonds	12,102,888		199,178		54,767		12,247,299
Corporate bonds	500,000		—		1,870		498,130
	$	43,526,449	$	206,233	$	412,689	$	43,319,993
December 31, 2016:
U.S. agency securities	$	249,667	$	—	$	6,602	$	243,065
Mortgage-backed securities*	31,884,681		3,206		491,081		31,396,806
Municipal bonds	12,685,114		68,278		239,306		12,514,086
Corporate bonds	500,000		—		1,120		498,880
	$	45,319,462	$	71,484	$	738,109	$	44,652,837



*All mortgage-backed securities are issued by FNMA, FHLMC, or GNMA and are backed by residential mortgage loans.

The amortized cost and estimated fair value of securities available-for-sale at June 30, 2017 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	June 30, 2017
	Amortized cost		Fair value
Due in one year or less	$	200,000	$	200,672
Due after one year through five years	2,153,830		2,175,817
Due after five years, but less than ten years	6,364,619		6,518,915
Due after ten years	3,634,168		3,595,736
	12,352,617		12,491,140
Mortgage-backed securities	30,673,832		30,330,723
Corporate bonds	500,000		498,130
	$	43,526,449	$	43,319,993

The details of the sales of investment securities for the three and six months ended June 30, 2017 and 2016 are summarized in the following table.



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Proceeds from sales	$	—	$	150,000	$	—	$	7,291,396
Gross gains on sales	—		—		—		50,200
Gross losses on sales	—		—		—		34,953

At June 30, 2017 and December 31, 2016, accrued interest receivable for securities available-for-sale totaled $189,087 and $196,227, respectively.

The following tables show the Company’s available-for-sale investments’ gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2017 and December 31, 2016.



	June 30, 2017
	Up to 12 months				Greater than 12 months				Total
	Fair value		Gross unrealized loss		Fair value		Gross unrealized loss		Fair value		Gross unrealized loss
U.S. agency securities	$	243,841	$	5,888	$	—	$	—	$	243,841	$	5,888
Mortgage-backed securities	23,476,314		280,552		5,130,312		69,612		28,606,626		350,164
Municipal bonds	4,200,324		54,767		—		—		4,200,324		54,767
Corporate bonds	498,130		1,870		—		—		498,130		1,870
Total	$	28,418,609	$	343,077	$	5,130,312	$	69,612	$	33,548,921	$	412,689

	December 31, 2016
	Up to 12 months				Greater than 12 months				Total
	Fair value		Gross unrealized loss		Fair value		Gross unrealized loss		Fair value		Gross unrealized loss
U.S. agency securities	$	243,065	$	6,602	$	—	$	—	$	243,065	$	6,602
Mortgage-backed securities	23,646,101		404,287		5,401,593		86,794		29,047,694		491,081
Municipal bonds	8,798,581		239,306		—		—		8,798,581		239,306
Corporate bonds	498,880		1,120		—		—		498,880		1,120
Total	$	33,186,627	$	651,315	$	5,401,593	$	86,794	$	38,588,220	$	738,109

The Company’s assessment of other‑than‑temporary impairment is based on its reasonable judgment of the specific facts and circumstances impacting each individual security at the time such assessments are made. The Company reviews and considers factual information, including expected cash flows, the structure of the security, the credit quality of the underlying assets, and the current and anticipated market conditions.

The Company does not intend to sell its available-for-sale investment securities and it is not likely that the Company will be required to sell them before the recovery of its cost. Due to the issuers’ continued

satisfactions of their obligations under the securities in accordance with their contractual terms and the expectation that they will continue to do so, and management’s intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair value, the Company believes that the investment securities identified in the tables above were temporarily impaired as of June 30, 2017 and December 31, 2016.


(3)	Loans Receivable

At June 30, 2017 and December 31, 2016, loans receivable consisted of the following segments:



	June 30, 2017			December 31, 2016
Loans:
One-to-four family residential	$	47,981,641		$	47,315,025
Non-owner occupied one-to-four family residential	3,864,581			3,650,171
Commercial real estate	3,935,807			3,596,717
Consumer	6,511,028			6,604,757
Total loans receivable	62,293,057			61,166,670
Discounts on loans purchased	(42,607		)	(56,707		)
Deferred loan costs (fees)	(40,020		)	(46,462		)
Allowance for loan losses	(498,450		)	(487,114		)
	$	61,711,980		$	60,576,387

Accrued interest receivable on loans receivable was $202,320 and $226,722 at June 30, 2017 and December 31, 2016, respectively.

The loan portfolio included approximately $43.3 million of fixed rate loans as of June 30, 2017 and $43.1 million as of December 31, 2016. The loan portfolio also included approximately $19.0 million and $18.1 million of variable rate loans as of June 30, 2017 and December 31, 2016, respectively.

The Company originates residential, commercial real estate loans and other consumer loans, primarily in its Hamilton County, and Buchanan County, Iowa market areas and their adjacent counties. A substantial portion of its borrowers’ ability to repay their loans is dependent upon economic conditions in the Company’s market area.

Allowance for Loan Losses

The following tables present the balance in the allowance for loan losses and recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2017 and December 31, 2016.



	June 30, 2017
	One-to-four family residential		Non-owner occupied on-to-four family residential		Commercial real estate		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	326,526		30,350		38,453		103,121		498,450
Total	$	326,526	$	30,350	$	38,453	$	103,121	$	498,450

Loans receivable:
Individually evaluated for impairment	$	—	$	—	$	285,038	$	—	$	285,038
Collectively evaluated for impairment	47,981,641		3,864,581		3,650,769		6,511,028		62,008,019
Total	$	47,981,641	$	3,864,581	$	3,935,807	$	6,511,028	$	62,293,057

	December 31, 2016
	One-to-four family residential		Non-owner occupied on-to-four family residential		Commercial real estate		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	319,849		28,231		37,135		101,899		487,114
Total	$	319,849	$	28,231	$	37,135	$	101,899	$	487,114

Loans receivable:
Individually evaluated for impairment	$	—	$	—	$	297,538	$	—	$	297,538
Collectively evaluated for impairment	47,315,025		3,650,171		3,299,179		6,604,757		60,869,132
Total	$	47,315,025	$	3,650,171	$	3,596,717	$	6,604,757	$	61,166,670

Activity in the allowance for loan losses by segment for the three and six months ended June 30, 2017 and 2016 is summarized in the following tables:



	Three months ended June 30, 2017
	Beginning Balance		Charge-offs		Recoveries		Provisions				Ending Balance
Loans:
One-to-four family residential	$	331,736	$	6,135	$	133	$	792			$	326,526
Non-owner occupied one-to-four family residential	28,696		—		—		1,654				30,350
Commercial real estate	40,799		—		—		(2,346		)	*	38,453
Consumer	99,144		13,923				17,900				103,121
Total	$	500,375	$	20,058	$	133	$	18,000			$	498,450

	Three months ended June 30, 2016
	Beginning Balance		Charge-offs		Recoveries		Provisions				Ending Balance
Loans:
One-to-four family residential	$	344,708	$	5,610	$	—	$	27,959			$	367,057
Non-owner occupied one-to-four family residential	45,125		—		—		(13,162		)	*	31,963
Commercial real estate	35,961		—		—		(5,652		)	*	30,309
Consumer	75,771		—		300		10,855				86,926
Total	$	501,565	$	5,610	$	300	$	20,000			$	516,255



	Six Months Ended June 30, 2017
	Beginning Balance		Charge-offs		Recoveries		Provisions				Ending Balance
Loans:
One-to-four family residential	$	319,849	$	10,945	$	133	$	17,489			$	326,526
Non-owner occupied one-to-four family residential	28,231		—		—		2,119				30,350
Commercial real estate	37,135		—		—		1,318				38,453
Consumer	101,899		13,923		71		15,074				103,121
Total	$	487,114	$	24,868	$	204	$	36,000			$	498,450

	Six Months Ended June 30, 2016
	Beginning Balance		Charge-offs		Recoveries		Provisions				Ending Balance
Loans:
One-to-four family residential	$	366,858	$	5,610	$	—	$	5,809			$	367,057
Non-owner occupied one-to-four family residential	44,510		—		—		(12,547		)	*	31,963
Commercial real estate	32,443		—		—		(2,134		)	*	30,309
Consumer	61,367		3,613		300		28,872				86,926
Total	$	505,178	$	9,223	$	300	$	20,000			$	516,255



* The negative provisions for the various segments are either related to the decline in outstanding balances in each of those portfolio segments during the time periods disclosed and/or improvement in the credit quality factors related to those portfolio segments.


(a)	Loan Portfolio Segment Risk Characteristics

One-to-four family residential: The Company generally retains most residential mortgage loans that are originated for its own portfolio. The market value of real estate securing residential real estate loans can fluctuate as a result of market conditions in the geographic area in which the real estate is located. Adverse developments affecting real estate values in the Company’s market could increase credit risk associated with its loan portfolio. Additionally, real estate lending typically involves large loan principal amounts and the repayment of the loans generally is dependent, in large part, on the borrower’s continuing financial stability, and is therefore more likely to be affected by adverse personal circumstances.

Non-owner occupied one-to-four family residential: The Company originates fixed-rate and adjustable-rate loans secured by non-owner occupied one-to-four family properties. These loans may have a term of up to 30 years. Generally the Bank will lend up to 75% of the property’s appraised value. Appraised values are determined by an outside independent appraiser. In deciding to originate a loan secured by a non-owner occupied one-to-four family residential property, management reviews the creditworthiness of the borrower and the expected cash flows from the property securing the loan, the cash flow requirements of the borrower and the value of the property securing the loan. This segment is generally secured by one-to-four family properties.

Commercial real estate: On a very limited basis, the Company originates fixed-rate and adjustable-rate commercial real estate and land loans. These loans may have a term of up to 30 years. Generally the Bank will lend up to 75% of the property’s appraised value. Appraised values are determined by an outside independent appraiser. In recent years, the Company has significantly reduced the emphasis on these types of loans and does not intend to emphasize these types of loans in the future. This segment is generally secured by retail, industrial, service or other commercial properties and loans secured by raw land, including timber.

Consumer: Consumer loans typically have shorter terms, lower balances, higher yields, and higher rates of default. Consumer loan collections are dependent on the borrower’s continuing financial stability, and are therefore more likely to be affected by adverse personal circumstances. This segment consists mainly of loans collateralized by automobiles. The collateral securing these loans, may depreciate over time, may be difficult to recover and may fluctuate in value based on condition.


(b)	Charge‑off Policy

The Company requires a loan to be at least partially charged off as soon as it becomes apparent that some loss will be incurred, or when its collectability is sufficiently questionable that it no longer is considered a bankable asset. The primary considerations when determining if and how much of a loan should be charged off are as follows: (1) the potential for future cash flows; (2) the value of any collateral; and (3) the strength of any co-makers or guarantors.


(c)	Troubled Debt Restructurings (TDR)

All loans deemed troubled debt restructurings, or “TDR”, are considered impaired, and are evaluated for collateral sufficiency. A loan is considered a TDR when the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Bank would not otherwise consider. There were no new troubled debt restructurings in the first six months of 2017.


(d)	Loans Measured Individually for Impairment

Loans that are deemed to be impaired are reserved for with the necessary allocation. All loans deemed troubled debt restructurings are considered impaired. Generally loans for 1-4 family residential and consumer are collectively evaluated for impairment.


(e)	Loans Measured Collectively for Impairment

All loans not evaluated individually for impairment are grouped together by type and further segmented by risk classification. The Company’s historical loss experiences for each portfolio segment are calculated using a 12 quarter rolling average loss rate for estimating losses adjusted for qualitative factors. The qualitative factors consider economic and business conditions, changes in nature and volume of the loan portfolio, concentrations, collateral values, level and trends in delinquencies, external factors, lending policies, experience of lending staff, and monitoring of credit quality.

The following tables set forth the composition of each class of the Company’s loans by internally assigned credit quality indicators.



	Pass		Special mention/watch		Substandard		Doubtful		Total
June 30, 2017:
Loans
One-to-four family residential	$	46,328,899	$	1,432,800	$	219,942	$	—	$	47,981,641
Non-owner occupied one-to-four family residential	3,490,936		373,645		—		—		3,864,581
Commercial real estate	3,368,985		259,066		307,756		—		3,935,807
Consumer	6,348,718		152,772		9,538		—		6,511,028
Total	$	59,537,538	$	2,218,283	$	537,236	$	—	$	62,293,057

	Pass		Special mention/watch		Substandard		Doubtful		Total
December 31, 2016:
Loans
One-to-four family residential	$	45,851,480	$	978,513	$	485,032	$	—	$	47,315,025
Non-owner occupied one-to-four family residential	3,299,494		36,298		314,379		—		3,650,171
Commercial real estate	3,009,623		289,556		297,538		—		3,596,717
Consumer	6,324,360		270,478		9,919		—		6,604,757
Total	$	58,484,957	$	1,574,845	$	1,106,868	$	—	$	61,166,670

Special Mention/Watch – Loans classified as special mention/watch are assets that do not warrant adverse classification but possess credit deficiencies or potential weakness deserving close attention.

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

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

The Company had one impaired loan as of June 30, 2017 and December 31, 2016. No interest income was recorded on impaired loans during 2017 or 2016.


(f)	Nonaccrual and Delinquent Loans

Loans are placed on nonaccrual status when (1) payment in full of principal and interest is no longer expected or (2) principal or interest has been in default for 90 or more (unless the loan is well secured with marketable collateral).

A nonaccrual asset may be restored to an accrual status when all past-due principal and interest has been paid and the borrower has demonstrated satisfactory payment performance (excluding renewals and modifications that involve the capitalizing of interest).

Delinquency status of a loan is determined by the number of days that have elapsed past the loan’s payment due date, using the following classification groupings: 30-59 days, 60-89 days, and 90 days or more. Loans shown in the 30‑59 day’s and 60‑89 day’s columns in the table below reflect contractual delinquency status only, and include loans considered nonperforming due to classification as a TDR or being placed on nonaccrual.

The following tables set forth the composition of the Company’s past-due loans at June 30, 2017 and December 31, 2016.



	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total loans receivable		Recorded investment > 90 days and accruing
June 30, 2017:
Loans
One-to-four family residential	$	634,143	$	227,821	$	219,943	$	1,081,907	$	46,899,734	$	47,981,641	$	51,140
Non-owner occupied one-to-four family residential	28,101		—		—		28,101		3,836,480		3,864,581		—
Commercial real estate	—		—		285,038		285,038		3,650,769		3,935,807		—
Consumer	115,260		1,832		5,898		122,990		6,388,038		6,511,028		5,898
Total	$	777,504	$	229,653	$	510,879	$	1,518,036	$	60,775,021	$	62,293,057	$	57,038

	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total loans receivable		Recorded investment > 90 days and accruing
December 31, 2016:
Loans
One-to-four family residential	$	706,135	$	272,378	$	258,009	$	1,236,522	$	46,078,503	$	47,315,025	$	193,251
Non-owner occupied one-to-four family residential	—		36,298		56,639		92,937		3,557,234		3,650,171		56,639
Commercial real estate	27,143		—		297,538		324,681		3,272,036		3,596,717		—
Consumer	190,455		80,023		1,365		271,843		6,332,914		6,604,757		1,365
Total	$	923,733	$	388,699	$	613,551	$	1,925,983	$	59,240,687	$	61,166,670	$	251,255

The following tables set forth the composition of the Company’s recorded investment in loans on nonaccrual status as of June 30, 2017 and December 31, 2016.



	June 30, 2017		December 31, 2016
Loans
One-to-four family residential	$	168,802	$	291,779
Non-owner occupied one-to-four family residential	—		314,380
Commercial real estate	285,038		297,538
Consumer	—		8,554
Total	$	453,840	$	912,251


(4)	Deposits

At June 30, 2017 and December 31, 2016, deposits are summarized as follows:



	June 30, 2017		December 31, 2016
Statement savings	$	14,625,100	$	12,031,554
Money market plus	11,010,640		11,169,038
NOW	18,623,859		18,489,727
Certificates of deposit	43,209,805		45,399,361
	$	87,469,404	$	87,089,680

Included in the NOW accounts were approximately $4.7 million and $4.8 million of non-interest bearing deposits as of June 30, 2017 and December 31, 2016, respectively.


(5)	Taxes on Income

Taxes on income comprise the following:



	June 30, 2017
	Federal			State			Total
Current	$	5,182		$	2,050		$	7,232
Deferred	(50,632		)	1,000			(49,632		)
	$	(45,450	)	$	3,050		$	(42,400	)

	June 30, 2016
	Federal			State			Total
Current	$	31,298		$	4,631		$	35,929
Deferred	(84,000		)	(1,000		)	(85,000		)
	$	(52,702	)	$	3,631		$	(49,071	)

Taxes on income differ from the amounts computed by applying the federal income tax rate of 34% to earnings before taxes on income for the following reasons, expressed in dollars:



	June 30, 2017			June 30, 2016
Federal tax at statutory rate	$	21,761		$	33,811
Items affecting federal income tax rate:
State taxes on income, net of federal benefit	2,013			2,360
Tax-exempt income	(43,749		)	(66,277		)
Bank-owned life insurance	(22,809		)	—
Valuation allowance	13,000			—
Other	(12,616		)	(18,965		)
	$	(42,400	)	$	(49,071	)

Federal income tax expense for the periods ended June 30, 2017 and December 31, 2016 was computed using the consolidated effective federal tax rate. The Company also recognized income tax expense pertaining to state franchise taxes payable individually by the Bank.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at June 30, 2017 and December 31, 2016 are presented below:



	June 30, 2017			December 31, 2016
Deferred tax assets:
Deferred directors’ fees	$	322,000		$	338,000
Allowance for loan losses	187,000			182,000
Net operating loss carryforward	169,000			138,000
AMT credit	48,289			35,000
Charitable contribution	88,000			86,000
Professional fees	76,000			77,000
Securities available-for-sale	76,728			246,159
Fixed assets	29,000			—
Other	20,763			28,420
Gross deferred tax assets	1,016,780			1,130,579
Valuation allowance	(119,000		)	(106,000		)
Net deferred tax assets	897,780			1,024,579
Deferred tax liabilities:
Prepaid expenses	(21,000		)	(21,000		)
FHLB stock dividends	(38,000		)	(38,000		)
Fixed assets	—			(6,000		)
Intangible assets	(24,000		)	(25,000		)
Gross deferred tax liabilities	(83,000		)	(90,000		)
Net deferred tax assets	$	814,780		$	934,579

Based upon the Company’s level of historical taxable income and anticipated future taxable income over the periods that the deferred tax assets are deductible, management has reviewed whether it is more likely than not the Company will realize the benefits of these deductible differences. Management has determined that a valuation allowance was required for deferred tax assets at June 30, 2017 and December 31, 2016, related to the charitable contribution carryforward and Iowa corporate net operating loss carryovers. The charitable contribution expires if not used by 2020.

As of December 31, 2016, the Company had no material unrecognized tax benefits. The evaluation was performed for those tax years that remain open to audit. The Company files a consolidated tax return for federal purposes and separate tax returns for the State of Iowa purposes.

Under previous law, the provisions of the IRS and similar sections of Iowa law permitted the Bank to deduct from taxable income an allowance for bad debts based on 8% of taxable income before such deduction or actual loss experience. Legislation passed in 1996 eliminated the percentage of taxable income method as an option for computing bad debt deductions for 1996 and in future years.

Deferred taxes have been provided for the difference between tax bad debt reserves and the loan loss allowances recorded in the financial statements subsequent to December 31, 1987. However, at June 30, 2017 and December 31, 2016, retained earnings contain certain historical additions to bad debt reserves for income tax purposes of approximately $2,134,000 as of December 31, 1987, for which no deferred taxes have been provided because the Bank does not intend to use these reserves for purposes other than to absorb losses. If these amounts which qualified as bad debt deductions are used for purposes other than to absorb bad debt losses or adjustments arising from the carryback of net operating losses, income taxes may be imposed at the then-existing rates. The approximate amount of unrecognized tax liability associated with these historical additions is $800,000.


(6)	Stockholders’ Equity


(a)	Common Stock Repurchase

The Company repurchased no shares during the three and six months ended June 30, 2017 and 2016.


(b)	Regulatory Capital Requirements

The Company and WCF Financial Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements (as shown in the following table) can result in certain mandatory and possibly additional discretionary actions by regulators which, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and WCF Financial Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and WCF Financial Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believes the Company and WCF Financial Bank met all capital adequacy requirements to which they were subject as of June 30, 2017 and December 31, 2016.

The Company’s and WCF Financial Bank’s capital amounts and ratios are presented in the following table as of June 30, 2017 and December 31, 2016 (dollars in thousands).



	June 30, 2017
					For capital adequacy				To be well-capitalized under
					with capital conservation				prompt corrective action
	Actual				buffer purposes				provisions
	Amount		Percent		Amount		Percent		Amount		Percent
Tangible capital:
Consolidated	$	29,074	23.40	%	$	4,978	4.00	%	N/A		N/A
WCF Financial Bank	19,171		16.10		4,759		4.00		$	5,949	5.00	%

Common equity tier 1:
Consolidated	29,074		54.80		3,049		5.75		3,447		6.50
WCF Financial Bank	19,171		37.20		2,960		5.75		3,346		6.50

Risk-based capital:
Consolidated	29,573		55.80		4,906		9.25		5,303		10.00
WCF Financial Bank	19,670		38.20		4,761		9.25		5,147		10.00

Tier 1 risk-based capital:
Consolidated	29,074		54.80		3,845		7.25		4,243		8.00
WCF Financial Bank	19,171		37.20		3,732		7.25		4,118		8.00



	December 31, 2016
									To be well-capitalized under
					For capital adequacy				prompt corrective action
	Actual				purposes				provisions
	Amount		Percent		Amount		Percent		Amount		Percent
Tangible capital:
Consolidated	$	29,192	24.30	%	$	4,812	4.00	%	N/A		N/A
WCF Financial Bank	18,993		16.00		4,753		4.00		$	5,941	5.00	%

Common equity tier 1:
Consolidated	29,192		55.30		2,706		5.13		3,432		6.50
WCF Financial Bank	18,993		36.80		2,648		5.13		3,359		6.50

Risk-based capital:
Consolidated	29,679		56.20		4,554		8.63		5,280		10.00
WCF Financial Bank	19,480		37.70		4,457		8.63		5,167		10.00

Tier 1 risk-based capital:
Consolidated	29,192		55.30		3,498		6.63		4,224		8.00
WCF Financial Bank	18,993		36.80		3,423		6.63		4,134		8.00

In July 2013, the Federal Reserve Board and the OCC issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes. The rules revised minimum capital requirements and adjusted prompt corrective action thresholds. The final rules revised the regulatory capital elements, added a new common equity Tier 1 capital ratio, increased the minimum Tier 1 capital ratio requirement, and implemented a new capital conservation buffer. The rules also permitted certain banking organizations to retain, through a one-time election, the existing treatment for AOCI. The Company and WCF Financial Bank made the election to retain the existing treatment, which excludes AOCI from regulatory capital amounts. The final rules took effect for the Company and WCF Financial Bank on January 1, 2015, subject to a transition period for certain parts of the rules.

Beginning in 2016, an additional capital conservation buffer was added to the minimum requirements for capital adequacy purposes, subject to a three year phase-in period. The capital conservation buffer will be fully phased-in on January 1, 2019 at 2.50%. A banking organization with a conservation buffer of less than 2.50% (or the required phase-in amount in years prior to 2019) will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. As of June 30, 2017, the ratios for the Company and WCF Financial Bank were sufficient to meet the fully phased-in conservation buffer.


(c)	Dividends and Restrictions Thereon

The Company declared and paid a $0.05 dividend in each of the first two quarters ended June 30, 2017. In the first quarter of 2016, the Company declared and paid a $0.06 dividend but did not declare or pay a dividend during the second quarter of 2016. Per share amounts related to periods prior to the date of completion of the Conversion (July 13, 2016) have been restated to give retroactive recognition to the exchange ratio applied to the Conversion (0.8115 to one).

Federal regulations impose certain limitations on the payment of dividends and other capital distributions by the Bank. Under the regulations, a savings institution, such as the Bank, that will meet the fully phased‑in capital requirements (as defined by the OCC regulations) subsequent to a capital distribution is generally permitted to make such capital distribution without OCC approval so long as they have not been notified of the need for more than normal supervision by the OCC. The Bank has not been so notified and, therefore, may make capital distributions during the calendar year equal to net income plus 50% of the amount by which the Bank’s capital exceeds the fully phased‑in capital requirement as measured at the beginning of the calendar year. A savings institution with total capital in excess of current minimum capital requirements but not in excess of the fully phased‑in requirements is permitted by the new regulations to make, without OCC approval, capital distributions of between 25% and 75% of its net income for the previous four quarters, less dividends already paid for such period. A savings institution that fails to meet current minimum capital requirements is prohibited from making any capital distributions without prior approval from the OCC.


(7)	Fair Value

FASB Accounting Standards Codification (ASC) 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the

principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.

ASC 820 requires the use of valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, ASC 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:


•	Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

•

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.


•	Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

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


•	Cash and due from banks, federal funds sold, and time deposits in other financial institutions. The carrying amount is a reasonable estimate of fair value.

•

Securities available-for-sale. Investment securities classified as available-for-sale are reported at fair value on a recurring basis. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other things.

•

Loans receivable. The Company does not record loans at fair value on a recurring basis. For variable‑rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans are determined using estimated future cash flows, discounted at the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The Company does record nonrecurring fair value adjustments to loans to reflect (1) partial write‑downs to collateral value or (2) the establishment of specific loan reserves that are based on the observable market price of the loan or the appraised of the collateral. These loans are classified as Level 3.


•	FHLB and Bankers’ Bank stock. The value of FHLB and Bankers’ Bank stock is equivalent to its carrying value because the stock is redeemable at par value.


•	Accrued interest receivable and accrued interest payable. The recorded amount of accrued interest receivable and accrued interest payable approximates fair value as a result of the short‑term nature of the instruments.

•

Deposits. The fair value of deposits with no stated maturity, such as passbook, money market, noninterest‑bearing checking, and NOW accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value estimates do not include the benefit that results from the low‑cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.


•	FHLB advances. The fair value of the FHLB advances is based on the discounted value of the cash flows. The discount rate is estimated using the rates currently offered for fixed‑rate advances of similar remaining maturities.

The following tables summarize financial assets measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value. The Company has no liabilities measured at fair value in the consolidated balance sheets.



	June 30, 2017
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
U.S. agency securities	$	—	$	243,841	$	—	$	243,841
Mortgage-backed securities	—		30,330,723		—		30,330,723
Municipal bonds	—		12,247,299		—		12,247,299
Corporate bonds	—		498,130		—		498,130
Total	$	—	$	43,319,993	$	—	$	43,319,993



	December 31, 2016
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
U.S. agency securities	$	—	$	243,065	$	—	$	243,065
Mortgage-backed securities	—		31,396,806		—		31,396,806
Municipal bonds	—		12,514,086		—		12,514,086
Corporate bonds	—		498,880		—		498,880
Total	$	—	$	44,652,837	$	—	$	44,652,837

There have been no changes in valuation methodologies at June 30, 2017 compared to December 31, 2016 and there were no transfers between levels during the periods ended June 30, 2017 and December 31, 2016.

The Company is required to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost or fair value accounting or write-downs of individual assets. As of June 30, 2017 and December 31, 2016, the Company did not have any material assets measured at fair value on a nonrecurring basis.

The estimated fair values of Company’s financial instruments (as described in note 1) at June 30, 2017 and December 31, 2016 were as follows:



		June 30, 2017				December 31, 2016
	Fair value	Carrying		Approximate		Carrying		Approximate
	hierarchy	amount		fair value		amount		fair value
Financial assets:
Cash and due from banks	Level 1	$	1,717,061	$	1,717,061	$	1,716,578	$	1,716,578
Federal funds sold	Level 1	2,180,000		2,180,000		1,306,000		1,306,000
Time deposits in other
financial institutions	Level 1	5,036,473		5,036,473		5,037,068		5,037,068
Securities available-for-sale	See previous table	43,319,993		43,319,993		44,652,837		44,652,837
Loans receivable, net	Level 2 (1)	61,711,980		62,427,839		60,576,387		61,896,952
FHLB stock	Level 1	363,400		363,400		354,800		354,800
Bankers’ Bank stock	Level 1	147,500		147,500		147,500		147,500
Accrued interest receivable	Level 1	391,407		391,407		422,949		422,949
Financial liabilities:
Deposits	Level 2	87,469,404		82,651,404		87,089,680		83,357,680
FHLB advances	Level 2	5,500,000		5,500,000		5,500,000		5,504,950
Accrued interest payable	Level 1	12,861		12,861		3,196		3,196



(1) Impaired loans would have a fair value hierarchy of a Level 3. See previous disclosures.


(8)	Commitments and Contingencies

The Company is involved with various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial statements.

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. The financial instruments include commitments to extend credit of approximately $305,000 and $360,000 as of June 30, 2017 and December 31, 2016, respectively. These commitments expire one year from origination and are both fixed and adjustable interest rates ranging from 3.25% to 5.50%.

(9)Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) components at June 30, 2017 and December 31, 2016 were as follows:



	June 30, 2017			December 31, 2016
Unrealized holding (losses) gains on securities available-for-sale	$	(206,456	)	$	(666,625	)
Tax impact	76,728			246,159
	$	(129,728	)	$	(420,466	)


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

General

Management’s discussion and analysis of the financial condition at June 30, 2017 and the results of operations for three and six months ended June 30, 2017 and 2016 is intended to assist in understanding the financial condition and results of operations of the Bank. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:


•	statements of our goals, intentions and expectations;


•	statements regarding our business plans, prospects, growth and operating strategies;


•	statements regarding the quality of our loan and investment portfolios; and


•	estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:


•	general economic conditions, either nationally or in our market areas, that are worse than expected;


•	changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;


•	our ability to access cost-effective funding;


•	fluctuations in real estate values and both residential and commercial real estate market conditions;


•	demand for loans and deposits in our market area;


•	our ability to implement and change our business strategies;


•	competition with depository and other financial institutions;


•	inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments, our level of loan originations, or increases in the level of defaults, losses and prepayments on loans we have made and make;


•	adverse changes in the securities markets;


•	changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;


•	the impact of the Dodd-Frank Act and the implementing regulations;


•	changes in the quality or composition of our loan or investment portfolios;


•	technological changes that may be more difficult or expensive than expected;


•	the inability of third-party providers to perform as expected;


•	our ability to manage market risk, credit risk and operational risk in the current economic environment;


•	our ability to enter new markets successfully and capitalize on growth opportunities;


•	our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;


•	changes in consumer spending, borrowing and savings habits;


•	changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;


•	our ability to retain key employees;


•	adverse changes in the national agriculture economy and the agriculture economy in our market area;


•	our compensation expense associated with equity allocated or awarded to our employees; and


•	changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in our annual report on Form 10-K as filed with the Securities and Exchange Commission on March 24, 2017.

Comparison of Financial Condition at June 30, 2017 and December 31, 2016

Total assets increased $0.6 million, or 0.5%, to $124.2 million at June 30, 2017 from $123.6 million at December 31, 2016. The increase was primarily due to an increase in federal funds sold of $0.9 million, or 69.2%, to $2.2 million at June 30, 2017 from $1.3 million, at December 31, 2016. This increase was due to the increase in deposits and called securities being held in federal funds sold. Cash and due from banks remained unchanged at $1.7 million at June 30, 2017 and December 31, 2016. Investment securities available-for-sale decreased $1.4 million, or 3.1%, to $43.3 million at June 30, 2017 from $44.7 million at December 31, 2016. The decrease in investment securities available-for-sale was due to the calling of

municipal securities and the paydown of principal on mortgage-backed securities. Net loans receivable increased $1.1 million, or 1.8%, to $61.7 million at June 30, 2017 from $60.6 million at December 31, 2016. The increase in net loans receivable was due to an increase in one-to-four family residential and commercial loan demand.

Total liabilities increased $0.4 million, or 0.4%, to $95.2 million at June 30, 2017 from $94.8 million at December 31, 2016. The increase in liabilities was mainly due to the increase in deposits due to changes in local competition and favorable rates offered by WCF Financial Bank. Deposits increased $0.4 million, or 0.4%, to $87.5 million at June 30, 2017 compared to $87.1 million at December 31, 2016.

Stockholders' equity remained unchanged at $29.0 million at June 30, 2017 and December 31, 2016. Stockholders' equity includes approximately $106,000 of net income during the six months ended June 30, 2017, an approximate $291,000 increase in market value of securities available-for-sale, net of income taxes, and approximately $27,000 increase in the anticipated release of ESOP shares, offset by approximately $240,000 in dividends paid on common stock at $0.05 per common share each of the first two quarters.

Comparison of Results of Operations for the Three Months Ended June 30, 2017 and 2016

Net income decreased approximately $52,000, or 64.2%, to approximately $29,000 for the three months ended June 30, 2017, from approximately $81,000 for the same period in 2016. Basic/diluted earnings per share were $0.01 and $0.03 for the three months ended June 30, 2017 and 2016, respectively. Total interest income increased approximately $30,000, or 3.2%, to approximately $972,000 for the 2017 quarter, compared to approximately $942,000 for the 2016 quarter. The increase in total interest income was primarily attributable to interest in taxable investment securities. Total interest expense remained unchanged at approximately $164,000 for the three months ended June 30, 2017 and 2016 due to an increase in deposits offset by lower interest rates during the quarter.

Each quarter an analysis of allowance factors is completed. Based on these factors, $18,000 provision for loan losses was recorded for the quarter ended June 30, 2017 compared to $20,000 provision for the quarter ended June 30, 2016. The allowance for loan losses reflects the estimate believed to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at June 30, 2017. While we believe the estimates and assumptions used in the determination of the adequacy of the allowance are reasonable, 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 the financial condition and results of operations.

Net interest income after provision for losses on loans increased approximately $32,000, or 4.2%, to approximately $790,000 for the three months ended June 30, 2017, from approximately $758,000 for the three months ended June 30, 2016.

Noninterest income increased approximately $40,000, or 32.8%, to approximately $162,000 for the three months ended June 30, 2017 from approximately $122,000 for the same period in 2016. The increase was due to an increase in fees and service charges, increase in cash value of bank-owned life insurance, and other income. Fees and service charges increased approximately $13,000, or 12.4%, to approximately$118,000 for the three months ended June 30, 2017 compared to approximately $105,000 for the quarter ended June 30, 2016. This increase was due to the evaluation of our fee structure and modifications of fee amounts. The increase in cash value of bank-owned life insurance of approximately $26,000 for the three months ended June 30, 2017 compared to no cash value for the quarter ended June 30, 2016 was due to the purchase of bank-owned life insurance late in 2016. Other income increased approximately $2,000, or 11.8%, to approximately $19,000 for the three months ended June 30, 2017 from approximately $17,000 for the same period in 2016. This increase was mainly due to the sale of credit life and disability insurance on loans.

Noninterest expense consists primarily of compensation and employee benefits, office property and equipment, data processing services, federal insurance premiums, charitable contributions and accounting, regulatory, and professional fees. During the three months ended June 30, 2017, noninterest expense increased approximately $136,000, or 16.6%, to approximately $955,000 compared to approximately$819,000, for the same three month period in 2016. Compensation and employee benefits increased approximately $62,000, or 18.8%, to approximately $391,000 for the three months ended June 30, 2017 compared to approximately $329,000 for the three months ended June 30, 2016 due to the recording of ESOP compensation expenses for the anticipated release of shares, the dividends paid to the unreleased ESOP shares, and the payment of accrued benefits due to changes in staffing. Office property and equipment decreased approximately $19,000, or 15.0%, to approximately $108,000 for the three months ended June 30, 2017 compared to approximately $127,000 for the quarter ended June 30, 2016 due to decreases in depreciation expense. Data processing services increased approximately $14,000, or 13.5%, to approximately $118,000 for the three months ended June 30, 2017 compared to approximately $104,000 for the three month period ended June 30, 2016. This increase was due to additional services provided by our data processor. Federal insurance premiums decreased approximately $13,000, or 59.1%, to approximately $9,000 during the three months ended June 30, 2017 compared to approximately $22,000 for the three months ended June 30, 2016, due to the change in calculation of the insurance premiums. Accounting, regulatory and professional fees increased approximately $86,000, or 80.4%, to approximately $193,000 in the second quarter of 2017 compared to approximately $107,000 for the same quarter of 2016, due to additional auditing and legal services.

We recognized an income tax benefit of approximately $32,000 for the three month period ended June 30, 2017 compared to an income tax benefit of approximately $20,000 for the 2016 quarter.

Comparison of Results of Operations for the Six Months Ended June 30, 2017 and 2016

Net income decreased approximately $42,000, or 28.9%, to approximately $106,000 for the six months ended June 30, 2017, from approximately $149,000 for the same period in 2016. Basic/diluted earnings per share were $0.04 and $0.06 for the six months ended June 30, 2017 and 2016, respectively. Total interest income increased approximately $72,000, or 3.9%, to approximately $1.94 million for the six months ended June 30, 2017, compared to approximately $1.87 million for the six months ended June 30, 2016. The increase in total interest income was from organic loan growth, interest in taxable investment securities, and other interest-earning assets. Total interest expense remained unchanged at approximately $328,000 for the six months ended June 30, 2017 and 2016 due to an increase in deposits offset by lower interest rates.

Each quarter an analysis of allowance factors is completed. Based on these factors, $36,000 provision for loan losses was recorded for the six months ended June 30, 2017 compared to a $20,000 provision for the six months ended June 30, 2016. The allowance for loan losses reflects the estimate believed to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at June 30, 2017. While we believe the estimates and assumptions used in the determination of the adequacy of the allowance are reasonable, 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 the financial condition and results of operations.

Net interest income after provision for losses on loans increased approximately $56,000, or 3.7%, to approximately $1.6 million for the six months ended June 30, 2017, from approximately $1.5 million for the six months ended June 30, 2016.

Noninterest income increased approximately $104,000, or 47.9%, to approximately $321,000 for the six months ended June 30, 2017 from approximately $217,000 for the same period in 2016. The increase was due to an increase in fees and service charges, increase in cash value of bank-owned life insurance, and

other income offset by no gains from sales of securities available-for-sale for the six months ended June 30, 2017 compared to approximately $15,000 for the six months ended June 30, 2016. Fees and service charges increased approximately $33,000, or 17.9%, to approximately $217,000 for the six months ended June 30, 2017 compared to approximately $184,000 for the six months ended June 30, 2016. This increase was due to the evaluation of our fee structure and modifications of fee amounts. The increase in cash value of bank-owned life insurance of approximately $67,000 for the six months ended June 30, 2017 compared to no cash value for the six months ended June 30, 2016 was due to the purchase of bank-owned life insurance late in 2016. Other income increased approximately $20,000, or 117.6%, to approximately $37,000 for the six months ended June 30, 2017 from approximately $17,000 other income for the same period in 2016. This increase was mainly due to the profit on the sale of REO property and the sale of credit life and disability insurance on loans.

Noninterest expense consists primarily of compensation and employee benefits, office property and equipment, data processing services, federal insurance premiums, charitable contributions and accounting, regulatory, and professional fees. During the six months ended June 30, 2017, noninterest expense increased approximately $195,000, or 12.2%, to approximately $1.8 million compared to approximately $1.6 million for the same six month period in 2016. Compensation and employee benefits increased approximately $113,000, or 17.5%, to approximately $760,000 for the six months ended June 30, 2017 compared to approximately $647,000 for the six months ended June 30, 2016 due to the recording of ESOP compensation expenses for the anticipated release of shares, the dividends paid to the unreleased ESOP shares, and the payment of accrued benefits due to changes in staffing. Office property and equipment decreased approximately $34,000, or 12.8%, to approximately $231,000 for the six months ended June 30, 2017 compared to approximately $265,000 for the six months ended June 30, 2016 due to decreases in depreciation expense. Data processing services increased approximately $44,000, or 24.2%, to approximately $226,000 for the six months ended June 30, 2017 compared to approximately $182,000 for the six months ended June 30, 2016. This increase was due to additional services provided by our data processor. Federal insurance premiums decreased approximately $22,000, or 56.4%, to approximately $17,000 during the six months ended June 30, 2017 compared to approximately $39,000 for the six months ended June 30, 2016, due to the change in calculation of the insurance premiums. Accounting, regulatory and professional fees increased approximately $116,000, or 52.7%, to approximately $336,000 in the six months ended June 30, 2017 compared to approximately $220,000 for the six months ended June 30, 2016, due to additional auditing and legal services.

We recognized an income tax benefit of approximately $42,000 for the six months ended June 30, 2017 compared to an income tax benefit of approximately $49,000 for the six months ended June 30, 2016.


Item 3	Quantitative and Qualitative Disclosures About Market Risk

Not applicable, as the Registrant is a smaller reporting company.


Item 4	Controls and Procedures

Evaluation of disclosure controls and procedures.

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of June 30, 2017. Based on that evaluation, our management, including the Chief Executive Officer and the Chief Financial Officer, concluded that our disclosure controls and procedures were effective.

Changes in internal controls.

During the quarter ended June 30, 2017, there have been no changes in the Company’s internal

controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1 Legal Proceedings

The Company is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Bank’s or the Company’s financial condition or results of operations.


Item 1A	Risk Factors

Not applicable, as the Registrant is a smaller reporting company.


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


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	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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.



		WCF BANCORP, INC.


Date: August 10, 2017		/s/ Stephen L. Mourlam
		Stephen L. Mourlam
		President and Chief Executive Officer


Date: August 10, 2017		/s/ Kasie L. Doering
		Kasie L. Doering
		Chief Financial Officer

WCF Bancorp, Inc. - FORM 10-Q - August 10, 2017

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WCF Bancorp, Inc. Reports