West End Indiana Bancshares, Inc. - FORM 10-Q

Attached files

file	filename
EX-32 - EXHIBIT 32 - West End Indiana Bancshares, Inc.	tv506903_ex32.htm
EX-31.2 - EXHIBIT 31.2 - West End Indiana Bancshares, Inc.	tv506903_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - West End Indiana Bancshares, Inc.	tv506903_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 September 30, 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. 000-54578

West End Indiana Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Maryland		36-4713616
(State or other jurisdiction of in Company or organization)		(I.R.S. Employer Identification Number)

34 South 7^th Street, Richmond, Indiana		47374
(Address of Principal Executive Offices)		Zip Code

(765) 962-9587

(Registrant’s telephone number)

N/A

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

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

YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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 x		Smaller reporting company x
		Emerging growth company ¨

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 November 14, 2018, there were 1,065,336 issued and outstanding shares of the Registrant’s Common Stock.

West End Indiana Bancshares, Inc.

Form 10-Q

Index

		Page
Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Income	2

	Condensed Consolidated Statements of Comprehensive Income	3

	Condensed Consolidated Statements of Cash Flows	4

	Condensed Consolidated Statement of Stockholders’ Equity	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42

Item 4.	Controls and Procedures	42

Part II. Other Information

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults upon Senior Securities	42

Item 4.	Mine Safety Disclosures	42

Item 5.	Other Information	42

Item 6.	Exhibits	43

	Signature Page	44

Part I. – Financial Information

Item 1.

Financial Statements

West End Indiana Bancshares, Inc.

Condensed Consolidated Balance Sheets

	September 30,			December 31,
	2018			2017
	(Unaudited)
Assets
Cash and due from banks	$	1,715,309		$	1,588,203
Interest-bearing demand deposits		10,526,565			8,757,619
Cash and cash equivalents		12,241,874			10,345,822
Investment securities available for sale		20,479,831			20,296,672
Loans held for sale		947,213			2,877,012
Loans, net of allowance for loan losses of $3,079,138 and $2,744,684		249,881,543			240,858,812
Premises and equipment		8,909,958			9,127,886
Federal Home Loan Bank stock		2,435,700			2,435,700
Interest receivable		1,080,693			1,103,553
Bank-owned life insurance		7,090,644			6,959,909
Foreclosed real estate held for sale		16,000			39,375
Other assets		5,634,938			5,369,094

Total assets		308,718,394		$	299,413,835

Liabilities and Equity

Liabilities
Deposits	$	226,763,562		$	226,980,788
Federal Home Loan Bank advances		50,500,000			41,500,000
Interest payable		132,385			105,709
Other liabilities		1,590,870			1,797,971
Total liabilities		278,986,817			270,384,468

Commitments and Contingencies

Redeemable common stock held by Employee Stock
Ownership Plan (ESOP)		873,886			854,526

Stockholders’ Equity
Common stock, $.01 par value per share: Issued and outstanding – 1,065,336 and 1,066,858		10,653			10,668
Additional paid in capital		6,224,437			6,062,163
Retained earnings		24,999,686			24,029,397
Unearned employee stock ownership plan (ESOP)		(742,530	)		(784,560	)
Accumulated other comprehensive loss		(760,669	)		(288,301	)
Total stockholders’ equity		29,731,577			29,029,367

Less maximum cash obligation related to ESOP shares		(873,886	)		(854,526	)

Total stockholders’ equity less maximum cash obligation related to ESOP shares		28,857,691			28,174,841

Total liabilities and stockholders’ equity	$	308,718,394		$	299,413,835

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

West End Indiana Bancshares, Inc.

Condensed Consolidated Statements of Income

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
	(Unaudited)
Interest and Dividend Income
Loans receivable, including fees	$	3,607,143		$	3,446,645		$	10,634,923		$	10,108,915
Investment securities		108,465			89,466			322,425			297,068
Other		75,430			33,002			209,937			91,343
Total interest income		3,791,038			3,569,113			11,167,285			10,497,326

Interest Expense
Deposits		568,156			408,357			1,600,700			1,200,435
Federal Home Loan Bank advances		250,739			141,511			684,313			352,438
Total interest expense		818,895			549,868			2,285,013			1,552,873

Net Interest Income		2,972,143			3,019,245			8,882,272			8,944,453
Provision for loan losses		515,848			382,000			1,549,746			1,146,000
Net Interest After Provision for Loan Losses		2,456,295			2,637,245			7,332,526			7,798,453

Other Income
Service charges on deposit accounts		179,213			184,348			532,345			520,709
Loan servicing income, net		(252	)		(26,176	)		127,213			13,929
Debit card income		101,613			88,617			299,241			277,317
Gain on sale of loans		78,446			104,313			223,989			358,264
Increase in cash surrender value of life insurance		43,833			44,220			130,735			132,272
Loss on other assets		(59,062	)		(99,645	)		(39,264	)		(602,585	)
Other income		177,640			5,031			201,006			5,232
Total other income		521,431			300,708			1,475,265			705,138

Other Expense
Salaries and employee benefits		1,376,704			1,386,526			4,158,077			4,011,679
Net occupancy		214,097			142,145			631,218			422,425
Data processing fees		139,518			121,664			383,871			342,360
Professional fees		215,995			291,130			427,075			609,508
Director expenses		24,300			26,727			72,972			91,205
Advertising		70,754			65,187			194,300			216,718
ATM charges		47,595			39,138			135,445			208,379
Postage and courier		61,191			56,166			183,493			181,341
FDIC insurance premiums		41,000			40,500			121,000			124,500
Foreclosed real estate and repossession expense		21,345			80,114			133,920			470,319
Other expenses		335,056			319,516			995,052			965,374
Total other expenses		2,547,555			2,568,813			7,436,423			7,643,808

Income Before Income Tax		430,171			369,140			1,371,368			859,783
Income tax expense		27,868			132,697			267,265			284,874

Net Income	$	402,303		$	236,443		$	1,104,103		$	574,909

Earnings Per Share
Basic	$	0.41		$	0.24		$	1.12		$	0.58
Diluted		0.39			0.23			1.07			0.56
Dividends Per Share		0.07			0.06			0.20			0.18

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

West End Indiana Bancshares, Inc.

Condensed Consolidated Statements of Comprehensive Income

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2018			2017		2018			2017
	(Unaudited)
Net income	$	402,303		$	236,443	$	1,104,103		$	574,909
Other comprehensive income, net of tax

Unrealized holding gains (loss) arising during the period, net of tax expense (benefit) of $(37,234) and $30,829, $(144,013) and $72,557		(105,234	)		49,875		(407,019	)		116,359

		(105,234	)		49,875		(407,019	)		116,359
Comprehensive income	$	297,069		$	286,318	$	697,084		$	691,268

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

West End Indiana Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows

	Nine Months Ended
	September 30,
	2018			2017
	(Unaudited)
Operating Activities
Net income	$	1,104,103		$	574,909
Items not requiring (providing) cash
Provision for loan losses		1,549,746			1,146,000
Depreciation and amortization		389,536			210,506
Investment securities amortization, net		216,994			250,109
Loan originated for sale		(8,130,013	)		(11,901,444	)
Proceeds on loan sold		10,193,252			12,468,014
Loss on other assets		39,264			602,585
ESOP shares earned		123,769			126,263
Stock based compensation		134,738			216,646
Gain on loans sold		(223,989	)		(358,264	)
Net change in
Interest receivable		22,860			89,426
Interest payable		26,676			13,049
Cash surrender value of life insurance		(130,735	)		(132,272	)
Other adjustments		(115,773	)		(37,732	)
Net cash provided by operating activities		5,200,428			3,267,795

Investing Activities
Purchases of securities available for sale		(4,126,227	)		(1,016,563	)
Proceeds from maturities of securities available for sale		3,175,042			3,219,914
Purchase of FHLB stock		-			(521,800	)
Net change in loans		(11,005,364	)		(8,204,855	)
Purchase of premises and equipment		(171,608	)		(3,521,044	)
Proceeds from sale of foreclosed real estate		294,388			90,872
Net cash used in investing activities		(11,833,769	)		(9,953,476	)

Financing Activities
Net change in demand deposits, money market, NOW, and savings accounts		(3,499,652	)		8,692,868
Net change in certificates of deposit		3,282,426			(10,518,218	)
Repurchased shares		(54,218	)		(28,430	)
Repayment of FHLB advances		(13,000,000	)		(27,000,000	)
Proceeds from FHLB advances		22,000,000			38,500,000
Cash dividends		(199,163	)		(176,934	)
Net cash provided by financing activities		8,529,393			9,469,286

Net Change in Cash and Cash Equivalents		1,896,052			2,783,605

Cash and Cash Equivalents, Beginning of Period		10,345,822			7,649,356

Cash and Cash Equivalents, End of Period	$	12,241,874		$	10,432,961

Additional Cash Flows Information
Interest paid	$	2,258,336		$	1,539,824
Income tax paid		35			673,909
Real estate acquired in settlement of loans		815,869			259,440
Sale and financing of foreclosed real estate		395,412			1,889,878

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

West End Indiana Bancshares, Inc.

Condensed Statement of Changes in Stockholders’ Equity

For the Nine Months Ended September 30, 2018

																			Maximum
																			Cash
																Accumulated			Obligation
	Common Stock						Additional						Unearned			Other			Related to			Total
	Shares						Paid-In			Retained			ESOP			Comprehensive			ESOP			Stockholders’
	Outstanding			Amount			Capital			Earnings			Shares			Loss			Shares			Equity
	(Unaudited)
Balances at January 1, 2018		1,066,858		$	10,668		$	6,062,163		$	24,029,397		$	(784,560	)	$	(288,301	)	$	(854,526	)	$	28,174,841
Net income		-			-			-			1,104,103			-			-			-			1,104,103
Other comprehensive loss		-			-			-			-			-			(407,019	)		-			(407,019	)
Reclassification in connection with ASU 2018-02		-			-			-			65,349			-			(65,349	)		-			-
ESOP shares earned		-			-			81,739			-			42,030			-			-			123,769
Stock based compensation expense		-			-			134,738			-			-			-			-			134,738
Change in obligation related to ESOP shares		-			-			-			-			-			-			(19,360	)		(19,360	)
Shares repurchased		(1,887	)		(19	)		(54,199	)														(54,218	)
Shares issued		365			4			(4	)														-
Cash dividends ($0.20) per share		-			-			-			(199,163	)		-			-			-			(199,163	)
Balances at September 30, 2018		1,065,336		$	10,653		$	6,244,437		$	24,999,686		$	(742,530	)	$	(760,669	)	$	(873,886	)	$	28,857,691

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

West End Indiana Bancshares, Inc.

Form 10-Q

Notes to Condensed Consolidated Financial Statements

NOTE 1: Nature of Operations

West End Bank, S.B. (the “Bank”), a wholly owned subsidiary of West End Indiana Bancshares, Inc. (the “Company”), is an Indiana-chartered savings bank that was organized in 1894 and is headquartered in Richmond, Indiana.

The Bank provides financial services to individuals, families and businesses through its four banking offices located in the Indiana counties of Union and Wayne and limited service branches located in the elementary schools and high school in Richmond, Indiana at which the Bank offers more limited banking services and at which it provides banking seminars to students who assist in the branch operations. Our principal business consists of attracting retail deposits from the general public in our market area and investing those deposits, together with funds generated from operations, and to a lesser extent, borrowings, in one- to four- family residential real estate loans, indirect automobile loans, commercial and multi-family real estate loans, and to a lesser extent, second mortgages and equity lines of credit, construction loans and commercial business loans. We also purchase investment securities consisting of municipal bonds, and mortgage-backed securities.

Basis of Presentation

The accompanying unaudited consolidated condensed financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Company included in the Annual Report on Form 10-K for the year ended December 31, 2017. However, in the opinion of management, all adjustments (consisting of only normal recurring accruals) which are necessary for a fair presentation of the financial statements have been included. The results of operations for the three and nine month periods ended September 30, 2018, are not necessarily indicative of the results which may be expected for the entire year. The consolidated condensed balance sheet of the Company as of December 31, 2017 has been derived from the audited consolidated balance sheet of the Company as of that date.

Principals of Consolidation and Revenue from Contract with Customers

The consolidated financial statements include the accounts of West End Indiana Bancshares, Inc. and its wholly owned subsidiary, West End Bank, S.B. All significant intercompany accounts and transactions have been eliminated in consolidation.

Revenue from Contracts with Customers

The Company records revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606”). Under Topic 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.

The Company’s primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of Topic 606. The Company has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income was not necessary. The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.

NOTE 2: Securities

The amortized cost and approximate fair values of securities are as follows:

	September 30, 2018 (Unaudited)
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
	(In Thousands)
Available for sale
Municipal bonds	$	2,019	$	-	$	(232	)	$	1,787
Mortgage-backed securities - GSE residential		19,491		-		(798	)		18,693
Total available for sale	$	21,510	$	-	$	(1,030	)	$	20,480

	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
	(In Thousands)
Available for sale
Municipal bonds	$	2,019	$	-	$	(67	)	$	1,952
Mortgage-backed securities – GSE residential		18,757		2		(414	)		18,345
Total available for sale	$	20,776	$	2	$	(481	)	$	20,297

The amortized cost and fair value of securities available for sale at September 30, 2018 (unaudited) and December 31, 2017, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2018				December 31, 2017
	(Unaudited)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)
After ten years	$	2,019	$	1,787	$	2,019	$	1,952
Mortgage-backed securities - GSE residential		19,491		18,693		18,757		18,345
Totals	$	21,510	$	20,480	$	20,776	$	20,297

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $10,950,000 at September 30, 2018 (unaudited). Securities pledged at December 31, 2017 were $13,473,000.

There were no activities related to the sales of securities available for sale for the nine months ended September 30, 2018 and 2017.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2018 (unaudited) and December 31, 2017 was $20,480,000 and $19,627,000, which is approximately 100% and 97% of the Company’s available-for-sale investment portfolio. These declines primarily resulted from changes in market interest rates.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced, and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

Securities with unrealized losses at September 30, 2018 (unaudited) were as follows:

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(In Thousands)
Available-for-sale securities
Municipal bonds	$	-	$	-		$	1,787	$	(232	)	$	1,787	$	(232	)
Mortgage-backed securities - GSE residential		5,681		(131	)		13,012		(667	)		18,693		(798	)
	$	5,681	$	(131	)	$	14,799	$	(899	)	$	20,480	$	(1,030	)

Securities with unrealized losses at December 31, 2017 were as follows:

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(In Thousands)
Available-for-sale securities
Municipal bonds	$	-	$	-		$	1,952	$	(67	)	$	1,952	$	(67	)
Mortgage-backed securities - GSE residential		4,644		(40	)		13,031		(374	)		17,675		(414	)
	$	4,644	$	(40	)	$	14,983	$	(441	)	$	19,627	$	(481	)

Municipal Bonds

The unrealized losses on the Company’s investments in municipal bonds were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2018.

Mortgage-backed Securities – GSE Residential

The unrealized losses on the Company’s investment in mortgage-backed securities were caused by interest rate increases. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not, more likely than not, the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2018.

NOTE 3: Loans and Allowance

The Company’s loan and allowance policies are as follows:

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

For all loan classes, the accrual of interest is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date. For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except residential and consumer loans, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges off residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

For all for classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

When cash payments are received on impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off experience by segment. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior three years. Management believes the three year historical loss experience methodology is appropriate in the current economic environment. Other adjustments (qualitative/environmental considerations) for each segment may be added to the allowance for each loan segment after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due based on the loan’s current payment status and the borrower’s financial condition including available sources of cash flows. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for non-homogenous type loans such as commercial, non-owner residential and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For impaired loans where the Company utilizes the discounted cash flows to determine the level of impairment, the Company includes the entire change in the present value of cash flows as bad debt expense.

The fair values of collateral dependent impaired loans are based on independent appraisals of the collateral. In general, the Company acquires an updated appraisal upon identification of impairment and annually thereafter for commercial, commercial real estate and multi-family loans. If the most recent appraisal is over a year old, and a new appraisal is not performed, due to lack of comparable values or other reasons, the existing appraisal is utilized and discounted 25% - 35% based on the age of the appraisal, condition of the subject property, and overall economic conditions. After determining the collateral value as described, the fair value is calculated based on the determined collateral value less selling expenses. The potential for outdated appraisal values is considered in our determination of the allowance for loan losses through our analysis of various trends and conditions including the local economy, trends in charge-offs and delinquencies, etc. and the related qualitative adjustments assigned by the Company.

Segments of loans with similar risk characteristics are collectively evaluated for impairment based on the segment’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Categories of loans include:

	(Unaudited)
	September 30,		December 31,
	2018		2017
	(In Thousands)
Commercial	$	12,188	$	11,572
Real estate loans
Residential		64,433		61,885
Commercial and multi-family		60,616		57,485
Construction		3,447		2,093
Second mortgages and equity lines of credit		7,057		6,594
Consumer loans
Indirect		86,812		86,109
Other		18,510		17,978
		253,063		243,176
Less
Net deferred loan fees, premiums and discounts		102		112
Allowance for loan losses		3,079		2,745
Total loans	$	249,882	$	240,859

The risk characteristics of each loan portfolio segment are as follows:

Commercial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial and Multi-Family Real Estate

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial and multi-family real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan.

Commercial and multi-family real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial and multi-family real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.

Construction

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Residential, Second Mortgages and Equity Lines of Credit and Consumer

With respect to residential loans that are secured by 1-4 family residences, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Second mortgages and equity lines of credit loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

The following presents by portfolio segment, the activity in the allowance for loan losses for the three and nine months ended September 30, 2018 (unaudited) and 2017 (unaudited):

				Real Estate
	Commercial			Residential			Commercial and Multi- Family			Construction		Seconds and Equity Line		Consumer			Total
	(In Thousands)
Three Months Ended September 30, 2018:
Balance, beginning of period	$	557		$	208		$	886		$	4	$	10	$	1,409		$	3,074
Provision(credit) for losses		(120	)		(8	)		109			-		1		534			516
Recoveries on loans		2			-			-			-		-		29			31
Loans charged off		(39	)		(8	)		-			-		-		(495	)		(542	)
Balance, end of year	$	400		$	192		$	995		$	4	$	11	$	1,477		$	3,079
Nine Months Ended September 30, 2018:
Balance, beginning of year	$	303		$	191		$	886		$	2	$	10	$	1,353		$	2,745
Provision for losses		135			35			110			2		1		1,267			1,550
Recoveries on loans		4			16			-			-		-		99			119
Loans charged off		(42	)		(50	)		(1	)		-		-		(1,242	)		(1,335	)
Balance, end of year	$	400		$	192		$	995		$	4	$	11	$	1,477		$	3,079

				Real Estate
	Commercial			Residential			Commercial and Multi- Family			Construction		Seconds and Equity Line			Consumer			Total
	(In Thousands)
Three Months Ended September 30, 2017:
Balance, beginning of period	$	304		$	269		$	625		$	2	$	5		$	1,165		$	2,370
Provision(credit) for losses		13			(60	)		50			-		9			370			382
Recoveries on loans		9			-			-			-		-			46			55
Loans charged off		(17	)		-			-			-		(6	)		(346	)		(369	)
Balance, end of year	$	309		$	209		$	675		$	2	$	8		$	1,235		$	2,438
Nine Months Ended September 30, 2017:
Balance, beginning of year	$	247		$	329		$	670		$	-	$	-		$	1,031		$	2,277
Provision(credit) for losses		191			(46	)		37			2		14			948			1,146
Recoveries on loans		9			2			-			-		-			165			176
Loans charged off		(138	)		(76	)		(32	)		-		(6	)		(909	)		(1,161	)
Balance, end of year	$	309		$	209		$	675		$	2	$	8		$	1,235		$	2,438

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of September 30, 2018 (unaudited) and December 31, 2017:

			September 30, 2018
			Real Estate
	Commercial		Residential		Commercial and Multi-Family		Construction		Seconds and Equity Line		Consumer		Total
	(In Thousands)
Allowance:
Balance, end of year	$	400	$	192	$	995	$	4	$	11	$	1,477	$	3,079
Individually evaluated for impairment		317		-		700		-		-		-		1,017
Collectivity evaluated for impairment		83		192		295		4		11		1,477		2,062
Loans:
Ending balance	$	12,188	$	64,433	$	60,616	$	3,447	$	7,057	$	105,322	$	253,063
Individually evaluated for impairment		794		-		1362		-		-		-		2,156
Collectivity evaluated for impairment		11,394		64,433		59,254		3,447		7,057		105,322		250,907

			December 31, 2017
			Real Estate
	Commercial		Residential		Commercial and Multi- Family		Construction		Seconds and Equity Line		Consumer		Total

	(In Thousands)
Allowance:
Balance, end of year	$	303	$	191	$	886	$	2	$	10	$	1,353	$	2,745
Individually evaluated for impairment		214		-		556		-		-		-		770
Collectivity evaluated for impairment		89		191		330		2		10		1,353		1,975
Loans:
Ending balance	$	11,572	$	61,885	$	57,485	$	2,093	$	6,594	$	104,087	$	243,716
Individually evaluated for impairment		814		-		1,605		-		-		-		2,419
Collectivity evaluated for impairment		10,758		61,885		55,880		2,093		6,594		104,087		241,297

The following tables present the credit risk profile of the Bank’s loan portfolio based on rating category and payment activity as of September 30, 2018 (unaudited) and December 31, 2017:

			September 30, 2018
			Real Estate
	Commercial		Residential		Commercial and Multi- Family		Construction		Seconds and Equity Line		Consumer		Total
	(In Thousands)
Pass	$	11,262	$	64,113	$	56,296	$	3,447	$	7,057	$	105,322	$	247,497
Watch		132		-		971		-		-		-		1,103
Special Mention		-		320		1,987		-		-		-		2,307
Substandard		794		-		1,362		-		-		-		2,156
Doubtful		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-
Total	$	12,188	$	64,433	$	60,616	$	3,447	$	7,057	$	105,322	$	253,063

			December 31, 2017
			Real Estate
	Commercial		Residential		Commercial and Multi- Family		Construction		Seconds and Equity Line		Consumer		Total
	(In Thousands)
Pass	$	10,601	$	61,561	$	52,873	$	2,093	$	6,594	$	104,087	$	237,809
Watch		157		––		992		—		—		—		1,149
Special Mention		––		324		2,015		—		––		—		2,339
Substandard		814		––		1,605		—		—		––		2,419
Doubtful		––		—		—		—		—		—		––
Loss		—		—		—		—		––		—		––
Total	$	11,572	$	61,885	$	57,485	$	2,093	$	6,594	$	104,087	$	243,716

The Company generally categorizes all classes of loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Generally, smaller dollar consumer loans are excluded from this grading process and are reflected in the Pass category. The delinquency trends of these consumer loans are monitored on homogeneous basis and the related delinquent amounts are reflected in the aging analysis table below. The Company uses the following definitions for risk ratings:

The Pass asset quality rating encompasses assets that have generally performed as expected. With the exception of some smaller consumer and residential loans, these assets generally do not have delinquency. Loans assigned this rating include loans to borrowers possessing solid credit quality with acceptable risk. Borrowers in these grades are differentiated from higher grades on the basis of size (capital and/or revenue), leverage, asset quality, stability of the industry or specific market area and quality/coverage of collateral. These borrowers generally have a history of consistent earnings and reasonable leverage.

The Watch asset quality rating encompasses assets that have been brought to the attention of management and may, if not corrected, warrant a more serious quality rating by management. These assets are usually in the first phase of a deficiency situation and may possess similar criteria as Special Mention assets. This grade includes “pass grade” loans to borrowers which require special monitoring because of deteriorating financial results, declining credit ratings, decreasing cash flow, increasing leverage, marginal collateral coverage or industry stress that has resulted or may result in a changing overall risk profile.

The Special Mention asset quality rating encompasses assets that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. This grade is intended to include loans to borrowers whose credit quality has clearly deteriorated and where risk of further decline is possible unless active measures are taken to correct the situation. Weaknesses are considered potential at this state and are not yet fully defined.

The Substandard asset quality rating encompasses assets that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any; assets having a well-defined weakness(es) based upon objective evidence; assets characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected; or the possibility that liquidation will not be timely. Loans categorized in this grade possess a well-defined credit weakness and the likelihood of repayment from the primary source is uncertain. Significant financial deterioration has occurred and very close attention is warranted to ensure the full repayment without loss. Collateral coverage may be marginal and the accrual of interest has been suspended.

The Doubtful asset quality rating encompasses assets that have all of the weaknesses of those classified as Substandard. In addition, these weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

The Loss asset quality rating encompasses assets that are considered uncollectible and of such little value that their continuance as assets of the bank is not warranted. A loss classification does not mean that an asset has no recovery or salvage value; instead, it means that it is not practical or desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be realized in the future.

The Company evaluates the loan grading system definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to either during 2017 or 2018.

The following table presents the Bank’s loan portfolio aging analysis as of September 30, 2018 (unaudited) and December 31, 2017:

			September 30, 2018
			Real Estate
	Commercial		Residential		Commercial and Multi- Family		Construction		Seconds and Equity Line		Consumer		Total
	(In Thousands)
30-59 days past due	$	1	$	525	$	39	$	-	$	32	$	1,646	$	2,243
60-89 days past due		33		116		-		-		10		744		903
Greater than 90 days past due		-		517		-		-		18		1,059		1,594
Total past due		34		1,158		39		-		60		3,449		4,740
Current		12,154		63,275		60,577		3,447		6,997		101,873		248,323
Total loans	$	12,188	$	64,433	$	60,616	$	3,447	$	7,057	$	105,322	$	253,063

Nonaccrual loans	$	-	$	285		-	$	-	$	-	$	27	$	312
Past due 90 days and accruing		-		232		-		-		18		1,032		1,282
Total	$	-	$	517	$	-	$	-	$	18	$	1,059	$	1,594

			December 31, 2017
			Real Estate
	Commercial		Residential		Commercial and Multi- Family		Construction		Seconds and Equity Line		Consumer		Total
	(In Thousands)
30-59 days past due	$	10	$	378	$	-	$	-	$	57	$	1,536	$	1,981
60-89 days past due		-		18		39		-		-		472		529
Greater than 90 days and accruing		-		149		8		-		-		666		823
Total past due		10		545		47		-		57		2,674		3,333
Current		11,562		61,340		57,438		2,093		6,537		101,413		240,383
Total loans	$	11,572	$	61,885	$	57,485	$	2,093	$	6,594	$	104,087	$	243,716

Nonaccrual loans	$	-	$	115	$	8	$	-	$	-	$	-	$	123
Past due 90 days and accruing		-		34		-		-		-		666		700
Total	$	-	$	149	$	8	$	-	$	-	$	666	$	823

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the 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 but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

The following table presents impaired loans and specific valuation allowance based on class level at September 30, 2018 (unaudited) and December 31, 2017:

			September 30, 2018
			Real Estate
	Commercial		Residential		Commercial and Multi -Family		Construction		Seconds and Equity Line		Consumer		Total
	(In Thousands)
Impaired loans without a specific allowance:
Recorded investment	$	56	$	-	$	418	$	-	$	-	$	-	$	474
Unpaid principal balance		56		-		418		-		-		-		474
Impaired loans with a specific allowance:
Recorded investment		738		-		944		-		-		-		1,682
Unpaid principal balance		738		-		944		-		-		-		1,682
Specific allowance		317		-		700		-		-		-		1,017
Total impaired loans:
Recorded investment		794		-		1,362		-		-		-		2,156
Unpaid principal balance		794				1,362								2,156
Specific allowance		317		-		700		-		-		-		1,017

			December 31, 2017
			Real Estate
	Commercial		Residential		Commercial and Multi- Family		Construction		Seconds and Equity Line		Consumer		Total
	(In Thousands)
Impaired loans without a specific allowance:
Recorded investment	$	76	$	-	$	812	$	-	$	-	$	-	$	888
Unpaid principal balance		76		-		812		-		-		-		888
Impaired loans with a specific allowance:
Recorded investment		738		-		793		-		-		-		1,531
Unpaid principal balance		738		-		793		-		-		-		1,531
Specific allowance		214		-		556		-		-		-		770
Total impaired loans:
Recorded investment		814		-		1,605		-		-		-		2,419
Unpaid principal balance		814		-		1,605		-		-		-		2,419
Specific allowance		214		-		556		-		-		-		770

The following presents by portfolio segment, information related to the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2018 (unaudited) and 2017 (unaudited):

(Unaudited)

Real Estate

Commercial

Residential

Commercial
and
Multi-Family

Construction

Seconds
and
Equity Line

Consumer

Total

(In Thousands)

Three Months Ended September 30, 2018:

Total impaired loan:

Average recorded investment

799

––

1,475

––

2,274

Interest income recognized

—

––

Interest income recognized on a cash basis

—

––

(Unaudited)

Real Estate

Commercial

Residential

Commercial
and
Multi-Family

Construction

Seconds
and
Equity Line

Consumer

Total

(In Thousands)

Nine Months Ended September 30, 2018:

Total impaired loan:

Average recorded investment

806

––

1,538

––

2,344

Interest income recognized

—

––

100

Interest income recognized on a cash basis

—

––

(Unaudited)

Real Estate

Commercial

Residential

Commercial
and Multi-
Family

Construction

Seconds
and
Equity Line

Consumer

Total

(In Thousands)

Three Months Ended September 30, 2017:

Total impaired loan:

Average recorded investment

826

––

1,807

––

2,633

Interest income recognized

—

––

Interest income recognized on a cash basis

—

––

(Unaudited)

Real Estate

Commercial

Residential

Commercial
and
Multi-Family

Construction

Seconds
and
Equity Line

Consumer

Total

(In Thousands)

Nine Months Ended September 30, 2017:

Total impaired loan:

Average recorded investment

1,556

––

1,797

––

3,353

Interest income recognized

—

––

144

Interest income recognized on a cash basis

—

––

Troubled Debt Restructurings

In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Company attempts to work out an alternative payment schedule with the borrower in order to optimize collectability of the loan. Any loans that are modified, whether through a new agreement replacing the old or via changes to an existing loan agreement, are reviewed by the Company to identify if a troubled debt restructuring (“TDR”) has occurred. A troubled debt restructuring occurs when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status, and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If such efforts by the Company do not result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Company may terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan.

Nonaccrual loans, including TDRs that have not met the six month minimum performance criterion, are reported in this report as non-performing loans. For all loan classes, it is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being restructured remain on nonaccrual status until six months of satisfactory borrower performance, at which time management would consider its return to accrual status. A loan is generally classified as nonaccrual when the Company believes that receipt of principal and interest is questionable under the terms of the loan agreement. Most generally, this is at 90 or more days past due. If the restructured loan is on accrual status prior to being restructured, it is reviewed to determine if the restructured loan should remain on accrual status. Loans that are considered TDR are classified as performing, unless they are on nonaccrual status or greater than 90 days past due, as of the end of the most recent quarter.

With regard to determination of the amount of the allowance for credit losses, all accruing restructured loans are considered to be impaired. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously above.

During the three and nine months ended September 30, 2018 (unaudited) and 2017 (unaudited), there were no new restructurings classified as TDRs. No loans restructured during the last twelve months defaulted during the three and nine months ended September 30, 2018 (unaudited) and 2017 (unaudited).

At September 30, 2018 and December 31, 2017, there were $611,000 and $126,000, respectively, of residential real estate loans in process of foreclosure.

NOTE 4: Disclosures About Fair Value of Assets and Liabilities

ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes six levels of inputs that may be used to measure fair value:

The standard describes three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices in active markets for identical assets or liabilities

Level 2

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

Level 3

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

Recurring Measurements

The following is a description of the valuation methodologies and inputs used for instruments measured at fair value, as well as the general classification of such instruments 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 pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions. Additionally, matrix pricing is used for certain investment securities and is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. Level 2 securities include SBA loan pools, municipal bonds and mortgage-backed securities. At September 30, 2018 (unaudited) and December 31, 2017, all mortgage-backed securities are residential government sponsored enterprises. In certain cases where Level 1 or 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 actual and expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. Due to the nature of the valuation inputs, mortgage-servicing rights are classified within Level 3 of the hierarchy. Significant changes in any of the inputs could significantly impact the fair value measurement.

Fair value determinations for Level 3 measurements are the responsibility of the Finance Department. The Finance Department contracts with a pricing specialist to generate fair value estimates on a quarterly basis. The Finance Department challenges the reasonableness of the assumptions used and reviews the methodology to ensure the estimated fair value complies with accounting standards generally accepted in the United States. Using the data from the quarterly valuation, the Finance Department adjusts to fair value on a monthly basis

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 September 30, 2018 and December 31, 2017:

			(Unaudited)
			September 30, 2018
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Available-for-sale securities:
Municipal bonds	$	1,787	$	—	$	1,787	$	—
Mortgage-backed securities - GSE residential		18,693		—		18,693		—
Mortgage-servicing rights		830		—		—		830

			December 31, 2017
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Available-for-sale securities:
Municipal bonds	$	1,952	$	—	$	1,952	$	—
Mortgage-backed securities - GSE residential		18,345		—		18,345		—
Mortgage-servicing rights		731		—		—		731

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

	(Unaudited)
	Mortgage-Servicing Rights
	Three Months Ended September 30						Nine Months Ended September 30
	2018			2017			2018			2017
	(In Thousands)
Balances, beginning of period	$	832		$	729		$	731		$	719
Total unrealized gains (losses) included in net income		(6	)		(39	)		81			(46	)
Additions (rights recorded on sale of loans)		40			41			103			97
Settlements (payments)		(36	)		(30	)		(85	)		(69	)
Balances, end of period	$	830		$	701		$	830		$	701

Total unrealized gains and losses included in net income reflected in the table above are included in other income.

Nonrecurring Measurements

The following is a description of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired Loans (Collateral Dependent)

Loans, for which it is probable that the Company will not collect all principal and interest due according to contractual terms, are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans.

Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

The following tables present the fair value measurements of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall:

			September 30, 2018
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Unaudited) (In Thousands)
Impaired loans	$	665	$	—	$	—	$	665

			December 31, 2017
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Impaired loans	$	761	$	—	$	—	$	761

Unobservable (Level 3) Inputs

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

	Fair Value at September 30, 2018		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
	(In Thousands) (unaudited)
Impaired loans	$	665	Based on independent appraisals	Marketability Discount	50.0%
Mortgage-servicing rights	$	830	Discounted Cash Flow	Discount rate Conditional prepayment rate Expected loan servicing years	6.0% -6.6% (6.4%) 8.2% - 10.8% (8.8%) 1.7-5.1 (4.53)

	Fair Value at December 31, 2017		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
	(In Thousands)
Impaired loans	$	761	Comparative sales based on independent appraisals	Marketability Discount	12.0% - 50.0%
Mortgage-servicing rights	$	731	Discounted Cash Flow	Discount rate Conditional prepayment rate Expected loan servicing years	5.3% -6.0% (5.8%) 10.7% - 12.3% (10.8%) 1.9 – 4.5 (4.1)

Sensitivity of Significant Unobservable Inputs

The following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement and of how those inputs might magnify or mitigate the effect of changes in unobservable inputs on the fair value measurement.

Mortgage –Servicing Rights

The significant unobservable inputs used in the fair value measurement of the Company’s mortgage-servicing rights are discount rates, conditional prepayment rates and expected loan servicing years. Significant increases or decreases in any of those inputs in isolation would result in a significant change in the fair value measurement.

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, Interest Receivable and Interest Payable

The carrying amount approximates fair value.

Loans Held for Sale

Loans held for sale are based on current market prices

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.

Deposits

Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits. The carrying amount approximates fair value. 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.

The following table presents estimated fair values of the Company’s financial instruments at September 30, 2018 (unaudited) and December 31, 2017.

	(Unaudited)
	September 30, 2018
			Fair Value
	Carrying Amount		Quoted Prices in Active markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Financial assets
Cash and cash equivalents	$	12,242	$	12,242	$	-	$	-
Loan held for sale		947		-		947		-
Loans, net		249,881		-		-		245,904
Federal Home Loan Bank stock		2,436		-		2,436		-
Interest receivable		1,081		-		1,081		-
Financial liabilities
Deposits		226,764		116,562		110,314		-
Federal Home Loan Bank advances		50,500		-		50,416		-
Interest payable		132		-		132		-

	December 31, 2017
			Fair Value
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Financial assets
Cash and cash equivalents	$	10,346	$	10,346	$	––	$	—
Loan held for sale		2,877		––		2,877		—
Loans, net		240,859		—		––		242,133
Federal Home Loan Bank stock		2,436		—		2,436		—
Interest receivable		1,103		—		1,103		—
Financial liabilities
Deposits		226,981		120,061		106,999		—
Federal Home Loan Bank advances		41,500		—		41,553		—
Interest payable		106		—		106		—

NOTE 5: Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognition guidance in U.S. GAAP when it became effective. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the guidance in determining revenue recognition as principal versus agent. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” which provides guidance in accounting for immaterial performance obligations and shipping and handling. In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients,” which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. This ASU also provides a practical expedient for contract modifications.

These amendments were effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods with that reporting period, as deferred by ASU 2015-14. Early application was permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within the reporting period. The Company utilized a 5 step model to analyze and review the appropriate actions within this ASU and it was determined the ASU did not have a significant effect on the Company’s consolidated financial statements.

In January 2016, FASB issued Accounting Standards Update (“ASU”) 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity 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, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies 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. The amendments in this update were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Adoption of the ASU did not a have a significant effect on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new ASU will require both types of leases to be recognized on the balance sheet. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods therein. Early adoption is permitted. We are currently evaluating the impact of adopting the new guidance on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326). The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. While the Company expects that the implementation of this ASU will increase the balance of the allowance for loan losses, it is continuing to evaluate the potential impact on the Company’s results of operations and financial position. The Company has established a workgroup to review and produce different methodologies to best estimate future loan losses.

In August 2016, FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The amendments in this Update provide guidance on eight cash flow issues where current Generally Accepted Accounting Principles is either unclear or does not include specific guidance. The eight cash flow issues are as follows:

Debt prepayment or debt extinguishment costs

Settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing

Contingent consideration payments made after a business combination

Proceeds from the settlement of insurance claims

Proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies

Distribution received from equity method investees

Beneficial interest in securitization transactions

Separately identifiable cash flows and application of the predominance principle

The amendments were effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this ASU did not have a significant effect on the Company’s consolidated financial statements.

In March 2017, the FASB has issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities which shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments in this ASU require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustment should be reflected, as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In February of 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. In addition, under the ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. Entities electing the reclassification are required to apply the guidance either at the beginning of the period of adoption or retrospectively for all periods impacted. This guidance is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company had approximately $65,000 stranded tax effects included in accumulated other comprehensive income. The Company adopted this ASU in the first quarter of 2018.

NOTE 6: Earnings per Share

The Company has granted stock compensation awards with non-forfeitable dividend rights, which are considered participating securities. Accordingly, earnings per share (EPS) is computed using the two-class method as required by ASC 260-10-45. Basic EPS is computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the period which excludes the participating securities. Diluted EPS includes the dilutive effect of additional potential common shares from stock compensation awards, but excludes awards considered participating securities. ESOP shares are not considered outstanding for EPS until they are earned. The following table presents the computation of basic and diluted EPS for the periods indicated (in thousands, except for share and per share data):

	(Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net Income	$	402		$	236		$	1,104		$	575
Allocated to participating securities		-			(3	)		(8	)		(11	)
Net income allocated to common stockholders	$	402		$	233		$	1,096		$	564

Weighted average common shares outstanding, gross		1,065,420			1,066,751			1,066,303			1,066,580
Less: Average unearned ESOP shares and participating securities		(75,177	)		(92,451	)		(83,554	)		(100,675	)
Weighted average common shares outstanding, net		990,243			974,300			982,749			965,905
Effect of diluted based awards		48,794			41,576			44,538			44,347
Weighted average shares and common stock equivalents		1,039,037			1,015,876			1,027,287			1,010,252

Income per common share:
Basic	$	0.41		$	0.24		$	1.12		$	.58
Diluted	$	0.39		$	0.23		$	1.07		$	.56

NOTE 7: Share Based Compensation (Unaudited)

In May 2013, the Company’s stockholders approved the West End Indiana Bancshares, Inc. 2013 Equity Incentive Plan (“Plan”) which provides for awards of stock options and restricted stock to officers, employees and outside directors. The cost of the Plan is based on the fair value of the awards on the grant date. The fair value of restricted stock awards is based on the closing price of the Company’s stock on the grant date. The fair value of stock options is estimated using a Black-Scholes option pricing model using assumptions for dividend yield, stock price volatility, risk-free interest rate, and option term. These assumptions are based on management’s judgments regarding future events, are subjective in nature, and contain uncertainties inherent in an estimate. The cost of the awards are being recognized on a straight-line basis over the five-year vesting period during which participants are required to provide services in exchange for the awards.

Until such time as awards of stock are granted and vest or options are exercised, shares of the Company’s common stock under the Plan are authorized but unissued shares. The maximum number of shares authorized under the Plan is 196,140. Total share-based compensation expense for the three and nine months ended September 30, 2018 (unaudited) was $2,000 and $135,000, and for the three and nine months ended September 30, 2017 (unaudited) was $72,000 and $217,000.

Stock Options

The table below represents the stock option activity for the period shown (unaudited):

	Options			Weighted average exercise price		Remaining contractual life (years)
Options outstanding at January 1, 2018		128,150		$	19.00		5.75
Granted		-			-		-
Exercised		(900	)		18.75		-
Forfeited		-			-		-
Expired		-			-		-
Options outstanding at September 30, 2018		127,250		$	19.00		5.00
Exercisable options outstanding at September 30, 2018		119,650		$	18.85		4.75

	Options			Weighted average exercise price		Remaining contractual life (years)
Options outstanding at January 1, 2017		136,550		$	18.99		6.75
Granted		-			-		-
Exercised		(8,100	)		18.95		-
Forfeited		-			-		-
Expired		-			-		-
Options outstanding at September 30, 2017		128,450		$	19.00		6.00
Exercisable options outstanding at September 30, 2017		93,090		$	18.85		5.75

At September 30, 2018 (unaudited) and December 31, 2017, the Company had $17,000 and $56,000 of unrecognized compensation expense related to stock options. The cost of stock options is amortized in monthly installments over the five-year vesting period. Exercisable options vested in the nine months ended September 30, 2018 and 2017 (unaudited) were 27,760, and 27,760 respectively. Stock option expense for the three and nine months ended September 30, 2018 and 2017 (unaudited) was $2,000, $38,000, $20,000 and $59,000 respectively. The total intrinsic value of options as of September 30, 2018 and September 30, 2017 (unaudited) was $1,411,000 and $1,317,000, respectively. The total intrinsic value of exercisable options as of September 30, 2018 and 2017 (unaudited) was $1,345,000 and $972,000 respectively.

The fair value of the Company’s stock options granted in 2016 was determined using the Black-Scholes option pricing formula. The following assumptions were used in the formula:

Expected volatility		12.34	%
Risk-free interest rate		1.56	%
Expected dividend yield		1.12	%
Expected life (in years)		7.5
Exercise price for the stock options	$	21.50

Expected volatility - Based on the historical volatility of share price for similar companies.

Risk-free interest rate - Based on the U.S. Treasury yield curve and expected life of the options at the time of grant.

Dividend yield - West End Indiana Bancshares, Inc. pays a regular quarterly dividend of $0.06 per share.

Expected life – Based on average of the five year vesting period and the ten year contractual term of the stock option plan.

Exercise price for the stock options - Based on the closing price of the Company’s stock on the date of grant.

Restricted Stock Awards

Restricted stock awards are accounted for as fixed grants using the fair value of the Company’s stock at the time of the grant. Unvested restricted stock awards may not be disposed of or transferred during the vesting period. Restricted stock awards carry with them the right to receive dividends.

The table below presents the restricted stock award activity for the period shown:

	Service-Based Restricted stock awards		Weighted average grant date fair value
Non-vested at January 1, 2018		11,208	$	18.75
Granted		—		—
Vested		11,208	$	18.75
Forfeited		—		—
Non-vested at September 30, 2018		—		—

As of September 30, 2018 (unaudited) and December 31, 2017, the Company had $0 and $97,000 of unrecognized compensation expense related to restricted stock awards. The cost of the restricted stock awards will be amortized in monthly installments over the five-year vesting period. Restricted stock expense for the three and nine months ended September 30, 2018 (unaudited), and 2017 (unaudited) was, $0, $97,000, $53,000 and $158,000, respectively.

NOTE 8: Employee Stock Ownership Plan

As part of the conversion, the Bank established an Employee Stock Ownership Plan (ESOP) covering substantially all employees. The ESOP acquired 112,080 shares of Company common stock at $10 per share in the conversion with funds provided by a loan from the Company. Accordingly, $1,121,000 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity. Shares are released to participants proportionately as the loan is repaid. Dividends on allocated shares are recorded as dividends and charged to retained earnings. Dividends on unallocated shares are used to repay the loan and are treated as compensation expense. Compensation expense is recorded equal to the fair market value of the stock when contributions, which are determined annually by the Board of Directors, are made to the ESOP.

ESOP expense for the three and nine months ended September 30, 2018 (unaudited) was $43,000 and $124,000.

	September 30,		December 31,
	2018		2017
	(unaudited)
Allocated shares		29,555		30,326
Unreleased shares		78,456		78,456
Total ESOP shares		108,011		108,782

Fair value of unreleased shares at September 30 (in thousands)	$	2,361	$	2,267

At September 30, 2018 (unaudited), the fair value of the 29,555 allocated shares held by the ESOP was $889,000 based on the quoted per share price of $30.09. At December 31, 2017, the fair value of the 30,326 allocated shares held by the ESOP was $876,000, based on the quoted per share price of $28.89.

In the event the ESOP is unable to satisfy the obligation to repurchase the shares held by each beneficiary upon the beneficiary’s termination or retirement, the Company is obligated to purchase such shares at their fair market value based on the most recent valuation report any time within 60 days of the distribution date. If this right is not exercised, an additional 60-day exercise period is available in the year following the year in which the distribution is made and begins after a new valuation of the stock has been determined and communicated to the participant or beneficiary. The allocated shares held by the ESOP and the outstanding shares held by former employee’s subject to the repurchase option totaled 29,555 at September 30, 2018 (unaudited) and 30,519 at December 31, 2017. The fair value of the 29,555 shares at September 30, 2018 (unaudited) was $857,000 ($29.00 per share based on the most recent valuation report) and the fair value of the 30,519 shares at December 31, 2017 was $855,000 ($28.00 per share based on the most recent valuation report) and have been classified as mezazanine capital.

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 September 30, 2018 and for three and nine months ended September 30, 2018 and 2017 is intended to assist in understanding the financial condition and results of operations of the Company on a consolidated basis. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10- Q.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” 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 quarterly report.

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

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

competition among depository and other financial institutions;

our success in continuing to emphasize consumer lending, including indirect automobile lending;

our ability to improve our asset quality even as we increase our non-residential lending;

our success in maintaining our commercial and multi-family real estate and our non-owner occupied one- to four-family residential real estate and commercial business lending;

changes in the interest rate environment that reduce our margins or reduce the fair value of our financial instruments;

adverse changes in the securities markets;

changes in laws or government regulations or policies affecting financial institutions, including changes in deposit insurance premiums, regulatory fees and capital requirements, which increase our compliance costs;

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

changes in consumer spending, borrowing and savings habits;

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

changes in our organization, compensation and benefit plans;

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

changes in our financial condition or results of operations that reduce capital available to pay dividends; and

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

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in West End Indiana Bancshares, Inc.’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 30, 2018.

Comparison of Financial Condition at September 30, 2018 and December 31, 2017

Total assets increased $9.3 million, or 3.1%, to $308.7 million at September 30, 2018 from $299.4 million at December 31, 2017. The increase was primarily the result of increases in net loans, cash and cash equivalents, securities available for sale and bank-owned life insurance, partially offset by decreases in loans held for sale, and premises and equipment.

Cash and cash equivalents increased 18.3% to $12.2 million at September 30, 2018 from $10.3 million at December 31, 2017. The increase in total cash and cash equivalents reflects fluctuations in balances for funding normal operations.

Securities available for sale increased $183,000, or 0.9%, to $20.5 million at September 30, 2018 from December 31, 2017. The increase is primarily the result of $4.1 million in purchases of securities available for sale, offset by $3.2 million of cash flow from maturities and pay downs on mortgage backed securities. At September 30, 2018, securities available for sale consisted of mortgage-backed securities and municipal obligations.

Net loans increased $9.0 million, or 3.7%, to $249.9 million at September 30, 2018 from $240.9 million at December 31, 2017. Growth in the loan portfolio was due to increases in commercial and multi-family real estate loans of $3.1 million, one-to-four family residential loans of $2.5 million, construction loans of $1.4 million, indirect consumer loans of $1.2 million, commercial loans of $616,000 and second mortgages and equity lines of credit of $463,000. Total loans held for sale decreased $1.9 million. Total nonperforming loans increased $760,000 to $1.6 million at September 30, 2018 from $823,000 at December 31, 2017.

Deposits decreased $217,000, or 0.1%, to $226.8 million at September 30, 2018 from $227.0 million at December 31, 2017. Core deposits, including savings, interest-bearing and noninterest-bearing checking, and money market deposit accounts, decreased $3.5 million to $116.6 million at September 30, 2018 from $120.1 million at December 31, 2017, and certificates and other time deposits increased $3.3 million to $110.2 million from $106.9 million at September 30, 2018 and December 31, 2017 respectively.

Borrowings, which consisted entirely of Federal Home Loan Bank advances, increased $9.0 million, or 21.7%, to $50.5 million at September 30, 2018 from $41.5 million at December 31, 2017. These advances were used to fund loan growth.

Total stockholders’ equity increased $702,000, or 2.4%, to $29.7 million at September 30, 2018 from $29.0 million at December 31, 2017. The increase was primarily a result of year to date net income of $1.1 million, stock-based compensation expense of $135,000, and ESOP shares earned of $124,000, offset in part by an increase in accumulated other comprehensive loss of $407,000, dividends of $199,000 and shares repurchased of $54,000.

Comparison of Operating Results for the Three Months Ended September 30, 2018 and 2017

General. The Company recorded net income of $402,000 for the quarter ended September 30, 2018 compared to net income of $236,000 for the quarter ended September 30, 2017. The increase to net income resulted primarily from increases in interest income of $222,000, noninterest income of $221,000, a decrease in income tax expense of $105,000 and a decrease in noninterest expenses of $21,000 offset by increases in interest expense of $269,000 and the provision for loan losses of $134,000.

Interest Income. Interest income increased $222,000, or 6.2%, to $3.8 million for the quarter ended September 30, 2018 from $3.6 million for the quarter ended September 30, 2017. The average balance of total interest-earning assets increased $17.2 million, or 6.4%, to $285.6 million for the quarter ended September 30, 2018 from $268.4 million for the quarter ended September 30, 2017. The average yield on interest-earning assets remained steady at 5.27% for the 2018 and 2017 periods.

Interest income on loans increased $160,000, or 4.7%, to $3.6 million for the quarter ended September 30, 2018 from $3.4 million for the quarter ended September 30, 2017. The average balance of net loans increased $13.5 million, or 5.7%, to $251.2 million for the quarter ended September 30, 2018 from $237.7 million for the quarter ended September 30, 2017. The average weighted yield on our loan portfolio decreased 5 basis points to 5.70% for the quarter ended September 30, 2018 from 5.75% for the quarter ended September 30, 2017, as the yield on construction and commercial and multi-family loans decreased from the periods ended September 2018 and 2017.

Interest income on investment securities increased $19,000 to $108,000 for the 2018 quarter from the 2017 quarter. The average balance of our securities available for sale decreased $459,000, or 2.1%, to $21.1 million for the quarter ended September 30, 2018 from $21.6 million for the quarter ended September 30, 2017. The average yield on our securities portfolio increased 39 basis points, to 2.03% for the quarter ended September 30, 2018 from 1.64% for the quarter ended September 30, 2017 as the yield on mortgage backed securities increased quarter to quarter.

Interest Expense. Interest expense increased $269,000, or 48.9%, to $819,000 for the quarter ended September 30, 2018 from $550,000 for the quarter ended September 30, 2017. The average rate paid on deposits increased 28 basis points to 1.11% for the quarter ended September 30, 2018 from 0.83% for the quarter ended September 30, 2017. The average balance of interest-bearing deposits increased $6.0 million, or 3.1%, to $202.5 million for the quarter ended September 30, 2018 from $196.5 million for the quarter ended September 30, 2017. The increase in the average balance of interest-bearing deposits was comprised of increases in certificates of deposit of $11.2 million and savings accounts of $1.1 million, offset by decreases in money market deposit accounts of $3.4 million, and interest-bearing checking accounts of $2.9 million.

The average balance of our certificates of deposit increased $11.2 million, or 11.3%, to $110.4 million for the quarter ended September 30, 2018, from $99.2 million for the quarter ended September 30, 2017. Interest expense on certificates of deposits increased $155,000, or 47.3%, to $483,000 for the quarter ended September 30, 2018 from $328,000 for the year-earlier period. The average rate paid on certificate of deposits increased 43 basis points to 1.74% for the 2018 period from 1.31% for the 2017 period.

Interest expense on borrowed funds, consisting entirely of Federal Home Loan Bank advances, increased $109,000, or 77.2%, to $251,000 for the quarter ended September 30, 2018 from $142,000 for the quarter ended September 30, 2017. The cost of funds increased 62 basis points as the average balance of FHLB advances increased $9.1 million to $50.5 million at September 30, 2018 quarter, from $41.4 million for the September 30, 2017 quarter.

Net Interest Income. Net interest income remained steady at $3.0 million for the quarters ended September 30, 2018 and 2017. Our net interest rate spread decreased to 3.99% from 4.35%, and our net interest margin decreased to 4.16% from 4.50% quarter to quarter as the cost of deposits continues to reprice faster than loans.

The following table summarizes average balances and yields, costs of interest-earnings assets and interest-bearing liabilities for the three months ended September 30, 2018 and 2017.

	Three months ended September 30,
	2018							2017
	Average Balance		Interest and Dividends		Yield/Cost			Average Balance		Interest and Dividends		Yield/Cost
Assets:
Interest-earning assets:
Loans	$	251,171	$	3,607		5.70	%	$	237,659	$	3,447		5.75	%
Investment securities		21,112		108		2.03	%		21,571		89		1.64	%
Other interest-earning assets		13,350		76		2.26	%		9,223		33		1.42	%
		285,633		3,791		5.27	%		268,453		3,569		5.27	%
Noninterest-earning assets		24,102							26,354
Total assets	$	309,735						$	294,807

Liabilities and stockholder's equity
Interest-bearing liabilities:
Now accounts	$	31,267		14		0.18	%	$	34,184		14		0.16	%
Money market accounts		38,383		50		0.52	%		41,775		51		0.49	%
Savings accounts		22,483		21		0.37	%		21,364		15		0.28	%
Certificates of deposit		110,378		483		1.74	%		99,156		328		1.31	%
Total interest-bearing deposits		202,511		568		1.11	%		196,479		408		0.83	%
FHLB advances		50,500		251		1.97	%		41,440		142		1.35	%
Total interest-bearing liabilities		253,011		819		1.28	%		237,919		550		0.92	%
Noninterest-bearing deposits		25,472							25,714
Other noninterest-bearing liabilities		1,646							2,295
Total liabilities		280,129							265,878
Total stockholders' equity		29,606							28,929
Total liabilities and stockholders' equity	$	309,735						$	294,807
Net interest income			$	2,972						$	3,019
Interest rate spread						3.99	%						4.35	%
Net interest margin (annualized)						4.16	%						4.50	%
Average interest-earning assets to average interest-bearing liabilities						112.89	%						112.83	%

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies — Allowance for Loan Losses,” we recorded a provision for loan losses of $516,000 for the quarter ended September 30, 2018, an increase of $134,000 from $382,000 allocated for the quarter ended September 30, 2017. The increase to the provision was based on management’s quarterly analysis of the loan portfolio and credit quality indicators including charge off trends and qualitative factors. The allowance for loan losses was $3.1 million, or 1.2% of total loans, at September 30, 2018, compared to $2.4 million, or 1.0% of total loans, at September 30, 2017. This increase was due primarily to the increase in balances in our loan portfolio of $8.6 million for the period ended September 30, 2018 from September 30, 2017. Non-performing loans increased to $1.6 million at September 30, 2018 from $1.1 million September 30, 2017. The allowance for loan losses as a percentage of non-performing loans was 194.5% at September 30, 2018 compared to 231.3% at September 30, 2017. To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at September 30, 2018 and 2017.

Noninterest Income. For the quarter ended September 30, 2018, noninterest income increased $221,000, or 73.4% to $521,000, due to the increase in other income of $173,000 to $178,000 for the quarter ended September 30, 2018 from $5,000 for the quarter ended September 30, 2017. The increase in other income was primarily due to a decrease in a reserve established in the prior year against reimbursable expenses and interest due from the SBA for a foreclosed commercial property that was sold in the fourth quarter of 2017.

Noninterest Expense. Noninterest expense decreased $21,000, or 0.8%, to $2.5 million for the quarter ended September 30, 2018 from $2.6 million for the quarter ended September 30, 2017. Changes include increases in net occupancy of $72,000, data processing fees of $18,000, and other expenses of $16,000 offset by a decrease in professional fees of $75,000, a decrease in foreclosed real estate and repossession expenses of $59,000. Net occupancy expense increased due to the completion of the administrative and operations building late in 2017 and affixed depreciation on the building and furniture fixtures and equipment. Expenses related to foreclosed real estate decreased due to additional expenses recorded in relation to maintenance of a commercial property held in foreclosed real estate held for sale that occurred in 2017 that did not recur in 2018. Professional fees decreased due to legal and information technology consulting fees that occurred in 2017 that did not recur in 2018.

Income Tax Expense. We recorded $28,000 of income tax expense for the quarter ended September 30, 2018 compared to a $133,000 income tax expense for the 2017 period, reflecting income of $430,000 before income tax expense during the 2018 quarter versus income before income tax expense of $369,000 for the quarter ended September 30, 2017. Our effective tax rate was 6.5% for the quarter ended September 30, 2018 compared to 35.9% for the quarter ended September 30, 2017. The decrease to the provision and effective tax was a result of updated information received in the third quarter of 2018 related to certain estimates that reduced our 2018 tax expense, accompanied by the reduced corporate federal income tax rate, which became effective in December 2017.

Comparison of Operating Results for the Nine Months Ended September 30, 2018 and 2017

General. Net income increased to $1.1 million for the nine months ended September 30, 2018 compared to net income of $575,000 for the nine months ended September 30, 2017, representing a $529,000, or 92.0% increase from the prior period. The increase in net income resulted primarily from increased noninterest income of $770,000, a decrease in noninterest expenses of $208,000, and decreases in the provision for income tax of $17,000, offset by increases in the provision for loan losses of $404,000 and a decrease in net interest income of $62,000.

Interest Income. Interest income increased $670,000, or 6.4%, to $11.2 million for the nine months ended September 30, 2018 from $10.5 million for the nine months ended September 30, 2017. The average balance of total interest-earning assets increased $14.8 million, or 5.5%, to $282.1 million for the nine months ended September 30, 2018 from $267.3 million for the nine months ended September 30, 2017. The average yield on total interest-earning assets increased four basis points to 5.29% for the 2018 period from 5.25% for the 2017 period.

Interest income and fees on loans increased $526,000, or 5.2%, to $10.6 million for the nine months ended September 30, 2018 from $10.1 million for the nine months ended September 30, 2017. The average balance of loans increased $13.1 million, or 5.6%, to $247.5 million for the nine months ended September 30, 2018 from $234.4 million for the nine months ended September 30, 2017. The average yield on the loan portfolio decreased two basis points to 5.75% for the nine months ended September 30, 2018 from 5.77% for the nine months ended September 30, 2017.

Interest income on investment securities increased $25,000, or 8.5%, to $322,000 for the nine months ended September 30, 2018 from $297,000 for the nine months ended September 30, 2017. The average yield on the securities portfolio increased to 2.01% for the nine months ended September 30, 2018 from 1.75% for the nine months ended September 30, 2017. The average balance of securities available for sale decreased $1.3 million, or 5.6%, to $21.4 million for the nine months ended September 30, 2018 from $22.7 million for the 2017 period.

Interest Expense. Interest expense increased $732,000, or 47.1%, to $2.3 million for the nine months ended September 30, 2018 from $1.6 million for the nine months ended September 30, 2017, as both the cost of deposits and the average balance of deposits increased. The average rate paid on deposits increased 25 basis points to 1.05% for the nine months ended September 30, 2018 from 0.80% for nine months ended September 30, 2017. The average balance of interest-bearing deposits increased $2.0 million, or 1.0%, to $203.0 million for the nine months ended September 30, 2018 from $201.0 million for the nine months ended September 30, 2017. The increase in the average balance of our deposits resulted from increases in certificate of deposits of $6.1 million, savings accounts of $519,000, offset by a decrease in interest bearing checking and money market accounts of $4.6 million. In addition, the interest expense of total deposits increased $400,000 to $1.6 million from $1.2 million for the nine months ended September 30, 2018 and 2017, respectively.

The average balance of our certificates of deposit increased $6.0 million, or 5.9%, to $109.5 million for the nine months ended September 30, 2018, from $103.5 million for the nine months ended September 30, 2017. Interest expense on certificates of deposits increased $386,000, or 39.8%, to $1.4 million for the quarter ended September 30, 2018 from $971,000 for the year-earlier period. The rate paid on certificate of deposits increased 41 basis points to 1.66% for the 2018 period from 1.25% for the 2017 period, due to the rising rate environment.

Interest expense on borrowed funds, consisting entirely of Federal Home Loan Bank advances, increased $332,000, or 94.2%, to $684,000 for the nine months ended September 30, 2018 from $352,000 for the nine months ended September 30, 2017, reflecting an increase of 61 basis points in the rate paid to 1.90% for period ending September 30, 2018 from 1.29% for the period ending September 30, 2017. The increase was due to the increased average balance of advances of $11.7 million from the prior quarter and the rising rate environment.

Net Interest Income. Net interest income decreased $62,000, or 0.7%, to $8.88 million for the nine months ended September 30, 2018 from $8.94 million for the nine months ended September 30, 2017. Our net interest rate spread decreased to 4.07% for the nine months ended September 30, 2018 from 4.38% for the nine months ended September 30, 2017, and net interest margin decreased to 4.20% for the nine months ended September 30, 2018 from 4.46% for nine months ended September 30, 2017 as the cost of deposits continues to reprice faster than loans.

The following table summarizes the average balance and yields, costs of interest-earnings assets and interest-bearing liabilities for the nine months ended September 30, 2018 and 2017.

	Nine months ended September 30,
	2018							2017
	Average Balance		Interest and Dividends		Yield/Cost			Average Balance		Interest and Dividends		Yield/Cost
Assets:
Interest-earning assets:
Loans	$	247,475	$	10,635		5.75	%	$	234,371	$	10,109		5.77	%
Investment securities		21,421		322		2.01	%		22,700		297		1.75	%
Other interest-earning assets		13,234		210		2.12	%		10,272		91		1.18	%
		282,130		11,167		5.29	%		267,343		10,497		5.25	%
Noninterest-earning assets		24,331							25,076
Total assets	$	306,462						$	292,419

Liabilities and stockholder's equity
Interest-bearing liabilities:
Now accounts	$	31,934		47		0.20	%	$	34,836		44		0.17	%
Money market accounts		39,484		146		0.49	%		41,149		145		0.47	%
Savings accounts		22,030		51		0.31	%		21,511		41		0.25	%
Certificates of deposit		109,546		1,357		1.66	%		103,489		971		1.25	%
Total interest-bearing deposits		202,994		1,601		1.05	%		200,935		1,201		0.80	%
FHLB advances		48,119		684		1.90	%		36,425		352		1.29	%
Total interest-bearing liabilities		251,113		2,285		1.22	%		237,410		1,553		0.87	%
Noninterest-bearing deposits		24,508							24,248
Other noninterest-bearing liabilities		1,499							1,991
Total liabilities		277,120							263,649
Total stockholders' equity		29,342							28,770
Total liabilities and stockholders' equity	$	306,462						$	292,419
Net interest income			$	8,882						$	8,944
Interest rate spread						4.07	%						4.38	%
Net interest margin (annualized)						4.20	%						4.46	%
Average interest-earning assets to average interest-bearing liabilities						112.35	%						112.61	%

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies — Allowance for Loan Losses,” provision for loan losses of $1.6 million was recorded for the nine months ended September 30, 2018 and $1.1 million for the nine months ended September 30, 2017. The increase to the provision is based on management’s quarterly analyses of the loan portfolio and credit quality indicators including charge-off trends and qualitative factors. The allowance for loan losses was $3.1 million, or 1.2% of total loans, at September 30, 2018, compared to $2.4 million, or 1.0% of total loans, at September 30, 2017. Total nonperforming loans were $1.6 million at September 30, 2018, compared with $1.1 million at September 30, 2017. To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at September 30, 2018 and 2017.

Noninterest income. Noninterest income increased $770,000, or 109.2%, to $1.5 million, for the nine months ended September 30, 2018 from $705,000 for the nine months ended September 30, 2017. The increase was due to reduction in losses on other assets of $563,000, increases in other income of $196,000, and loan servicing income of $113,000, offset by a decrease in gain on sale of loans of $134,000 as premiums on loan sales declined in 2018. The reduction in losses on other assets was due primarily to management’s determination that the fair market value on a single commercial property held in foreclosed real estate held for sale had decreased during the second quarter of 2017 resulting in a write down of $400,000. The increase in other income was due to a decrease in a reserve established in the prior year against reimbursable expenses and interest due from the SBA for a foreclosed commercial property that was sold in the fourth quarter of 2017. The decrease in the reserve was based on management’s ongoing assessment of the collectability on the receivable.

Noninterest Expense. Noninterest expense decreased $207,000, or 2.7%, to $7.4 million for the nine months ended September 30, 2018 from $7.6 million for the nine months ended September 30, 2017. The decrease was due primarily to decreases in foreclosed real estate and repossession expense of $336,000, professional fees of $182,000, and ATM charges of $73,000, offset by increases in net occupancy of $209,000, and salaries and employee benefits of $146,000. Expenses related to foreclosed real estate decreased due to the sale in 2017 of a commercial property held in foreclosure and relief of the related carryforward costs. The savings in ATM charges are due to the transition to a new servicer. Net occupancy expense increased due to the completion of the administrative and operations building late in 2017 and affixed depreciation on the building and furniture fixtures and equipment. Salaries and employee benefits increased due to normal cost of living and merit increases, and other employee benefit programs.

Income Tax Expense. The provision for income taxes was $267,000 for nine months ended September 30, 2018 compared to $284,000 for nine months ended September 30, 2017. Our effective tax rates were 19.5% and 33.1% for the nine months ended September 30, 2018 and 2017, respectively, reflecting an increase in pretax income for the 2018 period and the reduced corporate federal income tax rate which became effective in December 2017.

Liquidity and Capital Resources. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from sale of loans, proceeds from maturities and calls of securities, and Federal Home Loan Bank advances. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $5.2 million and $3.3 million for the nine months ended September 30, 2018 and 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 $(11.8 million) and $(10.0 million) for the nine months ended September 30, 2018 and 2017, respectively. Net cash provided by financing activities, consisting primarily of the activity in deposit accounts and Federal Home Loan Bank advances, was $8.5 million and $9.5 million for the nine months ended September 30, 2018 and 2017.

At September 30, 2018, we exceeded all of our regulatory capital requirements with a Tier 1 (core) capital level of $30.0 million, or 9.7% of adjusted total assets, which is above the required level of $9.8 million, or 4%; and total risk-based capital of $33.1 million, or 13.5% of risk-weighted assets, which is above the required level of $19.6 million, or 8%. Accordingly, West End Bank, S.B. was categorized as well capitalized at September 30, 2018. Management is not aware of any conditions or events since the most recent notification that would change our category.

At September 30, 2018, we had outstanding commitments to originate loans of $17.2 million and stand-by letters of credit of $45,000. We anticipate that we will have sufficient funds available to meet our current loan origination commitments. Certificates of deposit that are scheduled to mature in less than one year from September 30, 2018 totaled $59.1 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

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

Item 4.

Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2018. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended September 30, 2018, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1.

Legal Proceedings

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

Item 1A.

Risk Factors

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

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

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

(b)

Not applicable.

(c)

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

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not Applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

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

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

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

101.INS		XBRL Instance Document.

101.SCH		XBRL Schema Document.

101.CAL		XBRL Calculation Linkbase Document.

101.DEF		XBRL Definition Linkbase Document.

101.LAB		XBRL Label Linkbase Document.

101.PRE		Presentation Linkbase Document

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.

	WEST END INDIANA BANCSHARES, INC.

Date: November 14, 2018	/s/ Timothy R. Frame
	Timothy R. Frame
	President/Chief Executive Officer

Date: November 14, 2018	/s/ Shelley D. Miller
	Shelley D. Miller
	Executive Vice President and Chief Financial Officer

West End Indiana Bancshares, Inc. - FORM 10-Q - November 14, 2018

Attached files

West End Indiana Bancshares, Inc. Reports