Cincinnati Bancorp - FORM 10-Q

Attached files

file	filename
EX-32 - EXHIBIT 32 - Cincinnati Bancorp	tv493057_ex32.htm
EX-31.2 - EXHIBIT 31.2 - Cincinnati Bancorp	tv493057_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Cincinnati Bancorp	tv493057_ex31-1.htm

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 March 31, 2018

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

For the transition period from _______________ to _______________

Commission File No. 000-55529

Cincinnati Bancorp

(Exact name of registrant as specified in its charter)

Federal		47-4931771
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

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

(513) 574-3025

(Registrant’s telephone number)

N/A

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

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

YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES x NO ¨

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

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ¨		Smaller reporting company x
(Do not check if 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 Exchange Act).

YES ¨ NO x

As of May 7, 2018, 1,752,947 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding, of which 945,587 shares were owned by CF Mutual Holding Company.

Cincinnati Bancorp

Form 10-Q

Index

		Page
Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2018 (Unaudited) and December 31, 2017	1

	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2018 and 2017 (Unaudited)	2

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2018 and 2017 (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017 (Unaudited)	4

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40

Item 4.	Controls and Procedures	40

Part II. Other Information

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3.	Defaults upon Senior Securities	41

Item 4.	Mine Safety Disclosures	41

Item 5.	Other Information	41

Item 6.	Exhibits	41

	Signature Page	42

Part I. – Financial Information

Item 1.

Financial Statements

Cincinnati Bancorp

Condensed Consolidated Balance Sheets

March 31, 2018 (Unaudited) and December 31, 2017

	March 31,			December 31,
	2018			2017
		(Unaudited)

Assets
Cash and due from banks	$	1,800,731		$	2,567,495
Interest-bearing demand deposits in banks		5,531,329			4,294,461
Federal funds sold		4,412,377			3,404,868

Cash and cash equivalents		11,744,437			10,266,824

Available-for-sale securities		823,255			910,222
Loans held for sale		2,719,015			2,221,084
Loans, net of allowance for loan losses of $1,375,072 and $1,360,072, respectively		149,556,853			147,020,218
Premises and equipment, net		2,498,274			2,525,484
Federal Home Loan Bank stock		1,039,800			1,021,100
Interest receivable		355,869			448,727
Mortgage servicing rights		1,037,222			909,821
Federal Home Loan Bank lender risk account receivable		1,592,314			1,708,593
Bank-owned life insurance		3,272,666			3,254,330
Other assets		329,555			166,523

Total assets	$	174,969,260		$	170,452,926

Liabilities and Stockholders' Equity

Liabilities
Deposits
Demand	$	24,066,119		$	22,957,095
Savings		24,964,158			23,839,361
Certificates of Deposits		68,865,974			67,151,270
Total deposits		117,896,251			113,947,726

Federal Home Loan Bank advances		34,859,967			34,309,810
Advances from borrowers for taxes and insurance		1,168,955			1,480,777
Interest payable		48,517			38,626
Directors deferred compensation		452,244			440,632
Other liabilities		878,099			783,962

Total liabilities		155,304,033			151,001,533

Commitments and Contingent Liabilities

Temporary Equity
ESOP Shares subject to mandatory redemption		137,845			126,612

Stockholders' Equity
Preferred stock - authorized 1,000,000 shares, $0.01 par value, none issued		-			-
Common stock - authorized 9,000,000 shares, $0.01 par value 1,752,947 and 1,752,947 issued and outstanding at March 31, 2018 and December 31, 2017, respectively		17,192			17,192
Additional paid-in-capital		6,188,335			6,172,924
Unearned ESOP Shares		(527,943	)		(539,176	)
Retained earnings - substantially restricted		14,097,208			13,877,826
Accumulated other comprehensive loss		(247,410	)		(203,985	)

Total stockholders' equity		19,527,382			19,324,781

Total liabilities and stockholders' equity	$	174,969,260		$	170,452,926

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

Cincinnati Bancorp

Condensed Consolidated Statements of Income

Three Months Ended March 31, 2018 and 2017 (Unaudited)

	Three Months Ended March 31,
	2018		2017
	(Unaudited)

Interest and Dividend Income
Loans, including fees	$	1,557,947	$	1,348,435
Securities		3,584		44
Dividends on Federal Home Loan Bank stock and other		40,039		14,202
Total interest and dividend income		1,601,570		1,362,681

Interest Expense
Deposits		304,510		241,642
Federal Home Loan Bank advances		135,539		84,626
Total interest expense		440,049		326,268

Net Interest Income		1,161,521		1,036,413

Provision for Loan Losses		15,000		-

Net Interest Income After Provision for Loan Losses		1,146,521		1,036,413

Noninterest Income
Gain on sales of loans		339,760		295,599
Mortgage servicing fees		136,035		46,567
Other		197,582		199,706
Total noninterest income		673,377		541,872

Noninterest Expense
Salaries and employee benefits		817,889		676,952
Occupancy and equipment		131,865		98,722
Directors compensation		42,250		82,000
Data processing		150,458		138,735
Professional fees		91,430		67,172
Franchise tax		39,000		37,500
Deposit insurance premiums		12,577		2,030
Advertising		35,549		26,301
Software Licenses		22,205		19,690
Loan costs		95,937		52,918
Other		154,422		143,370
Total noninterest expense		1,593,582		1,345,390

Income Before Income Tax		226,316		232,895

Provision for Income Taxes		46,996		74,450

Net Income	$	179,320	$	158,445

Earnings per common share - basic	$	0.11	$	0.10
Earnings per common share - diluted	$	0.11	$	0.10
Weighted-average shares outstanding - basic		1,672,069		1,660,838
Weighted-average shares outstanding - diluted		1,672,069		1,660,838

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

Cincinnati Bancorp

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31, 2018 and 2017 (Unaudited)

	Three Months Ended March 31,
	2018			2017
	(Unaudited)

Net Income	$	179,320		$	158,445

Other Comprehensive Income (Loss):
Net unrealized losses on available-for-sale securities		(1,909	)		(4,430	)
Tax benefit		401			1,507
Changes in directors' retirement plan prior service costs		(2,664	)		3,535
Tax expense (benefit)		559			(1,201	)
Other comprehensive loss		(3,613	)		(589	)

Comprehensive Income	$	175,707		$	157,856

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

Cincinnati Bancorp

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2018 and 2017 (Unaudited)

	Three Months Ended March 31,
	2018			2017
	(Unaudited)

Operating Activities
Net income	$	179,320		$	158,445
Items not requiring (providing) cash:
Depreciation and amortization		33,898			34,237
Provision for loan losses		15,000			-
Amortization of premiums and discounts on securities		2,924			8,064
Amortization of deferred prepayment penalty on Federal Home Loan Bank advances		1,157			11,433
Change in deferred income taxes		(24,343	)		41,205
Gain on sale of loans		(339,760	)		(295,599	)
Proceeds from the sale of loans held for sale		12,234,610			9,617,083
Origination of loans held for sale		(12,392,781	)		(10,161,943	)
Earnings on cash surrender value of bank-owned life insurance		(18,336	)		(20,217	)
Stock based compensation expense		25,791			-
ESOP shares earned		12,086			10,671
Changes in:
Interest receivable		92,858			(12,508	)
Mortgage servicing rights		(127,401	)		(118,590	)
Federal Home Loan Bank lender risk account receivable		116,279			22,268
Other assets		(163,032	)		(147,436	)
Interest payable		9,891			1,884
Other liabilities		128,638			308,617
Net cash used in operating activities		(213,201	)		(542,386	)

Investing Activities
Proceeds from maturities of available-for-sale securities		82,134			216,051
Purchase of Federal Home Loan Bank stock		(18,700	)		-
Net change in loans		(2,551,635	)		1,840,117
Purchase of premises and equipment		(6,688	)		(27,071	)
Net cash (used in) provided by investing activities		(2,494,889	)		2,029,097

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

Cincinnati Bancorp

Condensed Consolidated Statements of Cash Flows (Continued)

Three Months Ended March 31, 2018 and 2017 (Unaudited)

	Three Months Ended March 31,
	2018			2017
	(Unaudited)

Financing Activities
Net increase in deposits		3,948,525			943,045
Proceeds from Federal Home Loan Bank advances		32,127,000			18,520,000
Repayment of Federal Home Loan Bank advances		(31,578,000	)		(20,970,000	)
Net decrease in advances from borrowers for taxes and insurance		(311,822	)		(452,166	)
Net cash provided by (used in) financing activities		4,185,703			(1,959,121	)

Increase (Decrease) in Cash and Cash Equivalents		1,477,613			(472,410	)
Cash and Cash Equivalents, Beginning of Period		10,266,824			11,128,155
Cash and Cash Equivalents, End of Period	$	11,744,437		$	10,655,745

Supplemental Cash Flows Information
Interest paid	$	430,158		$	324,384
Real estate acquired in settlement of loans		-			37,950

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

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1:

Nature of Operations and Summary of Significant Account Policies

Nature of Operations

Cincinnati Bancorp (“Company”) is the mid-tier holding company for Cincinnati Federal (the “Bank”), a federally chartered stock savings and loan association that is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in Hamilton County, Ohio and surrounding areas. On October 14, 2015, the Bank reorganized into the mutual holding company structure. As part of the reorganization, the Company sold 773,663 shares of common stock at a price of $10.00 per share in a public offering and issued 945,587 shares of common stock to CF Mutual Holding Company, the Company’s parent mutual holding company. The Company is subject to competition from other financial institutions. The Company is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

Principles of Consolidation

The accompanying condensed consolidated financial statements as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017 include the accounts of Cincinnati Bancorp and the Bank. All significant intercompany items have been eliminated.

Interim Financial Statements

The interim financial statements as of March 31, 2018, and for the three months ended March 31, 2018 and 2017 are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments contained in the interim financial statements. The results of operations for the three months ended March 31, 2018, are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 2018, or any other period.

Use of Estimates

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

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

NOTE 2:

Securities

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

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Available-for-Sale Securities:

March 31, 2018 (Unaudited):
Mortgage-backed securities of government sponsored entities	$	824,103	$	4,210	$	(5,058	)	$	823,255

December 31, 2017:
Mortgage-backed securities of government sponsored entities	$	909,161	$	4,470	$	(3,409	)	$	910,222

The Company had no sales of investment securities during the three month periods ended March 31, 2018 and 2017. The Company had not pledged any of its investment securities as of March 31, 2018 or December 31, 2017.

The amortized cost and fair value of available-for-sale securities at March 31, 2018 and December 31, 2017, by contractual maturity, if applicable, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties, as is the case with mortgage-backed securities included in the following table:

	March 31, 2018				December 31, 2017
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(Unaudited)
Mortgage-backed securities of government sponsored entities	$	824,103	$	823,255	$	909,161	$	910,222

Certain investments in debt securities have fair values at an amount less than their historical cost. The total fair value of these investments at March 31, 2018 and December 31, 2017 was $700,362 and $785,539, respectively, which is approximately 85% and 86%, respectively, of the Company’s investment portfolio.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following tables show the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporary impaired, aggregated by investment class and length of time that the individual securities have been in continuous unrealized loss position at March 31, 2018 and December 31, 2017:

	Less than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

March 31, 2018 (Unaudited):
Mortgage-backed securities of government sponsored entities	$	700,362	$	(5,058	)	$	-	$	-	$	700,362	$	(5,058	)

December 31, 2017:
Mortgage-backed securities of government sponsored entities	$	785,539	$	(3,409	)	$	-	$	-	$	785,539	$	(3,409	)

NOTE 3:

Loans and Allowance for Loan Losses

Categories of loans at March 31, 2018 and December 31, 2017 include:

	March 31,			December 31,
	2018			2017
	(Unaudited)

One to four family mortgage loans -owner occupied	$	79,480,301		$	77,532,809
One to four family - investment		11,284,018			11,354,976
Multi-family mortgage loans		25,769,293			23,895,594
Nonresidential mortgage loans		18,422,859			18,138,584
Construction and land loans		4,958,853			6,173,341
Real estate secured lines of credit		11,513,183			11,713,943
Commercial loans		418,052			334,628
Other consumer loans		464,701			471,386
Total loans		152,311,260			149,615,261

Less:
Net deferred loan costs		(477,528	)		(479,795	)
Undisbursed portion of loans		1,856,863			1,714,766
Allowance for loan losses		1,375,072			1,360,072

Net loans	$	149,556,853		$	147,020,218

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following tables present the activity in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method for the three months ended March 31, 2018 and 2017 and year ended December 31, 2017:

	Three Months Ended March 31, 2018 (Unaudited)
	One- to Four- Family Mortgage Loans Owner Occupied		One- to Four- Family Mortgage Loans Investment			Multi-Family Mortgage Loans		Nonresidential Mortgage Loans		Construction & Land Loans			Real Estate Secured Lines of Credit			Commercial Loans		Other Consumer Loans		Total

Allowance for loan losses:
Balance, beginning of period	$	338,697	$	171,674		$	240,896	$	196,811	$	82,669		$	312,638		$	6,934	$	9,753	$	1,360,072
Provision (credit) charged to expense		50,697		(57,722	)		29,569		11,196		(16,220	)		(4,505	)		1,915		70		15,000
Losses charged off		-		-			-		-		-			-			-		-		-
Recoveries		-		-			-		-		-			-			-		-		-
Balance, end of period	$	389,394	$	113,952		$	270,465	$	208,007	$	66,449		$	308,133		$	8,849	$	9,823	$	1,375,072

Ending balance:
Individually evaluated for impairment	$	-	$	42,396		$	9,055	$	-	$	-		$	-		$	-	$	-	$	51,451

Ending balance:
Collectively evaluated for impairment	$	389,394	$	71,556		$	261,410	$	208,007	$	66,449		$	308,133		$	8,849	$	9,823	$	1,323,621
Loans:
Ending balance	$	79,480,301	$	11,284,018		$	25,769,293	$	18,422,859	$	4,958,853		$	11,513,183		$	418,052	$	464,701	$	152,311,260

Ending balance:
Individually evaluated for impairment	$	743,610	$	1,049,876		$	630,486	$	175,840	$	-		$	38,619		$	-	$	-	$	2,638,431

Ending balance:
Collectively evaluated for impairment	$	78,736,691	$	10,234,142		$	25,138,807	$	18,247,019	$	4,958,853		$	11,474,564		$	418,052	$	464,701	$	149,672,829

	Three Months Ended March 31, 2017 (Unaudited)
	One- to Four- Family Mortgage Loans Owner Occupied		One- to Four- Family Mortgage Loans Investment		Multi-Family Mortgage Loans		Nonresidential Mortgage Loans			Construction & Land Loans			Real Estate Secured Lines of Credit			Commercial Loans			Other Consumer Loans			Total

Allowance for loan losses:
Balance, beginning of period	$	413,194	$	129,628	$	175,295	$	167,431		$	64,297		$	364,191		$	11,916		$	312		$	1,326,264
Provision (credit) charged to expense		45,798		13,278		23,747		(28,215	)		(3,988	)		(49,303	)		(1,241	)		(76	)		-
Losses charged off		-		-		-		-			-			-			-			-			-
Recoveries		-		-		-		-			-			-			-			-			-
Balance, end of period	$	458,992	$	142,906	$	199,042	$	139,216		$	60,309		$	314,888		$	10,675		$	236		$	1,326,264

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

	Year Ended December 31, 2017
	One- to Four- Family Mortgage Loans Owner Occupied			One- to Four- Family Mortgage Loans Investment		Multi-Family Mortgage Loans		Nonresidential Mortgage Loans		Construction & Land Loans		Real Estate Secured Lines of Credit			Commercial Loans			Other Consumer Loans		Total

Allowance for loan losses:
Balance, beginning of year	$	413,194		$	129,628	$	175,295	$	167,431	$	64,297	$	364,191		$	11,916		$	312	$	1,326,264
Provision (credit) charged to expense		(78,305	)		42,046		65,601		29,380		18,372		(51,553	)		(4,982	)		9,441		30,000
Losses charged off		-			-		-		-		-		-			-			-		-
Recoveries		3,808			-		-		-		-		-			-			-		3,808
Balance, end of year	$	338,697		$	171,674	$	240,896	$	196,811	$	82,669	$	312,638		$	6,934		$	9,753	$	1,360,072

Ending balance:
Individually evaluated for impairment	$	-		$	42,396	$	9,055	$	-	$	-	$	-		$	-		$	-	$	51,451

Ending balance:
Collectively evaluated for impairment	$	338,697		$	129,278	$	231,841	$	196,811	$	82,669	$	312,638		$	6,934		$	9,753	$	1,308,621
Loans:
Ending balance	$	77,532,809		$	11,354,976	$	23,895,594	$	18,138,584	$	6,173,341	$	11,713,943		$	334,628		$	471,386	$	149,615,261

Ending balance:
Individually evaluated for impairment	$	747,022		$	1,068,714	$	632,447	$	179,558	$	-	$	39,687		$	-		$	-	$	2,667,428

Ending balance:
Collectively evaluated for impairment	$	76,785,787		$	10,286,262	$	23,263,147	$	17,959,026	$	6,173,341	$	11,674,256		$	334,628		$	471,386	$	146,947,833

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Definitions are as follows:

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

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

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

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

Special Mention (5) loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Ordinarily, special mention credits have characteristics which corrective management action would remedy.

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

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

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

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of March 31, 2018 and December 31, 2017:

	March 31, 2018

	One- to Four- Family Mortgage Loans - Owner Occupied		One- to Four- Family Mortgage Loans - Investment		Multi-Family Mortgage Loans		Nonresidential Mortgage Loans		Construction & Land Loans		Real Estate Secured Lines of Credit		Commercial Loans		Other Consumer Loans		Total

Pass	$	79,187,901	$	9,681,206	$	25,129,752	$	17,642,820	$	4,958,853	$	10,824,812	$	418,052	$	464,701	$	148,308,097
Special mention		-		738,025		-		780,039		-		486,603		-		-		2,004,667
Substandard		292,400		864,787		639,541		-		-		201,768		-		-		1,998,496
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-

Total	$	79,480,301	$	11,284,018	$	25,769,293	$	18,422,859	$	4,958,853	$	11,513,183	$	418,052	$	464,701	$	152,311,260

	December 31, 2017

	One- to Four- Family Mortgage Loans - Owner Occupied		One- to Four- Family Mortgage Loans - Investment		Multi-Family Mortgage Loans		Nonresidential Mortgage Loans		Construction & Land Loans		Real Estate Secured Lines of Credit		Commercial Loans		Other Consumer Loans		Total

Pass	$	77,239,158	$	9,723,639	$	23,254,092	$	17,341,292	$	6,173,341	$	11,021,251	$	334,628	$	471,386	$	145,558,787
Special mention		-		384,819		-		617,734		-		489,700		-		-		1,492,253
Substandard		293,651		1,246,518		641,502		179,558		-		202,992		-		-		2,564,221
Doubtful		-		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-		-

Total	$	77,532,809	$	11,354,976	$	23,895,594	$	18,138,584	$	6,173,341	$	11,713,943	$	334,628	$	471,386	$	149,615,261

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

The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the three months ended March 31, 2018.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following tables present the loan portfolio aging analysis of the recorded investment in loans as of March 31, 2018 and December 31, 2017:

	March 31, 2018 (Unaudited)

	30-59 Past Due		60-89 Days Past Due		90 Days and Greater Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
One to Four-family mortgage loans	$	173,619	$	-	$	144,357	$	317,976	$	79,162,325	$	79,480,301	$	-
One to Four Family - Investment		-		-		-		-		11,284,018		11,284,018		-
Multi-family mortgage loans		-		-		-		-		25,769,293		25,769,293		-
Nonresidential mortgage loans		-		67,272		-		67,272		18,355,587		18,422,859		-
Construction & Land Loans		-		-		-		-		4,958,853		4,958,853		-
Real estate secured lines of credit		-		-		-		-		11,513,183		11,513,183		-
Commercial Loans		-		-		-		-		418,052		418,052		-
Other consumer loans		-		-		-		-		464,701		464,701		-

Total	$	173,619	$	67,272	$	144,357	$	385,248	$	151,926,012	$	152,311,260	$	-

	December 31, 2017

	30-59 Past Due		60-89 Days Past Due		90 Days and Greater Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
One to Four-family mortgage loans	$	92,143	$	-	$	144,357	$	236,500	$	77,296,309	$	77,532,809	$	-
One to Four Family - Investment		-		-		8,755		8,755		11,346,221		11,354,976		-
Multi-family mortgage loans		-		-		-		-		23,895,594		23,895,594		-
Nonresidential mortgage loans		-		-		-		-		18,138,584		18,138,584		-
Construction & Land Loans		-		-		-		-		6,173,341		6,173,341		-
Real estate secured lines of credit		80,000		-		-		80,000		11,633,943		11,713,943		-
Commercial Loans		-		-		-		-		334,628		334,628		-
Other consumer loans		-		-		-		-		471,386		471,386		-

Total	$	172,143	$	-	$	153,112	$	325,255	$	149,290,006	$	149,615,261	$	-

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The following tables present impaired loans at March 31, 2018, March 31, 2017 and December 31, 2017:

	March 31, 2018 (Unaudited)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
One- to four-family mortgage loans	$	743,610	$	743,610	$	-	$	745,200	$	7,014
One to Four family - Investment		559,994		559,994		-		562,777		7,300
Multi-family mortgage loans		521,303		521,303		-		522,145		7,337
Nonresidential mortgage loans		175,840		175,840		-		177,684		2,963
Construction & Land loans		-		-		-		-		-
Real estate secured lines of credit		38,619		38,619		-		39,232		497
Commercial Loans		-		-		-		-		-
Other consumer loans		-		-		-		-		-
Loans with a specific valuation allowance
One- to four-family mortgage loans		-		-		-		-		-
One to Four family - Investment		489,882		532,278		42,396		534,887		5,737
Multi-family mortgage loans		109,183		118,238		9,055		118,539		1,718
Nonresidential mortgage loans		-		-		-		-		-
Construction & Land loans		-		-		-		-		-
Real estate secured lines of credit		-		-		-		-		-
Commercial Loans		-		-		-		-		-
Other consumer loans		-		-		-		-		-

	$	2,638,431	$	2,689,882	$	51,451	$	2,700,464	$	32,566

	March 31, 2017 (Unaudited)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
One- to four-family mortgage loans	$	657,564	$	657,564	$	-	$	690,904	$	8,309
One to Four family - Investment		584,569		584,569		-		587,715		8,219
Multi-family mortgage loans		528,972		528,972		-		529,578		7,334
Nonresidential mortgage loans		190,306		190,306		-		191,933		3,055
Construction & Land loans		-		-		-		-		-
Real estate secured lines of credit		33,792		33,792		-		34,430		430
Commercial Loans		-		-		-		-		-
Other consumer loans		-		-		-		-		-
Loans with a specific valuation allowance
One- to four-family mortgage loans		-		-		-		-		-
One to Four family - Investment		612,811		659,912		47,101		662,184		7,647
Multi-family mortgage loans		111,792		120,847		9,055		121,052		1,616
Nonresidential mortgage loans		-		-		-		-		-
Construction & Land loans		-		-		-		-		-
Real estate secured lines of credit		-		-		-		-		-
Commercial Loans		-		-		-		-		-
Other consumer loans		-		-		-		-		-

	$	2,719,806	$	2,775,962	$	56,156	$	2,817,796	$	36,610

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

	December 31, 2017
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
One- to four-family mortgage loans	$	747,022	$	747,022	$	-	$	753,098	$	28,104
One to Four family - Investment		574,375		574,375		-		587,247		34,059
Multi-family mortgage loans		522,818		522,818		-		522,817		38,940
Nonresidential mortgage loans		179,558		179,558		-		186,670		12,352
Construction & Land loans		-		-		-		-		-
Real estate secured lines of credit		39,687		39,687		-		42,229		3,540
Commercial Loans		-		-		-		-		-
Other consumer loans		-		-		-		-		-
Loans with a specific valuation allowance
One- to four-family mortgage loans		-		-		-		-		-
One to Four family - Investment		494,339		536,735		42,396		546,369		25,911
Multi-family mortgage loans		109,629		118,684		9,055		120,196		8,153
Nonresidential mortgage loans		-		-		-		-		-
Construction & Land loans		-		-		-		-		-
Real estate secured lines of credit		-		-		-		-		-
Commercial Loans		-		-		-		-		-
Other consumer loans		-		-		-		-		-

	$	2,667,428	$	2,718,879	$	51,451	$	2,758,626	$	151,059

Income recognized on a cash basis was not materially different than interest income recognized on an accrual basis. The following table presents the nonaccrual loans at March 31, 2018 and December 31, 2017. This table excludes performing TDRs.

	March 31,		December 31,
	2018		2017


One- to four-family mortgage loans	$	144,357	$	144,357
One to four family - Investment		-		8,755
Multi-family mortgage loans		-		-
Nonresidential mortgage loans		-		-
Land loans		-		-
Real estate secured lines of credit		-		-
Commercial Loans		-		-
Other consumer loans		-		-

Total	$	144,357	$	153,112

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

At March 31, 2018, the Company had no loans that were modified in TDRs and impaired.

At December 31, 2017, the Company had no loans that were modified in TDRs and impaired and there were no troubled debt restructurings during the year.

There were no newly classified TDRs during the three months ended March 31, 2018.

There were no TDRs modified during the three months ended March 31, 2018 that subsequently defaulted. There was one TDR modified during the year ended December 31, 2016 that was not performing under the modified terms as of March 31, 2018. The net balance of the TDR was $14,300 as of March 31, 2018.

As of March 31, 2018, borrowers with loans designated as TDRs totaling $825,000 of residential real estate loans and $639,500 of multifamily loans, met the criteria for placement back on accrual status. This criteria is a minimum of six consecutive months of payment performance under existing or modified terms. As of March 31, 2018, the Company had no performing TDRs that did not meet the criteria for placement back on accrual status.

There were no foreclosed real estate properties at March 31, 2018 or December 31, 2017. There were three consumer mortgage loans in process of foreclosure at March 31, 2018 with a total net loan balance of $144,000.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4:

Earnings Per Common Share

Basic earnings per common share (“EPS”) excludes dilution and is calculated by dividing net income applicable to common stock by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Unallocated common shares held by the Company’s Employee Stock Ownership Plan (“the ESOP”) are shown as a reduction in stockholders’ equity and are excluded from weighted-average common shares outstanding for both basic and diluted EPS calculations until they are committed to be released. The computations for the three month periods ended March 31 are as follows:

	Three Months Ended March 31,
	2018		2017

Net Income	$	179,320	$	158,445
Less allocation of earnings to participating securities		2,845		-
Net income allocated to common shareholders		176,475		158,445

Shares outstanding for basic earnings per share:

Weighted Average shares outstanding:		1,725,989		1,719,250
Less: Average Unearned ESOP and unvested restricted stock:		53,920		58,412
		1,672,069		1,660,838

Basic earnings per common share:	$	0.11	$	0.10

Effect of dilutive securities:
Stock Options		-		-
Weighted average number of shares outstanding used in the calculation of basic earnings per common share		1,672,069		1,660,838
Diluted earnings per share:	$	0.11	$	0.10

The Company had no dilutive or potentially dilutive securities outstanding at March 31, 2018.

NOTE 5:

Regulatory Matters

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

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined) to risk-weighted assets (as defined), common equity Tier I capital (as defined) to risk-weighted assets (as defined) and of Tier I capital to average assets (as defined). Management believes that, as of March 31, 2018 and December 31, 2017, the Company met all capital adequacy requirements to which it was subject at such dates.

Effective January 1, 2015, new regulatory capital requirements commonly referred to as ‘Basel III” were implemented and are reflected below. Management opted out of the accumulated comprehensive income treatment under the new requirements, and as such unrealized gains and losses from available-for-sale securities will continue to be excluded from regulatory capital.

The below minimum capital requirements exclude the capital conservation buffer required to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. The capital conservation buffer is being phased in from 0.0% for 2015 to 2.50% by 2019. The capital conservation buffer was 1.875% at March 31, 2018 and 1.25% at December 31, 2017.

As of the most recent notification from the Office of the Comptroller of the Currency, the Bank was categorized 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, Tier I risk-based and Tier I leverage ratios as set forth in the table. Management believes that no conditions or events have occurred since the last notification that would change the Bank's category.

The Bank’s actual capital amounts and ratios are also presented in the following table:

	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 March 31, 2018
(Unaudited)

Total risk-based capital (to risk-weighted assets)	$	20,485		16.5	%	$	9,955		8.0	%	$	12,444		10.0	%

Tier I capital (to risk-weighted assets)		19,110		15.4	%		7,466		6.0	%		9,955		8.0	%

Common Equity Tier I capital (to risk-weighted assets)		19,110		15.4	%		5,600		4.5	%		8,089		6.5	%

Tier I capital (to adjusted total assets)		19,110		11.1	%		6,911		4.0	%		8,639		5.0	%

As of December 31, 2017

Total risk-based capital (to risk-weighted assets)	$	20,158		16.5	%	$	9,789		8.0	%	$	12,236		10.0	%

Tier I capital (to risk-weighted assets)		18,798		15.4	%		7,342		6.0	%		9,789		8.0	%

Common Equity Tier I capital (to risk-weighted assets)		18,798		15.4	%		5,506		4.5	%		7,953		6.5	%

Tier I capital (to adjusted total assets)		18,798		11.3	%		6,633		4.0	%		8,291		5.0	%

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 6:

Disclosure About Fair Values of Assets and Liabilities

Fair value is 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. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices 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 supported by little or no market activity and are significant to the fair value of the assets or liabilities.

Recurring Measurements

The following tables present the fair value measurements of assets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2018 and December 31, 2017:

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)

March 31, 2018
Mortgage-backed securities of government sponsored entities	$	823,255	$	-	$	823,255	$	-
Mortgage servicing rights		1,037,222		-		-		1,037,222

December 31, 2017
Mortgage-backed securities of government sponsored entities	$	910,222	$	-	$	910,222	$	-
Mortgage servicing rights		909,821		-		-		909,821

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-sale Securities

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

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

Level 2 of the valuation hierarchy. In certain cases where Level 1 and Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models having significant inputs of loan balance, weighted average coupon, weighted average maturity, escrow payments, servicing fees, prepayment speeds, float, cost to service, ancillary income, and discount rate. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

Mortgage servicing rights are tested for impairment. Management measures mortgage servicing rights through use of a third-party independent valuation. Inputs to the model are reviewed by management.

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements related to mortgage servicing rights recognized in the accompanying condensed consolidated balance sheets using significant unobservable (Level 3) inputs:

	Three Months Ended March 31,
	2018		2017
	(Unaudited)

Fair value as of the beginning of the period	$	909,821	$	730,164
Recognition of mortgage servicing rights on the sale of loans		48,927		39,453
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model		78,474		79,137

Fair value at the end of the period	$	1,037,222	$	848,754

Mortgage servicing rights are carried in the balance sheet at fair value and the changes in fair value are reported in other noninterest income in the period in which the changes occur.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

Nonrecurring Measurements

The following table presents the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fell at March 31, 2018 and December 31, 2017.

			Fair Value Measurements Using
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)

March 31, 2018
(Unaudited)

Collateral-dependent impaired loans	$	144,357	$	-	$	-	$	144,357

December 31, 2017

Collateral-dependent impaired loans	$	153,112	$	-	$	-	$	153,112

Collateral-dependent Impaired Loans, Net of Allowance for Loan Losses

The Company 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 by management. Appraisals are reviewed for accuracy and consistency by management. Appraisers are selected from the list of approved independent 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 management by comparison to historical results.

Foreclosed Assets Held for Sale

Foreclosed assets held for sale are 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 real estate is based on appraisals or evaluations. Foreclosed assets held for sale are classified within Level 3 of the fair value hierarchy.

Appraisals of real estate are obtained when the real estate is acquired and an appraisal is subsequently deemed necessary by events in the environment by the Chief Financial Officer. Appraisals are reviewed internally for accuracy and consistency in accordance with regulatory requirements. Appraisers are selected from the list of approved independent appraisers maintained by management. There were no foreclosed assets at March 31, 2018 and December 31, 2017.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at March 31, 2018 and December 31, 2017:

Fair Value at
March 31, 2018

Valuation

Technique

Unobservable Inputs

Range
(Weighted
Average)

Mortgage servicing rights

1,037,222

Discounted
cash flow

Discount rate
PSA prepayment speeds

10%
107%-228%

Impaired loans (collateral dependent)

144,357

Market comparable properties

Marketability discount

10%-15% (12%)

Fair Value at

December 31, 2017

Valuation
Technique

Unobservable Inputs

Range
(Weighted
Average)

Mortgage servicing rights

909,821

Discounted
cash flow

Discount rate
PSA prepayment speeds

10%
130%-272%

Impaired loans (collateral dependent)

153,112

Market comparable properties

Marketability discount

10%-15% (12%)

Fair Value of Financial Instruments

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

Cash and cash equivalents, Federal Home Loan Bank Stock and Interest Receivable

The carrying amount approximates fair value.

Loans Held for Sale

Fair value of loans held for sale is based on quoted market prices, where available, or is determined by discounting estimated cash flows using interest rates approximating the Company’s current origination rates for similar loans and adjusted to reflect the inherent credit risk.

Loans

The fair value of loans is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

Federal Home Loan Bank 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.

Deposits

Deposits include demand deposits and savings accounts. The fair value is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of a similar structure. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank Advances

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. Fair value of long-term debt is based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market.

If a quoted market price is not available, an expected present value technique is used to estimate fair value.

Advances from Borrowers for Taxes and Insurance and Interest Payable

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 forward sale commitments is estimated based on current market prices for loans 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 March 31, 2018 and December 31, 2017, the fair value of commitments was not material.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents estimated fair values of the Company’s financial instruments not previously presented at March 31, 2018 and December 31, 2017:

			Fair Value Measurements Using
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)

March 31, 2018
Financial Assets:
Cash and cash equivalents	$	11,744,437	$	11,744,437	$	-	$	-
Loans held for sale		2,719,015		-		2,795,818		-
Loans, net of allowance for loan losses		149,556,853		-		-		151,601,962
Federal Home Loan Bank stock		1,039,800		1,039,800		-		-
Interest receivable		355,869		-		355,869		-
Federal Home Loan Bank lender risk account receivable		1,592,314		-		-		1,635,450

Financial Liabilities:
Deposits		117,896,251		49,030,277		68,423,361		-
Federal Home Loan Bank advances		34,859,967		-		34,723,102		-
Advances from borrowers for taxes and insurance		1,168,955		-		1,168,955		-
Interest payable		48,517		-		48,517		-

December 31, 2017
Financial Assets:
Cash and cash equivalents	$	10,266,824	$	10,266,824	$	-	$	-
Loans held for sale		2,221,084		-		2,278,225		-
Loans, net of allowance for loan losses		147,020,218		-		-		149,839,913
Federal Home Loan Bank stock		1,021,000		1,021,000		-		-
Interest receivable		448,727		-		448,727		-
Federal Home Loan Bank lender risk account receivable		1,708,593		-		-		1,762,223

Financial Liabilities:
Deposits		113,947,726		46,796,456		66,965,227		-
Federal Home Loan Bank advances		34,309,810		-		34,222,713		-
Advances from borrowers for taxes and insurance		1,480,777		-		1,480,777		-
Interest payable		38,626		-		38,626		-

NOTE 7:

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.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

Forward sale commitments are commitments to sell groups of residential mortgage loans that the Company originates or purchases as part of its mortgage banking activities. The Company commits to sell the loans at specified prices in a future period. These commitments are acquired to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale since the Company is exposed to interest rate risk during the period between issuing a loan commitment and the sale of the loan into the secondary market.

The dollar amount of commitments to fund fixed rate loans at March 31, 2018 and December 31, 2017 follows:

	March 31,				December 31,
	2018				2017
	(Unaudited)
			Interest Rate				Interest Rate
	Amount		Range		Amount		Range

Commitments to fund
fixed-rate loans	$	6,269,846		4.125% - 6.125%	$	3,247,703		3.75% - 4.50%

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.

Loan commitments outstanding at March 31, 2018 and December 31, 2017 were composed of the following:

	March 31,		December 31,
	2018		2017
	(Unaudited)

Commitments to originate loans	$	8,688,466	$	6,360,251
Forward sale commitments		8,988,861		5,468,787
Lines of credit		13,871,144		12,637,670

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 8:

Accumulated Other Comprehensive Loss

The components of other comprehensive loss, net of tax, included in stockholders’ equity at March 31, 2018 and December 31, 2017 are as follows:

	March 31,			December 31,
	2018			2017
	(Unaudited)

Net unrealized gain (loss) on available for sale securities	$	(560	)	$	700

Directors' Retirement Plan		(312,925	)		(310,262	)

Tax benefit		66,075			105,577

Net of tax amount	$	(247,410	)	$	(203,985	)

NOTE 9:

Equity Incentive Plan

In May 2017, the Company’s stockholders approved the Cincinnati Bancorp 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan authorizes the issuance or delivery to participants of up to 117,940 shares of the Company’s common stock pursuant to the grants of restricted stock awards, restricted stock unit awards, incentive stock options, and non-qualified stock options. Of this number, the maximum number of shares of Company common stock that may be issued under the 2017 Plan pursuant to the exercise of stock options is 84,243 shares and the maximum number of shares of Company common stock that may be issued as restricted stock awards or restricted stock units is 33,697 shares. Stock options awarded to employees may be incentive stock options or non-qualified stock options. Shares subject to award under the 2017 Plan may be authorized but unissued shares or treasury shares. The 2017 Plan contains annual and lifetime limits on certain types of awards to individual participants.

Awards may vest or become exercisable only upon the achievement of performance measures or based solely on the passage of time after award. Stock options and restricted stock awards provide for accelerated vesting if there is a change in control (as defined in the 2017 Plan).

In June 2017, the Company granted stock options for 79,187 shares to members of the Board of Directors and certain members of management. Options granted in June 2017 have an exercise price of $9.55, as determined on the grant date and expire ten years from the grant date.

The fair value was calculated for stock options granted in June 2017 using the following assumptions: expected volatility of 11.45%, a risk-free interest rate of 2.31%, and an expected term of ten years.

The weighted-average grant-date fair value of options granted during the year 2018 was $3.64 per share. The weighted-average grant date fair value of shares granted during 2017 was $9.55.

No options granted under the 2017 Plan were exercisable at March 31, 2018.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

In June 2017, the Company awarded 33,697 restricted shares to members of the Board of Directors and certain members of management. The restricted stock awards have a five year vesting period. Shares of restricted stock granted to employees under the 2017 Plan are subject to vesting based on continuous employment for a specified time period following the date of grant. During the restricted period, the holder is entitled to full voting rights and dividends, thus are considered participating securities.

Total compensation cost recognized in the income statement for share-based payment arrangements during the three months ended March 31, 2018 and 2017 was $25,791 and $0, respectively.

As of March 31, 2018, there was approximately $430,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 5 years.

NOTE 10:

Pending Acquisition

On April 18, 2018, Cincinnati Bancorp (the “Company”), the holding company for Cincinnati Federal and the majority-owned subsidiary of CF Mutual Holding Company (the “MHC”), the MHC, Cincinnati Federal and Kentucky Federal Savings and Loan Association ("KF"), a mutual savings association, entered into a definitive merger agreement providing for the merger of KF with and into Cincinnati Federal. Kentucky Federal Savings and Loan Association operates as a community bank with three banking offices in Covington, Florence and Williamstown, Kentucky. At March 31, 2018, KF had total assets of approximately $32.3 million, consisting primarily of $16.9 million of net loans. Recorded liabilities totaled $29.3 million, consisting primarily of $27.7 million of deposits. Equity capital totaled approximately $3.0 million.

The transaction is expected to close in the second half of 2018, subject to the receipt of approval by Kentucky Federal Savings and Loan Association members and all applicable governmental approvals and the satisfaction or waiver of all other conditions precedent to the merger.

NOTE 11:

Recent Accounting Pronouncements

Cincinnati Bancorp is an “emerging growth company.” As an “emerging growth company”, we have elected 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 the financial statements of public companies that comply with such new or revised accounting standards.

FASB ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

ASU No. 2018-02 was issued in February 2018 and addresses a narrow-scope financial reporting issue that arose as a consequence of the passage of H.R. 1, originally known as the “Tax Cuts and Jobs Act.” GAAP requires adjustment of deferred tax assets and liabilities for the effect of a change in tax laws or rates with the effect to be included in income from continuing operations in the reporting period that includes the enactment date. This guidance is applicable even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income rather than in income from continuing operations. As a consequence, the tax effects of items within accumulated other comprehensive income, referred to as stranded tax effects in the update, do not reflect the appropriate tax rate. The amendments in ASU No. 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act. Because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. ASU No. 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. Cincinnati Bancorp early adopted ASU No. 2018-02 January 1, 2018 and reclassified its stranded tax effects totaling approximately $40,400 (credit) into retained earnings.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

FASB ASU No. 2017-09, Compensation – Stock Compensation (Topic 718) – Scope Modification Accounting

In May 2017 the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718) – Scope of Modification Accounting. The amendments in this update provide guidance about which the terms or conditions of share-based payment award require an entity to apply modifications accounting. The amendments in this update will be applied prospectively to an award modified on or after the adoption date. The amendments in ASU 2017-09 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2017. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2017-07, Compensation – Retirement Benefits (Topic 715)

ASU No. 2017-07 was issued in March 2017 and applies to all employers that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715. The amendments in this update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost, as defined, are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in ASU No. 2017-07 are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. For other entities, the amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods beginning after December 15, 2019. The amendments in this update are to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement. Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

FASB ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments

On August 26, 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), ("ASU 2016-15"). The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under FASB Accounting Standards Codification (FASB ASC) 230, Statement of Cash Flows. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company has assessed ASU 2016-15 and does not expect a significant impact on its accounting and disclosures.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

FASB ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326)

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income.

In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company is currently evaluating the impact of these amendments to the Company’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 these amendments. The Allowance for Loan Losses (ALL) estimate is material to the Company 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 adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the ALL, including changes in assumptions and estimates to consider 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 Company continues collecting and retaining historical loan and credit data. The Company is in the process of identifying data gaps. Certain CECL models are currently being evaluated. The Audit Committee is informed of ongoing CECL developments. For additional information on the allowance for loan losses, see Note 3.

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

FASB ASU 2016-02, Leases (Topic 842)

ASU No. 2016-02 was issued in February 2016 and requires a lessee to recognize in the statement of financial position a liability to make lease payments (“the lease liability”) and a right to use the underlying asset for the lease term, initially measured at the present value of the lease payments. When measuring assets and liabilities arising from a lease, the lessee should include payments to be made in optional periods only if the lessee is reasonably certain, as defined, to exercise an option to the lease or not to exercise an option to terminate the lease. Optional payments to purchase the underlying asset should be included if the lessee is reasonably certain it will exercise the purchase option. Most variable lease payments should be excluded except for those that depend on an index or a rate or are in substance fixed payments.

A lessee shall classify a lease as a finance lease if it meets any of the five listed criteria:

The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.

The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

The lease term is for the major part of the remaining economic life of the underlying asset.

The present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset.

The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

For finance leases, a lessee shall recognize in the statement of income interest on the lease liability separately from the amortization of the right-of-use asset. Amortization of the right-to-use asset shall be on a straight-line basis, unless another basis is more representative of the pattern in which the lessee expects to consume the right-of-use asset’s future economic benefits. If the lease does not meet any of the five criteria, the lessee shall classify it as an operating lease and shall recognize a single lease cost on a straight line basis over the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. 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. The impact is not expected to have a material effect on the Company’s financial position or results of operations since the Company does not have a material amount of lease agreements.

FASB ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities

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

Cincinnati Bancorp

Notes to Condensed Consolidated Financial Statements (Unaudited)

ASU 2016-01 is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For private companies the new guidance becomes effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019. 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. Early adoption of the amendments in this update is not permitted, except that early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued or, by all other entities, that have not yet been made available for issuance are permitted as of the beginning of the fiscal year of adoption for the following amendment: An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The Company is currently evaluating the impact of these amendments, but does not expect them to have a material effect on the Company’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. Adoption of the standard is not expected to have a significant impact on its fair value and other disclosure requirements. For additional information on fair value of assets and liabilities, see Note 6.

FASB ASU 2014-09, Revenue from Contracts with Customers

In May 2014, the FASB issued amended guidance on revenue recognition from contracts with customers. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most contract revenue recognition guidance, including industry-specific guidance. The core principle of the amended guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Public entities should apply the amendments in ASU 2014-09 to interim reporting periods within annual reporting periods beginning after December 15, 2017 (that is, a public entity would be required to apply the new revenue standard beginning in the first interim period within the period of adoption). Nonpublic entities should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 31, 2018, and to interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company 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 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 continues to evaluate those revenue streams that could be impacted by the amendments. The analysis includes identification of potential performance obligations and revenue principles. The adoption of ASU 2014-09 is not expected to have a material impact on the Bank’s accounting and disclosures.

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 months ended March 31, 2018 and 2017 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing in Part I, Item 1 of this quarterly report on Form 10-Q and with the audited financial statements and notes thereto at and for the year ended December 31, 2017, appearing in Cincinnati Bancorp’s Form 10-K for the year ended December 31, 2017.

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 Form 10-Q except as may be required by applicable law or regulation.

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 manage our operations under the current economic conditions nationally and in our market area;

our ability to integrate future acquisitions, including the pending merger with Kentucky Federal Savings and Loan Association, may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

our ability to obtain regulatory approvals of the proposed merger of Cincinnati Federal and Kentucky Federal Savings and Loan Association on the proposed terms and schedule, and approval of the merger by the depositors of Kentucky Federal Savings and Loan Association may be unsuccessful.

we may incur increased charge-offs in the future;

we may face competitive loss of customers;

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

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;

our ability to successfully implement our business plan and to grow our franchise to improve profitability;

our ability to attract and maintain deposits, and to obtain FHLB-Cincinnati advances;

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, and our ability to originate loans for portfolio and for sale in the secondary market;

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 savings 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 which could result in, among other things, increased deposit insurance premiums and assessments, increased capital requirements, and increased regulatory fees and compliance costs, 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.

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in Cincinnati Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2017.

Comparison of Financial Condition at March 31, 2018 and December 31, 2017

Total Assets. Total assets were $175.0 million at March 31, 2018, an increase of $4.5 million, or 2.7%, from the $170.5 million at December 31, 2017. The increase resulted primarily from an increase in loans, net of allowances, of $2.5 million, and an increase of $1.5 million in cash and cash equivalents.

Cash and Cash Equivalents. Cash and cash equivalents increased $1.5 million or 14.4%, to $11.7 million at March 31, 2018 from $10.3 million at December 31, 2017. The increase was primarily the result of increased deposit growth.

Net Loans. Net loans increased $2.5 million, or 1.7%, to $149.6 million at March 31, 2018 from $147.0 million at December 31, 2017. During the three months ended March 31, 2018, we originated $10.0 million of loans for portfolio, $5.6 million of which were one-to-four family residential real estate loans, $1.2 million were multifamily loans, $920,000 were nonresidential loans, $1.3 million were home equity lines of credit, and $975,000 were residential construction and land loans. During the three months ended March 31, 2018, we sold $12.2 million of one-to- four family residential loans, on both a servicing–retained and servicing–released basis. Subject to market conditions, management intends to continue this sales activity in future periods to generate gains on sale and servicing fee income.

Our one-to-four owner-occupied loan portfolio increased $1.9 million or 2.5%. The nonresidential portfolio increased $284,000 or 1.6% during the three months ended March 31, 2018. The one-to-four family investment loan portfolio decreased $71,000, or 0.6%. The home equity lines of credit portfolio decreased $201,000 or 1.7% to $11.5 million at March 31, 2018. Construction and land loans decreased $1.2 million or 19.7% and the multifamily portfolio increased $1.9 million, or 7.8%. We currently sell certain fixed-rate, 15- and 30-year term mortgage loans. We have sold loans on both a servicing-released and servicing-retained basis to: the FHLB-Cincinnati, through its mortgage purchase program; Freddie Mac; and certain private sector third-party buyers.

Loans Held for Sale. Loans held for sale increased $498,000, or 22.4%, to $2.7 million at March 31, 2018 from $2.2 million at December 31, 2017 as a result of increased origination of loans to be sold.

Available-for-Sale Securities. Available-for-sale securities, which consisted entirely of U.S. government-sponsored mortgage-backed securities, decreased $87,000, or 9.6%, to $823,000 at March 31, 2018 from $910,000 at December 31, 2017. There were no securities purchases during the three months ended March 31, 2018. There were $82,000 in maturities, the remaining difference was due to the change in market values within the portfolio during the three months ended March 31, 2018.

Deposits. Deposits increased $4.0 million, or 3.5%, to $117.9 million at March 31, 2018 from $113.9 million at December 31, 2017. Core deposits, defined as demand, NOW and savings accounts, increased $2.2 million, or 4.8%, to $49.0 million at March 31, 2018 from $46.8 million at December 31, 2017. The increase was primarily the result of marketing efforts directed at increasing retail deposit accounts. Time deposits increased $1.7 million, or 2.6%, to $68.9 million at March 31, 2018 from $67.2 million at December 31, 2017. Certificates originated through the National CD Rateline service increased $2.6 million to $20.0 million at March 31, 2018 included in the increase in time deposits noted above. During the three months ended March 31, 2018, management continued its strategy of pursuing growth in lower cost core deposits, and intends to continue its efforts to increase core deposits.

Federal Home Loan Bank Advances. Federal Home Loan Bank Advances increased $550,000, or 1.6%, to $34.9 million at March 31, 2018. The additional advances were used to fund loan originations.

Stockholders’ Equity. Stockholders’ equity increased $203,000, or 1.1%, to $19.5 million at March 31, 2018 from $19.3 million at December 31, 2017. The increase was primarily due to net income for the period of $179,000. Stockholder’s equity also increased from a $40,000 reclassification of deferred tax liabilities in other accumulated comprehensive income.

Comparison of Operating Results for the Three Months Ended March 31, 2018 and March 31, 2017

General. Net income for the quarter ended March 31, 2018 was $179,000, compared to net income of $158,000 for the quarter ended March 31, 2017, an increase of $21,000, or 13.2%. The increase was primarily due to a $125,000 increase in net interest income and a $131,000 increase in noninterest income, partially offset by an increase in noninterest expense of $248,000.

Interest Income. Interest income increased $239,000, or 17.5%, to $1.6 million for the quarter ended March 31, 2018 compared to the comparable quarter in 2017. Interest income on loans increased $210,000, or 15.5%, to $1.6 million as of March 31, 2018. The average balance of loans during the three months ended March 31, 2018 increased $18.5 million to $150.6 million, compared to $132.1 million for the three months ended March 31, 2017. The average yield on loans increased 6 basis points to 4.14% for the three months ended March 31, 2018 from 4.08% for the three months ended March 31, 2017. Interest income on securities available-for-sale increased $3,500 due to lower premium amortization expense and higher interest rates on coupon resets on the adjustable rate mortgage-backed securities. Interest income on other investments increased $26,000 for the three months ended March 31, 2018 due to an increase in the dividend received on FHLB Cincinnati stock and an increase in short term interest rates.

Interest Expense. Total interest expense increased $114,000, or 34.9%, to $440,000 for the quarter ended March 31, 2018 from $326,000 for the quarter ended March 31, 2017. Interest expense on deposit accounts increased $63,000, or 26.0%, to $305,000 for the quarter ended March 31, 2018 from $242,000 for the quarter ended March 31, 2017. The increase in deposit expense between comparable quarters in 2018 from 2017 was primarily due to $4.6 million increase in average deposit accounts, and a 21 basis point increase in average cost.

Interest expense on interest-bearing demand accounts increased $19,000 for the quarter ended March 31, 2018. The average balances in demand interest bearing accounts increased $1.6 million during the three months ended March 31, 2018. The average cost of interest-bearing demand accounts increased 83 basis points. The increase in costs is primarily attributable to a high yield promotion for larger balance demand accounts. Interest expense on certificates of deposit increased $43,000 as a result of a $3.3 million, or 5.0%, increase in the average balance of these certificates. The average cost of certificates increased 18 basis points to 1.55%. Savings interest expense increased $1,000 during the quarter ended March 31, 2018 compared to the quarter ended March 31, 2017.

Interest expense on FHLB advances increased $51,000, or 60.2%, to $136,000 for the quarter ended March 31, 2018 from $85,000 for the quarter ended March 31, 2017. The average balance of advances increased $9.7 million, or 39.1%, for the quarter ended March 31, 2018. The average cost of FHLB borrowings increased 21 basis points. The increase in the cost of advances resulted from increases in short term interest rates.

Net Interest Income. Net interest income before the provision for loan losses increased $125,000, or 12.1%, to $1.2 million for the quarter ended March 31, 2018. Average interest-earning assets increased $22.0 million primarily due to an $18.5 million increase in average outstanding loans for the quarter ended March 31, 2018. Interest on other interest earning assets increased $26,000 primarily due to an increase in average yields of 61 basis points due to the increase in the dividend rate on FHLB stock and increase in interest rates on balances held at other depository banks and fed funds sold. Average interest-bearing liabilities increased $14.3 million from the same quarter in 2017 due to the funding needed for the increase in lending. The interest rate spread decreased 16 basis points to 2.66% for the quarter ended March 31, 2018 compared to 2.82% at quarter ended March 31, 2017. The net interest margin decreased 10 basis points to 2.88% for the quarter ended March 31, 2018 compared to 2.98% for the quarter ended March 31, 2017.

Provision for Loan Losses. The provision for loan losses expense increased $15,000 for the quarter ended March 31, 2018. The quarter ended March 31, 2017 had no loan loss provision. A provision for loan losses was deemed prudent based on continued loan growth, particularly in the one-to-four owner-occupied loan and multifamily portfolio segment.

The allowance for loan losses reflects the estimate we believe to be appropriate to cover probable losses which were inherent in the loan portfolio at March 31, 2018. 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.

Non-Interest Income. Non-interest income increased $132,000, or 24.3%, to $673,000 for the quarter ended March 31, 2018 from $542,000 for the comparable quarter in 2017. The gain on sale of loans increased $44,000, or 14.9%, to $340,000 for the quarter ended March 31, 2018 from $296,000 for the comparable quarter in 2017. The fair value of existing mortgage servicing rights and mortgage servicing fees increased $89,000 for the quarter ended March 31, 2018. The increase in the fair value of mortgage servicing rights was attributable to lower prepayment speeds on mortgage loans due to higher interest rates.

Non-Interest Expense. Non-interest expense increased $248,000, or 18.4%, to $1.6 million for the quarter ended March 31, 2018 compared to the comparable quarter in 2017. The increase was due primarily to a $141,000, or 20.8%, increase in salary and employee benefits to $818,000 for the quarter ended March 31, 2018 from $677,000 for the comparable quarter in 2017 caused by increased staffing demands, incentive equity plan expense, and increased payroll expense. Data processing expense increased $11,000, or 8.5%, to $150,000 during the quarter ended March 31, 2018 from $139,000 for the quarter ended March 31, 2017. Professional fees increased $24,000, or 36.1% for the quarter ended March 31, 2018 due to higher strategic planning and legal costs. Advertising expense increased $9,000, or 35.2%. Loan costs increased $43,000, or 81.3% on higher loan volume compared to the comparable quarter in 2017.

Federal Income Taxes. Federal income taxes decreased $27,000 from the first quarter of 2017 primarily due to a decrease in the statutory corporate tax rate to 21% for the quarter ended March 31, 2018 from 32% for the quarter ended March 31, 2017.

Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information at the dates and for the periods indicated. No tax-equivalent yield adjustments have been made. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant. All average balances are monthly average balances. Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented. Non-accrual loans are included in the computation of average balances only. 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 March 31,
	2018							2017
	Average Outstanding Balance		Interest		Average Yield/Rate (5)			Average Outstanding Balance		Interest		Average Yield/Rate (5)
	(Dollars in thousands)
Interest-earning assets:
Loans	$	150,606	$	1,558		4.14	%	$	132,149	$	1,348		4.08	%
Securities		864		4		1.85			1,643		1		0.24
Other (1)		9,834		40		1.63			5,506		14		1.02
Total interest-earning assets		161,304		1,602		3.97			139,298		1,363		3.91
Non-interest-earning assets		11,533							14,361
Total assets	$	172,837						$	153,659

Interest-bearing liabilities:
Savings	$	23,884	$	6		0.10		$	24,116	$	5		0.08
Interest-bearing demand		7,416		32		1.73			5,793		13		0.90
Certificates of deposit		68,724		267		1.55			65,474		224		1.37
Total deposits		100,024		305		1.22			95,383		242		1.01
Borrowings		34,385		135		1.57			24,716		85		1.36
Total interest-bearing liabilities		134,409		440		1.31			120,099		327		1.09
Non-interest-bearing Demand		16,980							12,595
Other non-interest-bearing liabilities		2,726							2,763
Total non- interest-bearing liabilities		19,706							15,358
Total equity		18,722							18,202
Total liabilities and total equity	$	172,837						$	153,659
Net interest income			$	1,162						$	1,036
Net interest rate spread (2)						2.66	%						2.82	%
Net interest-earning assets (3)	$	26,895						$	19,199
Net interest margin (4)						2.88	%						2.98	%
Average interest-earning assets to interest-bearing liabilities						120.01	%						115.99	%

(1)

Consists of FHLB-Cincinnati stock, FHLB DDA, certificates of deposit, fed funds sold, and cash reserves.

(2)

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

(3)

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

(4)

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

(5)

Annualized

Liquidity and Capital Resources. Liquidity is the ability to meet 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 the sale or maturities of securities. In addition, the Bank may borrow from the FHLB. At March 31, 2018, the Bank had $34.9 million outstanding in advances from the FHLB. At March 31, 2018, the Bank had collateral based capacity to borrow $42.2 million. The Bank had additional lines of credit with three commercial banks totaling $11.5 million. Additionally, the Bank has contingent funding sources with CDARS and the StoneCastle’s Federally Insured Cash Account (FICA) program.

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

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash used in operating activities was $213,000 and 542,000 for the three months ended March 31, 2018, and March 31, 2017, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on mortgage-backed securities, was $2.5 million for the three months ended March 31, 2018. Net cash provided by investing activities was $2.0 million for three months ended March 31, 2017. Net cash provided by financing activities, consisting primarily of the activity in deposit accounts and FHLB advances, was $4.2 million for the three months ended March 31, 2018. Net cash used in financing activities was $2.0 million for the three months ended March 31, 2017.

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. We also anticipate continued participation in the National CD Rateline Program as a wholesale source of certificates of deposit, and continued use of FHLB-Cincinnati advances.

Cincinnati Bancorp is a separate legal entity from the Bank and must provide for its own liquidity to pay any dividend to its stockholders and for other corporate purposes. Cincinnati Bancorp’s primary source of liquidity is dividend payments, if any, received from the Bank. The Bank’s ability to pay dividends is subject to regulatory restrictions. At March 31, 2018, Cincinnati Bancorp (on an unconsolidated, stand-alone basis) had liquid assets of $715,000.

At March 31, 2018, the Bank exceeded all of its regulatory capital requirements with a Tier 1 leverage capital level of $19.1 million, or 11.1% of adjusted total assets, which is above the well-capitalized required level of $8.6 million, or 5.0%; total risk-based capital of $20.5 million, or 16.5% of risk-weighted assets, which is above the well-capitalized required level of $12.4 million, or 10.0% of risk-weighted assets; and common equity tier 1 risk based capital of $19.1 million, or 15.4%, of risk weighted assets, which is above the well-capitalized required level of $8.1 million, or 6.5%. At December 31, 2017, the Bank exceeded all of its regulatory capital requirements with a Tier 1 leverage capital level of $18.8 million, or 11.3% of adjusted total assets, which is above the well-capitalized required level of $8.3 million, or 5.0%; and total risk-based capital of $20.2 million, or 16.5% of risk-weighted assets, which is above the well-capitalized required level of $12.2 million, or 10.0% of risk-weighted assets. Accordingly, Cincinnati Federal was categorized as well capitalized at March 31, 2018, and December 31, 2017. Management is not aware of any conditions or events since the most recent notification that would change its category.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable, as the Company 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 amended) as of March 31, 2018. Based on that evaluation, the Company’s management, including the Principal Executive Officer and the Principal Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

During the quarter ended March 31, 2018, there has been 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 consolidated financial condition or results of operations.

Item 1A.

Risk Factors

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

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

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

(b)

Not applicable.

(c)

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

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

3.1		Cincinnati Bancorp Stock Holding Company Charter ⁽¹⁾

3.2		Cincinnati Bancorp Bylaws ⁽¹⁾

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

101		The following financial information from Cincinnati Bancorp Quarterly Report on Form 10-Q, for the quarter ended March 31, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the consolidated balance sheets; (ii) the consolidated statements of operations; (iii) the consolidated statements of comprehensive income; (iv) the consolidated statements of cash flows; and (v) notes to consolidated financial statements.

⁽¹⁾

Incorporated by reference to the Company’s Registration Statement on Form S-1, as initially filed on March 11, 2015, as subsequently amended.

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.

		CINCINNATI BANCORP

Date: May 15, 2018		/s/ Joseph V. Bunke
		Joseph V. Bunke
		President
		(Principal Executive Officer)

Date: May 15, 2018		/s/ Herbert C. Brinkman
		Herbert C. Brinkman
		Senior Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Attached files

Cincinnati Bancorp Reports

Also read