Attached files
| file | filename |
|---|---|
| EX-32 - EXHIBIT 32 - FFBW, Inc. | tv478445_ex32.htm |
| EX-31.2 - EXHIBIT 31.2 - FFBW, Inc. | tv478445_ex31-2.htm |
| EX-31.1 - EXHIBIT 31.1 - FFBW, Inc. | tv478445_ex31-1.htm |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2017
OR
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from _______________ to _______________
Commission File No. 001-38239
FFBW, Inc.
(Exact name of registrant as specified in its charter)
| Federal | 82-3027075 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
| 1360 South Moorland Road | ||
| Brookfield, Wisconsin | 53005 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(262) 542-4448
(Registrant’s telephone number)
N/A
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.
YES ¨ 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 ¨ NO x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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 ¨ | Smaller reporting company x |
| (Do not check if a smaller reporting company) | 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 Act). YES ¨ NO x
6,612,500 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding as of November 8, 2017.
FFBW, Inc.
Form 10-Q
Index
| 1 |
EXPLANATORY NOTE
FFBW, Inc., a federal corporation (the “Company” or the “Registrant”), was formed to serve as the mid-tier holding company for First Federal Bank of Wisconsin (the “Bank”) upon completion of the Bank’s mutual holding company reorganization. The mutual holding company reorganization was consummated on October 10, 2017. However, as of September 30, 2017, the Company had no assets or liabilities and had not conducted any business activities other than organizational activities. Accordingly, the unaudited financial statements and the other financial information contained in this quarterly report on Form 10-Q relate solely to the Bank.
The unaudited financial statements and other financial information contained in this quarterly report on Form 10-Q should be read in conjunction with the Bank’s audited financial statements as of and for the years ended December 31, 2016 and 2015 contained in the Company’s definitive prospectus dated August 14, 2017 (the “Prospectus”) as filed with the Securities and Exchange Commission pursuant to Securities Act Rule 424(b)(3) on August 23, 2017.
| 2 |
Part I. – Financial Information
| Item 1. | Financial Statements |
First Federal Bank of Wisconsin
Balance Sheets
September 30, 2017 (Unaudited) and December 31, 2016
(In Thousands)
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Assets | ||||||||
| Cash and due from banks | $ | 2,075 | $ | 6,911 | ||||
| Fed funds sold | 30,104 | - | ||||||
| Cash and cash equivalents | 32,179 | 6,911 | ||||||
| Available for sale securities, stated at fair value | 43,371 | 48,613 | ||||||
| Loans held for sale | 72 | 592 | ||||||
| Loans, net of allowance for loan and lease losses of $1,583 and $1,478 | 177,392 | 166,974 | ||||||
| Premises and equipment, net | 7,276 | 7,610 | ||||||
| Foreclosed assets | - | 667 | ||||||
| FHLB stock, at cost | 614 | 1,347 | ||||||
| Accrued interest receivable | 770 | 760 | ||||||
| Cash value of life insurance | 6,511 | 6,352 | ||||||
| Other assets | 2,109 | 1,729 | ||||||
| TOTAL ASSETS | $ | 270,294 | $ | 241,555 | ||||
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Liabilities and Equity | ||||||||
| Deposits | $ | 213,098 | $ | 184,639 | ||||
| Advance payments by borrowers for taxes and insurance | 1,187 | 33 | ||||||
| FHLB advances | 19,757 | 21,277 | ||||||
| Accrued interest payable | 478 | 29 | ||||||
| Other liabilities | 1,396 | 1,579 | ||||||
| Total liabilities | $ | 235,916 | $ | 207,557 | ||||
| Retained earnings | $ | 34,354 | $ | 34,123 | ||||
| Accumulated other comprehensive income (loss) | 24 | (125 | ) | |||||
| Total equity | $ | 34,378 | $ | 33,998 | ||||
| TOTAL LIABILITIES AND EQUITY | $ | 270,294 | $ | 241,555 |
The accompanying notes are an integral part of these financial statements.
| 3 |
First Federal Bank of Wisconsin
Statements of Income
Three and Nine Months Ended September 30, 2017 and 2016 (Unaudited)
(In Thousands)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Interest and dividend income: | ||||||||||||||||
| Loans, including fees | $ | 1,981 | $ | 1,920 | $ | 5,736 | $ | 5,861 | ||||||||
| Securities | ||||||||||||||||
| Taxable | 220 | 211 | 673 | 656 | ||||||||||||
| Tax-exempt | 36 | 58 | 115 | 204 | ||||||||||||
| Other | 16 | 7 | 29 | 24 | ||||||||||||
| Total interest and dividend income | 2,253 | 2,196 | 6,553 | 6,745 | ||||||||||||
| Interest Expense: | ||||||||||||||||
| Interest-bearing deposits | 349 | 352 | 998 | 1,027 | ||||||||||||
| Borrowed funds | 65 | 70 | 183 | 211 | ||||||||||||
| Total interest expense | 414 | 422 | 1,181 | 1,238 | ||||||||||||
| Net interest income | 1,839 | 1,774 | 5,372 | 5,507 | ||||||||||||
| Provision for loan losses | 63 | 324 | 166 | 357 | ||||||||||||
| Net interest income after provision for loan losses | 1,776 | 1,450 | 5,206 | 5,150 | ||||||||||||
| Noninterest income: | ||||||||||||||||
| Service charges and other fees | 80 | 60 | 204 | 175 | ||||||||||||
| Net gain on sale of loans | 81 | 84 | 214 | 167 | ||||||||||||
| Net gain (loss) on sale of securities | (2 | ) | 123 | 20 | 129 | |||||||||||
| Increase in cash surrender value of insurance | 49 | 45 | 149 | 145 | ||||||||||||
| Other noninterest income | 24 | 3 | 40 | 4 | ||||||||||||
| Total noninterest income | 232 | 315 | 627 | 620 | ||||||||||||
| Noninterest expense: | ||||||||||||||||
| Salaries and employee benefits | 945 | 1,048 | 2,984 | 2,964 | ||||||||||||
| Occupancy and equipment | 269 | 252 | 815 | 755 | ||||||||||||
| Data processing | 145 | 185 | 446 | 530 | ||||||||||||
| Foreclosed assets, net | (5 | ) | 12 | 22 | 21 | |||||||||||
| Professional fees | 112 | 75 | 341 | 261 | ||||||||||||
| Other | 528 | 263 | 996 | 738 | ||||||||||||
| Total noninterest expense | 1,994 | 1,835 | 5,604 | 5,269 | ||||||||||||
| Income before income taxes | 14 | (70 | ) | 229 | 501 | |||||||||||
| Provision (credit) for income taxes | (25 | ) | (52 | ) | (2 | ) | 63 | |||||||||
| Net income (loss) | $ | 39 | $ | (18 | ) | $ | 231 | $ | 438 | |||||||
The accompanying notes are an integral part of these financial statements.
| 4 |
First Federal Bank of Wisconsin
Statement of Comprehensive Income
Three and Nine Months Ended September 31, 2017 and 2016, (Unaudited)
(Dollars in Thousands)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income | $ | 39 | $ | (18 | ) | $ | 231 | $ | 438 | |||||||
| Other comprehensive income: | ||||||||||||||||
| Unrealized holding gains arising during the period | 23 | 419 | 249 | 497 | ||||||||||||
| Reclassification adjustment for gains realized in net income | 2 | (123 | ) | (20 | ) | (129 | ) | |||||||||
| Other comprehensive income before tax effect | 25 | 296 | 229 | 368 | ||||||||||||
| Tax effect of other comprehensive income items | (9 | ) | (104 | ) | (80 | ) | (144 | ) | ||||||||
| Other comprehensive income, net of tax | 16 | 192 | 149 | 224 | ||||||||||||
| Comprehensive income | $ | 55 | $ | 174 | $ | 380 | $ | 662 | ||||||||
The accompanying notes are an integral part of these financial statements.
| 5 |
First Federal Bank of Wisconsin
Statement of Changes in Equity
For the Nine Months Ended September 30, 2017 and 2016, (Unaudited)
(Dollars in Thousands)
| Retained Earnings | Accumulated Other Comprehensive Income | Total | ||||||||||
| Balance at January 1, 2016 | $ | 33,952 | $ | 230 | $ | 34,182 | ||||||
| Net income | 438 | - | 438 | |||||||||
| Other comprehensive income | - | 224 | 224 | |||||||||
| Balance at September 30, 2016 | 34,390 | 454 | 34,844 | |||||||||
| Balance at January 1, 2017 | 34,123 | (125 | ) | 33,998 | ||||||||
| Net income | 231 | - | 231 | |||||||||
| Other comprehensive income | - | 149 | 149 | |||||||||
| Balance at September 30, 2017 (unaudited) | $ | 34,354 | $ | 24 | $ | 34,378 | ||||||
The accompanying notes are an integral part of these financial statements.
| 6 |
First Federal Bank of Wisconsin
Statements of Cash Flows
For the Nine Months Ended September 30, 2017 and 2016 (Unaudited)
(Dollars in Thousands)
| For the nine months ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| Increase (decrease) in cash and cash equivalents: | ||||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 231 | $ | 438 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Provision for loan losses | 166 | 357 | ||||||
| Depreciation | 366 | 347 | ||||||
| Accretion of loan portfolio discount and deposit premium | (256 | ) | (374 | ) | ||||
| Net amortization (accretion) on available for sale securities available for sale | 402 | 373 | ||||||
| Gain on sale of available for sale securities | (20 | ) | (129 | ) | ||||
| Increase in cash surrender value of life insurance | (149 | ) | (145 | ) | ||||
| Accretion of discount on FHLB advances | (20 | ) | (20 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued interest receivable | (10 | ) | 14 | |||||
| Loans held for sale | 520 | (1,742 | ) | |||||
| Other assets | (461 | ) | 124 | |||||
| Accrued interest payable | 449 | 481 | ||||||
| Other liabilities | (183 | ) | 414 | |||||
| Net cash provided by operating activities | 1,035 | 138 | ||||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sales of available for sale securities | 6,856 | 9,479 | ||||||
| Maturities, calls, paydowns on available for sale securities | 6,195 | 7,170 | ||||||
| Purchases of available for sale securities | (7,961 | ) | (14,837 | ) | ||||
| Net (increase) decrease in loans | (10,876 | ) | 3,571 | |||||
| Purchases of premises and equipment | (280 | ) | (93 | ) | ||||
| Proceds from redemption of FHLB stock | 733 | - | ||||||
| Proceeds from sale of equipment | 248 | - | ||||||
| Purchase of life insurance | (10 | ) | - | |||||
| Proceeds from sale of foreclosed assets | 1,227 | - | ||||||
| Net cash (used) provided by investing activities | (3,868 | ) | 5,290 | |||||
| Cash flows from financing activities: | ||||||||
| Net increase in deposits | 28,447 | 1,252 | ||||||
| Net increase in advance payments by borrowers for taxes and insurance | 1,154 | 648 | ||||||
| Net increase (decrease) in FHLB open line of credit | - | (3,500 | ) | |||||
| Repayments of FHLB advances | (6,500 | ) | (1,000 | ) | ||||
| Proceeds from FHLB advances | 5,000 | 2,500 | ||||||
| Net cash (used) provided in financing activities | 28,101 | (100 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 25,268 | 5,328 | ||||||
| Cash and cash equivalents at beginning | 6,911 | 3,093 | ||||||
| Cash and cash equivalents at end | $ | 32,179 | $ | 8,421 | ||||
| Supplemental Cash Flow Disclosures: | ||||||||
| Cash paid for interest | $ | 733 | $ | 757 | ||||
| Cash paid for income taxes | - | - | ||||||
| Loans transferred to foreclosed assets | 560 | 746 | ||||||
The accompanying notes are an integral part of these financial statements.
| 7 |
First Federal Bank of Wisconsin
Form 10-Q
Notes to Financial Statements (Unaudited – Dollars in Thousands)
Note 1 – Basis of Presentation
The accompanying unaudited financial statements of First Federal Bank of Wisconsin (the “Bank”) were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America.
In the opinion of management, all adjustments necessary for a fair presentation of the financial statements have been included. The results of operations for the three- and nine-month periods ended September 30, 2017 are not necessarily indicative of the results which may be expected for the entire year. These statements should be read in conjunction with the Financial Statements and notes thereto for the year ended December 31, 2016 included in the Form S-1 of FFBW, Inc. as filed with the Securities and Exchange Commission (“SEC”). Reference is made to the accounting policies of the Bank described in the Notes to the Financial Statements contained in the Form S-1.
In preparing the financial statements, the Bank is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Bank’s financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.
Note 2 – Recent Accounting Pronouncements
Emerging Growth Company Status
The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Company is an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies. An emerging growth company may elect to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, but must make such election when the Company is first required to file a registration statement. The Company has elected to use the extended transition period described above and intends to maintain its emerging growth company status as allowed under the JOBS Act.
In June 2016, FASB issued ASU No. 2016-13, “Credit Losses (Topic 326).” ASU 2016-13 requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Bank is currently assessing the impact of adopting ASU 2016-13 on its financial statements.
In January 2016, FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”. The standard makes a number of changes to the recognition and measurement standards of financial instruments, including the following changes: 1) equity securities with a readily determinable fair value will have to be measured at fair value with changes in fair value recognized in net income; 2) entities that are public business entities will no longer be required to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost; and 3) entities that are public business entities will be required to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. This standard is effective for financial statements issued for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017. The adoption of this standard is not expected to have a material impact on our financial condition or results of operations, except that the Bank will no longer disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost.
| 8 |
In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The amendment supersedes and replaces nearly all existing revenue recognition guidance. Under the amended guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual and interim periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. In August 2015, FASB issued ASU No. 2015-14 Revenue from Contracts with Customer (Topic 606), Deferral of the Effective Date. The amendment defers the effective date of ASU No. 2014-09 by one year. Adoption of ASU No. 2014-09 and ASU 2015-14 is not expected to have a material impact on the financial statements, but significant disclosures to the Notes thereto will be required.
Note 3 – Available for Sale Securities
Amortized costs and fair values of available for sale securities are summarized as follows:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| September 30, 2017 | ||||||||||||||||
| Obligations of the US government and US government sponsored agencies | $ | 2,854 | $ | 28 | $ | - | $ | 2,882 | ||||||||
| Obligations of states and political subdivisions | 11,801 | 133 | (50 | ) | 11,884 | |||||||||||
| Mortgage-backed securities | 21,513 | 39 | (183 | ) | 21,369 | |||||||||||
| Certificates of deposit | 3,000 | 23 | (3 | ) | 3,020 | |||||||||||
| Corporate debt securities | 4,166 | 51 | (1 | ) | 4,216 | |||||||||||
| Total available for sale securities | $ | 43,334 | $ | 274 | $ | (237 | ) | $ | 43,371 | |||||||
| December 31, 2016 | ||||||||||||||||
| Obligations of the US government and US government sponsored agencies | $ | 3,885 | $ | 36 | $ | (2 | ) | $ | 3,919 | |||||||
| Obligations of states and political subdivisions | 15,606 | 104 | (148 | ) | 15,562 | |||||||||||
| Mortgage-backed securities | 23,155 | 39 | (302 | ) | 22,892 | |||||||||||
| Certificates of deposit | 1,000 | 17 | (3 | ) | 1,014 | |||||||||||
| Corporate debt securities | 5,159 | 76 | (9 | ) | 5,226 | |||||||||||
| Total available for sale securities | $ | 48,805 | $ | 272 | $ | (464 | ) | $ | 48,613 | |||||||
Fair values of securities are estimated based on financial models or prices paid for similar securities. It is possible interest rates could change considerably, resulting in a material change in estimated fair value.
| 9 |
The following table presents the portion of the Bank's portfolio which has gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position:
| Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
| September 30, 2017 | ||||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | 537 | $ | (1 | ) | $ | 2,675 | $ | (49 | ) | $ | 3,212 | $ | (50 | ) | |||||||||
| Mortgage-backed securities | 5,473 | (29 | ) | 8,589 | (154 | ) | 14,062 | (183 | ) | |||||||||||||||
| Certificates of deposit | - | - | 247 | (3 | ) | 247 | (3 | ) | ||||||||||||||||
| Corporate debt securities | - | - | 249 | (1 | ) | 249 | (1 | ) | ||||||||||||||||
| Total | $ | 6,010 | $ | (30 | ) | $ | 11,760 | $ | (207 | ) | $ | 17,770 | $ | (237 | ) | |||||||||
| December 31, 2016 | ||||||||||||||||||||||||
| Obligations of the US government and US government sponsored agencies | $ | 733 | $ | (1 | ) | $ | 179 | $ | (1 | ) | $ | 912 | $ | (2 | ) | |||||||||
| Obligations of states and political subdivisions | 7,087 | (148 | ) | - | - | 7,087 | (148 | ) | ||||||||||||||||
| Mortgage-backed securities | 15,370 | (278 | ) | 1,365 | (24 | ) | 16,735 | (302 | ) | |||||||||||||||
| Certificates of deposit | 247 | (3 | ) | - | - | 247 | (3 | ) | ||||||||||||||||
| Corporate debt securities | 1,590 | (8 | ) | 249 | (1 | ) | 1,839 | (9 | ) | |||||||||||||||
| Total | $ | 25,027 | $ | (438 | ) | $ | 1,793 | $ | (26 | ) | $ | 26,820 | $ | (464 | ) | |||||||||
The Bank held 45 securities with aggregate depreciation of approximately 1% from the Bank’s amortized cost basis at September 30, 2017 and 66 securities with aggregate depreciation of approximately 2% from the Bank’s amortized cost basis at December 31, 2016. It is the opinion of management that the unrealized losses are a result of fluctuations in prevailing interest rates and a decrease in market liquidity and not an impairment in the credit quality of the investment. In addition, the Bank does not have the intent to sell the securities, and it is more likely than not that it will not be required to sell the securities before the recovery of the losses. Based on this information, management believes the unrealized losses are temporary in nature.
The amortized cost and fair value of held to maturity securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities in mortgage-backed securities since the anticipated maturities are not readily determinable. Therefore, these securities are not included in the maturity categories in the following maturity summary listed below:
| September 30, 2017 | ||||||||
| Amortized Cost | Fair Value | |||||||
| Due in one year or less | $ | 497 | $ | 498 | ||||
| Due after one year through 5 years | 9,236 | 9,327 | ||||||
| Due after 5 years through 10 years | 4,654 | 4,714 | ||||||
| Due after 10 years | 7,434 | 7,463 | ||||||
| Subtotal | $ | 21,821 | $ | 22,002 | ||||
| Mortgage-backed securities | 21,513 | 21,369 | ||||||
| Total | $ | 43,334 | $ | 43,371 | ||||
| 10 |
Proceeds from sales of available for sale securities during the nine months ended September 30, 2017 and the year ended December 31, 2016 were $6,856 and $9,484, respectively. Gross realized gains, during the nine months ended September 30, 2017 and the year ended December 31, 2016 on these sales amounted to $86 and $133, respectively. Gross realized losses on these sales were $66 and $4, during the nine months ended September 30, 2017 and year ended December 31, 2016, respectively.
No securities were pledged at September 30, 2017 or December 31, 2016.
Note 4 – Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff, generally are generally reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses. Interest on loans is accrued and credited to income based on the unpaid principal balance. Loan-origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.
The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication the borrower may be unable to make payments as they become due. When loans are placed on nonaccrual or charged off, all unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses
The allowance for loan losses is maintained at the level considered adequate by management to provide for losses that are probable. The allowance for loan losses is established through a provision for loan losses charged to expense as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.
Management regularly evaluates the allowance for loan losses using the Bank’s past loan loss experience, known and inherent risks in the portfolio, composition of the portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, current economic conditions, and other relevant factors. This evaluation is inherently subjective since it requires material estimates that may be susceptible to significant change.
A loan is impaired when, based on current information, it is probable that the Bank will not collect all amounts due in accordance with the contractual terms of the loan agreement. Management determines whether a loan is impaired on a case-by-case basis, taking into consideration the payment status, collateral value, length and reason of any payment delays, the borrower’s prior payment record, and any other relevant factors. Large groups of smaller-balance homogeneous loans, such as residential mortgage and consumer loans, are collectively evaluated in the allowance for loan losses analysis and are not subject to impairment analysis unless such loans have been subject to a restructuring agreement. Specific allowances for impaired loans are based on discounted cash flows of expected future payments using the loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent.
| 11 |
Major classifications of loans are as follows:
| September 30, 2017 | December 31, 2016 | |||||||
| Commercial | ||||||||
| Development | $ | 1,853 | $ | 2,526 | ||||
| Real estate | 52,023 | 42,276 | ||||||
| Commercial and industrial | 8,908 | 7,617 | ||||||
| Residential real estate and consumer | ||||||||
| 1-4 family owner-occupied | 50,507 | 50,284 | ||||||
| 1-4 family investor-owned | 33,782 | 34,633 | ||||||
| Multifamily | 34,444 | 31,905 | ||||||
| Consumer | 1,769 | 1,582 | ||||||
| Subtotal | $ | 183,286 | $ | 170,823 | ||||
| Deferred loan fees | $ | (77 | ) | $ | (88 | ) | ||
| Loans in process | (4,234 | ) | (2,283 | ) | ||||
| Allowance for loan losses | (1,583 | ) | (1,478 | ) | ||||
| Net Loans | $ | 177,392 | $ | 166,974 | ||||
| 12 |
Analysis of the allowance for loan losses for the three and nine months ended September 30, 2017 and 2016 follows:
| Three Months Ended | Commercial | Residential real estate and consumer | Total | |||||||||
| Balance at June 30, 2017 | $ | 505 | $ | 1,014 | $ | 1,519 | ||||||
| Provision for loan losses | 87 | (24 | ) | 63 | ||||||||
| Loans charged off | - | - | - | |||||||||
| Recoveries of loans previously charged off | - | 1 | 1 | |||||||||
| Balance at September 30, 2017 | $ | 592 | $ | 991 | $ | 1,583 | ||||||
| Balance at June 30, 2016 | $ | 574 | $ | 973 | $ | 1,547 | ||||||
| Provision for loan losses | 31 | 293 | 324 | |||||||||
| Loans charged off | - | (250 | ) | (250 | ) | |||||||
| Recoveries of loans previously charged off | - | - | - | |||||||||
| Balance at September 30, 2016 | $ | 605 | $ | 1,016 | $ | 1,621 | ||||||
| Nine Months Ended | Commercial | Residential real estate and consumer | Total | |||||||||
| Balance at December 31, 2016 | $ | 348 | $ | 1,130 | $ | 1,478 | ||||||
| Provision for loan losses | 244 | (78 | ) | 166 | ||||||||
| Loans charged off | - | (97 | ) | (97 | ) | |||||||
| Recoveries of loans previously charged off | - | 36 | 36 | |||||||||
| Balance at September 30, 2017 | $ | 592 | $ | 991 | $ | 1,583 | ||||||
| Balance at December 31, 2015 | $ | 497 | $ | 1,054 | $ | 1,551 | ||||||
| Provision for loan losses | 108 | 249 | 357 | |||||||||
| Loans charged off | - | (287 | ) | (287 | ) | |||||||
| Recoveries of loans previously charged off | - | - | - | |||||||||
| Balance at September 30, 2016 | $ | 605 | $ | 1,016 | $ | 1,621 | ||||||
| Commercial | Residential real estate and consumer | Total | ||||||||||
| Allowance for loan losses at September 30, 2017: | ||||||||||||
| Individually evaluated for impairment | - | - | $ | - | ||||||||
| Collectively evaluated for impairment | 592 | 991 | 1,583 | |||||||||
| Total allowance for loan losses | $ | 592 | $ | 991 | $ | 1,583 | ||||||
| Allowance for loan losses at December 31, 2016: | ||||||||||||
| Individually evaluated for impairment | - | - | $ | - | ||||||||
| Collectively evaluated for impairment | 348 | 1,130 | 1,478 | |||||||||
| Total allowance for loan losses | $ | 348 | $ | 1,130 | $ | 1,478 | ||||||
| 13 |
Analysis for loans evaluated for impairment as of September 30, 2017 and December 31, 2016, follows:
| September 30, 2017 | Commercial | Residential real estate and consumer | Total | |||||||||
| Loans: | ||||||||||||
| Individually evaluated for impairment | $ | 198 | $ | 2,604 | $ | 2,802 | ||||||
| Collectively evaluated for impairment | 62,586 | 117,898 | 180,484 | |||||||||
| Total loans | $ | 62,784 | $ | 120,502 | $ | 183,286 | ||||||
| December 31, 2016 | ||||||||||||
| Loans: | ||||||||||||
| Individually evaluated for impairment | $ | 141 | $ | 5,038 | $ | 5,179 | ||||||
| Collectively evaluated for impairment | 52,278 | 113,366 | 165,644 | |||||||||
| Total loans | $ | 52,419 | $ | 118,404 | $ | 170,823 | ||||||
| As of September 30, 2017 | Principal Balance | Recorded Investment | Related Allowance | Average Investment | Interest Recognized | |||||||||||||||
| Loans with no related allowance for loan losses: | ||||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Commercial and industrial | $ | 204 | $ | 198 | $ | - | $ | 207 | $ | - | ||||||||||
| Residential real estate and consumer | ||||||||||||||||||||
| 1-4 family owner-occupied | 1,868 | 1,746 | - | 1,760 | - | |||||||||||||||
| 1-4 family investor-owned | 932 | 858 | - | 1,556 | 21 | |||||||||||||||
| Total | $ | 3,004 | $ | 2,802 | $ | - | $ | 3,523 | $ | 21 | ||||||||||
| As of December 31, 2016 | Principal Balance | Recorded Investment | Related Allowance | Average Investment | Interest Recognized | |||||||||||||||
| Loans with no related allowance for loan losses: | ||||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Real estate | $ | 14 | $ | 14 | $ | - | $ | 14 | $ | 1 | ||||||||||
| Commercial and industrial | 129 | 127 | - | 135 | - | |||||||||||||||
| Residential real estate and consumer | ||||||||||||||||||||
| 1-4 family owner-occupied | 2,363 | 2,104 | - | 2,310 | 20 | |||||||||||||||
| 1-4 family investor-owned | 2,707 | 2,466 | - | 2,592 | 73 | |||||||||||||||
| Multifamily | 513 | 468 | - | 483 | 10 | |||||||||||||||
| Total | $ | 5,726 | $ | 5,179 | $ | - | $ | 5,534 | $ | 104 | ||||||||||
No additional funds are committed to be advanced in connection with impaired loans.
The Bank regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan losses. The credit quality indicators monitored differ depending on the class of loan.
Commercial loans are generally evaluated using the following internally prepared ratings:
“Pass” ratings are assigned to loans with adequate collateral and debt service ability such that collectability of the contractual loan payments is highly probable.
| 14 |
“Special mention” ratings are assigned to loans where management has some concern that the collateral or debt service ability may not be adequate, though the collectability of the contractual loan payments is still probable.
“Substandard” ratings are assigned to loans that do not have adequate collateral and/or debt service ability such that collectability of the contractual loan payments is no longer probable.
“Doubtful” ratings are assigned to loans that do not have adequate collateral and/or debt service ability, and collectability of the contractual loan payments is unlikely.
Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing according to the contractual terms of the loan.
Information regarding the credit quality indicators most closely monitored for commercial loans by class as of September 30, 2017 and September 30, 2016, follows:
| Pass | Special Mention | Substandard | Doubtful | Totals | ||||||||||||||||
| September 30, 2017 | ||||||||||||||||||||
| Development | $ | 1,853 | $ | - | $ | - | $ | - | $ | 1,853 | ||||||||||
| Real estate | 50,718 | 1,305 | - | - | 52,023 | |||||||||||||||
| Commercial and industrial | 8,179 | 613 | 116 | - | 8,908 | |||||||||||||||
| 1-4 family investor-owned | 32,311 | 1,235 | 153 | 83 | 33,782 | |||||||||||||||
| Multifamily | 34,444 | - | - | - | 34,444 | |||||||||||||||
| Totals | $ | 127,505 | $ | 3,153 | $ | 269 | $ | 83 | $ | 131,010 | ||||||||||
| December 31, 2016 | ||||||||||||||||||||
| Development | $ | 2,526 | $ | - | $ | - | $ | - | $ | 2,526 | ||||||||||
| Real estate | 42,042 | 234 | - | - | 42,276 | |||||||||||||||
| Commercial and industrial | 6,895 | 595 | 127 | - | 7,617 | |||||||||||||||
| 1-4 family investor-owned | 31,114 | 2,709 | 720 | 90 | 34,633 | |||||||||||||||
| Multifamily | 31,442 | 220 | 243 | - | 31,905 | |||||||||||||||
| Totals | $ | 114,019 | $ | 3,758 | $ | 1,090 | $ | 90 | $ | 118,957 | ||||||||||
Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class as of September 30, 2017 and December 31, 2016, follows:
| Performing | Non-performing | Totals | ||||||||||
| September 30, 2017 | ||||||||||||
| 1-4 family owner-occupied | 49,284 | 1,223 | 50,507 | |||||||||
| Consumer | 1,769 | - | 1,769 | |||||||||
| $ | 51,053 | $ | 1,223 | $ | 52,348 | |||||||
| December 31, 2016 | ||||||||||||
| 1-4 family owner-occupied | 48,180 | 2,104 | 50,284 | |||||||||
| Consumer | 1,582 | - | 1,582 | |||||||||
| $ | 49,762 | $ | 2,104 | $ | 51,866 | |||||||
| 15 |
Loan aging information as of September 30, 2017, follows:
| September 30, 2017 | Loans Past Due | Loans Past Due | Nonaccrual | |||||||||||||||||
| Current Loans | 30-89 Days | 90+ Days | Total Loans | Loans | ||||||||||||||||
| Development | $ | 1,853 | $ | - | $ | - | $ | 1,853 | $ | - | ||||||||||
| Real estate | 52,023 | - | - | 52,023 | - | |||||||||||||||
| Commercial and industrial | 8,648 | 145 | 115 | 8,908 | 115 | |||||||||||||||
| Residential real estate and consumer | ||||||||||||||||||||
| 1-4 family owner-occupied | 48,329 | 1,826 | 352 | 50,507 | 1,223 | |||||||||||||||
| 1-4 family investor-owned | 33,385 | 160 | 237 | 33,782 | 237 | |||||||||||||||
| Multifamily | 34,444 | - | - | 34,444 | - | |||||||||||||||
| Consumer | 1,769 | - | - | 1,769 | - | |||||||||||||||
| Total | $ | 180,451 | $ | 2,131 | $ | 704 | $ | 183,286 | $ | 1,575 | ||||||||||
Loan aging information as of December 31, 2016, follows:
| December 31, 2016 | Loans Past Due | Loans Past Due | Nonaccrual | |||||||||||||||||
| Current Loans | 30-89 Days | 90+ Days | Total Loans | Loans | ||||||||||||||||
| Commercial | ||||||||||||||||||||
| Development | $ | 2,526 | $ | - | $ | - | $ | 2,526 | $ | - | ||||||||||
| Real estate | 42,276 | - | - | 42,276 | - | |||||||||||||||
| Commercial and industrial | 7,563 | 54 | - | 7,617 | 126 | |||||||||||||||
| Residential real estate and consumer | ||||||||||||||||||||
| 1-4 family owner-occupied | 48,134 | 1,743 | 407 | 50,284 | 1,698 | |||||||||||||||
| 1-4 family investor-owned | 33,896 | 170 | 567 | 34,633 | 827 | |||||||||||||||
| Multifamily | 31,905 | - | - | 31,905 | 248 | |||||||||||||||
| Consumer | 1,580 | 2 | - | 1,582 | - | |||||||||||||||
| Total | $ | 167,880 | $ | 1,969 | $ | 974 | $ | 170,823 | $ | 2,899 | ||||||||||
There were no loans past due ninety days or more and still accruing interest as of September 30, 2017 and December 31, 2016.
When, for economic or legal reasons related to the borrower’s financial difficulties, the Bank grants a concession to the borrower that the Bank would not otherwise consider, the modified loan is classified as a troubled debt restructuring. Loan modifications may consist of forgiveness of interest and/or principal, a reduction of the interest rate, interest-only payments for a period of time, and/or extending amortization terms. During the nine months ended and as of September 30, 2017, there was new troubled debt restructurings totaling $88 on two one-to-four family residential real estate loans that had balances totaling $88 pre-modification.
Three troubled debt restructurings totaling $419 defaulted within
12 months of their modification date during the nine months ended September 30, 2017 consisting of 1-4 family investor-owned properties.
| 16 |
Note 5 – Regulatory Capital Ratios
The Bank is subject to various regulatory capital requirements administered by 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 assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1, and Total capital to risk-weighted assets and of Tier 1 capital to average assets. It is management's opinion, as of December 31, 2016 and as of September 30, 2017, that the Bank meets all applicable capital adequacy requirements.
As of September 30, 2017, and December 31, 2016, the Bank is categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum regulatory capital ratios as set forth in the table. There are no conditions or events since September 30, 2017 that management believes have changed the Bank's category.
The Bank's actual capital amounts and ratios are presented in the following tables:
| To Be Well Capitalized | ||||||||||||||||||||||||
| For Capital Adequacy | Under Prompt | |||||||||||||||||||||||
| Actual | Purposes | Corrective Action Provisions | ||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| September 30, 2017 | ||||||||||||||||||||||||
| Common Equity Tier 1 capital (to risk-weighted assets) | $ | 34,268 | 18.52 | % | $ | > 8,326 | > 4.50 | % | $ | > 12,027 | > 6.50 | % | ||||||||||||
| Tier 1 capital (to risk-weighted assets) | 34,268 | 18.52 | % | >11,102 | > 6.00 | > 14,802 | > 8.00 | |||||||||||||||||
| Total capital (to risk-weighted assets) | 35,851 | 19.38 | % | >14,802 | > 8.00 | > 18,503 | > 10.00 | |||||||||||||||||
| Tier 1 capital (to average assets) | 34,268 | 14.28 | % | > 9,596 | > 4.00 | > 11,995 | > 5.00 | |||||||||||||||||
| December 31, 2016 | ||||||||||||||||||||||||
| Common Equity Tier 1 capital (to risk-weighted assets) | $ | 34,052 | 20.87 | % | $ | > 7,344 | > 4.50 | % | $ | > 10,608 | > 6.50 | % | ||||||||||||
| Tier 1 capital (to risk-weighted assets) | 34,052 | 20.87 | % | > 9,792 | > 6.00 | > 13,056 | > 8.00 | |||||||||||||||||
| Total capital (to risk-weighted assets) | 35,530 | 21.77 | % | >13,056 | > 8.00 | > 16,320 | > 10.00 | |||||||||||||||||
| Tier 1 capital (to average assets) | 34,052 | 13.93 | % | > 9,778 | > 4.00 | > 12,222 | > 5.00 | |||||||||||||||||
Note 6 – Fair Value Measurements
Accounting standards describe three levels of inputs that may be used to measure fair value (the fair value hierarchy). The level of an asset or liability within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement of that asset or liability.
Following is a brief description of each level of the fair value hierarchy:
Level 1 - Fair value measurement is based on quoted prices for identical assets or liabilities in active markets.
Level 2 - Fair value measurement is based on: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; or (3) valuation models and methodologies for which all significant assumptions are or can be corroborated by observable market data.
Level 3 - Fair value measurement is based on valuation models and methodologies that incorporate at least one significant assumption that cannot be corroborated by observable market data. Level 3 measurements reflect the Bank’s estimates about assumptions market participants would use in measuring fair value of the asset or liability.
| 17 |
Some assets and liabilities, such as available for sale securities, are measured at fair value on a recurring basis under accounting principles generally accepted in the United States. Other assets and liabilities, such as impaired loans, may be measured at fair value on a nonrecurring basis.
Following is a description of the valuation methodology used for each asset measured at fair value on a recurring or nonrecurring basis, as well as the classification of the asset within the fair value hierarchy.
Available for sale securities – Available for sale securities may be classified as Level 1 or Level 2 measurements within the fair value hierarchy. Level 1 securities include equity securities traded on a national exchange. The fair value measurement of a Level 1 security is based on the quoted price of the security. Level 2 securities include U.S. government and agency securities, obligations of states and political subdivisions, corporate debt securities, and mortgage-related securities. The fair value measurement of a Level 2 security is obtained from an independent pricing service and is based on recent sales of similar securities and other observable market data.
Information regarding the fair value of assets measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 follows:
| Recurring Fair Value Measurements Using | ||||||||||||||||
| Assets Measured at | Quoted Prices in Active Markets for Identical Instruments | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
| Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| September 30, 2017 | ||||||||||||||||
| Assets - Available for sale securities | 43,371 | - | 43,371 | - | ||||||||||||
| December 31, 2016 | ||||||||||||||||
| Assets - Available for sale securities | 48,613 | - | 48,613 | - | ||||||||||||
Loans - Loans are not measured at fair value on a recurring basis. However, loans considered to be impaired may be measured at fair value on a nonrecurring basis. The fair value measurement of an impaired loan that is collateral dependent is based on the fair value of the underlying collateral. Independent appraisals are obtained that utilize one or more valuation methodologies - typically they will incorporate a comparable sales approach and an income approach. Management routinely evaluates the fair value measurements of independent appraisers and adjusts those valuations based on differences noted between actual selling prices of collateral and the most recent appraised value. Such adjustments are usually significant, which results in a Level 3 classification. All other impaired loan measurements are based on the present value of expected future cash flows discounted at the applicable effective interest rate and, thus, are not fair value measurements.
Foreclosed Assets – Real estate acquired through or in lieu of loan foreclosure are not measured at fair value on a recurring basis. However, foreclosed assets are initially measured at fair value (less estimated costs to sell) when they are acquired and may also be measured at fair value (less estimated costs to sell) if they become subsequently impaired. The fair value measurement for each asset may be obtained from an independent appraiser or prepared internally. Fair value measurements obtained from independent appraisers generally utilize a market approach based on sales of comparable assets and/or an income approach. Such measurements are usually considered Level 2 measurements. However, management routinely evaluates fair value measurements of independent appraisers by comparing actual selling prices to the most recent appraisals. If management determines significant adjustments should be made to the independent appraisals based on these evaluations, these measurements are considered Level 3 measurements. Fair value measurements prepared internally are based on management’s comparisons to sales of comparable assets, but include significant unobservable data and are therefore considered Level 3 measurements.
| 18 |
Information regarding the fair value of assets measured at fair value on a nonrecurring basis as of September 30, 2017 and December 31, 2016 follows:
| Nonrecurring Fair Value Measurements Using | ||||||||||||||||
| Assets Measured at | Quoted Prices in Active Markets for Identical Instruments | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
| Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| As of December 31, 2016 | ||||||||||||||||
| Assets | ||||||||||||||||
| Foreclosed assets | 667 | - | - | 667 | ||||||||||||
Foreclosed assets with a carrying amount of $667 were determined to be at their fair value as of December 31, 2016.
The Bank estimates fair value of all financial instruments regardless of whether such instruments are measured at fair value. The following methods and assumptions were used by the Company to estimate fair value of financial instruments not previously discussed.
Cash and cash equivalents - Fair value approximates the carrying value.
Loans held for sale - Fair value is based on commitments on hand from investors or prevailing market prices.
Loans - Fair value of variable rate loans that reprice frequently is based on carrying values. Fair value of other loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings. Fair value of impaired and other nonperforming loans is estimated using discounted expected future cash flows or the fair value of underlying collateral, if applicable.
FHLB stock - Fair value is the redeemable (carrying) value based on the redemption provisions of the Federal Home Loan Bank.
Accrued interest receivable and payable - Fair value approximates the carrying value.
Cash value of life insurance - Fair value is based on reported values of the assets.
Deposits and advance payments by borrowers for taxes and insurance - Fair value of deposits with no stated maturity, such as demand deposits, savings, and money market accounts, including advance payments by borrowers for taxes and insurance, by definition, is the amount payable on demand on the reporting date. Fair value of fixed rate time deposits is estimated using discounted cash flows applying interest rates currently being offered on similar time deposits.
FHLB advances - Fair value of fixed rate, fixed term borrowings is estimated by discounting future cash flows using the current rates at which similar borrowings would be made. Fair value of borrowings with variable rates or maturing within 90 days approximates the carrying value of these borrowings.
Off-balance-sheet instruments - Fair value is based on quoted market prices of similar financial instruments where available. If a quoted market price is not available, fair value is based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the counterparty’s credit standing. Since the estimated fair value of off-balance-sheet instruments is not material, no amounts are presented in the following schedule.
| 19 |
The carrying value and estimated fair value of financial instruments at September 30, 2017 and December 31, 2016 follow:
| September 30, 2017 | ||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Financial assets: | ||||||||||||||||
| Cash and cash equivalents | 32,179 | 32,179 | ||||||||||||||
| Available for sale securities | 43,371 | 43,371 | ||||||||||||||
| Loans held for sale | 72 | 72 | ||||||||||||||
| Loans | 177,392 | 178,551 | ||||||||||||||
| Accrued interest receivable | 770 | 770 | ||||||||||||||
| Cash value of life insurance | 6,511 | 6,511 | ||||||||||||||
| FHLB stock | 614 | 614 | ||||||||||||||
| Financial liabilities: | ||||||||||||||||
| Deposits | 213,098 | 137,507 | 75,140 | |||||||||||||
| Advance payments by borrowers for taxes and insurance | 1,187 | 1,187 | ||||||||||||||
| FHLB advances | 19,757 | 19,700 | ||||||||||||||
| Accrued interest payable | 478 | 478 | ||||||||||||||
| December 31, 2016 | ||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Financial assets: | ||||||||||||||||
| Cash and cash equivalents | 6,912 | 6,912 | ||||||||||||||
| Available for sale securities | 48,614 | 48,614 | ||||||||||||||
| Loans held for sale | 592 | 592 | ||||||||||||||
| Loans | 166,974 | 167,628 | ||||||||||||||
| Accrued interest receivable | 760 | 760 | ||||||||||||||
| Cash value of life insurance | 6,352 | 6,352 | ||||||||||||||
| FHLB stock | 1,347 | 1,347 | ||||||||||||||
| Financial liabilities: | ||||||||||||||||
| Deposits | 184,639 | 100,142 | 83,907 | |||||||||||||
| Advance payments by borrowers for taxes and insurance | 33 | 33 | ||||||||||||||
| FHLB advances | 21,277 | 21,139 | ||||||||||||||
| Accrued interest payable | 29 | 29 | ||||||||||||||
Limitations – The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based on quoted market prices. However, in many instances, there are no quoted market prices for the Bank’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value of other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Bank.
| 20 |
Note 7 – Subsequent Events
On June 14, 2017, the Board of Directors of the Bank adopted a Plan of Reorganization from a Mutual Savings Bank to a Mutual Holding Company and Stock Issuance Plan (the “Plan”). The Plan was subject to the approval of the Board of Governors of the Federal Reserve System and the affirmative vote of a majority of the total votes eligible to be cast by the voting members of the Bank at a special meeting. Pursuant to the Plan, on October 10, 2017 the Bank converted to a stock savings bank and is now organized in the mutual holding company structure. The Bank issued all of its outstanding stock to a new holding company, FFBW, Inc., which sold 2,950,625 shares of common stock to the public at $10.00 per share, and contributed an additional 25,000 shares to FFBW Community Foundation, representing 45% of its outstanding shares of common stock. This amount included shares purchased by the Bank’s employee stock ownership plan (“ESOP”), which purchased 3.92% of the common stock of the new holding company outstanding upon the completion of the reorganization and stock issuance. FFBW, Inc. is organized as a corporation under the laws of the United States. FFBW, MHC has been organized as a mutual holding company under the laws of the United States and owns 55% of the outstanding common stock of FFBW, Inc.
The cost of the reorganization and the issuing of the common stock were deferred and deducted from the sales proceeds of the offering. As of September 30, 2017, reorganization costs of $573,000 had been recognized.
On October 13, 2017, the Bank sold and leased back two of its office buildings. The Bay View building was sold for $700,000, resulting in a net loss of approximately $8,000. The Racine Avenue building was sold for $1.2 million, resulting in a gain of approximately $59,000. In conjunction with the sales, the Bank entered into ten-year leases, with annual rent of $49,200 and $87,600 for Bay View and Racine Avenue, respectively.
Management has reviewed operations for potential disclosure of information or financial statement impacts related to events occurring after September 30, 2017 and through the date of November 7, 2017. Based on the results of this review, no additional subsequent events disclosures or financial statement impacts to the recently completed quarter are required as of the release date.
| 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 nine months ended September 30, 2017 and 2016 is intended to assist in understanding the financial condition and results of operations of the Bank. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:
| · | statements of our goals, intentions and expectations; |
| · | statements regarding our business plans, prospects, growth and operating strategies; |
| · | statements regarding the quality of our loan and investment portfolios; and |
| · | estimates of our risks and future costs and benefits. |
These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
| 21 |
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
| · | general economic conditions, either nationally or in our market areas, that are worse than expected; |
| · | changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; |
| · | our ability to access cost-effective funding; |
| · | fluctuations in real estate values and both residential and commercial real estate market conditions; |
| · | demand for loans and deposits in our market area; |
| · | our ability to implement and change our business strategies; |
| · | competition among depository and other financial institutions; |
| · | inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; |
| · | adverse changes in the securities or secondary mortgage markets; |
| · | changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III; |
| · | the impact of the Dodd-Frank Act and the implementing regulations; |
| · | changes in the quality or composition of our loan or investment portfolios; |
| · | technological changes that may be more difficult or expensive than expected; |
| · | the inability of third-party providers to perform as expected; |
| · | our ability to manage market risk, credit risk and operational risk in the current economic environment; |
| · | our ability to enter new markets successfully and capitalize on growth opportunities; |
| · | our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto; |
| · | changes in consumer spending, borrowing and savings habits; |
| · | changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; |
| · | our ability to retain key employees; |
| · | our compensation expense associated with equity allocated or awarded to our employees; and |
| 22 |
| · | changes in the financial condition, results of operations or future prospects of issuers of securities that we own. |
Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.
Critical Accounting Policies
There are no material changes to the critical accounting policies disclosed in the Company’s Prospectus dated August 14, 2017, as filed with the Securities and Exchange Commission pursuant to Securities Act Rule 424(b)(3) on August 23, 2017.
Comparison of Financial Condition at September 30, 2017 and December 31, 2016
Total Assets. Total assets increased $28.7 million, or 11.9%, to $270.3 million at September 30, 2017 from $241.6 million at December 31, 2016. The increase resulted primarily from subscription funds received in the stock offering of $29.0 million.
Cash and due from banks. Cash and due from banks decreased $4.8 million, or 70.0%, to $2.1 million at September 30, 2017 from $6.9 million at December 31, 2016. The decrease resulted primarily from moving the excess liquidity into a Fed Funds account.
Fed funds sold. Fed funds sold increased $30.1 million at September 30, 2017, primarily as a result of the subscriptions received in the stock offering.
Net Loans. Net loans increased $10.4 million, or 6.2%, to $177.4 million at September 30, 2017 from $167.0 million at December 31, 2016. The increase resulted from increases in commercial real estate loans of $9.7 million, or 23.1%, and multifamily loans of $2.5 million, or 8.0%.
During the quarter ended September 30, 2017, we sold $4.3 million of one- to four family owner-occupied residential real estate loans, on a servicing-released basis. Subject to market and economic conditions, management intends to continue this sales activity in future periods to generate gain on sale of loans income.
Available for sale securities. Available for sale securities decreased $5.2 million, or 10.8%, to $43.4 million at September 30, 2017 from $48.6 million at December 31, 2016. This was a result of normal portfolio calls and maturities.
FHLB stock. The FHLB repurchased $733,000 of its stock during the first nine months of 2017, reducing the balance 54.4% from $1.3 million to $614,000.
Deposits. Deposits increased $28.5 million, or 15.4%, to $213.1 million at September 30, 2017 from $184.6 million at December 31, 2016. Noninterest-bearing checking accounts increased $37.2 million, or 293.3%, to $49.9 million as of September 30, 2017 compared to $12.7 million as of December 31, 2016, primarily due to the subscription funds received for the stock offering. Interest-bearing checking accounts decreased $4.6 million, or 58.5%, to $3.3 million at September 30, 2017 from $7.9 million at December 31, 2016. Additionally, money market accounts decreased $1.0 million, or 1.6%, to $57.5 million at September 30, 2017, compared to $58.5 million at December 31, 2016, while savings accounts increased $5.8 million to $15.4 million at September 30, 2017, compared to $9.6 million at December 31, 2016. Certificates of deposit decreased $8.9 million, or 10.5% from $84.5 million as of December 31, 2016 to $75.6 million as of September 30, 2017. Health savings accounts remained consistent at $11.4 million.
Borrowings. Borrowings, consisting entirely of FHLB advances, totaled $19.8 million at September 30, 2017 compared to $21.3 million at December 31, 2016. The aggregate cost of outstanding advances from the FHLB was 1.72% at September 30, 2017, compared to the Bank’s cost of deposits of 0.72% at that date.
Other liabilities. Other liabilities decreased $183,000, or 11.6%, to $1.4 million at September 30, 2017 from $1.6 million at December 31, 2016.
| 23 |
Total Equity. Total equity increased $380,000, 1.1%, to $34.4 million at September 30, 2017 from $34.0 million at December 31, 2016. The increase resulted from net income of $231,000 for the nine months ended September 30, 2017 and the net change in the value of the available for sale securities during the period.
Comparison of Operating Results for the Three Months Ended September 30, 2017 and September 30, 2016
General. We had net income of $39,000 for the three months ended September 30, 2017, compared to a net loss of $18,000 for the three months ended September 30, 2016, an improvement of $57,000, or 316.7%. The increase in net income was the net effect of an increase in net interest income of $65,000, or 3.7%, and a decrease of $261,000, or 80.6%, in provision for loan losses, offset in part by an increase of $159,000, or 8.7%, in noninterest expense and a decrease of $83,000, or 26.3% in noninterest income.
Interest and dividend income. Interest and dividend income increased $57,000, or 2.6%, to $2.3 million for the three months ended September 30, 2017 from $2.2 million for the three months ended September 30, 2016. The increase was primarily attributable to a $61,000 increase in interest on loans resulting from an increase of $1.8 million in the average balance of loans quarter to quarter, partially offset by a $13,000 decrease in interest on available for sale securities, due to a decrease in the average balance of available for sale securities of $2.6 million period to period.
Interest Expense. Interest expense decreased $8,000, or 1.9%, to $414,000 for the three months ended September 30, 2017, from $422,000 for the three months ended September 30, 2016. Interest expense on borrowings, consisting entirely of FHLB advances, decreased $5,000, or 7.1%, to $65,000 during the three months ended September 30, 2017 from $70,000 during the three months ended September 30, 2016, as the average balance of borrowings decreased $4.8 million to $18.3 million for the 2017 quarter from $23.0 million for the 2016 quarter, although the cost of borrowings increased twenty basis points to 1.42% for the quarter ended September 30, 2017 from 1.22% for the quarter ended September 30, 2016. Interest expense on interest-bearing deposits decreased $3,000 quarter to quarter. The average cost of our interest-bearing deposits increased five basis points to 0.85% from 0.80% while the average balance of interest-bearing deposits decreased by $11.3 million, or 6.5%, during the same period.
Net Interest Income. Net interest income increased $65,000, or 3.7%, to $1.8 million for the three months ended September 30, 2017 from $1.8 million for the three months ended September 30, 2016. Average net interest-earning assets increased $14.5 million to $37.1 million for the 2017 quarter from $22.6 million for the 2016 quarter. The increase was due primarily to the increase in loans and the movement of deposits from interest-earning to noninterest-bearing accounts. Our net interest rate spread increased to 3.20% for the three months ended September 30, 2017 from 3.13% for the three months ended September 30, 2016, and our net interest margin increased to 3.36% for the 2017 quarter from 3.21% for the 2016 quarter.
Provision for Loan Losses. We recorded a provision for loan losses of $63,000 for the three months ended September 30, 2017, compared to a $324,000 provision for the three months ended September 30, 2016. The decrease in the provision for loan losses in the 2017 quarter compared to the 2016 quarter was the result of fewer charge-offs in the current quarter due to a more current, higher rated loan portfolio. The allowance for loan losses was $1.6 million, or 0.86% of total loans, at September 30, 2017, compared to $1.6 million, or 0.94% of total loans, at September 30, 2016. Classified (substandard, doubtful and loss) loans decreased to $352,000 at September 30, 2017 from $3.6 million at September 30, 2016. Total nonperforming loans decreased to $1.6 million at September 30, 2017 from $3.2 million at September 30, 2016. Net charge-offs for the three months ended September 30, 2017 were $0, compared to $250,000 for the prior year period. At September 30, 2017, $0.9 million, or 55.3%, of the nonperforming loans were contractually current.
Noninterest Income. Noninterest income decreased $83,000, or 26.3%, to $232,000 for the three months ended September 30, 2017 from $315,000 for the three months ended September 30, 2016. The decrease resulted primarily from the prior year gain on sale of securities of $123,000, offset in part by the increase in service charges and fees of $20,000 as well as other income of $21,000 consisting of rental income from our Brookfield branch office.
| 24 |
Noninterest Expense. Noninterest expense increased $159,000, or 8.7%, to $2.0 million for the three months ended September 30, 2017 from $1.8 million for the three months ended September 30, 2016. The increase was due to the donation of our former Waukesha branch building in the amount of $283,000, offset in part by a decrease in salaries and employee benefits of $103,000, or 9.8% for the three months ended September 30, 2017 compared to September 30, 2016 as well as a reduction in data processing expenses of $40,000. Professional fees increased $37,000, or 49.3%, due in large part to outsourced consulting assistance to improve information technology infrastructure.
Income Tax Expense. We recorded an income tax credit of $25,000 for the three months ended September 30, 2017 compared to an income tax credit of $52,000 for the three months ended September 30, 2016, an increase of $27,000, or 51.9%. The increase reflected an increase of $84,000 in income before income taxes to $14,000 for the 2017 quarter from the loss of $70,000 for the 2016 quarter.
Comparison of Operating Results for the Nine Months Ended September 30, 2017 and 2016
General. We had net income of $231,000 for the nine months ended September 30, 2017, compared to net income of $439,000 for the nine months ended September 30, 2016, a decrease of $207,000, or 47.3%. The decrease in net income was the net effect of a decrease in net interest income of $135,000, or 2.5%, and an increase of $335,000 in noninterest expense, offset in part by a decrease of $191,000, or 53.5%, in provision for loan losses.
Interest and dividend income. Interest and dividend income decreased $192,000, or 2.8%, to $6.6 million for the nine months ended September 30, 2017 from $6.7 million for the nine months ended September 30, 2016. The decrease was primarily attributable to a $125,000 decrease in interest on loans resulting from a decrease of $4.2 million in the average balance of loans period to period, as well as a $72,000 decrease in interest on available for sale securities, due to a decrease in the average balance of available for sale securities of $2.2 million period to period.
Interest Expense. Interest expense decreased $57,000, or 4.6%, to $1.1 million for the nine months ended September 30, 2017, from $1.2 million for the nine months ended September 30, 2016. Interest expense on borrowings, consisting entirely of FHLB advances, decreased $28,000, or 13.3%, to $183,000 during the nine months ended September 30, 2017 from $211,000 during the nine months ended September 30, 2016, as the average balance of borrowings decreased $5.1 million to $18.7 million for the 2017 period from $23.8 million for the 2016 period, although the cost of borrowings increased thirteen basis points to 1.31% for the 2017 period from 1.18% for the 2016 period. Interest expense on interest-bearing deposits decreased $29,000 period to period. The average cost of our interest-bearing deposits increased three basis points to 0.86% from 0.83%, while the average balance of interest-bearing deposits decreased by $10.5 million, or 6.0%, during the same period.
Net Interest Income. Net interest income decreased $135,000, or 2.5%, to $5.4 million for the nine months ended September 30, 2017 from $5.5 million for the nine months ended September 30, 2016. Average net interest-earning assets increased $8.6 million to $33.3 million for the 2017 period from $24.7 million for the 2016 period. The increase was due primarily to the increase in loans and the movement of deposits from interest-earning to noninterest-bearing accounts. Our net interest rate spread decreased to 3.18% for the nine months ended September 30, 2017 from 3.20% for the nine months ended September 30, 2016, and our net interest margin increased to 3.31% for the 2017 period from 3.29% for the 2016 period.
Provision for Loan Losses. We recorded a provision for loan losses of $166,000 for the nine months ended September 30, 2017, compared to a $357,000 provision for the nine months ended September 30, 2016. The decrease in the provision for loan losses in the 2017 period compared to the 2016 period was the result of fewer charge-offs in the current quarter due to a more current and higher rated loan portfolio. The allowance for loan losses was $1.6 million, or 0.86% of total loans, at September 30, 2017, compared to $1.6 million, or 0.94% of total loans, at September 30, 2016. Classified (substandard, doubtful and loss) loans decreased to $352,000 at September 30, 2017 from $3.6 million at September 30, 2016. Total nonperforming loans decreased to $1.6 million at September 30, 2017 from $3.2 million at September 30, 2016. Net charge-offs for the nine months ended September 30, 2017 were $97,000 compared to $287,000 for the prior year period. At September 30, 2017, $0.9 million, or 55.3%, of the nonperforming loans were contractually current.
| 25 |
Noninterest Income. Noninterest income increased $7,000, or 1.1%, to $627,000 for the nine months ended September 30, 2017 from $620,000 for the nine months ended September 30, 2016. The increase was due to an increase in service charges and other fees of $29,000, net gains on sale of loans of $47,000, other noninterest income of $36,000, offset in part by the decreased gain on sale of securities of $109,000.
Noninterest Expense. Noninterest expense increased $335,000, or 6.4%, to $5.6 million for the nine months ended September 30, 2017 from $5.3 million for the nine months ended September 30, 2016. The increase was due primarily to an increase of $60,000, or 7.9%, in occupancy and equipment, to $815,000 for the nine months ended September 30, 2017 from $755,000 for the nine months ended September 30, 2016. The increase was due to increased building maintenance. Professional services increased $80,000 during the 2017 period as a result of consulting expenses incurred to enhance information security. Additionally, the Bank donated the former downtown Waukesha branch, resulting in an expense of $283,000 included in other noninterest expense. These increases were offset in part by a decrease of $84,000, or 15.8%, in data processing expense, resulting from the renegotiated contract with the core processor.
Upon consummation of the reorganization and stock offering, we expect non-interest expense to increase because of costs associated with operating as a public company and increased compensation costs related to possible implementation of a stock-based benefit plan, if approved by our stockholders.
Income Tax Expense. We recorded an income tax credit of $2,000 for the nine months ended September 30, 2017 compared to an income tax expense of $63,000 for the nine months ended September 30, 2016, a decrease of $65,000 or 103.2%. The decrease was the result of a decrease of $272,000 in income before income taxes to $229,000 for the 2017 period from $501,000 for the 2016 period.
Liquidity and Capital Resources. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB-Chicago. At September 30, 2017, we had $19.8 million outstanding in advances from the FHLB-Chicago. At September 30, 2017, due to the FHLB-Chicago’s repurchase of its stock, we had no available additional FHLB-Chicago advances.
Additionally, at September 30, 2017 we had a $7.0 million federal funds rate line of credit with the Bankers’ Bank of Wisconsin, of which $0 was drawn at September 30, 2017.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents and available for sale investment securities. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $1.0 million and $138,000 for the nine months ended September 30, 2017 and 2016, respectively. Net cash provided (used) by investing activities, which consists primarily of disbursements for loan originations and the purchase of investment securities, offset by principal collections on loans, proceeds from the sale of loans and the sale of securities and proceeds from maturing securities and pay downs on securities, was ($3.9 million) and $5.3 million for the nine months ended September 30, 2017 and 2016, respectively. Net cash provided (used) in financing activities, consisting of activity in deposit accounts and FHLB advances, was $28.1 million and ($100,000) for the nine months ended September 30, 2017 and 2016, respectively.
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 current strategy to change our mix of deposits to become less reliant on certificates of deposit, we anticipate that we will continue to allow a significant portion of higher-costing certificates of deposit to run off at maturity. We also anticipate continued use of FHLB-Chicago advances as well as continuing to utilize non-core funding sources, such as the Certificate of Depository Registry Service (CDARS), as needed, to fund future loan growth and our operations.
| 26 |
At September 30, 2017, we exceeded all of our regulatory capital requirements with a Tier 1 leverage capital of $34.3 million, or 14.3% of adjusted total assets, which is above the well-capitalized required level of $12.0 million, or 5.0%; and total risk-based capital of $35.9 million, or 19.38% of risk-weighted assets, which is above the well-capitalized required level of $18.5 million, or 10.0%. Management is not aware of any conditions or events since the most recent notification that would change our category.
| 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 Chief Executive Officer and the Chief 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 amended) as of September 30, 2017. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.
During the quarter ended September 30, 2017, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Item 1. | Legal Proceedings |
We are 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 our financial condition or results of operations.
| Item 1A. | Risk Factors |
Not applicable, as the Registrant is a smaller reporting company.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
| (a) | There were no sales of unregistered securities during the period covered by this Report. |
| (b) | Not applicable. |
| (c) | There were no issuer repurchases of securities during the period covered by this Report. |
| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information |
None.
| 27 |
| Item 6. | Exhibits |
| 3.1 | Charter of FFBW, Inc. (1) | |
| 3.2 | Bylaws of FFBW, Inc. (2) | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.0 | The following materials for the quarter ended September 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive Income, (iv) Statements of Cash Flows, and (v) Notes to Financial Statements |
| (1) | Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-218736). |
| (2) | Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-218736). |
| 28 |
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.
| FFBW, INC. | |
| Date: November 8, 2017 | /s/ Edward H. Schaefer |
| Edward H. Schaefer | |
| President and Chief Executive Officer | |
| Date: November 8, 2017 | /s/ Nikola B. Schaumberg |
| Nikola B. Schaumberg | |
| Chief Financial Officer |
| 29 |