Eagle Financial Bancorp, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - Eagle Financial Bancorp, Inc.	t1702289_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - Eagle Financial Bancorp, Inc.	t1702289_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - Eagle Financial Bancorp, Inc.	t1702289_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Eagle Financial Bancorp, Inc.	t1702289_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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. 001-38162

Eagle Financial Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland		(82-1340349)
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

6415 Bridgetown Road, Cincinnati, OH 45248

(Address
    of principal executive office)

Registrant’s telephone number, including area code: (513) 574-0700

N/A

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

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

Yes ¨ No x

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer (Do not check if a 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

There were 1,612,808 shares of the Registrant’s common stock issued and outstanding as of August 11, 2017.

INDEX

		Page

Part I. Financial Information

Item 1.	Condensed Balance Sheets as of June 30, 2017 (Unaudited) and December 31, 2016	4
	Condensed Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2017 and 2016 (Unaudited)	5
	Condensed Statements of Retained Earnings as of June 30, 2017 and 2016 (Unaudited)	6
	Condensed Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	42

Part II. Other Information

Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
	Signatures	44

Table of Contents

Explanatory Note

Eagle Financial Bancorp, Inc., a Maryland corporation (the “Company” or the “Registrant”), was formed on February 17, 2017 to serve as the savings and loan holding company for Eagle Savings Bank (the “Bank”) as part of the Bank’s mutual-to-stock conversion. As of June 30, 2017 the conversion had not been completed, and, as of that date, the Registrant had no assets or liabilities, and had not conducted any business other than that of an organizational nature. Accordingly, financial and other information of the Bank is included in this Quarterly report.

Table of Contents

Part I. Financial Information

Item 1.

Financial Statements

Eagle Savings Bank

Condensed Balance Sheets

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

(Dollars in Thousands)

	June 30,		December 31,
	2017		2016
Assets

Cash and due from banks	$	498	$	459
Federal Reserve Bank and Federal Home Loan Bank (FHLB) demand accounts		19,663		19,130
Cash and cash equivalents		20,161		19,589
Interest-bearing time deposits in other banks		99		346
Loans held for sale		6,606		2,732
Loans, net of allowance for loan losses of $1,229 and $1,137 at June 30, 2017 and December 31, 2016, respectively		90,570		83,048
Premises and equipment - at depreciated cost		4,338		4,340
FHLB stock - at cost		736		728
Foreclosed real estate held for sale, net		-		55
Bank-owned life insurance (BOLI)		1,888		1,865
FHLB lender risk account receivable		3,050		2,698
Accrued interest receivable		282		270
Prepaid federal income taxes		-		75
Other assets		1,225		227

Total assets	$	128,955	$	115,973

Liabilities and Retained Earnings

Liabilities
Deposits
Noninterest-bearing	$	3,782	$	4,816
Interest-bearing		108,891		95,228
Total deposits		112,673		100,044

FHLB advances		17		28
Advances from borrowers for taxes and insurance		264		716
Accrued interest payable		1		1
Accrued supplemental retirement plans		973		868
Deferred federal tax liability		618		554
Accrued federal income taxes		12		-
Other liabilities		605		285

Total liabilities		115,163		102,496

Commitments and Contingencies		-		-

Retained Earnings		13,792		13,477

Total liabilities and retained earnings	$	128,955	$	115,973

See accompanying notes to condensed financial statements.

Table of Contents

Eagle Savings Bank

Condensed Statements of Income and Comprehensive Income

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016

Interest and Dividend Income
Interest earned on loans	$	998	$	927	$	1,951	$	1,806
Dividends on FHLB stock		9		8		18		14
Other interest-earning deposits		28		17		60		38

Total interest and dividend income		1,035		952		2,029		1,858

Interest Expense
Interest on deposits		167		177		328		343
FHLB advances		-		1		1		33
Total interest expense		167		178		329		376

Net Interest Income		868		774		1,700		1,482

Provision for Loan Losses		75		-		85		25

Net Interest Income After Provision for Loan Losses		793		774		1,615		1,457

Noninterest Income
Net gains on loan sales		493		486		1,096		797
Other service charges and fees		55		47		93		89
Death benefit proceeds in excess of cash surrender value of BOLI		-		-		-		940
Income from BOLI		11		12		23		24

Total noninterest income		559		545		1,212		1,850

Noninterest Expense
Compensation and benefits		806		556		1,547		1,076
Occupancy and equipment, net		60		51		111		112
Data processing		67		80		134		190
Legal and professional services		46		13		128		64
FDIC premium expense		9		17		9		35
Foreclosed real estate impairments and expenses, net		2		2		9		9
Franchise and other taxes		27		26		54		53
Advertising		51		85		67		106
ATM processing expense		21		24		44		43
FHLB advance prepayment penalty		-		-		-		121
Death benefit obligation expense		-		-		-		410
Other expenses		135		82		259		161

Total noninterest expense		1,224		936		2,362		2,380

Income Before Income Taxes		128		383		465		927

Income Taxes
Provision for Income taxes		39		126		150		-

Total income taxes		39		126		150		-

Net Income	$	89	$	257	$	315	$	927

See accompanying notes to condensed financial statements.

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Eagle Savings Bank

Condensed Statements of Retained Earnings

Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

	Retained
	Earnings
	(In thousands)
Balance at December 31, 2015	$	12,017

Net income		927

Balance at June 30, 2016	$	12,944


Balance at December 31, 2016	$	13,477

Net income		315

Balance at June 30, 2017	$	13,792

See accompanying notes to condensed financial statements.

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Eagle Savings Bank

Condensed Statements of Cash Flows

Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

	Six Months Ended
	June 30,
	2017			2016

Operating Activities
Net income	$	315		$	927
Items not requiring (providing) cash:
Depreciation and amortization		108			85
Proceeds on sale of loans in the secondary market		32,888			20,380
Loans originated for sale in the secondary market		(35,666	)		(22,447	)
Gain on sale of loans		(1,096	)		(797	)
Provision for loan losses		85			25
(Gain) loss on sale of foreclosed real estate		3			(20	)
Deferred federal tax liability		64			(34	)
Death benefit proceeds in excess of cash surrender value of BOLI		-			(940	)
Increase in cash surrender value of BOLI		(23	)		(24	)
Impairment on foreclosed real estate		3			3
Changes in:
FHLB lender risk account receivable		(352	)		(90	)
Accrued interest receivable and interest payable		(12	)		(26	)
Other assets and prepaid federal income taxes		(923	)		34
Accrued supplemental retirement plans		105			(14	)
Accrued expenses and other liabilities		332			(163	)

Net cash flows used in operating activities		(4,169	)		(3,101	)

Investing Activities
Net decrease in interest-bearing time deposits in other banks		247			249
Net increase in loans		(7,621	)		(4,006	)
Purchase of FHLB stock		(8	)		(1	)
Purchase of premises and equipment		(92	)		(8	)
Proceeds from sale of foreclosed real estate		49			324
Death benefit proceeds received		-			1,485

Net cash used in investing activities		(7,425	)		(1,957	)

Financing Activities
Net increase in deposits		12,629			6,174
Repayment of FHLB advances		(11	)		(3,015	)
Net decrease in advances from borrowers for taxes and insurance		(452	)		(437	)

Net cash provided by financing activities		12,166			2,722

Increase (Decrease) in Cash and Cash Equivalents		572			(2,336	)

Cash and Cash Equivalents, Beginning of Period		19,589			19,012

Cash and Cash Equivalents, End of Period	$	20,161		$	16,676

(Continued)

Table of Contents

Eagle Savings Bank

Condensed Statements of Cash Flows

Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

	Six Months Ended
	June 30,
	2017		2016
Supplemental Cash Flows Information:
Interest paid	$	329	$	376

See accompanying notes to condensed financial statements.

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Note 1:

Nature of Operations and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed balance sheet of the Bank as of December 31, 2016, which has been derived from audited financial statements, and unaudited condensed financial statements of the Bank as of June 30, 2017 and for the three and six months ended June 30, 2017 and 2016, were prepared in accordance with instructions for Form 10-Q and Article 8 of Regulation S-X and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in accounting principles generally accepted in the United States of America. Accordingly, these condensed financial statements should be read in conjunction with the financial statements and notes thereto of the Bank for the year ended December 31, 2016 included in the Registrant’s Form S-1. Reference is made to the accounting policies of the Bank described in the Notes to Financial Statements contained in the Form S-1.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited condensed financial statements have been included to present fairly the financial position as of June 30, 2017 and the results of operations and cash flows for the three and six months ended June 30, 2017 and 2016. All interim amounts have not been audited and the results of operations for the three and six months ended June 30, 2017, herein are not necessarily indicative of the results of operations to be expected for the entire year.

Use of Estimates

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

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

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Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Note 2:

Loans and Allowance for Loan Losses

The composition of the loan portfolio at June 30, 2017 and December 31, 2016 was as follows:

	June 30,			December 31,
	2017			2016
	(In thousands)
Residential mortgage loans	$	48,923		$	41,914
Commercial real estate and land loans		14,079			13,631
Home equity and other consumer		14,141			14,593
Residential construction loans		8,811			9,468
Residential mortgage loans, non-owner occupied		7,350			5,743
Multi-family real estate loans		1,937			2,513
Commercial loans		4,280			1,779
		99,521			89,641

Net deferred loan costs		77			98
Loans in process		(7,799	)		(5,554	)
Allowance for loan losses		(1,229	)		(1,137	)

Net loans	$	90,570		$	83,048

Loans serviced for the benefit of others at June 30, 2017 and December 31, 2016 amounted to $1,681 and $1,930, respectively.

Loans in process relates to primarily residential mortgage loans.

Risk characteristics applicable to each segment of the loan portfolio are described as follows.

Residential Mortgage Loans, including Construction Loans and Land Loans: The residential 1-4 family real estate loans and construction loans are generally secured by owner-occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Bank’s market areas that might impact either property values or a borrower’s personal income. Land loans are secured primarily by unimproved land for future residential use. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Residential Mortgage Loans, Non-Owner Occupied: One-to-four family, non-owner occupied loans carry greater inherent risks than one-to-four family, owner occupied loans, since the repayment ability of the borrower is generally reliant on the success of the income generated from the property.

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Commercial Real Estate and Multi-Family Real Estate: Commercial real estate loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. Multi-family real estate loans are generally secured by apartment complexes. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Bank’s market areas.

Commercial: The commercial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

Home equity and Other Consumer: The consumer loan portfolio consists of home equity loans and term and line of credit loans such as automobile loans and loans for other personal purposes. Repayment of the home equity loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Bank’s market areas that might impact either property values or a borrower’s personal income. Repayment for term and line of credit loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Bank’s market area) and the creditworthiness of a borrower.

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Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

The following tables present the activity in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method for the three and six months ended June 30, 2017 and 2016 and year ended December 31, 2016:

Six Months Ended June 30, 2017 (Unaudited)	Residential Mortgage Loans		Commercial Real Estate and Land Loans		Home Equity and Other Consumer			Residential Construction Loans		Residential Mortgage Loans Non- Owner Occupied		Multi- Family Real Estate Loans			Commercial Loans			Total
	(In thousands)
Allowance for loan losses:
Balance, beginning of year	$	166	$	164	$	341		$	88	$	175	$	30		$	173		$	1,137
Provision charged to expense		31		65		(25	)		3		45		(7	)		(27	)		85
Losses charged off		-		-		-			-		-		-			-			-
Recoveries		-		-		-			-		-		-			7			7

Balance, end of period	$	197	$	229	$	316		$	91	$	220	$	23		$	153		$	1,229

Ending balance: individually evaluated for impairment	$	24	$	60	$	-		$	-	$	45	$	-		$	140		$	269

Ending balance: collectively evaluated for impairment	$	173	$	169	$	316		$	91	$	175	$	23		$	13		$	960

Loans:
Ending balance	$	48,923	$	14,079	$	14,141		$	8,811	$	7,350	$	1,937		$	4,280		$	99,521

Ending balance: individually evaluated for impairment	$	143	$	213	$	-		$	-	$	269	$	-		$	301		$	926

Ending balance: collectively evaluated for impairment	$	48,780	$	13,866	$	14,141		$	8,811	$	7,081	$	1,937		$	3,979		$	98,595

Three Months Ended June 30, 2017 (Unaudited)	Residential Mortgage Loans		Commercial Real Estate and Land Loans		Home Equity and Other Consumer			Residential Construction Loans		Residential Mortgage Loans Non- Owner Occupied		Multi- Family Real Estate Loans			Commercial Loans			Total
	(In thousands)
Allowance for loan losses:
Balance, beginning of period	$	184	$	174	$	335		$	89	$	165	$	28		$	175		$	1,150
Provision charged to expense		13		55		(19	)		2		55		(5	)		(26	)		75
Losses charged off		-		-		-			-		-		-			-			-
Recoveries		-		-		-			-		-		-			4			4

Balance, end of period	$	197	$	229	$	316		$	91	$	220	$	23		$	153		$	1,229

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Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Six Months Ended June 30, 2016 (Unaudited)	Residential Mortgage Loans			Commercial Real Estate and Land Loans		Home Equity and Other Consumer		Residential Construction Loans		Residential Mortgage Loans Non- Owner Occupied			Multi- Family Real Estate Loans			Commercial Loans			Total
	(In thousands)
Allowance for loan losses:
Balance, beginning of year	$	151		$	146	$	290	$	39	$	204		$	36		$	170		$	1,036
Provision charged to expense		(3	)		7		1		76		(18	)		(3	)		(35	)		25
Losses charged off		-			-		-		-		(22	)		-			-			(22	)
Recoveries		5			-		-		-		6			-			35			46

Balance, end of year	$	153		$	153	$	291	$	115	$	170		$	33		$	170		$	1,085

Three Months Ended June 30, 2016 (Unaudited)	Residential Mortgage Loans		Commercial Real Estate and Land Loans		Home Equity and Other Consumer			Residential Construction Loans		Residential Mortgage Loans Non- Owner Occupied			Multi- Family Real Estate Loans			Commercial Loans			Total
	(In thousands)
Allowance for loan losses:
Balance, beginning of period	$	148	$	147	$	307		$	71	$	183		$	35		$	159		$	1,050
Provision charged to expense		1		6		(16	)		44		(12	)		(2	)		(21	)		-
Losses charged off		-		-		-			-		(7	)		-			-			(7	)
Recoveries		4		-		-			-		6			-			32			42

Balance, end of period	$	153	$	153	$	291		$	115	$	170		$	33		$	170		$	1,085

Year Ended December 31, 2016	Residential Mortgage Loans			Commercial Real Estate and Land Loans		Home Equity and Other Consumer		Residential Construction Loans		Residential Mortgage Loans Non- Owner Occupied			Multi- Family Real Estate Loans			Commercial Loans			Total
	(In thousands)
Allowance for loan losses:
Balance, beginning of year	$	151		$	146	$	290	$	39	$	204		$	36		$	170		$	1,036
Provision charged to expense		39			18		51		49		(29	)		(6	)		(39	)		83
Losses charged off		(35	)		-		-		-		-			-			-			(35	)
Recoveries		11			-		-		-		-			-			42			53

Balance, end of year	$	166		$	164	$	341	$	88	$	175		$	30		$	173		$	1,137

Ending balance: individually evaluated for impairment	$	15		$	-	$	-	$	-	$	39		$	-		$	168		$	222

Ending balance: collectively evaluated for impairment	$	151		$	164	$	341	$	88	$	136		$	30		$	5		$	915

Loans:
Ending balance	$	41,914		$	13,631	$	14,593	$	9,468	$	5,743		$	2,513		$	1,779		$	89,641

Ending balance: individually evaluated for impairment	$	145		$	207	$	-	$	-	$	319		$	4		$	330		$	1,005

Ending balance: collectively evaluated for impairment	$	41,769		$	13,424	$	14,593	$	9,468	$	5,424		$	2,509		$	1,449		$	88,636

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Internal Risk Categories

Loan grades are numbered 1 through 8. Grades 5 through 8 are considered satisfactory grades. The grade of 1, or Special Mention, represents loans of lower quality and is considered criticized. The grades of 2, or Substandard, 3, or Doubtful, and 4, or Loss refer to assets that are classified. The use and application of these grades by the Bank will be uniform and shall conform to the Bank’s policy.

Special Mention (grade 1) assets have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Ordinarily, special mention credits have characteristics which corrective management action would remedy.

Substandard (grade 2) loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful (grade 3) loans classified as 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 current known facts, conditions and values, highly questionable and improbable.

Loss (grade 4) loans classified as loss are considered uncollectible and of such little value that their continuance as assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off even though partial recovery may be affected in the future.

Satisfactory (grades 5 through 8) represent loans for which quality is considered to be satisfactory.

The following tables present the credit risk profile of the Bank’s loan portfolio based on rating category and payment activity as of June 30, 2017 and December 31, 2016:

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

June 30, 2017 (Unaudited)	Residential Mortgage Loans		Commercial Real Estate and Land Loans		Home Equity and Other Consumer		Residential Construction Loans		Residential Mortgage Loans Non-Owner Occupied		Multi-Family Real Estate Loans		Commercial Loans		Total
	(In thousands)
Rating
Satisfactory (5-8)	$	47,732	$	13,866	$	14,065	$	8,811	$	7,232	$	1,937	$	3,890	$	97,533
Special mention (1)		-		-		-		-		-		-		89		89
Substandard (2)		1,191		213		76		-		118		-		301		1,899
Doubtful (3)		-		-		-		-		-		-		-		-
Loss (4)		-		-		-		-		-		-		-		-

Total	$	48,923	$	14,079	$	14,141	$	8,811	$	7,350	$	1,937	$	4,280	$	99,521

December 31, 2016	Residential Mortgage Loans		Commercial Real Estate and Land Loans		Home Equity and Other Consumer		Residential Construction Loans		Residential Mortgage Loans Non-Owner Occupied		Multi-Family Real Estate Loans		Commercial Loans		Total
	(In thousands)
Rating
Satisfactory (5-8)	$	40,975	$	13,424	$	14,556	$	9,468	$	5,523	$	2,509	$	1,350	$	87,805
Special mention (1)		-		-		-		-		-		-		99		99
Substandard (2)		939		207		37		-		220		4		330		1,737
Doubtful (3)		-		-		-		-		-		-		-		-
Loss (4)		-		-		-		-		-		-		-		-

Total	$	41,914	$	13,631	$	14,593	$	9,468	$	5,743	$	2,513	$	1,779	$	89,641

The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the three and six months ended June 30, 2017.

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

The following tables present the Bank’s loan portfolio aging analysis of the recorded investment in loans as of June 30, 2017 and December 31, 2016:

June 30, 2017 (Unaudited)	30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due or More		Total Past Due		Current		Total Loans Receivable		Recorded Investment 90 Days and Accruing
	(In thousands)
Residential mortgage loans	$	220	$	261	$	276	$	757	$	48,166	$	48,923	$	-
Commercial real estate and land loans		-		-		213		213		13,866		14,079		-
Home equity and other consumer		36		-		-		36		14,105		14,141		-
Residential construction loans		-		-		-		-		8,811		8,811		-
Residential mortgage loans, non-owner occupied		-		-		-		-		7,350		7,350		-
Multi-family real estate loans		-		-		-		-		1,937		1,937		-
Commercial loans		-		-		-		-		4,280		4,280		-

Total	$	256	$	261	$	489	$	1,006	$	98,515	$	99,521	$	-

December 31, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due or More		Total Past Due		Current		Total Loans Receivable		Recorded Investment 90 Days and Accruing
	(In thousands)
Residential mortgage loans	$	191	$	278	$	-	$	469	$	41,445	$	41,914	$	-
Commercial real estate and land loans		-		207		-		207		13,424		13,631		-
Home equity and other consumer		104		-		50		154		14,439		14,593		-
Residential construction loans		-		-		-		-		9,468		9,468		-
Residential mortgage loans, non-owner occupied		-		-		-		-		5,743		5,743		-
Multi-family real estate loans		-		-		-		-		2,513		2,513		-
Commercial loans		-		-		-		-		1,779		1,779		-

Total	$	295	$	485	$	50	$	830	$	88,811	$	89,641	$	-

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

The following tables present impaired loans at June 30, 2017, June 30, 2016 and as of December 31, 2016:

							For the Three Months Ended				For the Six Months Ended
	As of June 30, 2017						June 30, 2017				June 30, 2017
							Average				Average
			Unpaid				Investment		Interest		Investment		Interest
	Recorded		Principal		Allocated		in Impaired		Income		in Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized		Loans		Recognized
	(In thousands)
Loans without an allocated allowance:
Residential mortgage loans	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial real estate and land loans		-		-		-		-		-		-		-
Home equity and other consumer		-		-		-		-		-		-		-
Residential construction loans		-		-		-		-		-		-		-
Residential mortgage loans, non-owner occupied		-		-		-		-		-		-		-
Multi-family real estate loans		-		-		-		-		-		-		-
Commercial loans		-		-		-		-		-		-		-
Loans with an allocated allowance:
Residential mortgage loans		143		143		24		144		2		145		4
Commercial real estate and land loans		213		213		60		209		-		210		1
Home equity and other consumer		-		-		-		-		-		-		-
Residential construction loans		-		-		-		-		-		-		-
Residential mortgage loans, non-owner occupied		269		269		45		270		3		294		6
Multi-family real estate loans		-		-		-		-		-		-		-
Commercial loans		301		301		140		315		6		315		9

Total	$	926	$	926	$	269	$	938	$	11	$	964	$	20

							For the Three Months Ended				For the Six Months Ended
	As of June 30, 2016						June 30, 2016				June 30, 2016
							Average				Average
			Unpaid				Investment		Interest		Investment		Interest
	Recorded		Principal		Allocated		in Impaired		Income		in Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized		Loans		Recognized
	(In thousands)
Loans without an allocated allowance:
Residential mortgage loans	$	81	$	81	$	-	$	82	$	1	$	82	$	2
Commercial real estate and land loans		-		-		-		-		-		-		-
Home equity and other consumer		-		-		-		-		-		-		-
Residential construction loans		-		-		-		-		-		-		-
Residential mortgage loans, non-owner occupied		247		247		-		252		4		261		7
Multi-family real estate loans		11		11		-		12		-		14		-
Commercial loans		-		-		-		-		-		-		-
Loans with an allocated allowance:
Residential mortgage loans		-		-		-		-		-		-		-
Commercial real estate and land loans		-		-		-		-		-		-		-
Home equity and other consumer		-		-		-		-		-		-		-
Residential construction loans		-		-		-		-		-		-		-
Residential mortgage loans, non-owner occupied		206		206		42		207		2		208		5
Multi-family real estate loans		-		-		-		-		-		-		-
Commercial loans		330		330		168		330		6		330		10

Total	$	875	$	875	$	210	$	883	$	13	$	895	$	24

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

	As of December 31, 2016
							Average
			Unpaid				Investment		Interest
	Recorded		Principal		Allocated		in Impaired		Income
	Balance		Balance		Allowance		Loans		Recognized
	(In thousands)
Loans without an allocated allowance:
Residential mortgage loans	$	80	$	80	$	-	$	81	$	4
Commercial real estate and land loans		207		207		-		208		7
Home equity and other consumer		-		-		-		-		-
Residential construction loans		-		-		-		-		-
Residential mortgage loans, non-owner occupied		116		116		-		219		5
Multi-family real estate loans		4		4		-		11		1
Commercial loans		-		-		-		-		-
Loans with an allocated allowance:
Residential mortgage loans		65		65		15		66		3
Commercial real estate and land loans		-		-		-		-		-
Home equity and other consumer		-		-		-		-		-
Residential construction loans		-		-		-		-		-
Residential mortgage loans, non-owner occupied		203		203		39		206		9
Multi-family real estate loans		-		-		-		-		-
Commercial loans		330		330		168		330		17

Total	$	1,005	$	1,005	$	222	$	1,121	$	46

Interest income recognized is not materially different than interest income that would have been recognized on a cash basis.

The following table presents the Bank’s nonaccrual loans at June 30, 2017 and December 31, 2016. This table excludes performing troubled debt restructurings.

	June 30,		December 31,
	2017		2016
	(In thousands)
Residential mortgage loans	$	276	$	-
Commercial real estate and land loans		213		-
Home equity and other consumer		-		50
Residential construction loans		-		-
Residential mortgage loans, non-owner occupied		-		-
Multi-family real estate loans		-		-
Commercial loans		-		-

Total	$	489	$	50

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Following is a summary of troubled debt restructurings at June 30, 2017 and December 31, 2016:

	As of June 30, 2017				As of December 31, 2016
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
	(Dollars in thousands)				(Dollars in thousands)

Residential mortgage loans		1	$	79		1	$	80
Commercial real estate and land loans		-		-		-		-
Home equity and other consumer		-		-		-		-
Residential construction loans		-		-		-		-
Residential mortgage loans, non-owner occupied		5		268		6		319
Multi-family real estate loans		-		-		1		4
Commercial loans		1		301		1		330
		7	$	648		9	$	733

As of June 30, 2017, the Bank had total troubled debt restructurings of $648. There were six residential mortgage loans and residential non-owner occupied loans totaling $347 in troubled debt restructurings with the largest totaling $199. The remaining $301 in troubled debt restructurings consisted of one commercial loan for $301. As of December 31, 2016, the Bank had total troubled debt restructurings of $733. There were seven residential mortgage loans and residential non-owner occupied loans totaling $399 in troubled debt restructurings with the largest totaling $203. The remaining $334 in troubled debt restructurings consisted of one commercial loan for $330 and one multi-family loan for $4. These loans were modified due to short term concessions. Eagle Savings Bank has no commitments to lend additional funds to these debtors owing receivables whose terms have been modified in troubled debt restructurings. During the three months and six months ended June, 30, 2017 and 2016 there were no new troubled debt restructurings.

At June 30, 2017, the Bank had no foreclosed real estate. At December 31, 2016, foreclosed real estate included two plots of land totaling $55.

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Note 3:

Regulatory Matters

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

Quantitative measures established by regulatory reporting standards, to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total capital (as defined), Tier I capital (as defined) and common equity Tier 1capital (as defined) to risk-weighted assets (as defined) and Tier I capital (as defined) to average assets (as defined). Management believes, as of June 30, 2017 and December 31, 2016 that the Bank meets all capital adequacy requirements to which it is subject.

As of June 30, 2017 and December 31, 2016 the most recent notification from the Bank’s regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based capital, Tier I risk-based capital, common equity Tier 1 risk-based capital and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Beginning in January 2016, the capital conservation buffer requirement of 0.625% of risk-weighted assets was phased-in and will increase each year until fully implemented at 2.5% in January 2019.

An institution will be subject to further limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital levels fall below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that could be utilized for such actions.

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

The Bank’s actual capital amounts and ratios are presented in the following tables (minimum capital requirements exclude the capital conservation buffer):

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
2017	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of June 30, 2017:

Equity	$	13,792
Allowance for loan losses		1,229

Total risk-based capital (to risk-weighted assets)	$	15,021		13.1	%	$	9,163		8.0	%	$	11,454		10.0	%

Tier I capital (to risk-weighted assets)		13,792		12.0	%		6,872		6.0	%		9,163		8.0	%

Common equity Tier I capital (to risk-weighted assets)		13,792		12.0	%		5,154		4.5	%		7,445		6.5	%

Tier I capital (to adjusted total assets)		13,792		11.7	%		4,714		4.0	%		5,893		5.0	%

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

2016	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of December 31, 2016:

Equity	$	13,477
Allowance for loan losses		1,137

Total risk-based capital (to risk-weighted assets)	$	14,614		14.1	%	$	8,283		8.0	%	$	10,354		10.0	%

Tier I capital (to risk-weighted assets)		13,477		13.0	%		6,212		6.0	%		8,283		8.0	%

Common equity Tier I capital (to risk-weighted assets)		13,477		13.0	%		4,659		4.5	%		6,730		6.5	%

Tier I capital (to adjusted total assets)		13,477		11.7	%		4,620		4.0	%		5,775		5.0	%

Note 4:

Disclosure About Fair Values of Assets and Liabilities

ASC Topic 820, Fair Value Measurements, 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 at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

	Level 1	Quoted prices in active markets for identical assets or liabilities

	Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

	Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Nonrecurring Measurements

The following tables present the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2017 and December 31, 2016:

			Fair Value Measurements Using
	Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
June 30, 2017	Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Impaired loans (collateral dependent)	$	657	$	-	$	-	$	657

			Fair Value Measurements Using
	Fair		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2016	Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Impaired loans (collateral dependent)	$	376	$	-	$	-	$	376

Foreclosed assets held for sale		55		-		-		55

Fair value adjustments, consisting of charge-offs or allocated allowances, on impaired loans and foreclosed assets held for sale during the six months ended June 30, 2017 and the year ended December 31, 2016 amounted to $47 and $18, respectively.

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

Foreclosed Real Estate Held for Sale (Other Real Estate Owned)

Other real estate owned (OREO) is carried at the lower of fair value at acquisition date or current estimated fair value, less estimated cost to sell when the real estate is acquired. Estimated fair value of OREO is based on appraisals or evaluations. OREO is classified within Level 3 of the fair value hierarchy.

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Appraisals of OREO are obtained when the real estate is acquired and subsequently as deemed necessary. Appraisals are reviewed for accuracy and consistency by the lending department. Appraisers are selected from the list of approved appraisers maintained by management.

Collateral-dependent Impaired Loans, Net of ALLL

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy. The Bank considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary. Appraisals are reviewed for accuracy and consistency by the lending department. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by comparison to historical results.

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements.

	Fair Value at		Valuation
	6/30/2017		Technique	Unobservable Inputs	Range
	(Dollars in thousands)
Impaired loans (collateral dependent)	$	657	Market comparable properties	Marketability discount	10% - 15%

	Fair Value at		Valuation
	12/31/2016		Technique	Unobservable Inputs	Range
	(Dollars in thousands)
Impaired loans (collateral dependent)	$	376	Market comparable properties	Marketability discount	10% - 15%

Foreclosed assets held for sale		55	Market comparable properties	Marketability discount	10% - 15%

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

Cash and Cash Equivalents and Interest-bearing Time Deposits

The carrying amount approximates fair value.

Loans Held For Sale

The carrying amount approximates fair value due to the insignificant time between origination and date of sale. The carrying amount is the amount funded.

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Loans

Fair value is estimated by discounting the future cash flows using the market rates at which similar notes would be made to borrowers with similar credit ratings and for the same remaining maturities. The market rates used are based on current rates the Bank would impose for similar loans and reflect a market participant assumption about risks associated with nonperformance, illiquidity, and the structure and term of the loans along with local economic and market conditions.

FHLB Stock

Fair value is estimated at book value due to restrictions that limit the sale or transfer of such securities.

FHLB Lender Risk Account Receivable

The fair value of the Federal Home Loan Bank lender risk account receivable is estimated by discounting the estimated remaining cash flows of each strata of the receivable at current rates applicable to each strata for the same remaining maturities.

Accrued Interest Receivable and Payable

The carrying amount approximates fair value. The carrying amount is determined using the interest rate, balance and last payment date.

Deposits

Fair value of term deposits is estimated by discounting the future cash flows using rates of similar deposits with similar maturities. The market rates used were obtained from a knowledgeable independent third party and reviewed by the Bank. The rates were the average of current rates offered by local competitors of the Bank.

The estimated fair value of checking, NOW, savings and money market deposits is the book value since rates are regularly adjusted to market rates and amounts are payable on demand at the reporting date.

FHLB Advances

Fair value is estimated by discounting the future cash flows using rates of similar advances with similar maturities. These rates were obtained from current rates offered by FHLB.

Advances from Borrowers for Taxes and Insurance

The carrying amount approximates fair value.

Commitments to Originate Loans, Forward Sale Commitments, Letters of Credit and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of commitments to sell securities is estimated based on current market prices for securities of similar terms and credit quality. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. At June 30, 2017 and December 31, 2016, the fair value of such commitments was not material.

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

The following tables present estimated fair values of the Bank’s financial instruments at June 30, 2017 and December 31, 2016.

					Fair Value Measurements Using
June 30, 2017	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Financial Assets
Cash and cash equivalents	$	20,161	$	20,161	$	20,161	$	-	$	-
Interest-bearing time deposits		99		99		99		-		-
Loans held for sale		6,606		6,606		-		-		6,606
Loans, net of allowance for losses		90,570		92,525		-		-		92,525
FHLB stock		736		736		-		736		-
FHLB lender risk account receivable		3,050		3,049		-		-		3,049
Interest receivable		282		282		-		282		-

Financial Liabilities
Deposits		112,673		112,557		69,541		43,016		-
FHLB advances		17		17		-		17		-
Advances from borrowers for taxes and insurance		264		264		-		264		-
Interest payable		1		1		-		1		-

					Fair Value Measurements Using
December 31, 2016	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
	(In thousands)
Financial Assets
Cash and cash equivalents	$	19,589	$	19,589	$	19,589	$	-	$	-
Interest-bearing time deposits		346		346		346		-		-
Loans held for sale		2,732		2,732		-		-		2,732
Loans, net of allowance for losses		83,048		84,852		-		-		84,852
FHLB stock		728		728		-		728		-
FHLB lender risk account receivable		2,698		2,795		-		-		2,795
Interest receivable		270		270		-		270		-

Financial Liabilities
Deposits		100,044		99,927		58,724		41,203		-
FHLB advances		28		28		-		28		-
Advances from borrowers for taxes and insurance		716		716		-		716		-
Interest payable		1		1		-		1		-

Table of Contents

Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Note 5:

Commitments and Credit Risk

Commitments to Originate Loans

Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

At June 30, 2017, the Bank had a loan approved but not yet originated with a variable interest rate of 3.000% for $410 secured by one-to four-family residential real estate. At December 31, 2016, the Bank had loans approved but not yet originated with fixed interest rate ranges of 3.875% - 4.125% for $436 secured by one-to four-family residential real estate. At June 30, 2017 and December 31, 2016, the Bank had undisbursed loans in process of $7,799 with fixed interest rate ranges of 3.000% - 4.625% and $5,554 with fixed interest rate ranges of 3.250% - 4.500%, respectively.

Lines of Credit

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate. Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

Lines of credit at June 30, 2017 and December 31, 2016 were as follows:

	June 30, 2017		December 31, 2016
	(In thousands)
Unused lines of credit	$	2,702	$	1,699
Unused home equity lines		10,530		10,000

Total commitments	$	13,232	$	11,699

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Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

Note 6:

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09 "Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. On July 9, 2015, the FASB approved amendments deferring the effective date by one year.

ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods with in that reporting period. Early application is permitted but not before the original public entity effective date, i.e., annual periods beginning after December 15, 2016. In March 2016, the FASB issued final amendments (ASU No. 2016-08 and ASU No. 2016-10) to clarify the implementation guidance for principal versus agent considerations, identifying performance obligations and the accounting for licenses of intellectual property. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this Update recognized at the date of initial application. In May 2016, the FASB issued final amendments (ASU No. 2016-12 and ASU 2016-11) to address narrow-scope improvements to the guidance on collectability, non-cash consideration, completed contracts at transition and to provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. Additionally, the amendments included a rescission of SEC guidance because of ASU 2014-09 related to revenue and expense recognition for freight services in process, accounting for shipping and handling fees and costs, and accounting for consideration given by a vendor to a customer. In December 2016, the FASB issued final guidance (ASU 2016-20) that allows entities not to make quantitative disclosures about performance obligations in certain cases and requires entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. It also makes 12 additional technical corrections and improvements to the new revenue standard. These amendments are effective upon the adoption of ASU 2014-09. The Bank continues to assess the guidance from the FASB and the Transition Resource Group for Revenue Recognition in determining the impact of ASU 2014-09 on its accounting and disclosures. The Bank is in its preliminary stages of evaluating the impact of these amendments, although it doesn’t expect the amendments to have a significant impact to the Bank’s financial position or results of operations. The amendments could potentially impact the accounting procedures and processes over the recognition of certain revenue sources, including, but not limited to, non-interest income. Management is currently evaluating those revenue streams that will be impacted by the amendments. The analysis includes identification of possible performance obligations and recognition principles. The financial statement impact of this new standard cannot be reasonably estimated at this time.

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." ASU 2016-01 is intended to improve the recognition and measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized in net income; requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured and amortized at cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU 2016-01 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Bank is currently evaluating the impact of these amendments, but does not expect them to have a material effect on the Bank’s financial position or results of operations since it does not have any equity securities or a valuation allowance. However, the amendments will have an impact on certain items that are disclosed at fair value that are not currently utilizing the exit price notion when measuring fair value. At this time the Bank cannot quantify the change in the fair value of such disclosures since the Bank is currently evaluating the full impact of the Update and is in the planning stages of developing appropriate procedures and processes to comply with the disclosure requirements of such amendments. The current accounting policies and procedures will be modified after the Bank has fully evaluated the standard to comply with the accounting changes mentioned above. For additional information on fair value of assets and liabilities, see Note 4.

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Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

In February 2016, the FASB issued ASU No. 2016-02 "Leases (Topic 842)." ASU 2016-02 establishes a right of use model that requires a lessee to record a right of use asset and a lease liability for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. A lease will be treated as sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor doesn't convey risks and rewards or control, an operating lease results. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with certain practical expedients available. Early adoption is permitted. The impact is not expected to have a material effect on the Bank’s financial position or results of operations since the Bank does not have a material amount of lease agreements. The Bank is currently in the process of fully evaluating the amendments and will subsequently implement new processes to comply with the ASU. In addition, the Bank will change its current accounting practice to comply with the amendments and such changes as mentioned above.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326) -Measurement of Credit Losses on Financial Instruments." The provisions of ASU 2016-13 were issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires that financial assets measured at amortized cost 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 amendments in ASU 2016-13 eliminate the probable incurred loss recognition in current GAAP and reflect an entity's current estimate of all expected credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Bank is currently evaluating the impact of these amendments to the Bank’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The Allowance for Loan Losses (ALL) estimate is material to the Bank and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the ALL at the adoption date. The Bank is anticipating a significant change in processes and procedures to calculate the ALL, including changes in assumptions and estimates to consider the expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. In addition, the current accounting policy and procedures for the other-than temporary impairment on available-for-sale securities will be replaced with an allowance approach. The Bank is expecting to begin developing processes during the third quarter of 2017. Management’s attention is focused on collecting historical loan loss data, loan level data, and evaluating data capabilities to ensure it is fully compliant with the amendments at adoption date. For additional information on the allowance for loan losses, see Note 2.

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Eagle Savings Bank

Notes to Condensed Financial Statements

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

Three Months and Six Months Ended June 30, 2017 and 2016 (Unaudited)

(Dollars in Thousands)

In August 2016, the FASB issued ASU No. 2016-15 "Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 provides cash flow statement classification guidance for certain transactions including how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Bank has assessed ASU 2016-15 and does not expect a significant impact on its accounting and disclosures.

In November 2016, the FASB issued ASU No. 2016-18 "Statement of Cash Flows (Topic 230) – Restricted Cash." ASU 2016-18 provides amendments to cash flow statement classification and presentation to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and should be applied using a retrospective transition method to each period presented. Early adoption is permitted, including adoption in an interim period. The Bank has assessed ASU 2016-18 and does not expect a significant impact on its accounting and disclosures.

Note 7:

Plan of Conversion and Change in Corporate Form

On March 3, 2017, the Bank’s Board of Directors adopted a Plan of Conversion (the “Plan”) to convert from an Ohio-chartered mutual savings association to an Ohio-chartered savings association (the “Conversion”). Eagle Financial Bancorp, Inc., a Maryland corporation (the “Company”), was formed to become the savings and loan holding company of the Bank upon consummation of the Conversion. The Conversion was completed on July 20, 2017. In connection with the Conversion, the Company offered shares of its common stock (the “Offering”) to eligible depositors of the Bank. The Offering resulted in the sale of 1,572,808 shares of common stock and the contribution of 40,000 shares to Eagle Savings Bank Charitable Foundation, Inc. for a total of 1,612,808 common shares issued by the Company. The total shares sold include 129,024 shares subscribed for by the Eagle Savings Bank Employee Stock Ownership Plan (“ESOP), or 8% of the total shares issued in the Conversion, including shares contributed to the charitable foundation. The purchase of shares by the ESOP was funded by a loan from the Company.

The Company contributed approximately $6 million of the net proceeds of the offering to the Bank. In addition, approximately $1.3 million of the net proceeds were used to fund the loan to the employee stock ownership plan, and $5.9 million of the proceeds were retained by the Company. The cost of the Conversion and issuing the capital stock was deferred and deducted from the proceeds of the offering. Through June 30, 2017, the Bank had incurred approximately $756,000 in conversion costs, which are included in other assets on the condensed balance sheet.

At the time of the Conversion, the Bank substantially restricted retained earnings by establishing a liquidation account. The liquidation account will be maintained for the benefit of eligible holders who continue to maintain their accounts at the Bank after the Conversion. The liquidation account will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account.

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Item 2.

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

General

Management’s discussion and analysis of the financial condition and results of operations at and for the three and six months ended June 30, 2017 and 2016 is intended to assist in understanding the financial condition and result of operations of the Bank. The information contained in this section should be read in conjunction with the Unaudited Condensed Financial Statements and the notes thereto, appearing in Part 1, 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,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” 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 asset quality of our loan and investment portfolios; and

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations 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. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this report.

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:

our ability to continue to manage our operations successfully;

our ability to successfully implement our business plan of managed growth, diversifying our loan portfolio and increasing mortgage banking operations to improve profitability;

our success in increasing our commercial business, commercial real estate, construction and home equity lending;

adverse changes in the financial industry, securities, credit and national local real estate markets (including real estate values);

significant increases in our loan losses, including as a result of our inability to resolve classified and non-performing assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for loan losses;

credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses;

the use of estimates in determining fair value of certain of our assets, which may prove to be incorrect and result in significant declines in valuations;

competition among depository and other financial institutions;

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our ability to attract and maintain deposits and our success in introducing new financial products;

our ability to maintain our asset quality even as we increase our commercial business, commercial real estate, construction, and home equity lending;

changes in interest rates generally, including changes in the relative differences between short term and long term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources;

fluctuations in the demand for loans, which may be affected by the number of unsold homes, land and other properties in our market areas and by declines in the value of real estate in our market area;

changes in consumer spending, borrowing and saving habits;

declines in the yield on our assets resulting from the current low interest rate environment;

risks related to a high concentration of loans secured by real estate located in our market area;

the results of examinations by our regulators, including the possibility that our regulators may, among other things, require us to increase our allowance for loan losses, write down assets, change our regulatory capital position, limit our ability to borrow funds or maintain or increase deposits, or prohibit us from paying dividends, which could adversely affect our dividends and earnings;

changes in the level of government support of housing finance;

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

changes in laws or government regulations or policies affecting financial institutions, including the Dodd-Frank Act and the JOBS Act, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements, regulatory fees and compliance costs, particularly the new capital regulations, and the resources we have available to address such changes;

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 and the Public Company Accounting Oversight Board;

changes in our compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs in response to product demand or to implement our strategic plans;

loan delinquencies and changes in the underlying cash flows of our borrowers;

our ability to control costs and expenses, particularly those associated with operating as a publicly traded company;

the failure or security breaches of computer systems on which we depend;

the ability of key third-party service providers to perform their obligations to us;

changes in the financial condition or future prospects of issuers of securities that we own; and

other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this prospectus.

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.

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Critical Accounting Policies

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

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

The following represents our critical accounting policies:

Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical charge-off experience for the last three years and expected loss given default derived from our internal risk rating process. Other qualitative adjustments are made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.

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FHLB-Cincinnati Lender Risk Account Receivable. Certain loan sale transactions with the FHLB-Cincinnati provide for establishment of a Lender Risk Account (“LRA”). The LRA consists of amounts withheld from loan sale proceeds by the FHLB-Cincinnati for absorbing inherent losses that are probable on those sold loans. These withheld funds are an asset as they are scheduled to be paid to us in future years, net of any credit losses on those loans sold. The receivables are initially measured at fair value. The fair value is estimated by discounting the cash flows over the life of each master commitment contract. The accretable yield is amortized over the life of the master commitment contract. Expected cash flows are re-evaluated at each measurement date. If there is an adverse change in expected cash flows, the accretable yield would be adjusted on a prospective basis and the asset would be evaluated for impairment.

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

Total Assets. Total assets were $129.0 million at June 30, 2017, an increase of $13.0 million, or 11.2%, over the $116.0 million at December 31, 2016. The increase was primarily due to an increase in net loans of $7.5 million and an increase in loans held for sale of $3.9 million.

Net Loans. Net loans increased by $7.5 million, or 9.1%, to $90.6 million at June 30, 2017 from $83.0 million at December 31, 2016. During the six months ended June 30, 2017, we originated $43.3 million of loans and sold $32.9 million of loans in the secondary market. During the six months ended June 30, 2017, one- to four-family residential real estate loans increased $8.6 million, or 18.1%, to $56.3 million at June 30, 2017, from $47.7 million at December 31, 2016; multi-family loans decreased $576,000, or 22.9%, to $1.9 million at June 30, 2017; commercial real estate loans and land loans increased $448,000, or 3.3%, to $14.1 million at June 30, 2017; construction loans decreased $657,000, or 6.9%, to $8.8 million at June 30, 2017; home equity and other consumer loans decreased $452,000, or 3.1% to $14.1 million at June 30, 2017; and commercial loans increased $2.5 million, or 140.6% to $4.3 million at June 30, 2017. The increases in loan balances reflect our strategy to grow and diversify our loan portfolio. Such growth has been achieved amid strong competition for commercial real estate and one- to four-family residential mortgage loans in our market area in the current low interest rate environment. We have sold loans on a servicing released basis in transactions with the FHLB-Cincinnati, through its mortgage purchase program, and other investors. We sold $32.9 million of loans in the six months of 2017. Loans serviced for investors were $1.7 million at June 30, 2017. Management intends to continue this sales activity in future periods.

Interest-Bearing Deposits in Other Banks. The Bank’s investment in certificates of deposit in other banks decreased $247,000, or 71.4% to $99,000 as of June 30, 2017.

Foreclosed Assets. Foreclosed assets decreased $55,000, or 100.0%, to $0 at June 30, 2017 from $55,000 at December 31, 2016, as we sold $55,000 of foreclosed properties. There were no additions during the six months ended June 30, 2017 to foreclosed real estate.

Deposits. Deposits increased by $12.7 million, or 12.6%, to $112.7 million at June 30, 2017 from $100.0 million at December 31, 2016. This increase included approximately $12.8 million relating to subscriptions for Company common stock in connection with the Bank’s conversion from the mutual to stock form of organization. Our core deposits, which are all deposits other than certificates of deposit, increased $10.8 million, or 18.4%, to $69.5 million at June 30, 2017 from $58.7 million at December 31, 2016. Certificates of deposit increased $1.8 million, or 4.4%, to $43.1 million at June 30, 2017 from $41.3 million at December 31, 2016. During the six months ended June 30, 2017, management continued its strategy of pursuing growth in demand accounts and other lower cost core deposits. Management intends to continue its efforts to increase core deposits, with a special emphasis on growth in consumer and business demand deposits.

Federal Home Loan Bank Advances. FHLB-Cincinnati advances decreased $11,000, or 39.3%, to $17,000 at June 30, 2017 from $28,000 at December 31, 2016. The weighted average cost of these advances was 3.33% at June 30, 2017, compared to our cost of deposits of 0.67% at that same date.

Retained Earnings. Retained earnings increased $315,000, or 2.3%, to $13.8 million at June 30, 2017 from $13.5 million at December 31, 2016. The increase resulted from net income of $315,000 during the six months ended June 30, 2017.

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

General. Our net income for the three months ended June 30, 2017 was $89,000, compared to a net income of $257,000 for the three months ended June 30, 2016, a decrease of $168,000, or 65.4%. The decrease in net income was primarily due to a $288,000 increase in noninterest expense, the result of an increase in compensation and employee benefits from the addition of several new employees in the second half of 2016. There was also a $75,000 increase in the provision for loan losses. The impact of these increases was partially offset by a $94,000 increase in net interest income, the result of the increase in loan balances during the three months ended June 30, 2017. There was also an $87,000 decrease in the provision for income tax expense and a $7,000 increase in gain on loan sales.

Interest Income. Interest income increased $83,000, or 8.7%, to $1.0 million for the three months ended June 30, 2017 from $952,000 for the three months ended June 30, 2016. This increase was primarily attributable to a $71,000 increase in interest income on loans receivable and an increase of $11,000 in interest income on other interest-earning deposits. The average balance of loans during the three months ended June 30, 2017 increased by $8.9 million, or 11.4%, from the average balance for the three months ended June 30, 2016. Interest income on other interest-bearing deposits, including certificates of deposit in other financial institutions, increased $11,000, or 64.7%, for the three months ended June 30, 2017, as a result of an increase in the average yield of 36 basis points, to 0.91%. We held no investment securities during the 2017 or 2016 period.

Interest Expense. Total interest expense decreased $11,000, or 6.2%, to $167,000 for the three months ended June 30, 2017 from $178,000 for the three months ended June 30, 2016. Interest expense on deposit accounts decreased $10,000, or 5.6%, to $167,000 for the three months ended June 30, 2017 from $177,000 for the three months ended June 30, 2016. The average balance of deposits during the three months ended June 30, 2017 increased by $6.9 million, or 7.5% from the average balance from the three months ended June 30, 2016. This increase is offset by a 0.10% decrease in the average cost of deposits to 0.67% from 0.77%.

Interest expense on FHLB advances decreased $1,000, or 100.0%, for the three months ended June 30, 2017. The average balance of FHLB advances during the three months ended June 30, 2017 decreased by $22,000, or 50.0%, from the average balance for the three months ended June 30, 2016.

Net Interest Income. Net interest income increased $94,000, or 12.1%, to $868,000 for the three months ended June 30, 2017, compared to $774,000 for the three months ended June 30, 2016. The increase reflected an increase in total interest and dividend income of $83,000 and a decrease in total interest expense of $11,000. Our net interest margin increased to 3.34% for the three months ended June 30, 2017 from 3.20% for the three months ended June 30, 2016. The interest rate spread and net interest margin were impacted by rising interest rates in the three months ended June 30, 2017.

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies—Allowance for Loan Losses,” we recorded a provision for loan losses of $75,000 for the three months ended June 30, 2017 and $0 for the three months ended June 30, 2016. The allowance for loan losses was $1.2 million, or 1.23% of total loans, at June 30, 2017, compared to $1.1 million, or 1.27% of total loans, at December 31, 2016. The provision for loan losses in the three months ended June 30, 2017 was due primarily to increases in our total loan portfolio and changes in the composition of the portfolio. Total nonperforming loans were $1.1 million at June 30, 2017, compared to $783,000 at December 31, 2016. Classified and special mention loans increased to $2.0 million at June 30, 2017, compared to $1.8 million at December 31, 2016. Total loans past due 30 days or more were $1.0 million and $830,000 at June 30, 2017 and December 31, 2016, respectively. Net recoveries totaled $4,000 for the three months ended June 30, 2017, compared to $35,000 of net loan recovery for the three months ended June 30, 2016. The allowance for loan losses reflects the estimate we believe to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at June 30, 2017 and 2016. While we believe the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact our financial condition and results of operations. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.

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Non-Interest Income. Non-interest income increased $14,000, or 2.6%, to $559,000 for the three months ended June 30, 2017 from $545,000 for the three months ended June 30, 2016. The increase was due to increases in the gain on sale of loans, and in other fees and service charges collected during the three months ended June 30, 2017 as compared to the three months ended June 30, 2016.

Non-Interest Expense. Non-interest expense increased $288,000, or 30.8%, to $1.2 million for the three months ended June 30, 2017, compared to $936,000 for the three months ended June 30, 2016. The increase was primarily the result of an increase in compensation and employee benefits from the addition of several new employees hired during the second half of 2016. We expect that those expenses will continue to increase for the full year ending December 31, 2017 compared to 2016 because employees hired during 2016 will be working for a full year in 2017 compared to just part of the year in 2016. In addition, non-interest expense can be expected to increase in the future compared to historical expense levels because of costs associated with operating as a public company and increased compensation costs related to possible implementation of one or more stock-based benefit plans, if approved by our stockholders.

Federal Income Taxes. Federal income taxes decreased by $87,000 for the three months ended June 30, 2017, compared to an income tax expense of $126,000 for the three months ended June 30, 2016. The reduction in income tax expense for the three months ended June 30, 2017 was a direct result of the increase in non-interest expense and the resulting decrease in net income.

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Average Balances and Yields

The following table sets forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or interest expense.

	For the Three Months Ended June 30,
	2017								2016
						Average								Average
	Average					Yield/			Average					Yield/
	Balance			Interest		Cost (4)			Balance			Interest		Cost (4)

Assets:
Interest Earning Assets
Loans	$	87,741		$	998		4.55	%	$	78,784		$	927		4.71	%
Interest bearing deposits and other		16,305			37		0.91	%		18,057			25		0.55	%
Total interest -earning assets		104,046			1,035		3.98	%		96,841			952		3.93	%
Total non-interest earning assets		15,637								14,168
Total assets	$	119,683							$	111,009

Liabilities and Equity:
Interest bearing checking		19,049			6		0.13	%		17,281			18		0.42	%
Savings		16,092			6		0.15	%		13,581			4		0.12	%
Money Market		21,071			12		0.23	%		19,448			13		0.27	%
CD's		43,175			143		1.32	%		42,132			142		1.35	%
Total interest-bearing deposits		99,387			167		0.67	%		92,442			177		0.77	%
FHLB Advances		22			-		3.33	%		44			1		3.33	%
Total interest bearing liabilities		99,409			167		0.67	%		92,486			178		0.77	%
Total non-interest-bearing liabilities		6,544								5,661

Total liabilities		105,953								98,147
Total equity		13,730								12,862
Total liabilities and equity	$	119,683							$	111,009

Net interest income				$	868							$	774
Net interest rate spread (1)							3.31	%							3.16	%
Net interest earning assets (2)	$	4,637							$	4,355
Net interest margin (3)							3.34	%							3.20	%
Ratio of average interest-earning assets to average interest bearing liabilities		104.66	%							104.71	%

(1)

Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)

Net interest margin represents net interest income divided by total interest-earning assets.

(4)

Average yield/cost is annualized

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

General. Our net income for the six months ended June 30, 2017 was $315,000, compared to a net income of $927,000 for the six months ended June 30, 2016, a decrease of $612,000, or 66.0%. The decrease in net income was primarily due to a $638,000 decrease in noninterest income, due to the absence of death benefit proceeds in excess of the cash surrender value of bank-owned life insurance of $940,000 received in the six months ended June 30, 2016, a $60,000 increase in the provision for loan losses, and an increase of $150,000 in tax expense. The negative impact of these changes was partially offset by a $218,000 increase in net interest income, the result of the increase in loan balances during the six months ended June 30, 2017, and a $299,000 increase in net gain on loans sales during the period.

Interest Income. Interest income increased $171,000, or 9.2%, to $2.0 million for the six months ended June 30, 2017 from $1.9 million for the six months ended June 30, 2016. This increase was attributable to a $145,000 increase in interest income on loans receivable and an increase of $22,000 in interest income on other interest-earning deposits. The average balance of loans during the six months ended June 30, 2017 increased by $8.0 million, or 10.3%, from the average balance for the six months ended June 30, 2016. Interest income on other interest-bearing deposits, including certificates of deposit in other financial institutions, increased $22,000, or 57.9%, for the six months ended June 30, 2017, as a result of an increase in the average yield of 34 basis points, to 0.88%. We held no investment securities during the 2017 or 2016 periods.

Interest Expense. Total interest expense decreased $47,000, or 12.5%, to $329,000 for the six months ended June 30, 2017 from $376,000 for the six months ended June 30, 2016. Interest expense on deposit accounts decreased $15,000, or 4.4%, to $328,000 for the six months ended June 30, 2017 from $343,000 for the six months ended June 31, 2016. The average balance of deposits during the six months ended June 30, 2017 increased by $6.3 million, or 7.0% from the average balance from the six months ended June 30, 2016. This increase is offset by a 0.08% decrease in the average cost of deposits to 0.67% from 0.75%.

Interest expense on FHLB advances decreased $32,000, or 97.0%, to $1,000 for the six months ended June 30, 2017 from $33,000 for the six months ended June 30, 2016. The decrease is attributable to the prepayment of a $3.0 million FHLB advance in 2016. The average balance of FHLB advances during the six months ended June 30, 2017 decreased by $1.5 million, or 98.4%, from the average balance for the six months ended June 30, 2016.

Net Interest Income. Net interest income increased $218,000, or 14.7%, to $1.7 million for the six months ended June 30, 2017, compared to $1.5 million for the six months ended June 30, 2016. The increase reflected an increase in total interest and dividend income of $171,000 and a decrease in total interest expense of $47,000. Our net interest margin increased to 3.27% for the six months ended June 30, 2017 from 3.04% for the six months ended June 30, 2016. The interest rate spread and net interest margin were impacted by rising interest rates in the six months ended June 30, 2017.

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies—Allowance for Loan Losses,” we recorded a provision for loan losses of $85,000 for the six months ended June 30, 2017 and $25,000 for the six months ended June 30, 2016. The allowance for loan losses was $1.2 million, or 1.23% of total loans, at June 30, 2017, compared to $1.1 million, or 1.27% of total loans, at December 31, 2016. The provisions for loan losses in the six months ended June 30, 2017 and the six months ended June 30, 2016 were due primarily to increases in our total loan portfolio and changes in the composition of the portfolio. Total nonperforming loans were $1.1 million at June 30, 2017, compared to $783,000 at December 31, 2016. Classified and special mention loans increased to $2.0 million at June 30, 2017, compared to $1.8 million at December 31, 2016. Total loans past due 30 days or more were $1.0 million and $830,000 at March 31, 2017 and December 31, 2016, respectively. Net loan recoveries totaled $7,000 for the six months ended June 30, 2017, compared to $24,000 of net loans recoveries for the six months ended June 30, 2016. The allowance for loan losses reflects the estimate we believe to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at June 30, 2017 and 2016. While we believe the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact our financial condition and results of operations. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.

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Non-Interest Income. Non-interest income decreased $638,000, or 34.5%, to $1.2 million for the six months ended June 30, 2017 from $1.9 million for the six months ended June 30, 2016. The decrease was primarily due to the absence of death benefit proceeds in excess of the cash surrender value of bank-owned life insurance of $940,000 during the six months ended June 30, 2017 as compared to the six months ended June 30, 2016. This decrease was partially offset by an increase in the gain on loan sales in the secondary market of $299,000 during the six months ended June 30, 2017.

Non-Interest Expense. Non-interest expense decreased $18,000, or 0.8%, to $2.4 million for the six months ended June 30, 2017, compared to $2.4 million for the six months ended June 30, 2016. The decrease was due primarily to the absence of a $410,000 death benefit obligation paid during the six months ended June 30, 2016, and by a decrease of $121,000 in the FHLB prepayment penalty, the result of a payoff of a FHLB advance. These decreases were offset by a $471,000 increase in compensation and benefits expense. We expect that expenses will continue to increase for the full year ending December 31, 2017 compared to 2016 because employees hired during 2016 will be working for a full year in 2017 compared to just part of the year in 2016. In addition, non-interest expense can be expected to increase in the future compared to historical expense levels because of costs associated with operating as a public company and increased compensation costs related to possible implementation of one or more stock-based benefit plans, if approved by our stockholders.

Federal Income Taxes. Federal income taxes increased to $150,000 for the six months ended June 30, 2017, compared to the six months ended June 30, 2016. The increase in income tax expense for the six months ended June 30, 2017 resulted from non-taxable proceeds from life insurance during the six months ended June 30, 2016.

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Average Balances and Yields

	For the Six Months Ended June 30,
	2017								2016
						Average								Average
	Average					Yield/			Average					Yield/
	Balance			Interest		Cost (4)			Balance			Interest		Cost (4)

Assets:
Interest Earning Assets
Loans	$	86,152		$	1,951		4.53	%	$	78,082		$	1,806		4.63	%
Interest bearing deposits and other		17,679			78		0.88	%		19,402			52		0.54	%
Total interest -earning assets		103,831			2,029		3.91	%		97,484			1,858		3.81	%
Total non-interest earning assets		14,027								13,276
Total assets	$	117,858							$	110,760

Liabilities and Equity:
Interest bearing checking		17,616			12		0.14	%		16,853			31		0.37	%
Savings		16,042			12		0.15	%		13,492			10		0.15	%
Money Market		21,238			24		0.23	%		19,078			23		0.24	%
CD's		42,655			280		1.31	%		41,781			279		1.34	%
Total interest-bearing deposits		97,551			328		0.67	%		91,204			343		0.75	%
FHLB Advances		24			1		3.33	%		1,530			33		4.31	%
Total interest bearing liabilities		97,575			329		0.67	%		92,734			376		0.81	%
Total non-interest-bearing liabilities		6,630								5,418

Total liabilities		104,205								98,152
Total equity		13,653								12,608
Total liabilities and equity	$	117,858							$	110,760

Net interest income				$	1,700							$	1,482
Net interest rate spread (1)							3.24	%							3.00	%
Net interest earning assets (2)	$	6,256							$	4,750
Net interest margin (3)							3.27	%							3.04	%
Ratio of average interest-earning assets to average interest bearing liabilities		106.41	%							105.12	%

(1)

Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)

Net interest margin represents net interest income divided by total interest-earning assets.

(4)

Average yield/cost is annualized

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and proceeds from the sale of loans. We also have the ability to borrow from the FHLB-Cincinnati. At June 30, 2017, we had $17,000 outstanding in advances from the FHLB-Cincinnati. At June 30, 2017, we had the capacity to increase our borrowings by approximately $29.8 million from the FHLB-Cincinnati and an additional $10.0 million on a line of credit with the FHLB-Cincinnati.

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

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Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash used by operating activities was $4.2 million for the six months ended June 30, 2017, while net cash used in operating activities was $3.1 million for the six months ended June 30, 2016, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations, offset by principal collections on loans, was $7.4 million for the six months ended June 30, 2017, while the net cash used by investing activities was $2.0 million for the six months ended June 30, 2016, respectively. Net cash provided by financing activities, consisting primarily of the activity in deposit accounts, was $12.1 million for the six month ended June 30, 2017, while the net cash provided by financing activities was $2.7 million for the six months ended June 30, 2016, resulting from activity in deposit accounts and FHLB-Cincinnati advances.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

At June 30, 2017, we exceeded all of our regulatory capital requirements with a Tier 1 leverage capital level of $13.8 million, or 11.7% of adjusted total assets, which is above the well-capitalized required level of $5.9 million, or 5.0%; and total risk-based capital of $15.0 million, or 13.1% of risk-weighted assets, which is above the well-capitalized required level of $11.5 million, or 10.0%. Accordingly, Eagle Savings Bank was categorized as well capitalized at June 30, 2017 and December 31, 2016. In addition, our capital levels increased as a result of the July 20, 2017 consummation of the Bank’s mutual to stock conversion and related offering of the Company. Management is not aware of any conditions or events since the most recent notification that would change our category.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At June 30, 2017, we had outstanding commitments to originate loans of $18.4 million, including undisbursed funds on construction loans and funds available on undrawn lines of credit. We anticipate that we will have sufficient funds available to meet our current lending commitments. Certificates of deposit that are scheduled to mature within one year from June 30, 2017 totaled $18.9 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize FHLB-Cincinnati advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

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

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ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4.

CONTROLS AND PROCEDURES

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

During the quarter ended June 30, 2017 there was no change in the Company’s internal control over financial reporting that has materially affected, or is 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 Company’s financial condition or results of operations.

ITEM 1A.

RISK FACTORS

In addition to other information set forth in this report, you should carefully consider the factors discussed in the Eagle Financial Bancorp, Inc’s Prospectus dated May 15, 2017 (“Prospectus”) as filed with the Securities and Exchange Commission pursuant to Securities Act Rule 424(b)(3) on May 24, 2017, including under the section titled “Risk Factors”, which could materially affect our business, financial condition or future results. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. At June 30, 2017, the risk factors for Eagle Financial Bancorp, Inc. have not changed materially from those reported in our Prospectus. However, the risks described in the Prospectus are not the only risks that we face.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

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ITEM 6.	EXHIBITS

	31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	101.0	The following material from Eagle Financial Bancorp, Inc’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statements of Equity, (iv) the Condensed Statements of Cash Flows, and (v) the Notes to Condensed Financial Statements.

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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.

Date:	August 11, 2017	By:	/s/Gary J. Koester
			Gary J. Koester
			President and Chief Executive Officer

Date:	August 11, 2017	By:	/s/Kevin R. Schramm
			Kevin R. Schramm
			Vice President, Chief Financial Officer and Treasurer

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Eagle Financial Bancorp, Inc. Reports

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