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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the year ended December 31, 2018.

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from _______________ to _______________.

 

Commission file number: 001-38239

 

FFBW, INC.

(Exact name of registrant as specified in its charter)

 

Federal

 

82-3027075

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

1360 South Moorland Road

Brookfield, Wisconsin

 

53005

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's telephone number, including area code: (262) 542-4448

 

Securities registered pursuant to Section 12(b) of the Act:

 

Common stock, par value $0.01 per share

 

The NASDAQ Stock Market, LLC

(Title of each class to be registered)

 

(Name of each exchange on which

each class is to be registered)

 

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐     NO ☒

 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐     NO ☒

 

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 filing requirements for the past 90 days. YES ☒     NO ☐

 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒     NO ☐

 

 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

 

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

 

Large accelerated filer ☐ Accelerated filer ☐
   
Non-accelerated filer ☒ Smaller reporting company ☒
   
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 Act). YES ☐     NO ☒

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the closing price of the common stock on June 29, 2018 (the last date of trading of the Registrant’s most recently completed fiscal second quarter), was approximately $28.7 million.

 

As of March 27, 2019, there were 6,682,606 issued and outstanding shares of the Registrant’s Common Stock.

 

DOCUMENTS INCORPORATED BY REFERENCE:

 

(1) Proxy Statement for the 2019 Annual Meeting of Stockholders of the Registrant (Part III).

(2) Annual Report to Stockholders (Parts II and IV).

 

 

 

 

TABLE OF CONTENTS

 

ITEM 1.

BUSINESS

4

 

 

 

ITEM 1A.

RISK FACTORS

39

 

 

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

39

 

 

 

ITEM 2.

PROPERTIES

40

 

 

 

ITEM 3.

LEGAL PROCEEDINGS

40

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

40

 

 

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

41

 

 

 

ITEM 6.

SELECTED FINANCIAL DATA

41

 

 

 

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

41

 

 

 

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

53

 

 

 

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

53

 

 

 

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

53

 

 

 

ITEM 9A.

CONTROLS AND PROCEDURES

53

 

 

 

ITEM 9B.

OTHER INFORMATION

53

 

 

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

53

 

 

 

ITEM 11.

EXECUTIVE COMPENSATION

54

 

 

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

54

 

 

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

55

 

 

 

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

55

 

 

 

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

55

 

 

 

ITEM 16.

FORM 10-K SUMMARY

56

 

 

 

  

CONSOLIDATED FINANCIAL STATEMENTS

F-2

 

3

 

 

PART I

 

ITEM 1.              Business

 

 

FORWARD-LOOKING STATEMENTS

 

This Annual Report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

 

 

statements of our goals, intentions and expectations;

 

 

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

 

 

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

 

 

estimates of our risks and future costs and benefits.

 

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Annual 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;

 

 

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

 

 

our ability to access cost-effective funding;

 

 

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

 

 

demand for loans and deposits in our market area;

 

 

our ability to implement and change our business strategies;

 

 

competition among depository and other financial institutions;

 

 

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

 

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adverse changes in the securities or secondary mortgage markets;

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

changes in consumer spending, borrowing and savings habits;

 

 

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

 

 

our ability to retain key employees;

 

 

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

 

 

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

 

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

 

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BUSINESS OF FFBW, INC.

 

FFBW, Inc. (the “Company”) was incorporated under federal law on October 10, 2017 as part of the mutual holding company reorganization of First Federal Bank of Wisconsin, for the purpose of becoming the savings and loan holding company of First Federal Bank of Wisconsin. Since being incorporated, other than holding the common stock of First Federal Bank of Wisconsin, retaining approximately 50% of the net cash proceeds of the stock conversion offering and making a loan to the employee stock ownership plan of First Federal Bank of Wisconsin, we have not engaged in any business activities to date.

 

The Company is authorized to pursue business activities permitted by applicable laws and regulations, which may include the acquisition of banking and financial services companies. See “Supervision and Regulation – Holding Company Regulation” for a discussion of the activities that are permitted for savings and loan holding companies. We currently have no understandings or agreements to acquire other financial institutions, although we may determine to do so in the future. We may also borrow funds including for reinvestment in First Federal Bank of Wisconsin.

 

Our cash flow depends on earnings from the investment of the net proceeds we retained from our initial public stock offering that was consummated in October 2017, and any dividends we receive from First Federal Bank of Wisconsin. We neither own nor lease any property, but pay a fee to First Federal Bank of Wisconsin for the use of its premises, equipment and furniture. At the present time, we employ only persons who are officers of First Federal Bank of Wisconsin who also serve as officers of FFBW. We use the support staff of First Federal Bank of Wisconsin from time to time and pay a fee to First Federal Bank of Wisconsin for the time devoted to FFBW by employees of First Federal Bank of Wisconsin. However, these persons are not separately compensated by FFBW. FFBW may hire additional employees, as appropriate, to the extent it expands its business in the future.

 

 

BUSINESS OF FIRST FEDERAL BANK OF WISCONSIN

 

General

 

First Federal Bank of Wisconsin is a federally chartered stock savings bank, with its home office in Waukesha, Wisconsin, which is in Waukesha County, located in southeastern Wisconsin approximately 18 miles west of Milwaukee. First Federal Bank of Wisconsin was originally organized in 1922, and has operated continuously in the Milwaukee metropolitan area since that time. In May 2014, we merged with Bay View Federal Savings and Loan Association (“Bay View Federal”), a federal mutual saving association located in Milwaukee, Wisconsin, with approximately $135 million in assets as of the May 17, 2014 closing date of the merger. In the merger, Bay View Federal’s sole office located in the Bay View neighborhood of Milwaukee became a branch office of First Federal Bank of Wisconsin, thereby expanding our presence into Milwaukee County.

 

From our founding in 1922 until 2006, we operated as a traditional thrift institution, offering primarily residential mortgage loans and savings accounts. Beginning in 2006, we expanded our loan operations and began offering commercial products. Our commercial loan offerings have increased significantly in the last decade, including through our merger in 2014 with Bay View Federal.

 

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In July 2016, we hired our current president and chief executive officer, Edward H. Schaefer, and since this time we have conducted an extensive review of our credit, underwriting, information technology and compliance operations. Under the leadership of Mr. Schaefer, we believe that we have significantly upgraded our loan operations, policies, procedures and controls. Among other areas, we have enhanced our commercial real estate and commercial and industrial lending infrastructure and have recently added a new senior vice president of commercial lending. Additionally, consistent with our strategy to grow our commercial loan operations, we have enhanced our suite of deposit products in order to accommodate business customers, and thereby grow our core deposits.

 

Subject to market conditions, we expect to continue to increase our focus on originating commercial real estate and commercial and industrial loans to continue to diversify our overall loan portfolio, increase the overall yield earned on our loans and assist in managing interest rate risk. We also invest in securities, which have historically consisted of mortgage-backed securities issued by U.S. government sponsored enterprises, municipal securities, corporate debt securities and U.S. government and agency securities. We offer a variety of deposit accounts, including checking accounts, savings accounts, health savings accounts and certificate of deposit accounts. Additionally, we have used advances from the Federal Home Loan Bank of Chicago and brokered certificates of deposit to fund our operations.

 

In October 2017, we consummated our reorganization in to a mutual holding company structure whereby First Federal Bank of Wisconsin became a stock bank and the wholly owned subsidiary of FFBW, Inc. Concurrently with this reorganization, FFBW, Inc. sold 44.6% of its stock to the general public, including First Federal Bank of Wisconsin’s employee stock ownership plan, and issued 55.0% of its stock to FFBW, MHC, our top tier mutual holding company. Additionally, as part of the reorganization, we established a charitable foundation called FFBW Community Foundation and funded it with $250,000 in cash and 25,000 shares. The purpose of this foundation is to make contributions to support various charitable organizations operating in our community now and in the future.

 

Our website address is www.firstfederalwisconsin.com. The Company makes available, through links on our website, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports filed or furnished pursuant to Section 13(a) of 15(d) of the Exchange Act, and statements of ownership on Forms 3, 4, 5, and 8. Investors are encouraged to access these reports and other information about our business on our website. The information found on the Company’s website is not incorporated by reference to this or any other report the Company files or furnishes to the SEC.

 

Market Area

 

We conduct our operations from our three full-service banking offices in Waukesha County, Wisconsin, which is located immediately west of Milwaukee, and our office in the Bay View neighborhood on Milwaukee’s south side. We consider our primary lending market area to be southeastern Wisconsin, however, we occasionally make loans secured by properties located outside of our primary lending market, usually to borrowers with whom we have an existing relationship and who have a presence within our primary market.

 

Waukesha County contains a diverse cross section of employment sectors, with a mix of services, manufacturing, wholesale/retail trade, federal and local government, health care facilities and finance-related employment. Waukesha County had an estimated population of 400,000 as of July 2017. The Bay View neighborhood of Milwaukee is a more urban community located in the southern portion of the city of Milwaukee.

 

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Waukesha County is primarily a suburban community and is the second wealthiest county in Wisconsin. According to the United States Census, from 2013 through 2017:

 

 

the median household income in Waukesha County was $81,000 compared to a median household income for Wisconsin of $57,000;

 

 

The median home value was $263,000, compared to $169,000 in Wisconsin;

 

 

Approximately 42.9% of the population of Waukesha County held a bachelor’s degree or higher, compared to 29.0% of Wisconsin; and

 

 

Approximately 4.8% of the population of Waukesha County had incomes below the poverty level, compared to 11.3% of Wisconsin.

 

Competition

 

We face significant competition within our market both in making loans and attracting deposits. Our market area has a high concentration of financial institutions, including large money center and regional banks, community banks and credit unions. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms, consumer finance companies and credit unions. We face additional competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies.

 

As of June 30, 2018 (the latest date for which information is available), our market share was 0.99% of total deposits in Waukesha County, Wisconsin, making us the 21st largest out of 35 banks in Waukesha County. Our market share was 0.12% of total deposits in Milwaukee County, Wisconsin, making us the 23rd largest out of 28 banks in Milwaukee County.

 

Lending Activities

 

Our lending focus was historically originating 1-4 family owner-occupied residential real estate loans, 1-4 family investor-owned residential real estate loans, commercial real estate loans and multifamily loans. We are putting more focus on also originate commercial and industrial loans, commercial development loans and consumer loans. Subject to market conditions and our asset-liability analysis, we expect to continue to increase our focus on commercial real estate and commercial and industrial lending, in an effort to diversify our overall loan portfolio and increase the overall yield earned on our loans.

 

Since 2016, we have hired a new president and chief executive officer who has extensive commercial lending experience and as well as a new senior vice president of commercial lending. Additionally, we continually enhance our underwriting policies and procedures. We believe that these enhanced policies and procedures will further our business strategy of growing our commercial real estate and commercial and industrial loan portfolios while maintaining a strong credit and underwriting culture.

 

We sell the majority of the fixed-rate conforming and eligible jumbo 1-4 family owner-occupied residential real estate loans that we originate, generally on a servicing-released basis, with limited or no recourse, while retaining non-eligible jumbo fixed-rate and adjustable-rate 1-4 family owner-occupied residential real estate loans in order to manage the duration and time to repricing of our loan portfolio.

 

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Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, by type of loan at the dates indicated, excluding loans held for sale of $679,000, $109,000, $592,000, $636,000 and $215,000 at December 31, 2018, 2017, 2016, 2015, 2014, respectively.

 

   

At December 31,

 
   

2018

   

2017

   

2016

 
   

Amount

   

Percent

   

Amount

   

Percent

   

Amount

   

Percent

 
   

(Dollars in thousands)

 
                                                 

Commercial:

                                               

Development

  $ 7,801       3.9

%

  $ 1,498       0.9

%

  $ 2,526       1.5

%

Real estate

    69,425       34.6       53,202       30.7       42,276       25.1  

Commercial and industrial

    13,142       6.4       10,135       5.9       7,617       4.6  

Residential real estate and consumer:

                                               

1-4 family owner-occupied

    41,018       20.4       41,446       23.9       48,001       28.5  

1-4 family investor-owned

    32,312       16.1       33,658       19.4       34,633       20.5  

Multifamily

    34,467       17.2       31,677       18.3       31,905       18.9  

Consumer

    2,733       1.4       1,613       0.9       1,582       0.9  
                                                 

Total loans

    200,898       100.0

%

    173,229       100.0

%

    168,540       100.0

%

                                                 

Deferred loan costs (fees)

    (86 )             (74 )             (88 )        

Allowance for loan losses

    (2,118 )             (1,800 )             (1,478 )        
                                                 

Total loans, net

  $ 198,694             $ 171,355             $ 166,974          

 

   

At December 31,

 
   

2015

   

2014

 
   

Amount

   

Percent

   

Amount

   

Percent

 
   

(Dollars in thousands)

 
                                 

Commercial:

                               

Development

  $ 4,340       2.5

%

  $ 2,639       1.5

%

Real estate

    42,213       24.3       38,177       22.3  

Commercial and industrial

    8,972       5.1       7,173       4.2  

Residential real estate and consumer:

                               

1-4 family owner-occupied

    55,364       31.9       58,014       33.9  

1-4 family investor-owned

    33,353       19.2       32,713       19.1  

Multifamily

    26,963       15.5       27,152       15.9  

Consumer

    2,555       1.5       5,256       3.1  
                                 

Total loans

    173,760       100.0

%

    171,124       100.0

%

                                 

Deferred loan costs (fees)

    (77 )             (71 )        

Allowance for loan losses

    (1,551 )             (1,167 )        
                                 

Total loans, net

  $ 172,132             $ 169,886          

 

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Loan Portfolio Maturities. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2018. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in the year ending December 31, 2019. Maturities are based on the final contractual payment date and do not reflect the impact of prepayments and scheduled principal amortization.

 

   

Commercial development

   

Commercial

real estate

   

Commercial and industrial

   

One- to

four-

family owner-

occupied

   

One- to

four-

family investor-

owned

   

Multifamily

   

Consumer

   

Total

 
   

(In thousands)

 
                                                                 

Due During the Years Ending December 31,

                                                               

2019

  $ 500     $ 5,075     $ 4,276     $ 3,783     $ 1,890     $ 1,535     $ 700     $ 17,759  

2020

    3,398       16,448       1,752       343       7,720       5,373       130       35,164  

2021

    1,040       5,717       2,252       277       3,656       2,052       117       15,111  

2022 to 2023

    2,863       30,283       4,496       656       7,336       14,177       173       59,984  

2024 to 2028

    -       5,914       366       2,678       313       7,645       1,613       18,529  

2029 to 2033

    -       2,326       -       6,139       1,868       415       -       10,748  

2034 and beyond

    -       3,662       -       27,142       9,529       3,270       -       43,603  
                                                                 

Total

  $ 7,801     $ 69,425     $ 13,142     $ 41,018     $ 32,312     $ 34,467     $ 2,733     $ 200,898  

 

The following table sets forth the fixed- and adjustable-rate loans at December 31, 2018 that are contractually due after December 31, 2019.

 

   

Due After December 31, 2019

 
   

Fixed

   

Adjustable

   

Total

 
   

(In thousands)

 
                         

Commercial:

                       

Development

  $ 4,939     $ 2,362     $ 7,301  

Real estate

    50,126       14,224       64,350  

Commercial and industrial

    7,536       1,330       8,866  

Residential real estate and consumer:

                       

1-4 family owner-occupied

    12,981       24,254       37,235  

1-4 family investor-owned

    20,114       10,308       30,422  

Multifamily

    29,603       3,329       32,932  

Consumer

    291       1,742       2,033  

Total

  $ 125,590     $ 57,549     $ 183,139  

 

1-4 Family Owner-Occupied Residential Real Estate Lending. At December 31, 2018, we had $41.0 million of loans secured by 1-4 family owner-occupied residential real estate, representing 20.4% of our total loan portfolio. In addition, at December 31, 2018, we had $679,000 of residential mortgages held for sale. We originate both fixed-rate and adjustable-rate 1-4 family residential real estate loans. At December 31, 2018, 47.6% of our 1-4 family owner-occupied residential real estate loans were fixed-rate loans, and 52.4% of such loans were adjustable-rate loans.

 

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Our fixed-rate 1-4 family residential real estate loans typically have terms of 10 to 30 years and are generally underwritten according to Fannie Mae guidelines when the loan balance meets such guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which as of December 31, 2018 was $453,100 for single-family homes in our market area. We typically sell, servicing-released, our conforming and eligible jumbo fixed-rate 1-4 family owner-occupied residential real estate loans. We also originate loans above the lending limit for conforming loans, which are referred to as “jumbo loans” that we retain in our portfolio. Jumbo loans that we originate typically have 15 to 30 year terms and maximum loan-to-value ratios of 80%. At December 31, 2018, we had $16.5 million in jumbo loans, which represented 40.1% of our 1-4 family owner-occupied residential real estate loans. Our average loan size for jumbo loans was $658,000 at December 31, 2018. Virtually all of our 1-4 family residential real estate loans are secured by properties located in Waukesha County or Milwaukee County, Wisconsin.

 

We generally limit the loan-to-value ratios of our mortgage loans without private mortgage insurance to 85% of the sales price or appraised value, whichever is lower. Loans where the borrower obtains private mortgage insurance may be made with loan-to-value ratios up to 100%.

 

Our adjustable-rate 1-4 family residential real estate loans carry terms to maturity ranging from 10 to 30 years and generally have fixed rates for initial terms of five years, although we also offer terms of three or seven years, and adjust annually thereafter at a margin, which in recent years has been tied to a margin above the 12-month Treasury rate. The maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period, with a lifetime interest rate cap of generally 6% over the initial interest rate of the loan and a rate floor. We typically hold in our loan portfolio our adjustable-rate 1-4 family residential real estate loans.

 

Although adjustable-rate mortgage loans may reduce to an extent our vulnerability to changes in market interest rates because they periodically re-price, as interest rates increase the required payments due from the borrower also increase (subject to rate caps), increasing the potential for default by the borrower. At the same time, the ability of the borrower to repay the loan and the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustments of the contractual interest rate are also limited by our maximum periodic and lifetime rate adjustments. Moreover, the interest rates on most of our adjustable-rate loans do not adjust for up to five years after origination. As a result, the effectiveness of adjustable-rate mortgage loans in compensating for changes in general interest rates may be limited during periods of rapidly rising interest rates.

 

We do not offer “interest only” mortgage loans on permanent 1-4 family residential real estate loans (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan). We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. We do not have a “subprime lending” program for 1-4 family residential real estate loans (i.e., loans that generally target borrowers with weakened credit histories).

 

Generally, residential mortgage loans that we originate include “due-on-sale” clauses, which give us the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid. All borrowers are required to obtain title insurance for the benefit of First Federal Bank of Wisconsin. We also require homeowner’s insurance and fire and casualty insurance and, where circumstances warrant, flood insurance on properties securing real estate loans.

 

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1-4 Family Investor-Owned Residential Real Estate Lending. At December 31, 2018, we had $32.3 million of loans secured by 1-4 family investor-owned residential real estate, representing 16.1% of our total loan portfolio. 1-4 family investor-owned residential real estate loans are underwritten pursuant to our commercial lending underwriting criteria. Generally, we require personal guarantees from the borrowers on these properties, and we will not make loans in excess of 80% loan to value on non-owner-occupied properties.

 

We believe that there is a greater credit risk inherent in investor-owned residential properties than in owner-occupied 1-4 family residential real estate loans since, similar to commercial real estate and multifamily loans, the repayment of these loans may depend, in part, on the successful management of the property and/or the borrower’s ability to lease the units of the property. In addition, the physical condition of investor-owned properties is often below that of owner-occupied properties due to lax property maintenance standards, which has a negative impact on the value of the collateral properties.

 

Multifamily Residential Real Estate Loans. At December 31, 2018, multifamily residential real estate loans were $34.5 million, or 17.2%, of our total loan portfolio. Our multifamily residential real estate loans are generally secured by properties consisting of five or more rental units in our market area. In addition to originating these loans, we also purchase and participate in multifamily residential real estate loans from other financial institutions. Such loans are independently underwritten according to our policies and require satisfactory documentation review by our legal counsel before we will purchase or participate in such loans. We believe our enhanced credit underwriting and loan administration policies and procedures should address these risks.

 

We originate a variety of adjustable-rate multifamily residential real estate loans with terms and amortization periods generally up to 25 years, which may include balloon loans. Interest rates and payments on our adjustable-rate generally are indexed to the prime rate plus a margin. We generally include pre-payment penalties on multi-family residential real estate loans we originate.

 

In underwriting multifamily residential real estate loans, we consider a number of factors, which include the projected net cash flow to the loan’s debt service requirement (generally requiring a minimum of 115%), the age and condition of the collateral, the financial resources and income level of the borrower and the borrower’s experience in owning or managing similar properties. Multifamily residential real estate loans are generally originated in amounts up to 75% of the appraised value or the purchase price of the property securing the loan, whichever is lower. When circumstances warrant, guarantees are obtained from multifamily residential real estate customers. In addition, the borrower’s and guarantor’s financial information on such loans is monitored on an ongoing basis by requiring periodic financial statement updates.

 

If we foreclose on a multifamily residential real estate loan, the marketing and liquidation period to convert the real estate asset to cash can be a lengthy process with substantial holding costs. In addition, vacancies, deferred maintenance, repairs and market stigma can result in prospective buyers expecting sale price concessions to offset their real or perceived economic losses for the time it takes them to return the property to profitability. Depending on the individual circumstances, initial charge-offs and subsequent losses on commercial real estate loans can be unpredictable and substantial.

 

At December 31, 2018, our largest multifamily residential real estate loan had an outstanding balance of $3.8 million and was secured by an apartment complex. At December 31, 2018, this loan was performing in accordance with its repayment terms.

 

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Commercial Real Estate Lending. Consistent with our strategy to diversify our loan portfolio and increase our yield, we are focused on increasing our origination of commercial real estate loans. At December 31, 2018, we had $69.4 million in commercial real estate loans, representing 34.6% of our total loan portfolio. Our commercial real estate loans are generally secured by office and industrial buildings, warehouses, small retail facilities and restaurants and other special purpose commercial properties, primarily in southeastern Wisconsin.

 

Our commercial real estate loans generally have initial terms of five to ten years and amortization terms of 15 to 20 years, with a balloon payment at the end of the initial term, and may be fixed-rate or adjustable-rate loans. Our adjustable-rate commercial real estate loans are generally tied to a margin above the prime rate. The maximum loan-to-value ratio of our commercial real estate loans is generally 80% of the lower of cost or appraised value of the property securing the loan.

 

At December 31, 2018, the average loan size of our outstanding commercial real estate loans was $655,000, and the largest of such loans was a $4.3 million loan secured by a hotel. This loan was performing in accordance with its repayment terms at December 31, 2018.

 

We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including project-level and global cash flows, credit history, and management expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service). We generally require a debt service ratio of at least 1.15x. All commercial real estate loans of $250,000 or more are appraised by outside independent appraisers.

 

Personal guarantees are generally obtained from the principals of commercial real estate loans. We require property and casualty insurance and flood insurance if the property is determined to be in a flood zone area.

 

Commercial real estate loans entail greater credit risks compared to 1-4 family owner-occupied residential real estate loans because they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the property, as repayment of the loan generally is dependent, in large part, on sufficient income from the property to cover operating expenses and debt service. Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for commercial real estate than residential properties.

 

Commercial and Industrial Lending. At December 31, 2018, we had $13.1 million of commercial and industrial loans, representing 6.4% of our total loan portfolio. We originate commercial and industrial loans and lines of credit secured by non-real estate business assets. These loans are generally originated to small businesses in our primary market area. Our commercial and industrial loans are generally used by the borrowers for working capital purposes or for acquiring equipment, inventory or furniture, and are primarily secured by business assets other than real estate, such as business equipment, inventory and accounts receivable. Our commercial and industrial loans are generally term loans with terms of three to seven years and lines of credit with terms of one to two years, with a target loan size of $250,000 to $3.0 million. Our commercial and industrial lines of credit are generally priced on an adjustable-rate basis tied to the prime rate. Term loans are generally priced at a spread over the comparable term Federal Home Loan Bank of Chicago rate. We generally obtain personal guarantees with commercial and industrial loans.

 

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At December 31, 2018, the average loan size of our outstanding commercial and industrial loans was $183,000, and our largest outstanding commercial and industrial loan balance was a $1.3 million loan to a graphics company. This loan was performing in accordance with its repayment terms at December 31, 2018.

 

We typically originate commercial and industrial loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, the experience and stability of the borrower’s management team, earnings projections and their underlying assumptions, and the value and marketability of any collateral securing the loan. As a result, the availability of funds for the repayment of commercial and industrial loans may be substantially dependent on the success of the business itself and the general economic environment in our market area. Therefore, commercial and industrial loans that we originate have greater credit risk than 1-4 family residential real estate loans. In addition, commercial and industrial loans often result in larger outstanding balances to single borrowers, or related groups of borrowers, and also generally require substantially greater evaluation and oversight efforts.

 

As commercial and industrial loans typically help to drive deposit growth, we are increasing our focus on growing this segment of the  loan portfolio. This will also improve diversification and increase loan portfolio yield.

 

Commercial Development Loans. At December 31, 2018, we had $7.8 million, or 3.9% of our total loan portfolio, in commercial development loans. Our commercial development loans may be made for the construction and development of both 1-4 family residential real estate and commercial real estate projects. Our commercial development loans generally have initial terms of up to 36 months, during which the borrower pays interest only. Upon completion of construction, these loans convert to permanent loans. Our commercial development loans are generally underwritten pursuant to the same guidelines used for originating permanent commercial real estate loans, and have rates and terms comparable to commercial real estate loans that we originate. The maximum loan-to-value of our commercial construction loans is 65% of the lesser of the appraised value of the completed property or the contract price for the land plus the value of the improvements. Before making a commitment to fund a construction loan, First Federal Bank of Wisconsin requires detailed cost estimates to complete the project and an appraisal of the property by an independent licensed appraiser. Each property is inspected before disbursement of funds during the term of the construction loan. Loan proceeds are disbursed after inspection based on the percentage of completion method. All borrowers are required to obtain title insurance, property and casualty insurance, and, if the property is determined to be located in a flood zone area, flood insurance. At December 31, 2018, the unadvanced portion of total commercial development loans totaled $9.1 million. At December 31, 2018, our largest commercial development loan had a balance of $1.9 million and was secured by a multifamily complex construction project and was performing in accordance with its repayment terms.

 

Commercial development financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a commercial development loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost is inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project is inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property. Commercial development loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated.

 

Consumer Lending. To a much lesser extent, we offer a variety of consumer loans to individuals who reside or work in our market area, including home equity lines of credit, new and used automobile loans, boat loans, recreational vehicle loans and loans secured by certificates of deposit. At December 31, 2018, our consumer loan portfolio totaled $2.7 million, or 1.4% of our total loan portfolio. At December 31, 2018, we had no unsecured consumer loans.

 

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Consumer loans generally have shorter terms to maturity, which reduces our exposure to changes in interest rates. In addition, management believes that offering consumer loan products helps to expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities.

 

Originations, Sales and Purchases of Loans

 

Most of our loan originations are generated by our loan personnel operating at our banking office locations. While we originate both fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon relative borrower demand and the pricing levels as set in the local marketplace by competing banks, thrifts, credit unions, and mortgage banking companies. Our volume of real estate loan originations is influenced significantly by market interest rates, and, accordingly, the volume of our real estate loan originations can vary from period to period.

 

We consider our balance sheet as well as market conditions on an ongoing basis in making decisions as to whether to hold loans we originate for investment or to sell such loans to investors, choosing the strategy that is most advantageous to us from a profitability and risk management standpoint. For the years ended December 31, 2018 and 2017, we sold $13.0 million and $14.4 million of 1-4 family owner-occupied residential real estate loans. Subject to market and economic conditions, management intends to continue this sales activity in future periods to generate gain on sale income.

 

From time to time, we may purchase loan participations secured by properties within and outside of our primary lending market area in which we are not the lead lender. In these circumstances, we follow our customary loan underwriting and approval policies. At December 31, 2018, we had seven loans with an aggregate balance of $12.0 million in which we were not the lead lender, all of which were performing in accordance with their original repayment terms. We also have participated out portions of loans that exceeded our loans-to-one borrower legal lending limit and for risk diversification. At December 31, 2018 we had participated out portions of five loans with an aggregate amount of $7.2 million. Historically, we have not purchased whole loans, however, pursuant to our growth strategy, we may purchase whole loans in the future.

 

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The following table sets forth our loan origination, purchase, sale and principal repayment activity during the periods indicated.

 

   

Years Ended December 31,

 
   

2018

   

2017

   

2016

   

2015

   

2014

 
   

(In thousands)

 
                                         

Total loans, including loans held for sale, at beginning of period

  $ 173,229     $ 168,540     $ 173,760     $ 171,124     $ 89,533  
                                         

Loans originated:

                                       

Commercial development

    4,332       2,480       1,873       832       -  

Commercial real estate

    12,635       23,892       9,011       16,784       15,415  

Commercial and industrial

    6,434       3,904       2,637       2,582       3,724  

Residential 1-4 family owner-occupied

    30,461       30,742       33,688       26,885       18,178  

Residential 1-4 family investor-owned

    3,580       4,795       5,783       6,212       12,368  

Multifamily

    10,455       8,415       5,380       2,340       7,382  

Consumer

    781       368       76       70       73  

Total loans originated

    68,678       74,596       58,448       55,705       57,140  
                                         

Loans purchased:

                                       

Commercial development

    -       4,000       -       -       3,015  

Commercial real estate

    5,327       418       1,975       1,890       15,292  

Residential 1-4 family owner-occupied

    -       -       -       -       20,109  

Residential 1-4 family investor-owned

    -       -       -       -       22,182  

Multifamily

    -       -       4,000       -       13,607  

Consumer

    -       -       -       -       275  

Total loans purchased

    5,327       4,418       5,975       1,890       74,480  
                                         

Loans sold:

                                       

Commercial real estate

    -       -       -       (3,529 )     (2,031 )

Residential 1-4 family owner-occupied

    (13,003 )     (14,440 )     (20,175 )     (14,434 )     (4,646 )

Total loans sold

    (13,003 )     (14,440 )     (20,175 )     (17,693 )     (6,677 )
                                         

Other:

                                       

Principal repayments

    (33,333 )     (59,885 )     (49,468 )     (37,266 )     (43,352 )
                                         

Net loan activity

    27,669       4,689       (5,220 )     2,636       81,591  

Total loans, including loans held for sale, at end of period

  $ 200,898     $ 173,229     $ 168,540     $ 173,760     $ 171,124  

 

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Loan Approval Procedures and Authority

 

Pursuant to federal law, the aggregate amount of loans that First Federal Bank of Wisconsin is permitted to make to any one borrower or a group of related borrowers is generally limited to 15% of First Federal Bank of Wisconsin’s unimpaired capital and surplus (25% if the amount in excess of 15% is secured by “readily marketable collateral” or 30% for certain residential development loans).  At December 31, 2018, based on the 15% limitation, First Federal Bank of Wisconsin’s loans-to-one-borrower limit was approximately $7.6 million.  On the same date, First Federal Bank of Wisconsin had no borrowers with outstanding balances in excess of this amount. At December 31, 2018, our largest loan relationship with one borrower was for $5.8 million, which was secured by a commercial office building, commercial vehicles, 1-4 family investor-owned properties and commercial development properties, and the underlying loans were performing in accordance with their repayment terms on that date. 

 

Our lending is subject to written underwriting standards and origination procedures.  Decisions on loan applications are made on the basis of detailed applications submitted by the prospective borrower, credit histories that we obtain, and property valuations (consistent with our appraisal policy) prepared by outside independent licensed appraisers approved by our board of directors.  The loan applications are designed primarily to determine the borrower’s ability to repay the requested loan, and the more significant items on the application are verified through use of credit reports, bank statements and tax returns. 

 

All loan approval amounts are based on the aggregate loans, including total balances of outstanding loans and the proposed loan to the individual borrower and any related entity. Our president and chief executive officer has individual authorization to approve loans up to $2.0 million.  Our senior vice president of commercial lending has individual authorization to approve loans up to $1.0 million.  Our Officers Loan Committee, which consists of our president and chief executive officer, senior vice president of commercial lending, and all loan officers, can approve loans up to $3.0 million in the aggregate.  Our Board Credit Committee, which consists of our president and chief executive officer, chief lending officer, and three outside directors can approve loans up to $5.0 million. Loans in excess of $5.0 million require the approval of our full board of directors.

 

Generally, we require title insurance or abstracts on our mortgage loans as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan.

 

Delinquencies and Non-Performing Assets

 

Delinquency Procedures. When a loan payment becomes 15 days past due, we contact the customer by mailing a late notice, and loan officers may contact their customers. If a loan payment becomes 30 days past due, we mail an additional late notice and a loan-specific letter written by a collection representative, and we also place telephone calls to the borrower. These loan collection efforts continue until a loan becomes 90 days past due, at which point we would refer the loan for foreclosure proceedings unless management determines that it is in the best interest of First Federal Bank of Wisconsin to work further with the borrower to arrange a workout plan. The foreclosure process would begin when a loan becomes 120 days delinquent. From time to time we may accept deeds in lieu of foreclosure.

 

Loans Past Due and Nonperforming Assets. Loans are reviewed on a regular basis. Management determines that a loan is impaired or nonperforming when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent.  When a loan is determined to be impaired, the measurement of the loan in the allowance for loan losses is based on present value of expected future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.  

 

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When we acquire real estate as a result of foreclosure, the real estate is classified as foreclosed assets.  Foreclosed assets are recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property. Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for loan losses, or, if the existing allowance is inadequate, charged to expense, in either case during the applicable period of such determination. After acquisition, all costs incurred in maintaining the property are expensed.  Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.

 

Delinquent Loans. The following table sets forth our loan delinquencies by type, by amount and by percentage of type at the dates indicated.

 

   

Loans Delinquent For

                 
   

30-89 Days

   

90 Days and Over

    Total  
   

Number

   

Amount

   

Number

   

Amount

   

Number

   

Amount

 
   

(Dollars in thousands)

 

At December 31, 2018

                                               

Commercial:

                                               

Development

    -     $ -       -     $ -       -     $ -  

Real estate

    -       -       -       -       -       -  

Commercial and industrial

    1       66       -       -       1       66  

Residential real estate and consumer:

                                               

1-4 family owner-occupied

    1       5       -       -       1       5  

1-4 family investor-owned

    1       243       -       -       1       243  

Multifamily

    -       -       -       -       -       -  

Consumer

    -       -       -       -       -       -  

Total

    3     $ 314       -     $ -       3     $ 314  
                                                 

At December 31, 2017

                                               

Commercial:

                                               

Development

    -     $ -       -     $ -       -     $ -  

Real estate

    -       -       -       -       -       -  

Commercial and industrial

    1       75       1       114       2       189  

Residential real estate and consumer:

                                               

1-4 family owner-occupied

    4       436       1       69       5       505  

1-4 family investor-owned

    3       205       2       244       5       449  

Multifamily

    -       -       -       -       -       -  

Consumer

    1       6       -       -       1       6  

Total

    9     $ 722       4     $ 427       13     $ 1,149  
                                                 

At December 31, 2016

                                               

Commercial:

                                               

Development

    -     $ -       -     $ -       -     $ -  

Real estate

    -       -       -       -       -       -  

Commercial and industrial

    1       54       -       -       1       54  

Residential real estate and consumer:

                                               

1-4 family owner-occupied

    10       1,743       2       407       12       2,150  

1-4 family investor-owned

    2       170       3       567       5       737  

Multifamily

    -       -       -       -       -       -  

Consumer

    1       2       -       -       1       2  

Total

    14     $ 1,969       5     $ 974       19     $ 2,943  

 

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    Loans Delinquent For                  
    30-89 Days     90 Days and Over     Total  
    Number     Amount     Number     Amount     Number     Amount  
    (Dollars in thousands)  

At December 31, 2015

                                               

Commercial:

                                               

Development

    -     $ -       1     $ 566       1     $ 566  

Real estate

    -       -       -       -       -       -  

Commercial and industrial

    2       162       -       -       2       162  

Residential real estate and consumer:

                                               

1-4 family owner-occupied

    5       691       3       715       8       1,406  

1-4 family investor-owned

    7       650       7       1,004       14       1,654  

Multifamily

    -       -       -       -       -       -  

Consumer

    3       117       2       200       5       317  

Total

    17     $ 1,620       13     $ 2,485       30     $ 4,105  
                                                 

At December 31, 2014

                                               

Commercial:

                                               

Development

    2     $ 1,083       -     $ -       2     $ 1,083  

Real estate

    -       -       -       -       -       -  

Commercial and industrial

    1       118       -       -       1       118  

Residential real estate and consumer:

                                               

1-4 family owner-occupied

    6       958       6       1,107       12       2,065  

1-4 family investor-owned

    1       170       4       363       5       533  

Multifamily

    -       -       -       -       -       -  

Consumer

    2       172       2       43       4       215  

Total

    12     $ 2,501       12     $ 1,513       24     $ 4,014  

 

Nonperforming Loans. We generally cease accruing interest on our loans when contractual payments of principal or interest have become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income is reversed. Interest received on nonaccrual loans generally is applied against principal or interest and is recognized on a cash basis. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

 

Nonperforming loans decreased to $720,000, or 0.36% of total loans, at December 31, 2018 from $1.2 million, or 0.72% of total loans, at December 31, 2017 and $2.9 million, or 1.72% of total loans, at December 31, 2016.

 

Troubled Debt Restructurings. Loans are accounted for as troubled debt restructurings when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and First Federal Bank of Wisconsin grants a concession to the borrower that it would not otherwise consider. These concessions include a modification of terms, such as a reduction of the stated interest rate or loan balance, a reduction of accrued interest, an extension of the maturity date at an interest rate lower than current market rate for a new loan with similar risk, or some combination thereof to facilitate payment. Troubled debt restructurings are considered impaired loans. There were no additional funds committed to impaired loans as of December 31, 2018. As of December 31, 2017, approximately $50,000 was committed to one impaired loan relationship to finance costs relating to the disposal of several properties.

 

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Loans on non-accrual status at the date of modification are initially classified as non-accrual troubled debt restructurings. At December 31, 2018, we had $700,000 in non-accrual troubled debt restructurings. Our policy provides that troubled debt restructured loans are returned to accrual status after a period of satisfactory and reasonable future payment performance under the terms of the restructuring. Satisfactory payment performance is generally no less than six consecutive months of timely payments. At December 31, 2018, we had $501,000 in accruing troubled debt restructurings.

 

Nonperforming Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.

 

   

At December 31,

 
   

2018

   

2017

   

2016

   

2015

   

2014

 
    (In thousands)  
                                         

Non-accrual loans:

                                       

Commercial:

                                       

Development

  $ -     $ -     $ -     $ 566     $ 646  

Real estate

    -       -       -       -       -  

Commercial and industrial

    20       114       126       -       -  

Residential real estate and consumer:

                                       

1-4 family owner-occupied

    365       580       1,698       1,871       1,410  

1-4 family investor-owned

    241       549       827       1,003       825  

Multifamily

    -       -       248       277       306  

Consumer

    94       -       -       200       192  

Total

    720       1,243       2,899       3,917       3,379  
                                         

Accruing loans 90 days or more past due:

                                       

Residential real estate and consumer:

                                       

Consumer

    -       -       -       -       23  

Total loans 90 days or more past due

    -       -       -       -       23  

Total non-performing loans

    720       1,243       2,899       3,917       3,402  

Foreclosed assets

    69       619       667       -       -  

Other non-performing assets

    -       -       -       -       -  

Total non-performing assets

  $ 789     $ 1,862     $ 3,566     $ 3,917     $ 3,402  
                                         

Troubled debt restructurings:

                                       

Commercial:

                                       

Development

  $ -     $ -     $ -     $ 566     $ 646  

Real estate

    -       -       14       -       -  

Commercial and industrial

    67       192       127       -       -  

Residential real estate and consumer:

                                       

1-4 family owner-occupied

    785       630       2,104       1,685       2,600  

1-4 family investor-owned

    241       808       2,454       927       997  

Multifamily

    -       -       468       277       306  

Consumer

    108       -       -       171       -  

Total

  $ 1,201     $ 1,630     $ 5,167     $ 3,626     $ 4,549  
                                         

Ratios:

                                       

Total non-performing loans to total loans

    0.36 %     0.72 %     1.72 %     2.25 %     1.99 %

Total non-performing loans to total assets

    0.27 %     0.48 %     1.20 %     1.61 %     1.41 %

Total non-performing assets to total assets

    0.30 %     0.73 %     1.48 %     1.61 %     1.41 %

 

For the year ended December 31, 2018, gross interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms was $31,000. Interest income recognized on such loans for the year ended December 31, 2018 was $31,000.

 

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Foreclosed Assets. Foreclosed assets consist of property acquired through formal foreclosure, in-substance foreclosure or by deed in lieu of foreclosure, and are recorded at the lower of recorded investment or fair value less estimated costs to sell. Write-downs from recorded investment to fair value, which are required at the time of foreclosure, are charged to the allowance for loan losses. After transfer, adjustments to the carrying value of the properties that result from subsequent declines in value are charged to operations in the period in which the declines occur. During the year ended December 31, 2018, six loans totaling $221,000 secured by one- to four-family investor-owned residential properties and one loan totaling $69,000 secured by 1-4 family owner-occupied residential property were transferred into foreclosed assets. We had $69,000 and $619,000 of foreclosed assets at December 31, 2018 and 2017, respectively.

 

Other Loans of Concern. There were no other loans at December 31, 2018 that are not already disclosed where there is information about possible credit problems of borrowers that caused management to have serious doubts about the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure of such loans in the future.

 

Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the OCC to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.

 

When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses in the loan portfolio. General allowances represent loss allowances which have been established to cover probable accrued losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific loss allowances.

 

In accordance with our loan policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations. Loans are listed on the “watch list” initially because of emerging financial weaknesses even though the loan is currently performing as agreed, or if the loan possesses weaknesses although currently performing. If a loan deteriorates in asset quality, the classification is changed to “special mention,” “substandard,” “doubtful” or “loss” depending on the circumstances and the evaluation. Generally, loans 90 days or more past due are placed on nonaccrual status and classified “substandard.” Management reviews the status of each impaired loan on our watch list on a quarterly basis.

 

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Allowance for Loan Losses

 

The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb probable credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, and economic conditions. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Because of uncertainties associated with regional economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that management’s estimate of probable credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term. The allowance is increased by a provision for loan losses, which is charged to expense and reduced by full and partial charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses. Management’s periodic evaluation of the adequacy of the allowance is based on various factors, including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses.

 

As an integral part of their examination process, the Office of the Comptroller of the Currency will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses. However, regulatory agencies are not directly involved in the process for establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

 

Allowance for Loan Losses. The following table sets forth activity in our allowance for loan losses for the periods indicated.

 

   

At or For the Years Ended December 31,

 
   

2018

   

2017

    2016     2015     2014  
   

(Dollars in thousands)

 
                                         

Balance at beginning of year

  $ 1,800     $ 1,478     $ 1,551     $ 1,167     $ 1,033  

Charge-offs:

                                       

Commercial:

                                       

Development

    -       -       -       -       -  

Real estate

    -       -       -       -       -  

Commercial and industrial

    24       -       -       -       -  

Residential real estate and consumer:

                                       

1-4 family owner-occupied

    -       51       255       22       204  

1-4 family investor-owned

    172       82       493       74       145  

Multifamily

    -       -       -       -       -  

Consumer

    -       -       169       20       40  

Total charge-offs

    196       133       917       116       388  
                                         

Recoveries:

                                       

Residential real estate and consumer:

                                       

1-4 family owner-occupied

    1       18       -       140       -  

1-4 family investor-owned

    -       18       -       -       -  

Total recoveries

    1       36       -       140       -  

Net charge-offs

    195       97       917       (24 )     388  

Provision for loan losses

    513       419       844       360       523  

Balance at end of year

  $ 2,118     $ 1,800     $ 1,478     $ 1,551     $ 1,167  
                                         

Ratios:

                                       

Net charge-offs to average loans outstanding

    0.10 %     0.06 %     0.53 %     -0.01 %     0.27 %

Allowance for loan losses to non-performing loans at end of year

    294.17 %     144.81 %     50.98 %     39.60 %     34.30 %

Allowance for loan losses to total loans at end of year

    1.05 %     1.04 %     0.88 %     0.89 %     0.68 %

 

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Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category, the total loan balances by category, and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. At the dates indicated, we had no unallocated allowance for loan losses.

 

   

At December 31,

 
   

2018

   

2017

 
   

Amount

   

Percent of

Allowance to

Total Allowance

   

Percent of Loans

in Category to

Total Loans

   

Amount

   

Percent of

Allowance to

Total Allowance

   

Percent of Loans

in Category to

Total Loans

 
   

(Dollars in thousands)

 

Commercial:

                                               

Development

  $ 92       4.3

%

    3.9

%

  $ 18       1.0

%

    0.9

%

Real estate

    697       32.9       34.6       537       29.8       30.7  

Commercial and industrial

    151       7.1       6.4       105       5.8       5.9  

Residential real estate and consumer:

                                               

1-4 family owner-occupied

    433       20.5       20.4       420       23.3       23.9  

1-4 family investor-owned

    407       19.2       16.1       411       22.9       19.4  

Multifamily

    334       15.8       17.2       306       17.0       18.3  

Consumer

    4       0.2       1.4       3       0.2       0.9  

Total allowance for loan losses

  $ 2,118       100.0

%

    100.0

%

  $ 1,800       100.0

%

    100.0

%

 

 

 

   

At December 31,

 
   

2016

   

2015

   

2014

 
   

Amount

   

Percent of

Allowance to

Total Allowance

   

Percent of Loans in Category to Total Loans

   

Amount

   

Percent of

Allowance to

Total Allowance

   

Percent of Loans in Category to

Total Loans

   

Amount

   

Percent of

Allowance to

Total Allowance

   

Percent of Loans in Category to Total Loans

 
   

(Dollars in thousands)

 

Commercial:

                                                                       

Development

  $ 23       1.6

%

    1.5

%

  $ 23       1.5

%

    2.5

%

  $ 9       0.8

%

    1.5

%

Real estate

    268       18.1       25.1       416       26.8       24.3       322       27.6       22.3  

Commercial and industrial

    57       3.9       4.6       58       3.7       5.1       103       8.8       4.2  

Residential real estate and consumer:

                                                                       

1-4 family owner-occupied

    388       26.2       28.5       498       32.1       31.9       152       13.0       33.9  

1-4 family investor-owned

    500       33.8       20.5       313       20.2       19.2       384       32.8       19.1  

Multifamily

    195       13.2       18.9       126       8.1       15.5       26       2.3       15.9  

Consumer

    47       3.2       0.9       118       7.6       1.5       171       14.7       3.1  

Total allowance for loan losses

  $ 1,478       100.0

%

    100.0

%

  $ 1,551       100.0

%

    100.0

%

  $ 1,167       100.0

%

    100.0

%

 

 

At December 31, 2018, our allowance for loan losses represented 1.05% of total loans and 294.17% of non-performing loans, and at December 31, 2017, our allowance for loan losses represented 1.04% of total loans and 144.81% of non-performing loans. There were $195,000 and $97,000 in net loan charge-offs during the years ended December 31, 2018 and 2017, respectively.

 

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Table of Contents

 

Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for loan losses may not be adequate and management may determine that increases in the allowance are necessary if the quality of any portion of our loan portfolio deteriorates as a result. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.

 

Investment Activities

 

General. The goals of our investment policy are to provide and maintain liquidity to meet deposit withdrawal and loan funding needs, to help mitigate interest rate and market risk, to diversify our assets, and to generate a reasonable rate of return on funds within the context of our interest rate and credit risk objectives. Our board of directors is responsible for adopting our investment policy. The investment policy is reviewed annually by the board of directors. Authority to make investments under the approved investment policy guidelines is delegated to our president and chief executive officer and our chief financial officer. All investment transactions are reviewed at the next regularly scheduled meeting of the board of directors. Since 2014, we have classified all of our investment securities as available-for-sale.

 

We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various government-sponsored enterprises and municipal governments, deposits at the Federal Home Loan Bank of Chicago, certificates of deposit of federally insured institutions, investment grade corporate bonds and investment grade marketable equity securities. We also are required to maintain an investment in Federal Home Loan Bank of Chicago stock. While we have the authority under applicable law to invest in derivative securities, we had no investments in derivative securities at December 31, 2018.

 

The following table sets forth the amortized cost and fair value of our investment securities portfolio (excluding Federal Home Loan Bank of Chicago common stock) at the dates indicated. At the dates indicated, all of our investment securities were held as available-for-sale.

 

   

At December 31,

 
   

2018

   

2017

   

2016

 
   

Amortized

   

Fair

   

Amortized

   

Fair

   

Amortized

   

Fair

 
   

Cost

   

Value

   

Cost

   

Value

   

Cost

   

Value

 
   

(In thousands)

 
                                                 

U.S. government and agency securities

  $ 1,299     $ 1,307     $ 2,211     $ 2,220     $ 3,885     $ 3,919  

State and political subdivision securities

    8,381       8,295       13,102       13,137       15,606       15,562  

Mortgage-backed securities

    29,164       28,536       33,908       33,467       23,155       22,892  

Certificates of deposits

    1,500       1,446       4,000       3,997       1,000       1,014  

Corporate debt securities

    4,220       4,167       5,171       5,191       5,159       5,226  

Total securities available for sale

  $ 44,564     $ 43,751     $ 58,392     $ 58,012     $ 48,805     $ 48,613  

  

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Table of Contents

 

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at December 31, 2018 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All of our investment securities at this date were held as available-for-sale.

 

   

One Year or Less

   

More than One Year

through Five Years

   

More than Five Years

through Ten Years

   

More than Ten Years

   

Total Securities

 
   

Amortized

Cost

   

Weighted

Average

Yield

   

Amortized

Cost

   

Weighted

Average

Yield

   

Amortized

Cost

   

Weighted

Average

Yield

   

Amortized

Cost

   

Weighted

Average

Yield

   

Amortized

Cost

   

Fair

Value

   

Weighted Average Yield

 
   

(Dollars in thousands)

 
                                                                                         

U.S. government and agency securities

  $ -       -

%

  $ 267       3.87

%

  $ 394       4.37

%

  $ 638       3.05

%

  $ 1,299     $ 1,307       3.62

%

State and political subdivision securities

    250       3.19       976       3.28       3,205       2.98       3,950       2.57       8,381       8,295       2.83  

Mortgage-backed securities

    26       3.63       496       2.12       8,802       2.65       19,840       2.50       29,164       28,536       2.54  

Certificates of deposits

    250       2.68       1,000       2.48       250       2.75       -       -       1,500       1,446       2.56  

Corporate debt securities

    2,142       2.30       1,039       4.42       1,039       2.72       -       -       4,220       4,167       2.92  

Total securities available for sale

  $ 2,668       2.43

%

  $ 3,778       3.27

%

  $ 13,690       2.78

%

  $ 24,428       2.53

%

  $ 44,564     $ 43,751       2.66

%

 

 

U.S. Government and Agency Obligations. At December 31, 2018, we had U.S. government and agency securities totaling $1.3 million, which constituted 3.0% of our securities portfolio. While these securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent we deem appropriate, for liquidity purposes, as collateral for borrowings and for prepayment protection.

 

Corporate Debt Securities. At December 31, 2018, we had corporate debt securities totaling $4.2 million, which constituted 9.5% of our securities portfolio. All of our corporate debt securities are investment grade and have maturities not in excess of 10 years. These securities generally provide slightly higher yields than U.S. government and agency securities and mortgage-backed securities.

 

State and Political Subdivision (“Municipal”) Securities. At December 31, 2018, we had municipal securities totaling $8.3 million, which constituted 19.0% of our securities portfolio. Our current municipal securities have a weighted average maturity of 9.3 years. These securities often provide slightly higher after-tax yields than U.S. government and agency securities and mortgage-backed securities, but are not as liquid as other investments, so we typically maintain investments in municipal securities, to the extent appropriate, for generating returns in our investment portfolio.

 

Mortgage-Backed Securities. At December 31, 2018, we had mortgage-backed securities totaling $28.5 million, which constituted 65.2% of our securities portfolio, including $12.3 million of agency collateralized mortgage obligations (CMOs). Of the $28.5 million of mortgage-backed securities, $8.4 million were commercial and $20.1 million were residential mortgage-backed securities. Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages. Certain types of mortgage-backed securities are commonly referred to as “pass-through” certificates because the principal and interest of the underlying loans is “passed through” to investors, net of certain costs, including servicing and guarantee fees. Residential mortgage-backed securities typically are collateralized by pools of 1-4 family or multi-family mortgages, although we invest primarily in mortgage-backed securities backed by 1-4 family mortgages. Commercial mortgage-backed securities typically are collateralized by pools of commercial mortgage loans. The issuers of such securities pool and resell the participation interests in the form of securities to investors such as First Federal Bank of Wisconsin. The interest rate of the security is lower than the interest rates of the underlying loans to allow for payment of servicing and guaranty fees. All of our mortgage-backed securities are either backed by Ginnie Mae, a U.S. government agency, the Small Business Administration or government-sponsored enterprises, such as Fannie Mae and Freddie Mac.

 

Residential and commercial mortgage-backed securities issued by U.S. government agencies and government-sponsored enterprises are more liquid than individual mortgage loans because there is an active trading market for such securities. In addition, residential and commercial mortgage-backed securities may be used to collateralize our borrowings. Investments in residential and commercial mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such interests, thereby affecting the net yield on our securities. Current prepayment speeds determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

 

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Other Securities. We held common stock of the Federal Home Loan Bank of Chicago in connection with our borrowing activities totaling $739,000 at December 31, 2018. The Federal Home Loan Bank of Chicago common stock is carried at cost. We may be required to purchase additional Federal Home Loan Bank of Chicago stock if we increase borrowings in the future.

 

Bank-Owned Life Insurance. We invest in bank-owned life insurance to provide us with a funding source for certain of our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. At December 31, 2018, our balance in bank-owned life insurance totaled $7.0 million and was issued by two insurance companies, both of which were rated AA+ by Standard & Poors.

 

Sources of Funds

 

General. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also use borrowings, primarily Federal Home Loan Bank of Chicago advances, to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds. In addition, we receive funds from scheduled loan payments, loan and mortgage-backed securities prepayments, maturities and calls of available-for-sale securities, retained earnings and income on earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

 

Deposits. Our deposits are generated primarily from residents within our primary market area. We offer a selection of deposit accounts, including noninterest-bearing checking accounts, interest-bearing checking accounts, money market accounts, statement savings, health savings and certificates of deposit. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. We have not in the past used, and currently do not hold, any brokered deposits. However, depending on our needs, we expect to utilize brokered certificates of deposit and online sources as alternative funding sources. At December 31, 2018, our core deposits, which are deposits other than certificates of deposit, were $95.1 million, representing 51.9% of total deposits. As part of our business strategy, we intend to continue our effort to increase our core deposits through the commercial product line, which will allow the brokered certificates and online sources to run off upon maturity.

 

Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. The flow of deposits is influenced significantly by general economic conditions, changes in interest rates and competition. The variety of deposit accounts that we offer allows us to be competitive in generating deposits and to respond with flexibility to changes in our customers’ demands. Our ability to gather deposits is impacted by the competitive market in which we operate, which includes numerous financial institutions of varying sizes offering a wide range of products. We believe that deposits are a stable source of funds, but our ability to attract and maintain deposits at favorable rates will be affected by market conditions, including competition and prevailing interest rates.

 

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The following tables set forth the distribution of total deposit accounts, by account type, for the periods indicated.

 

   

For the Years Ended December 31,

 
   

2018

   

2017

   

2016

 
   

Average

Balance

   

Percent

   

Weighted

Average Rate

   

Average

Balance

   

Percent

   

Weighted

Average Rate

   

Average

Balance

   

Percent

   

Weighted

Average Rate

 
   

(Dollars in thousands)

 

Deposit type:

                                                                       

Noninterest- bearing checking

  $ 19,631       10.92

%

    -

%

  $ 20,902       11.30

%

    -

%

  $ 11,508       6.20

%

    -

%

Interest-bearing checking

    5,225       2.91       0.46       3,255       1.76       0.34       7,779       4.19       0.71  

Money market

    51,855       28.83       0.84       54,956       29.70       0.51       49,629       26.75       0.32  

Statement savings

    15,394       8.56       0.19       16,447       8.89       0.10       17,618       9.49       0.13  

Health savings

    11,462       6.37       0.26       11,486       6.21       0.26       11,558       6.23       0.37  

Certificates of deposit

    76,277       42.41       1.52       77,990       42.14       1.25       87,476       47.14       1.24  
                                                                         

Total deposits

  $ 179,844       100.00

%

    0.71

%

  $ 185,036       100.00

%

    0.71

%

  $ 185,568       100.00

%

    0.74

%

 

 

As of December 31, 2018, the aggregate amount of our outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $54.6 million. The following table sets forth the maturity of those certificates as of December 31, 2018.

 

   

At

 
   

December 31, 2018

 
   

(In thousands)

 

Three months or less

  $ 7,727  

Over three months through six months

    7,437  

Over six months through one year

    26,537  

Over one year to three years

    11,038  

Over three years

    1,839  

Total

  $ 54,578  

 

Borrowed Funds. We may obtain advances from the Federal Home Loan Bank of Chicago upon the security of our capital stock in the Federal Home Loan Bank of Chicago and certain of our mortgage loans. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. To the extent such borrowings have different terms to repricing than our deposits, they can change our interest rate risk profile. At December 31, 2018, we had $17.8 million in advances from the Federal Home Loan Bank of Chicago. At December 31, 2018, our available and unused portion of this borrowing agreement was $2 million.

 

Additionally, at December 31, 2018 we had a $7 million federal funds rate line of credit with the Bankers’ Bank of Wisconsin, of which $0 was drawn at December 31, 2018. We also has the authority to borrow through the Federal Reserve’s Discount Window.

 

The following table sets forth information concerning balances and interest rates on our borrowings at and for the periods shown:

 

   

At or For the Years Ended

 
   

December 31,

 
   

2018

   

2017

   

2016

 
   

(Dollars in thousands)

 
                         

Balance at end of period

  $ 17,750     $ 12,750     $ 21,277  

Average balance during period

  $ 22,552     $ 17,866     $ 23,147  

Maximum outstanding at any month end

  $ 39,900     $ 24,750     $ 24,250  

Weighted average interest rate at end of period

    2.10 %     1.69 %     1.21 %

Average interest rate during period

    1.92 %     1.34 %     1.16 %

 

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Expense and Tax Allocation

 

First Federal Bank of Wisconsin has entered into an agreement with FFBW, Inc. to provide it with certain administrative support services for compensation not less than the fair market value of the services provided. In addition, First Federal Bank of Wisconsin and FFBW, Inc. have entered into an agreement to establish a method for allocating and for reimbursing the payment of their consolidated tax liability.

 

Personnel

 

As of December 31, 2018, we had 43 full-time equivalent employees. Our employees are not represented by any collective bargaining group. Management believes that we have a good working relationship with our employees.

 

TAXATION

 

FFBW Inc. and First Federal Bank of Wisconsin are subject to federal and state income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal and state taxation is intended only to summarize material income tax matters and is not a comprehensive description of the tax rules applicable to FFBW, MHC, FFBW, Inc. and First Federal Bank of Wisconsin.

 

Our federal and state tax returns have not been audited for the past six years.

 

Federal Taxation

 

Method of Accounting. For federal income tax purposes, First Federal Bank of Wisconsin currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal income tax returns. FFBW, Inc. and First Federal Bank of Wisconsin file a consolidated federal income tax return. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for income taxes on bad debt reserves by savings institutions. For taxable years beginning after 1995, First Federal Bank of Wisconsin has been subject to the same bad debt reserve rules as commercial banks. It currently utilizes the specific charge-off method under Section 582(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

 

Minimum Tax. The Internal Revenue Code imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, less an exemption amount, referred to as “alternative minimum taxable income.” The alternative minimum tax is payable to the extent tax computed this way exceeds tax computed by applying the regular tax rates to regular taxable income. Net operating losses can, in general, offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. After the computation of taxes for the year ended December 31, 2018, First Federal Bank of Wisconsin had no minimum tax credit carryforward.

 

Net Operating Loss Carryovers. Generally, a financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At December 31, 2018, First Federal Bank of Wisconsin had no federal net operating loss carryovers.

 

Capital Loss Carryovers. A corporation cannot recognize capital losses in excess of capital gains generated. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. Any capital loss carryback or carryover is treated as a short-term capital loss for the year to which it is carried. As such, it is grouped with any other capital losses for the year to which it is carried and is used to offset any capital gains. Any undeducted loss remaining after the five-year carryover period is not deductible. At December 31, 2018, First Federal Bank of Wisconsin had no capital loss carryovers.

 

Corporate Dividends. FFBW, Inc. may generally exclude from its income 100% of dividends received from First Federal Bank of Wisconsin as a member of the same affiliated group of corporations.

 

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State Taxation

 

FFBW, Inc. is subject to the Wisconsin corporate franchise (income) tax. Wisconsin imposes a corporate franchise tax of 7.9% on the combined taxable incomes of the members of FFBW’s consolidated income tax group, which will include First Federal Bank of Wisconsin.

 

Our  state tax returns have not been audited for the last six years.

 

Net Operating Loss Carryovers. Wisconsin law allows financial institutions to carry forward a Wisconsin net operating loss to the succeeding 20 taxable years. At December 31, 2018, the Company had no Wisconsin net operating loss carryovers.

 

REGULATION AND SUPERVISION

General

 

As a federal savings association, First Federal Bank of Wisconsin is subject to examination, supervision and regulation, primarily by the Office of the Comptroller of the Currency, and, secondarily, by the Federal Deposit Insurance Corporation (“FDIC”) as deposits insurer. The federal system of regulation and supervision establishes a comprehensive framework of activities in which First Federal Bank of Wisconsin may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund.

 

First Federal Bank of Wisconsin is also regulated to a lesser extent by the Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,” which governs the reserves to be maintained against deposits and other matters. In addition, First Federal Bank of Wisconsin is a member of and owns stock in the Federal Home Loan Bank of Chicago, which is one of the 11 regional banks in the Federal Home Loan Bank System. First Federal Bank of Wisconsin’s relationship with its depositors and borrowers also is regulated to a great extent by federal law and, to a lesser extent, state law, including in matters concerning the ownership of deposit accounts and the form and content of First Federal Bank of Wisconsin’s loan documents.

 

As a savings and loan holding company, FFBW, Inc. is subject to examination and supervision by, and be required to file certain reports with, the Federal Reserve Board. FFBW, Inc. is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

 

Set forth below are certain material regulatory requirements that are applicable to First Federal Bank of Wisconsin and FFBW, Inc. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on First Federal Bank of Wisconsin and FFBW, Inc. Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on FFBW, Inc., First Federal Bank of Wisconsin and their operations.

 

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Dodd-Frank Act

 

The Dodd-Frank Act which became law in 2011 made significant changes to the regulatory structure for depository institutions and their holding companies. However, the Dodd-Frank Act’s changes go well beyond that and affect the lending, investments and other operations of all depository institutions. The Dodd-Frank Act required the Federal Reserve Board to set minimum capital levels for both bank holding companies and savings and loan holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital for holding companies were restricted to capital instruments that were then currently considered to be Tier 1 capital for insured depository institutions. Subsequent regulations issued by the Federal Reserve Board generally exempted from these requirements bank and savings and loan holding companies of less than $1 billion of consolidated assets. The legislation also established a floor for capital of insured depository institutions, and directed the federal banking regulators to implement new leverage and capital requirements that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

 

The Dodd-Frank Act created a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as First Federal Bank of Wisconsin, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets continue to be examined for compliance by their applicable bank regulators. The new legislation also weakened the federal preemption available for national banks and federal savings associations, and gave state attorneys general the ability to enforce applicable federal consumer protection laws.

 

The Dodd-Frank Act broadened the base for FDIC insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital of a financial institution. The legislation also permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor. The Dodd-Frank Act increased stockholder influence over boards of directors by requiring publicly traded companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments. The legislation also directed the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank and savings and loan holding company executives, regardless of whether the company is publicly traded. Further, the legislation required that originators of securitized loans retain a percentage of the risk for transferred loans, directed the Federal Reserve Board to regulate pricing of certain debit card interchange fees and contained a number of reforms related to mortgage originations.

 

Many provisions of the Dodd-Frank Act involve delayed effective dates and/or require implementing regulations. The implementation of the legislation is an ongoing process and the impact on operations cannot yet fully be assessed. The Dodd-Frank Act has resulted in, and may continue to result in, an increased regulatory burden and increased compliance, operating and interest expense for First Federal Bank of Wisconsin. However, in February 2017, the President issued an executive order that a policy of his administration would be making regulation efficient, effective, and appropriately tailored, and directed certain regulatory agencies to review and identify laws and regulations that inhibit federal regulation of the U.S. financial system in a manner consistent with the policies stated in the executive order. Any changes in laws or regulation as a result of this review could result in a repeal, amendment to or delayed implementation of the Dodd-Frank Act.

 

 

Federal Banking Regulation

 

Business Activities. A federal savings association derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and applicable federal regulations. Under these laws and regulations, First Federal Bank of Wisconsin may invest in mortgage loans secured by residential and commercial real estate, commercial and industrial and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits. The Dodd-Frank Act authorized, for the first time, the payment of interest on commercial checking accounts. First Federal Bank of Wisconsin may also establish, subject to specified investment limits, service corporation subsidiaries that may engage in certain activities not otherwise permissible for First Federal Bank of Wisconsin, including real estate investment and securities and insurance brokerage.

 

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Examinations and Assessments.   First Federal Bank of Wisconsin is primarily supervised by the Office of the Comptroller of the Currency. First Federal Bank of Wisconsin is required to file reports with and is subject to periodic examination by the Office of the Comptroller of the Currency. First Federal Bank of Wisconsin is required to pay assessments to the Office of the Comptroller of the Currency to fund the agency’s operations.

 

Capital Requirements. Federal regulations require FDIC-insured depository institutions, including federal savings associations, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets and a Tier 1 capital to total assets leverage ratio. The existing capital requirements were effective January 1, 2015 and are the result of a final rule implementing regulatory amendments based on recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.

 

The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and Total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively. The regulations also establish a minimum required leverage ratio of at least 4% of Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital. Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus Additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

 

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institution’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risk deemed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien 1-4 family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

 

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented at 2.5% on January 1, 2019.

 

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies are required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion.  A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes.  The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%.  The federal regulators jointly issued a proposed rule on November 21, 2018, whereby a qualifying community bank organization may elect, but is not required to, use the community bank leverage ratio capital framework, in which case it will be considered well-capitalized so long as its community bank leverage ratio is greater than 9%.  A financial institution can elect to be subject to this new definition.

 

At December 31, 2018, First Federal Bank of Wisconsin’s capital exceeded all applicable requirements including the applicable capital conservation buffer.

 

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Loans-to-One Borrower. Generally, a federal savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by “readily marketable collateral,” which generally includes certain financial instruments (but not real estate). As of December 31, 2018, First Federal Bank of Wisconsin was in compliance with the loans-to-one borrower limitations.

 

Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.

 

Prompt Corrective Action. Under the federal Prompt Corrective Action statute, the Office of the Comptroller of the Currency is required to take supervisory actions against undercapitalized institutions under its jurisdiction, the severity of which depends upon the institution’s level of capital. An institution that has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a common equity Tier 1 ratio of less than 4.5% or a leverage ratio of less than 4% is considered to be “undercapitalized.” A savings institution that has total risk-based capital of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a common equity Tier 1 ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be “significantly undercapitalized.” A savings institution that has a tangible capital to assets ratio equal to or less than 2.0% is deemed to be “critically undercapitalized.”

 

Generally, the Office of the Comptroller of the Currency is required to appoint a receiver or conservator for a federal savings association that becomes “critically undercapitalized” within specific time frames. The regulations also provide that a capital restoration plan must be filed with the Office of the Comptroller of the Currency within 45 days of the date that a federal savings association is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any holding company of a federal savings association that is required to submit a capital restoration plan must guarantee performance under the plan in an amount of up to the lesser of 5.0% of the savings association’s assets at the time it was deemed to be undercapitalized by the Office of the Comptroller of the Currency or the amount necessary to restore the savings association to adequately capitalized status. This guarantee remains in place until the Office of the Comptroller of the Currency notifies the savings association that it has maintained adequately capitalized status for each of four consecutive calendar quarters. Institutions that are undercapitalized become subject to certain mandatory measures such as restrictions on capital distributions and asset growth. The Office of the Comptroller of the Currency may also take any one of a number of discretionary supervisory actions against undercapitalized federal savings associations, including the issuance of a capital directive and the replacement of senior executive officers and directors.

 

At December 31, 2018, First Federal Bank of Wisconsin met the criteria for being considered “well capitalized,” which means that its total risk-based capital ratio exceeded 10%, its Tier 1 risk-based ratio exceeded 8.0%, its common equity Tier 1 ratio exceeded 6.5% and its leverage ratio exceeded 5.0%.

 

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Qualified Thrift Lender Test. As a federal savings association, First Federal Bank of Wisconsin must satisfy the qualified thrift lender, or “QTL,” test. Under the QTL test, First Federal Bank of Wisconsin must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of every 12-month period. “Portfolio assets” generally means total assets of a savings association, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings association’s business.

 

Alternatively, First Federal Bank of Wisconsin may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code.

 

A savings association that fails the QTL test must operate under specified restrictions set forth in the Home Owners’ Loan Act. The Dodd-Frank Act made noncompliance with the QTL test subject to agency enforcement action for a violation of law. At December 31, 2018, First Federal Bank of Wisconsin satisfied the QTL test.

 

Capital Distributions. Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the savings association’s capital account. A federal savings association must file an application with the Office of the Comptroller of the Currency for approval of a capital distribution if:

 

 

the total capital distributions for the applicable calendar year exceed the sum of the savings association’s net income for that year to date plus the savings association’s retained net income for the preceding two years;

 

 

the savings association would not be at least adequately capitalized following the distribution;

 

 

the distribution would violate any applicable statute, regulation, agreement or regulatory condition; or

 

 

the savings association is not eligible for expedited treatment of its filings.

 

Even if an application is not otherwise required, every savings association that is a subsidiary of a savings and loan holding company, such as First Federal Bank of Wisconsin, must file a notice with the Federal Reserve Board at least 30 days before the board of directors declares a dividend.

 

An application or notice related to a capital distribution may be disapproved if:

 

 

the federal savings association would be undercapitalized following the distribution;

 

 

the proposed capital distribution raises safety and soundness concerns; or

 

 

the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

 

In addition, the Federal Deposit Insurance Act provides that an insured depository institution shall not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital requirement.

 

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Community Reinvestment Act and Fair Lending Laws. All federal savings associations have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. In connection with its examination of a federal savings association, the Office of the Comptroller of the Currency is required to assess the federal savings association’s record of compliance with the Community Reinvestment Act. A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the Office of the Comptroller of the Currency, as well as other federal regulatory agencies and the Department of Justice.

 

The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. First Federal Bank of Wisconsin received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination.  

 

Transactions with Related Parties. A federal savings association’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with an insured depository institution such as First Federal Bank of Wisconsin. FFBW, Inc. will be an affiliate of First Federal Bank of Wisconsin because of its control of First Federal Bank of Wisconsin. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements. In addition, federal regulations prohibit a savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

 

First Federal Bank of Wisconsin’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions generally require that extensions of credit to insiders:

 

 

be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and

 

 

not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of First Federal Bank of Wisconsin’s capital.

 

In addition, extensions of credit in excess of certain limits must be approved by First Federal Bank of Wisconsin’s board of directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

 

Enforcement. The Office of the Comptroller of the Currency has primary enforcement responsibility over federal savings associations and has authority to bring enforcement action against all “institution-affiliated parties,” including directors, officers, stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings association. Formal enforcement action by the Office of the Comptroller of the Currency may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution to the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1.0 million per day. The FDIC also has the authority to terminate deposit insurance or recommend to the Office of the Comptroller of the Currency that enforcement action be taken with respect to a particular savings association. If such action is not taken, the FDIC has authority to take the action under specified circumstances.

 

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Insurance of Deposit Accounts. The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured financial institutions such as First Federal Bank of Wisconsin. Deposit accounts in First Federal Bank of Wisconsin are insured by the FDIC generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts.

 

The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. Under the FDIC’s risk-based assessment system, insured institutions were assigned a risk category based on supervisory evaluations, regulatory capital levels and certain other factors. An institution’s rate depended upon the category to which it is assigned, and certain adjustments specified by FDIC regulations. Institutions deemed less risky pay lower FDIC assessments. The Dodd-Frank Act required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits. The FDIC finalized a rule, effective April 1, 2011, that set the assessment range at 2.5 to 45 basis points of total assets less tangible equity.

 

Effective July 1, 2016, the FDIC adopted changes that eliminated the risk categories. Assessments for most institutions are now based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure within three years. In conjunction with the Deposit Insurance Fund reserve ratio achieving 1.15%, the assessment range (inclusive of possible adjustments) was reduced for most banks and savings associations to 1.5 basis points to 30 basis points.

 

In addition to the FDIC assessments, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the FDIC, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019.

 

The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of First Federal Bank of Wisconsin. First Federal Bank of Wisconsin cannot predict what assessment rates will be in the future.

 

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

 

Federal Home Loan Bank System. First Federal Bank of Wisconsin is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of Chicago, First Federal Bank of Wisconsin is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of December 31, 2018, First Federal Bank of Wisconsin was in compliance with this requirement.

 

Proposed Federal Regulation. On September 10, 2018, the Office of the Comptroller of the Currency issued a proposed rule implementing a section of the Economic Growth, Relief and Consumer Protection Act that permits an eligible federal savings association with total consolidated assets of $20 billion or less as of December 31, 2017, to elect to operate with national bank powers without converting to a national bank charter.  An eligible savings association is a federal savings association that: (1) is well capitalized; (2) has a CAMELs composite rating of 1 or 2; (3) has a consumer compliance rating of 1 or 2; (4) has a Community Reinvestment Act rating of “outstanding” or “satisfactory,” if applicable; and (5) is not subject to an enforcement action.  The proposed rule is subject to change, and the Office of the Comptroller of the Currency will issue a final rule after reviewing all comments on the proposal.

 

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Other Regulations

 

Interest and other charges collected or contracted for by First Federal Bank of Wisconsin are subject to state usury laws and federal laws concerning interest rates. First Federal Bank of Wisconsin’s operations are also subject to federal laws applicable to credit transactions, such as the:

 

 

Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

 

 

Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

 

 

Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

 

 

Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

 

 

Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

 

 

Truth in Savings Act; and

 

 

rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

 

The operations of First Federal Bank of Wisconsin also are subject to the:

 

 

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

 

 

Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

 

 

Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

 

 

The USA PATRIOT Act, which requires savings associations to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

 

 

The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

 

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Holding Company Regulation

 

General. FFBW, Inc. and FFBW, MHC are non-diversified savings and loan holding companies within the meaning of the Home Owners’ Loan Act. As such, FFBW, Inc. and FFBW, MHC are registered with the Federal Reserve Board and are subject to the regulation, examination, supervision and reporting requirements applicable to savings and loan holding companies. In addition, the Federal Reserve Board has enforcement authority over FFBW, Inc., FFBW, MHC and its non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution.

 

Permissible Activities. Under present law, the business activities of FFBW, Inc. and FFBW, MHC are generally limited to those activities permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act of 1956, as amended, provided certain conditions are met and financial holding company status is elected, or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to regulatory approval, and certain additional activities authorized by federal regulations. FFBW, Inc. and FFBW, MHC have not elected financial holding company status.

 

Federal law prohibits a savings and loan holding company, including FFBW, Inc. and FFBW, MHC, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or savings and loan holding company, without prior Federal Reserve Board approval. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board considers factors such as the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

 

The Federal Reserve Board is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions:

 

 

the approval of interstate supervisory acquisitions by savings and loan holding companies; and

 

 

the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisition.

 

Capital. Savings and loan holding companies have historically not been subjected to consolidated regulatory capital requirements. The Dodd-Frank Act required the Federal Reserve Board to establish for all bank and savings and loan holding companies, minimum consolidated capital requirements that are as stringent as those required for the insured depository subsidiaries. However, pursuant to legislation passed in December 2014, the Federal Reserve Board extended to savings and loan holding companies the applicability of the “Small Bank Holding Company” exception to its consolidated capital requirements and increased the threshold for the exception from $500 million of assets to $1.0 billion, effective May 15, 2015. As a result, savings and loan holding companies with less than $1.0 billion in consolidated assets are generally not subject to the capital requirements unless otherwise advised by the Federal Reserve Board.

 

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Source of Strength. The Dodd-Frank Act extended the “source of strength” doctrine to savings and loan holding companies. The Federal Reserve Board has issued regulations requiring that all savings and loan holding companies serve as a source of strength to their subsidiary depository institutions.

 

Dividends and Stock Repurchases. The Federal Reserve Board has issued a policy statement regarding the payment of dividends by holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall supervisory financial condition. Separate regulatory guidance provides for prior consultation with Federal Reserve Bank staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a savings and loan holding company to pay dividends may be restricted if a subsidiary savings association becomes undercapitalized. The regulatory guidance also states that a savings and loan holding company should inform Federal Reserve Bank supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the savings and loan holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies may affect the ability of FFBW, Inc. to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

 

Waivers of Dividends by FFBW, MHC. FFBW, Inc. may pay dividends on its common stock to public stockholders. If it does, it is also required to pay dividends to FFBW, MHC, unless FFBW, MHC elects to waive the receipt of dividends. Under the Dodd-Frank Act, FFBW, MHC must receive the approval of the Federal Reserve Board before it may waive the receipt of any dividends from FFBW, Inc. The Federal Reserve Board has issued an interim final rule providing that it will not object to dividend waivers under certain circumstances, including circumstances where the waiver is not detrimental to the safe and sound operation of the savings association and a majority of the mutual holding company’s members have approved the waiver of dividends by the mutual holding company within the previous twelve months. In addition, for a “non-grandfathered” mutual holding company such as FFBW, MHC, each officer or director of FFBW, Inc. and First Federal Bank of Wisconsin, and any tax-qualified stock benefit plan or non-tax-qualified stock benefit plan in which such individual participates that holds any shares of stock to which the waiver would apply, must waive the right to receive any such dividend declared. In addition, any dividends waived by FFBW, MHC must be considered in determining an appropriate exchange ratio in the event of a conversion of the mutual holding company to stock form.

 

Acquisition. Under the Federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve Board has found that the acquisition will not result in control of the company. A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock. Under the Change in Bank Control Act, the Federal Reserve Board generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.

 

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Federal Securities Laws

 

FFBW, Inc.’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. FFBW, Inc. will be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

 

Emerging Growth Company Status

 

The JOBS Act, which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” FFBW, Inc. qualifies as an emerging growth company under the JOBS Act.

 

An “emerging growth company” may choose not to hold non-binding advisory stockholder votes on annual executive compensation (more frequently referred to as “say-on-pay” votes) or on executive compensation payable in connection with a merger (more frequently referred to as “say-on-golden parachute” votes). An emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and can provide scaled disclosure regarding executive compensation; however, FFBW, Inc. will also not be subject to the auditor attestation requirement or additional executive compensation disclosure so long as it remains a “smaller reporting company” under Securities and Exchange Commission regulations (generally less than $75 million of voting and non-voting equity held by non-affiliates). Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company. FFBW, Inc. has elected to comply with new or amended accounting pronouncements in the same manner as a private company.

 

A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.0 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.07 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by non-affiliates).

 

Availability of Annual Report on Form 10-K

 

This Annual Report on Form 10-K is available on our website at www.firstfederalwisconsin.com. Information on the website is not incorporated into, and is not otherwise considered a part of, this Annual Report on Form 10-K.

 

ITEM 1A.            Risk Factors

 

The presentation of Risk Factors is not required for smaller reporting companies like FFBW, Inc.

 

ITEM 1B.            Unresolved Staff Comments

 

None.

 

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ITEM 2.            Properties

 

As of December 31, 2018, the net book value of our real properties, including land, was $4.6 million. The following is a list of our offices:

 

 

 

Year

Acquired

 

Net Book Value of Real

 
 Location  Leased or Owned

or Leased

  Property    
       

(In thousands)

 

Home Banking Office

           
             

1617 East Racine Avenue

Leased

2017

    -  

Waukesha, Wisconsin 53186

           
             

Branch Offices:

           
             

Brookfield Office

Owned

2015

    4,440  

1360 South Moorland Road

           

Brookfield, Wisconsin 53005

           
             

West Office

Owned

1984

    170  

1801 Summit Avenue

           

Waukesha, Wisconsin 53188

           
             

Bay View Office

Leased

2017

    -  

3974 South Howell Avenue

           

Milwaukee, Wisconsin 53207

           

 

 

ITEM 3.            Legal Proceedings

 

We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at December 31, 2018, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

 

ITEM 4.            Mine Safety Disclosures

 

Not applicable.

 

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PART II 

 

ITEM 5.            Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market, Holder and Dividend Information. The Company’s common stock is listed on the NASDAQ Capital Market under the symbol “FFBW.” The approximate number of holders of record of FFBW common stock as of March 27, 2019, was 300.  Certain shares of FFBW, Inc. are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. The following table presents quarterly market information for FFBW’s common stock for the years ended December 31, 2018 and 2017. The common stock did not trade until October 11, 2017; and accordingly, no information is presented for prior periods.

 

 

Year Ended December 31, 2018

 

High

   

Low

 

Quarter ended December 31, 2018

  $ 11.60     $ 9.50  

Quarter ended September 30, 2018

  $ 11.79     $ 11.02  

Quarter ended June 30, 2018

  $ 11.18     $ 10.73  

Quarter ended March 31, 2018

  $ 11.35     $ 10.30  

 

Year Ended December 31, 2017

 

High

   

Low

 

Quarter ended December 31, 2017

  $ 12.50     $ 10.00  

 

FFBW does not currently pay cash dividends on its common stock. Dividend payments by FFBW are dependent on dividends it receives from First Federal Bank of Wisconsin, because FFBW has no source of income other than dividends from First Federal Bank of Wisconsin, earnings from the investment of proceeds from the sale of shares of common stock retained by FFBW and interest payments with respect to FFBW’s loan to the Employee Stock Ownership Plan. See “Item 1. Business—Supervision and Regulation—Federal Banking Regulation—Capital Distributions.”

 

The Federal Reserve Board has issued a policy statement providing that dividends should be paid only out of current earnings and only if our prospective rate of earnings retention is consistent with our capital needs, asset quality and overall financial condition.  Regulatory guidance also provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the holding company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the holding company’s overall rate or earnings retention is inconsistent with its capital needs and overall financial condition. In addition, First Federal Bank of Wisconsin’s ability to pay dividends will be limited if it does not have the capital conservation buffer required by the new capital rules, which may limit our ability to pay dividends to stockholders.  No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future.  Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the Office of the Comptroller of the Currency, may be paid in addition to, or in lieu of, regular cash dividends.

 

   If FFBW, Inc. pays dividends to its stockholders, it will likely pay dividends to FFBW, MHC. The Federal Reserve Board’s current regulations significantly restrict the ability of mutual holding companies organized after December 1, 2009 to waive dividends declared by their subsidiaries.  Accordingly, we do not currently anticipate that FFBW, MHC will waive dividends paid by FFBW, Inc.

 

(b)      Report of Offering of Securities and Use of Proceeds Therefrom. Not applicable.

 

(c)     Securities Authorized for Issuance Under Equity Compensation Plans. At December 31, 2018, there were no compensation plans under which equity securities of FFBW, Inc. were authorized for issuance other than the Equity Incentive Plan. See Part III, Item 12.

 

ITEM 6.            Selected Financial Data

 

Not required for smaller reporting companies.

 

ITEM 7.            Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited and unaudited financial statements, which appear beginning on page F-2 of this Annual Report on Form 10-K.

 

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Business Strategy

 

Our goal is to provide long-term value to our stockholders, customers and employees and the communities we serve by executing a safe and sound business strategy that produces increasing earnings. We believe there is a significant opportunity for a community-focused bank to provide a full range of financial services to commercial and retail customers in our market area, and the increased capital we will have after the completion of the offering will enable us to compete more effectively with other financial institutions.

 

Our current business strategy consists of the following:

 

 

Grow our balance sheet. As a result of our efforts to build our management team and infrastructure, and given our attractive market area, we believe we are well-positioned to increase the size of our balance sheet without a proportional increase in overhead expense or operating risk. Accordingly, we intend to increase, on a managed basis, our assets and liabilities, particularly loans and deposits.

 

 

Grow our loan portfolio prudently with a focus on diversifying the portfolio, particularly in commercial real estate and commercial and industrial lending. Our commercial loan offerings have increased significantly in the last decade. Since hiring our president and chief executive officer in July 2016, we believe that we have implemented a stronger sales culture in our institution and we intend to increase our emphasis on the origination of commercial real estate and commercial and industrial loans. In November 2018, we hired a new Senior Vice President of Commercial Lending, with extensive experience in commercial and industrial lending. Additionally, in recent years we have conducted an extensive review of, and have enhanced, our credit, underwriting, information technology and compliance operations. We believe all of these actions have properly positioned our institution to achieve prudent, organic and consistent growth in the future. The capital we raised in the offering supports an increased lending limit, which enables us to originate larger loans to new and existing customers.

 

 

Increase core deposits, with an emphasis on low cost commercial demand deposits. We seek core deposits to provide a stable source of funds to support loan growth at costs consistent with improving our net interest rate spread and margin. Core deposits also help us maintain loan-to-deposit ratios at levels consistent with regulatory expectations. We consider our core deposits to include checking accounts, money market accounts, statement savings and health savings accounts. As part of our focus on commercial loan growth, our lenders are expected to source business checking accounts from our borrowers. However, we expect to continue to utilize non-core funding source, as needed, to fund future loan growth and our operations.

 

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Manage credit risk to maintain a low level of non-performing assets. We believe strong asset quality is a key to our long-term financial success. Our strategy for credit risk management focuses on having an experienced team of credit professionals, well-defined policies and procedures, appropriate loan underwriting criteria and active credit monitoring. In recent years we have conducted an extensive review of, and have enhanced, our credit, underwriting and loan processing policies and procedures. Our nonperforming assets to total assets ratio was 0.30% at December 31, 2018, compared to 0.73% at December 31, 2017 and 1.48% at December 31, 2016. At December 31, 2018, the majority of our nonperforming assets were related to 1-4 family residential real estate loans, including investor-owned 1-4 family loans, as our residential borrowers experienced difficulties repaying their loans during the past recession. We will continue to increase our investment in our credit review function, both in personnel as well as ancillary systems, as necessary, in order to be able to evaluate more complex loans and better manage credit risk, which will also support our intended loan growth.

 

 

Grow organically and through opportunistic bank or branch acquisitions or de novo branching. As a result of our new executive management team, increased loan personnel and enhanced loan policies and procedures and credit administration processes, we expect to grow organically. In addition to this organic growth, we will also consider acquisition opportunities that we believe would enhance the value of our franchise and yield potential financial benefits for our stockholders. Although we believe opportunities exist to increase our market share in our historical markets, we expect to continue to expand into nearby markets in southeastern Wisconsin. We will consider expanding our branch network by establishing new (“de novo”) branches and/or adding loan production offices. The capital we raised in the offering will also provide us the opportunity to make acquisitions of other financial institutions or branches thereof, and has helped fund improvements in our operating facilities, credit reporting and customer delivery services in order to enhance our competitiveness.

 

Critical Accounting Policies

 

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

 

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

 

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The following represent our critical accounting policies:

 

Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered necessary to cover inherent, but unconfirmed, credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of our most critical accounting policies.

 

Management performs a quarterly evaluation of the allowance for loan losses. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.

 

The analysis has two components, specific and general allowances. The specific allowance is for unconfirmed losses related to loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral, adjusted for market conditions and selling expenses. If the fair value of the loan is less than the loan’s carrying value, a charge is recorded for the difference. The general allowance, which is for loans reviewed collectively, is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes historical loss percentages and qualitative factors that are applied to the loan groups to determine the amount of the allowance for loan losses necessary for loans that are reviewed collectively. The qualitative component is critical in determining the allowance for loan losses as certain trends may indicate the need for changes to the allowance for loan losses based on factors beyond the historical loss history. Not incorporating a qualitative component could misstate the allowance for loan losses. Actual loan losses may be significantly more than the allowances we have established which could result in a material negative effect on our financial results.

 

Deferred Tax Assets. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets.

 

Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. First Federal Bank of Wisconsin estimates the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, First Federal Bank of Wisconsin estimates fair value. These estimates are subjective in nature and any imprecision in estimating these factors can impact the amount of gain or loss recorded. A more detailed description of the fair values measured at each level of the fair value hierarchy and the methodology utilized by the Bank can be found in Note 15 of the Financial Statements “ – Fair Value.”

 

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

 

Total Assets. Total assets increased $6.2 million, or 2.4%, to $262.7 million at December 31, 2018 from $256.5 million at December 31, 2017. The increase resulted primarily from an increase in net loans of $27.3 million offset in part by decreases in available for sale securities of $14.3 million and cash and cash equivalents of $7.3 million.

 

Cash and due from banks. Cash and due from banks decreased $1.5 million, or 46.8%, to $1.7 million at December 31, 2018 from $3.3 million at December 31, 2017. The decrease resulted primarily as a results of deploying funds for loan growth.

 

Fed funds sold. Fed funds sold decreased $5.8 million, or 67.8%, to $2.7 million at December 31, 2018 from $8.5 million at December 31, 2017, primarily as a result of the deploying funds for loan growth.

 

Net Loans.  Net loans increased $27.3 million, or 16.0%, to $198.7 million at December 31, 2018 from $171.4 million at December 31, 2017. The increase resulted from increases in commercial real estate loans of $16.2 million, or 30.5%, commercial development loans of $6.3 million, or 420.8%, commercial and industrial loans of $3.0 million, or 29.7%, multifamily loans of $2.8 million, or 8.8%, and consumer loans of $1.1 million, or 69.4%, offset by decreases of $1.3 million, or 4.0%, in 1-4 family investor-owned loans and $428,000, or 1.0%, in 1-4 family owner-occupied loans.

 

During the years ended December 31, 2018 and 2017, we sold $13.0 million and $14.4 million, respectively, of one- to four family owner-occupied residential real estate loans, on a servicing-released basis. Subject to market and economic conditions, management intends to continue this sales activity in future periods to generate gain on sale of loans income.

 

Available for sale securities. Available for sale securities decreased $14.3 million, or 24.6%, to $43.8 million at December 31, 2018 from $58.0 million at December 31, 2017. This was a result of the deploying funds from sales and paydowns to fund loan growth.

 

FHLB stock. FHLB stock increased $225,000, or 43.8%, to $739,000 at December 31, 2018 from $514,000 at December 31, 2017. This was a result of FHLB requirements due to increase in FHLB advances.

 

Deposits.  Deposits increased $292,000, or 0.2%, to $183.2 million at December 31, 2018 from $182.9 million at December 31, 2017. Noninterest-bearing checking accounts increased $492,000, or 2.2%, to $22.8 million as of December 31, 2018 compared to $22.3 million as of December 31, 2017. Interest-bearing checking accounts increased $1.4 million, or 35.0%, to $5.4 million at December 31, 2018 from $4.0 million at December 31, 2017. Additionally, money market accounts decreased $12.6 million, or 23.1%, to $41.9 million at December 31, 2018, compared to $54.5 million at December 31, 2017, and savings accounts decreased $257,000, or 1.8%, to $13.8 million at December 31, 2018, compared to $14.0 million at December 31, 2017. Certificates of deposit increased $11.4 million, or 14.8%, to $88.1 million as of December 31, 2018 from $76.8 million as of December 31, 2017, which includes $14 million of brokered certificates of deposit. Health savings accounts remained consistent at $11.2 million and $11.3 million as of December 31, 2018 and 2017, respectively.

 

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Borrowings. Borrowings, consisting entirely of FHLB advances, totaled $17.8 million at December 31, 2018 compared to $12.8 million at December 31, 2017. The aggregate cost of outstanding advances from the FHLB was 2.10% at December 31, 2018, compared to the Bank’s cost of deposits of 1.33% at that date.

 

Other liabilities. Other liabilities increased $28,000, or 2.2%, to $1.3 million at December 31, 2018 from $1.3 million at December 31, 2017.

 

Total Equity.  Total equity increased $873,000, or 1.5%, to $60.4 million at December 31, 2018 from $59.5 million at December 31, 2017. The increase resulted primarily from net income of $1.1 million, recognition of ESOP shares of $143,000 and recognition of stock based compensation of $18,000, partially offset by other comprehensive loss of $346,000.

 

Comparison of Operating Results for the Years Ended December 31, 2018 and December 31, 2017 

 

General.  We had net income of $1.1 million for the year ended December 31, 2018, compared to a net loss of $186,000 for the year ended December 31, 2017, an increase of $1.2 million, or 668.8%. The increase in net income was the net effect of an increase in net interest income after provision for loan losses of $965,000, or 13.7%, and decrease in noninterest expense of $524,000, or 6.7%, offset in part by a decrease in noninterest income of $191,000, or 21.4%, and an increase in income taxes of $54,000, or 20.5%.

 

Interest and dividend income. Interest and dividend income increased $1.6 million, or 17.9%, to $10.6 million for the year ended December 31, 2018 from $9.0 million for the year ended December 31, 2017. The increase was primarily attributable to a $1.4 million increase in interest on loans, due to an increase in the average balance of loans of $18.7 million year to year.  Also interest on available for sale securities increased $254,000, due to an increase in the average balance of available for sale securities of $7.4 million year to year.

 

Interest Expense. Interest expense increased $555,000, or 35.7%, to $2.1 million for the year ended December 31, 2018, from $1.6 million for the year ended December 31, 2017. Interest expense on borrowings, consisting entirely of FHLB advances, increased $192,000, or 80.0%, to $432,000 during the year ended December 31, 2018 from $240,000 during the year ended December 31, 2017, as the average balance of borrowings increased $4.7 million to $22.6 million for the 2018 period from $17.9 million for 2017, and the cost of borrowings increased fifty-eight basis points to 1.92% for 2018 from 1.34% for the 2017.  Interest expense on interest-bearing deposits increased $363,000, or 27.6%, year to year. The average cost of our interest-bearing deposits increased twenty-five basis points to 1.05% from 0.80%, while the average balance of interest-bearing deposits decreased by $3.9 million, or 2.4%, during the same period.

 

Net Interest Income.  Net interest income increased $1.1 million, or 14.2%, to $8.5 million for the year ended December 31, 2018 from $7.4 million for the year ended December 31, 2017. Average net interest-earning assets increased $20.6 million to $64.5 million for 2018 from $43.9 million for 2017. The increase in average net interest-earning assets was due primarily to the increase of average loans of $18.7 million. Our net interest rate spread increased to 3.14% for the year ended December 31, 2018 from 3.13% for the year ended December 31, 2017, and our net interest margin increased to 3.44% for 2018 from 3.29% for 2017.

 

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Provision for Loan Losses.  We recorded a provision for loan losses of $513,000 for the year ended December 31, 2018, compared to a $419,000 provision for the year ended December 31, 2017. The increase in the provision for loan losses in 2018 compared to 2017 was a result of our loan growth in 2018. The allowance for loan losses was $2.1 million, or 1.05% of total loans, at December 31, 2018, compared to $1.8 million, or 1.04% of total loans, at December 31, 2017. Classified (substandard, doubtful and loss) loans increased to $421,000 at December 31, 2018 from $359,000 at December 31, 2017. Total nonperforming loans decreased to $720,000 at December 31, 2018 from $1.2 million at December 31, 2017. Net charge-offs for the year ended December 31, 2018 were $195,000, compared to $97,000 for the prior year period. At December 31, 2018, $720,000, or 100.0%, of the nonperforming loans were contractually current.

 

Noninterest IncomeNoninterest income decreased $191,000, or 21.4%, to $700,000 for the year ended December 31, 2018 from $891,000 for the year ended December 31, 2017. The decrease resulted primarily from a $224,000 loss from sale of securities completed as part of a balance sheet restructuring strategy to sell more than $5.4 million of securities with below market book yields and redeploy those funds into higher yielding assets.  By redeploying those funds into higher yielding loans and securities, management expects an earnback period of approximately 1.15 years. In addition, the gain on sale dropped $22,000 in 2018 compared to 2017 due to management's decision to retain mortgage loans in the portfolio rather than selling to the secondary market. Finally, 2017 included a gain on the sales of two buildings. This was partially offset by the increase in service charges and other fees of $92,000 year over year.

 

Noninterest Expense.  Noninterest expense decreased $524,000, or 6.7%, to $7.3 million for the year ended December 31, 2018 from $7.8 million for the year ended December 31, 2017. The decrease was due primarily to a decrease of $830,000, or 51.0%, in other expense, to $798,000 for the year ended December 31, 2018 from $1.6 million for the year ended December 31, 2017. The decrease was due to two major donations made during 2017: The Company donated the former downtown Waukesha branch, resulting in an expense of $283,000 included in other noninterest expense. Additionally, as a part of the reorganization and stock issuance completed in 2017, the Company expensed $500,000 to set up the FFBW Community Foundation, Inc., which is also included in other noninterest expense. The decrease in occupancy and equipment of $107,000, or 9.6%, resulted from decreased building maintenance. These decreases were offset in part by an increase of $114,000, or 18.8%, in data processing expense, salaries and employee benefits of $288,000, or 7.3%, and foreclosed assets expense of $9,000, or 33.3%.

 

Income Tax Expense.  We recorded an income tax expense of $318,000 for the year ended December 31, 2018 compared to $264,000 for the year ended December 31, 2017, an increase of $54,000 or 20.5%. Due to increase in income before income taxes of $1.3 million offset by the Tax Cuts and Jobs Act of 2017, the Company reduced the value of the deferred tax asset by $353,000, which increased the income tax expense in 2017 by the same amount.

 

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

 

   

For the Year Ended December 31,

 
   

2018

   

2017

   

2016

 
   

Average

Outstanding

Balance

   

Interest

   

Yield/ Rate

   

Average

Outstanding

Balance

   

Interest

   

Yield/ Rate

   

Average

Outstanding

Balance

   

Interest

   

Yield/ Rate

 
   

(Dollar in thousands)

 

Interest-earning assets:

                                                                       

Loans

  $ 189,233     $ 9,192       4.86

%

  $ 170,577     $ 7,817       4.58

%

  $ 172,892     $ 7,741       4.48

%

Investment securities

    55,030       1,339       2.43       47,602       1,085       2.28       48,218       1,093       2.27  

Interest-bearing deposits

    2,278       42       1.84       7,024       79       1.12                          

FHLB stock

    765       36       4.71       700       14       2.00       1,347       31       2.30  

Total interest-earning assets

    247,306       10,609       4.29       225,903       8,995       3.98       222,457       8,865       3.99  

Noninterest-earning assets

    20,763                       20,454                       23,985                  

Allowance for loan losses

    (1,912 )                     (1,542 )                     (1,546 )                

Total assets

  $ 266,157                     $ 244,815                     $ 244,896                  
                                                                         

Interest-bearing liabilities:

                                                                       

Demand accounts

  $ 5,225       24       0.46

%

  $ 3,254       11       0.34

%

  $ 7,779       55       0.71

%

Money market accounts

    51,855       433       0.84       54,956       282       0.51       49,629       159       0.32  

Savings accounts

    15,394       29       0.19       16,447       16       0.10       17,618       23       0.13  

Health savings accounts

    11,462       30       0.26       11,485       30       0.26       11,558       43       0.37  

Certificates of deposit

    76,277       1,161       1.52       77,990       975       1.25       87,476       1,085       1.24  

Total interest-bearing deposits

    160,213       1,677       1.05       164,132       1,314       0.80       174,060       1,365       0.78  

Borrowings

    22,552       432       1.92       17,866       240       1.34       23,147       268       1.16  

Total interest-bearing liabilities

    182,765       2,109       1.15       181,998       1,554       0.85       197,207       1,633       0.83  

Noninterest-bearing deposits

    19,631                       20,902                       11,508                  

Other noninterest bearing liabilities

    229                       2,083                       1,306                  

Total liabilities

    202,625                       204,983                       210,021                  

Equity

    63,532                       36,832                       34,875                  

Total liabilities and equity

  $ 266,157                     $ 241,815                     $ 244,896                  

Net interest income

          $ 8,500                     $ 7,441                     $ 7,232          

Net interest rate spread (1)

                    3.14

%

                    3.13

%

                    3.16

%

Net interest-earning assets (2)

  $ 64,541                     $ 43,905                     $ 25,250                  

Net interest margin (3)

                    3.44

%

                    3.29

%

                    3.25

%

Average interest-earning assets to interest-bearing liabilities

    135 %                     124 %                     113 %                

 

 

 

(1)

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

(2)

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

(3)

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

 

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Rate/Volume Analysis

 

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in average rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior period average rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

 

   

Years Ended December 31,

 
   

2018 vs. 2017

 
   

Increase (Decrease) Due to

   

Total Increase

 
   

Volume

   

Rate

     (Decrease)   
   

(In thousands)

 

Interest-earning assets:

                       

Loans

  $ 851     $ 524     $ 1,375  

Available-for-sale securities

    170       84       254  

Interest-bearing deposits

    (53 )     16       (37 )

FHLB Stock

    1       21       22  

Total interest-earning assets

    969       645       1,614  
                         

Interest-bearing liabilities:

                 

Demand accounts

    7       6       13  

Money market accounts

    (16 )     167       151  

Savings accounts

    (1 )     14       13  

Health savings accounts

    -       -       -  

Certificates of deposit

    (21 )     207       186  

Total deposits

    (31 )     394       363  

Borrowings

    62       130       192  

Total interest-bearing liabilities

    31       524       555  

Change in net interest income

  $ 938     $ 121     $ 1,059  

 

 

Management of Market Risk

 

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset/Liability Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. 

 

Our asset/liability management strategy attempts to manage the impact of changes in interest rates on net interest income, our primary source of earnings. Among the techniques we use to manage interest rate risk are: 

 

 

originating commercial real estate, multifamily and commercial and industrial loans, all of which tend to have shorter terms and higher interest rates than 1-4 family owner-occupied residential real estate loans, and which generate customer relationships that can result in larger noninterest-bearing checking accounts; 

 

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selling substantially all of our conforming and eligible jumbo, longer-term, fixed-rate 1-4 owner-occupied residential real estate loans and retaining the non-conforming and shorter-term, fixed-rate and adjustable-rate 1-4 family residential real estate loans that we originate, subject to market conditions and periodic review of our asset/liability management needs; and

 

 

reducing our dependence on certificates of deposit to support lending and investment activities and increasing our reliance on core deposits, including checking accounts and savings accounts, which are less interest rate sensitive than certificates of deposit.

 

Our board of directors is responsible for the review and oversight of our executive management team and other essential operational staff which are responsible for our asset/liability analysis. These officers act as an asset/liability committee and are charged with developing and implementing an asset/liability management plan, and they meet at least quarterly to review pricing and liquidity needs and assess our interest rate risk. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. 

 

We do not engage in hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities. 

 

Net Portfolio Value. The Office of the Comptroller of Currency requires the computation of amounts by which the net present value of an institution’s cash flow from assets, liabilities and off-balance sheet items (the institution’s net portfolio value or “NPV”) would change in the event of a range of assumed changes in market interest rates.

 

The tables below set forth, as of December 31, 2018, the estimated changes in our NPV that would result from the designated instantaneous changes in market interest rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

 

Change in

Interest

Rates (basis

points) (1)

   

Estimated

NPV (2)

   

Estimated Increase

(Decrease) in NPV

   

NPV as a Percentage of Present

Value of Assets (3)

 
                             

NPV

   

Increase (Decrease)

 
             

Amount

   

Percent

   

Ratio (4)

   

(basis points)

 

(Dollars in thousands)

 
                                           
300     $ 48,020     $ (7,955 )     (14.21

)%

    19.79

%

    (1.71

)%

200       50,780       (5,195 )     (9.28

)%

    20.43

%

    (1.07 )
100       53,744       (2,231 )     (3.99

)%

    21.10

%

    (0.40 )
-       55,975       -       -

%

    21.50

%

    -  
-100       57,370       1,395       2.49

%

    21.61

%

    0.11  

 

____________________________

 

(1)

Assumes an immediate uniform change in interest rates at all maturities.

 

(2)

NPV is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

 

(3)

Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

 

(4)

NPV Ratio represents NPV divided by the present value of assets.

 

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The tables above indicate that at December 31, 2018, in the event of a 100 basis point decrease in interest rates, we would have experienced a 2.49% increase in NPV. In the event of a 200 basis point increase in interest rates at December 31, 2018, we would have experienced a 9.28% decrease in NPV.

 

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in NPV requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the NPV table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the NPV table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on NPV and will differ from actual results.

 

NPV calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.

 

Liquidity and Capital Resources 

 

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB-Chicago. At December 31, 2018, we had $17.8 million outstanding in advances from the FHLB-Chicago. At December 31, 2018 we had $2.0 million available additional FHLB-Chicago advances based on our current FHLB stock ownership.

 

Additionally, at December 31, 2018 we had a $7 million federal funds rate line of credit with the Bankers’ Bank of Wisconsin, of which $0 was drawn at December 31, 2018. 

 

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents and available-for-sale investment securities. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period. 

 

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $2.0 million and $1.2 million for the years ended December 31, 2018 and 2017, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of investment securities, offset by principal collections on loans, the sale of securities and proceeds from maturing securities, and pay downs on securities, was $14.7 million and $11.8 million for the years ended December 31, 2018 and 2017, respectively. Net cash provided by financing activities, consisting of activity in deposit accounts and FHLB advances and the issuance of common stock, was $5.3 million and $15.5 million for the years ended December 31, 2018 and 2017, respectively.

 

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our current strategy to change our mix of deposits to become less reliant on certificates of deposit, we anticipate that we will continue to allow a significant portion of higher-costing certificates of deposit to run off at maturity. We also anticipate continued use of FHLB-Chicago advances as well as continuing to utilize brokered certificates of deposit and online sources, as needed, to fund future loan growth and our operations. 

 

At December 31, 2018, we exceeded all of our regulatory capital requirements with a Tier 1 leverage capital level of $48.5 million, or 18.4% of adjusted total assets, which is above the well-capitalized required level of $13.2 million, or 5.0%; and total risk-based capital of $50.6 million, or 24.7% of risk-weighted assets, which is above the well-capitalized required level of $20.5 million, or 10.0%. Management is not aware of any conditions or events since December 31, 2018, that would change our category.

 

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Off-Balance Sheet Arrangements and Contractual Obligations

 

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. For additional information, see Note 11 - "Commitments and Contingencies" of the Notes to the Financial Statements beginning on page F-2 of this Annual Report on Form 10-K.

 

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment, agreements with respect to borrowings and deposits, and agreements with respect to securities.

 

Recent Accounting Pronouncements

 

For a discussion of the impact of recent accounting pronouncements, see Note 1- "Summary of Significant Accounting Policies" of the notes to our financial statements beginning on page F-2 of this this Annual Report on Form 10-K.

 

Impact of Inflation and Changing Prices

 

The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles in the United States of America which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

 

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ITEM 7A.            Quantitative and Qualitative Disclosures about Market Risk

 

Not required for smaller reporting companies.

 

ITEM 8.              Financial Statements and Supplementary Data

 

The Company’s Consolidated Financial Statements are presented in this Annual Report on Form 10-K beginning at page F-2.

 

 

ITEM 9.              Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

ITEM 9A.            Controls and Procedures

 

(a)     An evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Controller and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of December 31, 2018. Based on that evaluation, the Company’s management, including the President and Chief Executive Officer and the Controller and Principal Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

 

During the quarter ended December 31, 2018, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

(b)     Management’s annual report on internal control over financial reporting.

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s system of internal control over financial reporting is designed under the supervision of management, including our Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles(“GAAP”) and necessarily include some amounts based on management's best estimates and judgments. Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that receipts and expenditures are made only in accordance with the authorization of management and the Board of Directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on our consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections on any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions or that the degree of compliance with policies and procedures may deteriorate.

 

As of December 31, 2018, management assessed the effectiveness of the Company’s internal control over financial reporting based upon the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework of 2013. Based upon its assessment, management believes that the Company’s internal control over financial reporting as of December 31, 2018 is effective using these criteria.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company (as a smaller reporting company or an emerging growth company) to provide only management’s report in this annual report.

 

There were no changes made in our internal controls during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B.             Other Information

 

Date of Annual Meeting of Stockholders.

 

The 2019 Annual Meeting of Stockholders of FFBW will be held on Wednesday, May 22, 2019 at 2:00 at 1360 S Moorland Rd, Brookfield, Wisconsin.

 

PART III

 

 

ITEM 10.             Directors, Executive Officers and Corporate Governance

 

FFBW, Inc. has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer and principal accounting officer or controller or persons performing similar functions. A copy of the Code is available on FFBW, Inc.’s website at www.firstfederalwisconsin.com under “About Us – Investor Relations – Governance – Governance Documents.”

 

53

Table of Contents

 

The information contained under the sections captioned “Proposal I – Election of Directors” in the Company’s definitive Proxy Statement for the 2019 Annual Meeting of Stockholders (the “Proxy Statement”) is incorporated herein by reference.

 

ITEM 11.            Executive Compensation

 

The information contained under the section captioned “Proposal I – Election of Directors – Executive Compensation” in the definitive Proxy Statement is incorporated herein by reference.

 

ITEM 12.            Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

(a)

Securities Authorized for issuance under Stock-Based Compensation Plans

 

The following table sets forth information as of December 31, 2018 with respect to compensation plans under which shares of our common stock may be issued:

 

Plan Category

 

Number of Shares to

be Issued upon

Exercise of

Outstanding Options,

warrants and rights

   

Weighted

Average Exercise

Price of

Outstanding

Options, warrants

and rights

   

Number of Shares

Remaining Available

for Future Issuance

Under Equity

Compensation Plans

(Excluding Shares

Reflected in the first

column)(1)

 

Equity compensation plans approved by stockholders

    192,089       10.81       177,286  

Equity compensation plans not approved by stockholders

    N/A       N/A       N/A  

Total

    192,089       10.81       177,286  

 

 

 

(1)

Includes unexercised options and unissued restricted shares.

 

(b)

Security Ownership of Certain Beneficial Owners

 

The information required by this item is incorporated herein by reference to the section captioned “Voting Securities and Principal Holders” in the Proxy Statement.

 

(c)

Security Ownership of Management

 

The information required by this item is incorporated herein by reference to the section captioned “Voting Securities and Principal Holders” in the Proxy Statement.

 

(d)

Changes in Control

 

Management of the Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant

 

54

Table of Contents

 

ITEM 13.            Certain Relationships and Related Transactions and Director Independence

 

The information required by this item is incorporated herein by reference to the sections captioned “Proposal I – Election of Directors – Transactions with Certain Related Persons,” “– Board Independence” and “– Meetings and Committees of the Board of Directors” of the Proxy Statement.

 

ITEM 14.            Principal Accountant Fees and Services

 

The information required by this item is incorporated herein by reference to the section captioned “Proposal II – Ratification of Appointment of Independent Registered Public Accounting Firm” of the Proxy Statement.

 

 

 PART IV

 

ITEM 15.            Exhibits and Financial Statement Schedules

 

 

(a)(1)

Financial Statements

 

The documents filed as a part of this Form 10-K are:

 

 

(A)

Report of Independent Registered Public Accounting Firm

 

 

(B)

Consolidated Balance Sheets as of December 31, 2018 and 2017

 

 

(C)

Consolidated Statements of Operations for the years ended December 31, 2018 and 2017

     
 

(D)

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017

 

 

(E)

Consolidated Statements of Changes in Equity for the years ended December 31, 2018 and 2017

 

 

(F)

Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017

 

 

(G)

Notes to Consolidated Financial Statements.

 

 

(a)(2)

Financial Statement Schedules

 

All financial statement schedules have been omitted as the required information is inapplicable or has been included in the Notes to Consolidated Financial Statements.

 

55

Table of Contents

 

 

(a)(3)

Exhibits

 

 

3.1

Articles of Incorporation of FFBW*

 

3.2

Bylaws of FFBW *

 

4

Form of Common Stock Certificate of FFBW *

 

10.1

Employment Agreement with Edward H. Schaefer*

 

10.2

Employment Agreement with for Nikola Schaumberg*

 

10.3

Deferred Compensation Agreement with Edward H. Schaefer *

 

10.4

Amended and Restated Deferred Compensation Agreement with Gary Riley *

 

10.5

Split-Dollar Life Agreement with Edward H. Schaefer**

  10.6 FFBW, Inc. 2018 Equity Incentive Plan***
 

21

Subsidiaries

  23 Consent of Wipfli LLP
 

31.1

Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2

Certification required 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 Taxonomy Extension Schema Document 

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 

101.DEF XBRL Taxonomy Extension Definition Linkbase Document 

101.LAB XBRL Taxonomy Extension Label Linkbase Document 

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 

 

_______

___________________

 

*

Incorporated by reference to the Registration Statement on Form S-1 (file no. 333-218736), initially filed June 14, 2017.

 

**

Incorporated by reference to the Current Report on Form 8-K filed on October 17, 2018.

  *** Incorporated by reference to Appendix A of the Proxy Statement filed on October 17, 2018

 

ITEM16.            Form 10-K Summary

 

None.

 

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Table of Contents

 

 

Report of Independent Registered Public Accounting Firm

 

 

To the Stockholders and the Board of Directors of FFBW, Inc.

Brookfield, Wisconsin

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of FFBW, Inc. (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the two years in the period ended December 31, 2018 and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

Wipfli LLP

 

We have served as the Company’s auditor since 2015.

March 27, 2019

Milwaukee, Wisconsin

 

F-1

Table of Contents

 

 

FFBW, Inc.

 

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

 

   

December 31,

   

December 31,

 

 

 

2018

   

2017

 
 Assets                

Cash and due from banks

  $ 1,746     $ 3,285  

Fed funds sold

    2,742       8,528  

Cash and cash equivalents

    4,488       11,813  

Available for sale securities, stated at fair value

    43,751       58,012  

Loans held for sale

    679       109  

Loans, net of allowance for loan and lease losses of $2,118 and $1,800, respectively

    198,694       171,355  

Premises and equipment, net

    5,057       5,290  

Foreclosed assets

    69       619  

FHLB stock, at cost

    739       514  

Accrued interest receivable

    768       782  

Cash value of life insurance

    7,007       6,558  

Other assets

    1,474       1,429  

TOTAL ASSETS

  $ 262,726     $ 256,481  
                 
                 

Liabilities and Equity

             
                 

Deposits

  $ 183,205     $ 182,913  

Advance payments by borrowers for taxes and insurance

    55       36  

FHLB advances

    17,750       12,750  

Accrued interest payable

    70       37  

Other liabilities

    1,284       1,256  

Total liabilities

    202,364       196,992  

Preferred stock ($0.01 par value, 1,000,000 authorized, no shares issued or outstanding as of December 31, 2018 and 2017, respectively)

    -       -  

Common stock ($0.01 par value, 19,000,000 authorized, 6,696,742 and 6,612,500 issued and outstanding as of December 31, 2018 and 2017, respectively)

    67       66  

Additional paid in capital

    28,326       28,296  

Unallocated common stock of Employee Stock Ownership Plan ("ESOP") (243,303 and 256,263 shares at December 31, 2018 and 2017, respectively)

    (2,433 )     (2,563 )

Retained earnings

    34,995       33,937  

Accumulated other comprehensive loss, net of income taxes

    (593 )     (247 )

Total equity

    60,362       59,489  

TOTAL LIABILITIES AND EQUITY

  $ 262,726     $ 256,481  

 

See accompanying notes to financial statements.

 

F-2

Table of Contents

 

 

FFBW, Inc.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share data)

 

   

Years ended December 31,

 
   

2018

   

2017

 
                 

Interest and dividend income:

               

Loans, including fees

  $ 9,192     $ 7,817  

Securities

               

Taxable

    1,290       943  

Tax-exempt

    49       142  

Other

    78       93  
                 

Total interest and dividend income

    10,609       8,995  
                 

Interest expense:

               

Interest-bearing deposits

    1,677       1,314  

Borrowed funds

    432       240  
                 

Total interest expense

    2,109       1,554  
                 

Net interest income

    8,500       7,441  

Provision for loan losses

    513       419  
                 

Net interest income after provision for loan losses

    7,987       7,022  
                 

Noninterest income:

               

Service charges and other fees

    371       279  

Net gain on sale of loans

    244       266  

Net gain (loss) on sale of securities

    (204 )     20  

Increase in cash surrender value of insurance

    194       196  

Other noninterest income

    95       130  
                 

Total noninterest income

    700       891  
                 

Noninterest expense:

               

Salaries and employee benefits

    4,248       3,960  

Occupancy and equipment

    1,002       1,109  

Data processing

    719       605  

Foreclosed assets, net

    36       27  

Professional fees

    508       506  

Other

    798       1,628  
                 

Total noninterest expense

    7,311       7,835  
                 

Income before income taxes

    1,376       78  

Provision for income taxes

    318       264  
                 

Net income (loss)

  $ 1,058     $ (186 )
                 

Basic earnings (loss) per share

  $ 0.17     $ (0.03 )
Diluted earnings (loss) per share   $ 0.17     $ (0.03 )

 

See accompanying notes to financial statements.

 

F-3

Table of Contents

 

 

FFBW, Inc.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

 

   

Years ended December 31,

 
   

2018

   

2017

 
                 

Net income (loss)

  $ 1,058     $ (186 )

Other comprehensive loss:

               

Unrealized holding losses arising during the period

    (637 )     (168 )

Reclassification adjustment for (gains) losses realized in net income

    204       (20 )

Other comprehensive loss before tax effect

    (433 )     (188 )

Tax effect of other comprehensive loss items

    87       66  

Other comprehensive loss, net of tax

    (346 )     (122 )

Comprehensive income (loss)

  $ 712     $ (308 )

 

See accompanying notes to financial statements.

 

F-4

Table of Contents

 

 

FFBW, Inc.

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Dollars in thousands, except share data)

 

   

Number of

Shares

   

Common

Stock

   

Additional

Paid-In

Capital

   

Unallocated

Common

Stock of

ESOP

   

Retained

Earnings

   

Accumulated

Other

Comprehensive

Loss

   

Total

 

Balance at December 31, 2016

    -     $ -     $ -     $ -     $ 34,123     $ (125 )   $ 33,998  

Net loss

    -       -       -       -       (186 )     -       (186 )

Other comprehensive loss

    -       -       -       -       -       (122 )     (122 )

Issuance of common stock, net of issuance costs

    6,587,500       66       28,293       -       -               28,359  

Issuance of common stock to FFBW Community Foundation, Inc.

    25,000       -       -       -       -       -       -  

Stock purchased by the ESOP (259,210 shares)

    -       -       -       (2,592 )     -       -       (2,592 )

ESOP shares committed to be released (2,947 shares)

    -       -       3       29       -       -       32  

Balance at December 31, 2017

    6,612,500     $ 66     $ 28,296     $ (2,563 )   $ 33,937     $ (247 )   $ 59,489  

Net income

    -       -       -       -       1,058       -       1,058  

Other comprehensive loss

    -       -       -       -       -       (346 )     (346 )

Stock based compensation expense

    84,242       1       17       -       -       -       18  

ESOP shares committed to be released (12,960 shares)

    -       -       13       130       -       -       143  

Balance at December 31, 2018

    6,696,742     $ 67     $ 28,326     $ (2,433 )   $ 34,995     $ (593 )   $ 60,362  

 

See accompanying notes to financial statements.

 

F-5

Table of Contents

 

 

FFBW, Inc.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 

   

For the years ended December 31,

 
   

2018

   

2017

 

Increase in cash and cash equivalents:

               

Cash flows from operating activities:

               

Net income (loss)

  $ 1,058     $ (186 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

               

Provision for loan losses

    513       419  

Depreciation

    342       460  

Gain on sale of premises and equipment

    -       64  

Accretion of loan portfolio discount

    (144 )     (405 )

Net amortization on securities available for sale

    526       525  

(Gain) loss on sales and impairments of foreclosed assets

    17       (12 )

(Gain) loss on sale of securities

    204       (20 )

Increase in cash surrender value of life insurance

    (194 )     (196 )

Accretion of discount on FHLB advances

    -       (27 )

ESOP compensation

    143       32  

Stock based compensation

    18       -  

Changes in operating assets and liabilities:

               

Accrued interest receivable

    14       (22 )

Loans held for sale

    (570 )     483  

Other assets

    42       366  

Accrued interest payable

    33       8  

Other liabilities

    28       (323 )

Net cash provided by operating activities

    2,030       1,166  

Cash flows from investing activities:

               

Proceeds from sales of available for sale securities

    12,874       6,856  

Maturities, calls, paydowns on available for sale securities

    8,091       8,081  

Purchases of available for sale securities

    (7,867 )     (25,029 )

Net increase in loans

    (27,967 )     (5,793 )

Purchases of premises and equipment

    (109 )     (357 )

Proceeds from redemption of FHLB stock

    -       833  

Purchases of FHLB stock

    (225 )     -  

Proceeds from sale of equipment

    -       2,153  

Purchase of life insurance

    (255 )     (10 )

Proceeds from sale of foreclosed assets

    792       1,458  

Net cash used by investing activities

    (14,666 )     (11,808 )

Cash flows from financing activities:

               

Net increase (decrease) in deposits

    292       (1,726 )

Net increase in escrow

    19       3  

Net decrease in FHLB open line of credit

    -       (2,500 )

Repayments of FHLB advances

    (2,000 )     (6,000 )

Proceeds from FHLB advances

    7,000       -  

Net proceeds from issuance of common stock

    -       25,767  

Net cash provided in financing activities

    5,311       15,544  

Net increase (decrease) in cash and cash equivalents

    (7,325 )     4,902  

Cash and cash equivalents at beginning

    11,813       6,911  

Cash and cash equivalents at end

  $ 4,488     $ 11,813  
                 

Supplemental Cash Flow Disclosures:

               

Cash paid for interest

  $ 2,076     $ 1,546  

Cash paid for income taxes

    120       -  

Loans transferred to foreclosed assets

    238       1,118  

Financed sales of foreclosed assets

    21       280  

 

See accompanying notes to financial statements

 

F-6

Table of Contents

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

NOTE 1 - Summary of Significant Accounting Policies


 

Organization

 

On October 10, 2017, First Federal Bank of Wisconsin (“the Bank”) converted to a stock savings bank and is now organized in the mutual holding company structure.  The Bank issued all of its outstanding stock to a new holding company, FFBW, Inc., (“the Company”) which sold 2,950,625 shares of common stock to the public at $10.00 per share, and contributed an additional 25,000 shares to FFBW Community Foundation, representing 45% of its outstanding shares of common stock.  This amount included shares purchased by the Bank’s employee stock ownership plan (“ESOP”), which purchased 3.92% of the common stock of the new holding company outstanding upon the completion of the reorganization and stock issuance.  FFBW, Inc. is organized as a corporation under the laws of the United States.  FFBW, MHC has been organized as a mutual holding company under the laws of the United States and owns 3,636,875 shares, or 55% of the outstanding common stock of FFBW, Inc.    

 

The cost of the reorganization and the issuing of the common stock totaling $1,394 were deferred and deducted from the sales proceeds of the offering.  

 

At December 31, 2018, the significant assets of FFBW, Inc. were the capital stock of the Bank, and a loan to the First Federal Bank of Wisconsin Employee Stock Ownership Plan (“ESOP”). The liabilities of FFBW, Inc. were insignificant. The Company is subject to the financial reporting requirements of the Securities Exchange Act of 1934, as amended. The Company is subject to regulation and examination by the Board of Governors of the Federal Reserve System (“the Federal Reserve Board”).

 

First Federal Bank of Wisconsin is a community bank headquartered in Waukesha, Wisconsin that provides financial services to individuals and businesses from our offices in Waukesha, Brookfield, and the Bay View neighborhood of Milwaukee.

 

Jumpstart Our Business Startups Act

 

The Jumpstart Our Business Startups Act (the JOBS Act), which was signed into law on April 5, 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as an “emerging growth company” and believes that it will continue to qualify as an “emerging growth company” until five years from the completion of the stock offering.

 

As an “emerging growth company,” the Company has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, the financial statements may not be comparable to the financial statements of companies that comply with such new or revised accounting standards.

 

Use of Estimates

 

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the fair values of securities, fair value of financial instruments, the valuation of other real estate owned and the valuation of deferred income tax assets.

 

Cash and Cash Equivalents

 

For purposes of reporting cash flows, cash and cash equivalents include cash and balances due from banks, non-maturity deposits in the Federal Home Loan Bank of Chicago (FHLB), and fed funds sold. The Company has not experienced any losses in such accounts.

 

Available for Sale Securities

 

Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity.  Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company's assets and liabilities, liquidity needs, regulatory capital requirements, and other similar factors.  Securities classified as available for sale are carried at fair value.  Unrealized gains or losses are reported as increases or decreases in other comprehensive income, net of the related deferred tax effect.  Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings. Gains and losses on the sale of securities are recorded on the trade date and determined using the specific-identification method.

 

F-7

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 1 - Summary of Significant Accounting Policies (cont.)


 

Declines in fair value of securities that are deemed to be other than temporary, if applicable, are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient enough to allow for any anticipated recovery in fair value.

 

Loans Acquired in a Transfer 

 

The Company acquires loans (including debt securities) individually and in groups or portfolios. These loans are initially measured at fair value with no allowance for loan losses. The Company's allowance for loan losses on all acquired loans reflect only those losses incurred subsequent to acquisition.

 

Certain acquired loans may have experienced deterioration of credit quality between origination and the Company's acquisition of the loans. At acquisition, the Company reviews each loan to determine whether there is evidence of deterioration of credit quality since origination and if it is probable that the Company will be unable to collect all amounts due according to the loan's contractual terms. If both conditions exist, the Company determines whether each such loan is to be accounted for individually or whether such loans will be assembled into pools of loans based on common risk characteristics (for example, credit score, loan type, and date of origination). The Company considers expected prepayments and estimates the amount and timing of undiscounted principal, interest, and other cash flows expected at acquisition for each loan and aggregated pool of loans. The excess of the loan's or pool's scheduled contractual principal and interest payments over all cash flows expected at acquisition is calculated as the nonaccretable difference. The excess of cash flows expected to be collected over the fair value of each loan or pool (accretable yield) is accreted into interest income over the remaining life of the loan or pool.

 

At each reporting date, the Company continues to estimate cash flows expected to be collected for each loan or pool. If expected cash flows have decreased from the acquisition date estimate, the Company recognizes an allowance for loan losses. If expected cash flows have increased from the acquisition date estimate, the Company increases the amount of accretable yield to be recognized as interest income over the remaining life of the loan or pool.

 

Loans Held for Sale

 

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Mortgage loans held for sale are sold with the mortgage servicing rights released by the Company. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loan sold.

 

Loans  

 

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances adjusted for deferred loan fees and costs, charge-offs, and an allowance for loan losses. Interest on loans is accrued and credited to income based on the unpaid principal balance. Loan-origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

 

The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication that the borrower may be unable to make payments as they become due. When loans are placed on nonaccrual status or charged off, all unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

 

F-8

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 1 - Summary of Significant Accounting Policies (cont.)


 

Allowance for Loan Losses

 

The allowance for loan losses is maintained at the level considered adequate by management to provide for losses that are probable as of the balance sheet date. The allowance for loan losses is established through a provision for loan losses charged to expense as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. In determining the adequacy of the allowance balance, the Company makes evaluations of the loan portfolio and related off-balance sheet commitments, considers current economic conditions and historical loss experience, and reviews specific problem loans and other factors.

 

When establishing the allowance for loan losses, management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment. These risk categories and their relevant risk characteristics are as follows:

 

Commercial development: These loans are secured by vacant land and/or property that are in the process of improvement. Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user. Construction loans include not only construction of new structures, but loans originated to finance additions to or alterations of existing structures. Until a permanent loan originates, or payoff occurs, all commercial construction loans secured by real estate are reported in this loan pool. Development loans also have the risk that improvements will not be completed on time, or in accordance with specifications and projected costs.

 

Commercial real estate: These loans are primarily secured by office and industrial buildings, warehouses, small retail shopping facilities, and various special purpose properties, including restaurants. These loans are subject to underwriting standards and processes similar to commercial and industrial loans. Loans to closely held businesses are generally guaranteed in full by the owners of the business. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property. The cash flows of the borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to the general economic factors or conditions specific to the real estate market, such as geographic location and/or purpose type.

 

Commercial and industrial: Commercial and industrial loans are extended primarily to small and middle market customers. Such credits typically comprise working capital loans, asset acquisition loans, and loans for other business purposes. Loans to closely held businesses are generally guaranteed in full by the owners of the business. Commercial and industrial loans are made based primarily on the historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of the borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to economic or individual performance factors. Minimum standards and underwriting guidelines have been established for commercial and industrial loans.

 

1-4 family owner-occupied: These loans are generally to individuals and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations, the underlying collateral, and the loan to collateral value. Also included in this category are junior liens on 1-4 family residential properties. Underwriting standards for 1-4 family owner-occupied loans are heavily influenced by statutory requirements, which include, but are not limited to, loan-to-value and affordability ratios, risk-based pricing strategies, and documentation requirements.

 

F-9

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 1 - Summary of Significant Accounting Policies (cont.)


 

1-4 family investor-owned: These loans may be to individuals or businesses and are subject to underwriting standards and processes similar to commercial and industrial loans. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property(ies). The cash flows of the borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to the general economic factors or conditions specific to the real estate market, such as geographic location and/or purpose type.

 

Multifamily real estate: These loans include loans to finance non-farm properties with five or more units in structures primarily to accommodate households. Such credits are typically originated to finance the acquisition or refinancing of an apartment building. These loans are subject to underwriting standards and processes similar to commercial and industrial loans. Loans to closely held businesses are generally guaranteed in full by the owners of the business. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the subject multifamily property, with assumptions made for vacancy rates. Cash flows of the borrowers rely on the receipt of rental income from the tenants of the property who are themselves subject to fluctuations in national and local economic conditions and unemployment trends.

 

Consumer: These loans may take the form of installment loans, demand loans, or single payment loans, and are extended to individuals for household, family, and other personal expenditures. These loans generally include direct consumer automobile loans and credit card loans. These loans are generally smaller in size and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations.

 

Management regularly evaluates the allowance for loan losses using the Company’s past loan loss experience, known and inherent risks in the loan portfolio, composition of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, current economic conditions, and other relevant factors. This evaluation is inherently subjective since it requires material estimates that may be susceptible to significant change.

 

A loan is impaired when, based on current information, it is probable that the Company will not collect all amounts due in accordance with the contractual terms of the loan agreement. Management determines whether a loan is impaired on a case-by-case basis, taking into consideration the payment status, collateral value, length and reason of any payment delays, the borrower’s prior payment record, and any other relevant factors. Large groups of smaller-balance homogeneous loans, such as residential mortgage and consumer loans, are collectively evaluated in the allowance for loan losses analysis and are not subject to impairment analysis unless such loans have been subject to a restructuring agreement. Specific allowances for impaired loans are based on discounted cash flows of expected future payments using the loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent.

 

In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require the Company to make additions to the allowance for loan losses based on their judgments of collectability based on information available to them at the time of their examination.

 

F-10

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 1 - Summary of Significant Accounting Policies (cont.)


 

Troubled Debt Restructurings 

 

Loans are accounted for as troubled debt restructurings when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and the Company grants a “concession” to the borrower that they would not otherwise consider. These concessions include a modification of terms such as a reduction of the stated interest rate or loan balance, a reduction of accrued interest, an extension of the maturity date at an interest rate lower than a current market rate for a new loan with similar risk, or some combination thereof to facilitate repayment. Troubled debt restructurings are considered impaired loans.

 

Foreclosed Assets

 

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value, less costs to sell, at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less costs to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.

 

Premises and Equipment

 

Depreciable assets are stated at cost less accumulated depreciation. Provisions for depreciation are computed on straight-line and accelerated methods over the estimated useful lives of the assets.

 

Federal Home Loan Bank Stock

 

The Company's investment in Federal Home Loan Bank ("FHLB") stock is carried at cost, which approximates fair value. The Company is required to hold the stock as a member of the FHLB, and transfer of the stock is substantially restricted. The stock is evaluated for impairment on an annual basis.

 

Income Taxes

 

Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

 

As changes in tax laws or rates are enacted, deferred income tax assets and liabilities are adjusted through the provision for income taxes. The differences relate principally to the allowances for loan losses, deferred compensation, depreciation, FHLB stock dividends and non-accrual interest. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

F-11

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 1 - Summary of Significant Accounting Policies (cont.)


 

The tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.

 

The Company's policy is to recognize interest and penalties related to income tax issues as components of income tax expense. During the periods shown, the Company did not recognize any interest or penalties related to income tax expense in its statements of operations.

 

Transfers of Financial Assets 

 

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

 

Advertising 

 

Advertising costs are expensed as incurred.

 

Other Comprehensive Loss

 

Other comprehensive loss is shown on the statements of comprehensive income (loss). The Company’s accumulated other comprehensive income (loss) is composed of the unrealized loss on securities available for sale, net of tax and is shown on the statements of changes in equity. Reclassification adjustments out of other comprehensive loss for gains realized on sales of securities available for sale comprise the entire balance of “net gain (loss) on sale of securities” on the statements of operations. As part of this reclassification, income tax credit of approximately $56 was recognized for the year ended December 31, 2018 and income tax expense of approximately $5 was recognized for the years ended December 31, 2017 in “provision for income taxes” on the statements of operations.

 

Off-Balance Sheet Financial Instruments

 

In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, unfunded commitments under lines of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.

 

Life Insurance

 

The Company has purchased life insurance policies on certain key executives. Life insurance is measured at the amount that could be realized under the insurance contract as of the balance sheet date, which is generally the cash surrender value of the policy.

 

F-12

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 1 - Summary of Significant Accounting Policies (cont.)


 

Subsequent Events 

 

Management has reviewed the Company’s operations for potential disclosure or financial statement impacts related to events occurring after December 31, 2018, but prior to the release of these financial statements. Based on the results of this review, on January 25, 2019, the Company announced that it has adopted a stock repurchase program for up to approximately 5% of its outstanding common stock. Other than the repurchase program, no subsequent event disclosure or financial statement impacts to these financial statements are required as of March 27, 2019.

 

Reclassifications

 

Certain reclassifications have been made to the 2017 consolidated financial statements to conform to the 2018 classifications.

 

Recent Accounting Pronouncements

 

The following Accounting Standards Updates (ASUs) have been issued by the Financial Accounting Standards Board (FASB) and may impact the Company's financial statements in future reporting periods:

 

ASU No. 2016-13, “Credit Losses (Topic 326).”

 

ASU 2016-13 requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently assessing the impact of adopting ASU 2016-13 on its financial statements.

 

ASU No. 2016-02 “Leases (Topic 842): Amendments to the Leases Analysis.”

ASU No. 2018-10 "Codification Improvements to Topic 842."

ASU No. 2018-11 "Targeted Improvements"

 

For lessees, Topic 842 requires leases to be recognized on the balance sheet, along with disclosure of key information about leasing arrangements. Topic 842 was subsequently amended by ASU 2018-01, 2018-10 and 2018-11. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification expense recognition in the income statement.

 

For lessors, Topic 842 requires lessors to classify leases as sales-type, direct financing or operating leases. A lease is a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee and a third party, the lease is a direct financing lease. All leases that are not sales-type or direct financing leases are operating leases.

 

The new standard is effective for the Company on January 1, 2020, with early adoption permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) the new standard's effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company expects to adopt the new standard on January 1, 2020 using the effective date as its date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2020.

 

ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”

ASU No. 2018-03, “Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10)”

 

These standards make a number of changes to the recognition and measurement standards of financial instruments, including the following changes: 1) equity securities with a readily determinable fair value will have to be measured at fair value with changes in fair value recognized in net income; 2) entities that are public business entities will no longer be required to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost; and 3) entities that are public business entities will be required to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. These standards are effective for financial statements issued for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The adoption of these standard is not expected to have a material impact on our financial condition or results of operations, except that the Company will no longer disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost.

 

ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”

 

The amendment supersedes and replaces nearly all existing revenue recognition guidance. Under the amended guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual and interim periods beginning after December 15, 2018. Adoption of ASU No. 2014-09 is not expected to have a material impact on the Company’s financial statements.

 

F-13

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)

 

NOTE 1 - Summary of Singificamt Accounting Policies (cont.) 


 

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

 

This ASU allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The reclassification is not required but is an accounting policy election that must be disclosed during the year of adoption. This ASU will be effective for fiscal years beginning after December 15, 2018 with earlier adoption permitted. At this time, the Company does not expect to elect the reclassification option.

 

ASU No. 2018-09, “Codification Improvements”

 

This ASU represents changes in various Subtopics to clarify, correct errors, or make minor improvements. The amendments are not expected to have a significant effect on current accounting practice. Subtopics impacted by this ASU that are relevant to the Company include Subtopic 220-10 Income Statement - Reporting Comprehensive Income-Overall, Subtopic 718-740 Compensation - Stock Compensation-Income Taxes, and Subtopic 820-10 Fair Value Measurement-Overall. Many of the amendments within this ASU do not require transition and are effective upon issuance. However, some are not effective until fiscal years beginning after December 15, 2018. The amendments within this ASU are not expected to materially impact the Company's financial statements.    

ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”

This ASU modifies the disclosure requirements on fair value measurements in Topic 820, including the removal, modification to, and addition of certain disclosure requirements. This ASU will be effective for fiscal years beginning after December 15, 2019 with early adoption permitted. The majority of the disclosure changes are to be applied on a prospective basis. The Company is currently in the process of reviewing this ASU to determine whether the modifications within will be adopted prior to the effective date. Although this ASU has a significant impact to the Company’s fair value disclosures, no additional impact to the financial statements is expected.

 

Recent Accounting Pronouncements Adopted in 2018

 

The following Accounting Standards Update has been issued by the Financial Accounting Standards Board and has been adopted by the Company in 2018:

 

ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”'

 

This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods or services from nonemployees. Key improvements from this ASU include clarifying the measurement date to the grant date and eliminating the requirement to reassess classification of such awards upon vesting. Any share-based awards to nonemployees classified as a liability that are not settled prior to adoption and any equity classified awards for which a measurement date has not been established will require remeasurement through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Upon transition, nonemployee awards are required to be measured at fair value as of the adoption date and must not remeasure assets that are completed. The Company has early adopted this ASU beginning October 1, 2018. This ASU did not have a material impact the Company's financial statements.

 

F-14

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

NOTE 2 – Earnings Per Share


 

Earnings (loss) per share is based on net income (loss) divided by the weighted average number of shares outstanding during the period, including allocated and committed-to-be-released Employee Stock Ownership Plan (“ESOP”) shares.

 

   

Year Ended December 31,

 
   

2018

      2017*  

Net income (loss)

  $ 1,058     $ (186 )

Basic potential common shares

               

Weighted average shares outstanding

    6,617,507       6,612,500  

Weighted average unallocated Employee Stock Ownership Plan Shares

    (249,783 )     (257,245 )

Basic weighted average shares outstanding

    6,367,724       6,355,255  

Dilutive potential common shares

    -       -  

Diluted weighted average shares outstanding

    6,367,724       6,355,255  
                 

Basic earnings (loss) per share

  $ 0.17     $ (0.03 )

Diluted earnings (loss) per share

  $ 0.17     $ (0.03 )

 

*Loss per shares for the year ended December 31, 2017, includes income attributed to the period prior to the initial public offering for the common shares issued.

 

 

NOTE 3 - Cash and Due from Banks


 

Under Regulation D, savings institutions are generally required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank, based upon a percentage of deposits. The Company was required to maintain reserve balances on deposit with the Federal Reserve Bank of $0 as of both December 31, 2018 and 2017.

 

In the normal course of business, the Company maintains cash and due from bank balances with correspondent banks. Balances in these accounts may exceed the Federal Deposit Insurance Corporation's insured limit of $250. Management believes these financial institutions have strong credit ratings and that the credit risk related to these deposits is minimal.

 

F-15

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

NOTE 4 Available for Sale Securities


 

Amortized costs and fair values of available for sale securities are summarized as follows:

 

   

Amortized

Cost

   

Gross

Unrealized

Gains

   

Gross

Unrealized

Losses

   

Estimated

Fair Value

 

December 31, 2018

                               

Obligations of the US government and US government sponsored agencies

  $ 1,299     $ 8     $ -     $ 1,307  

Obligations of states and political subdivisions

    8,381       17       (103 )     8,295  

Mortgage-backed securities

    29,164       24       (652 )     28,536  

Certificates of deposit

    1,500       1       (55 )     1,446  

Corporate debt securities

    4,220       2       (55 )     4,167  

Total available for sale securities

  $ 44,564     $ 52     $ (865 )   $ 43,751  
                                 

December 31, 2017

                               

Obligations of the US government and US government sponsored agencies

  $ 2,211     $ 11     $ (2 )   $ 2,220  

Obligations of states and political subdivisions

    13,102       104       (69 )     13,137  

Mortgage-backed securities

    33,908       14       (455 )     33,467  

Certificates of deposit

    4,000       6       (9 )     3,997  

Corporate debt securities

    5,171       29       (9 )     5,191  

Total available for sale securities

  $ 58,392     $ 164     $ (544 )   $ 58,012  

 

 

Fair values of securities are estimated based on financial models or prices paid for similar securities. It is possible interest rates could change considerably, resulting in a material change in estimated fair value.

 

F-16

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 4 Available for Sale Securities (cont.)


 

The following table presents the portion of the Company's portfolio which has gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position:

 

   

Less Than 12 Months

   

12 Months or More

   

Total

 
   

Fair Value

   

Unrealized

Losses

   

Fair Value

   

Unrealized

Losses

   

Fair Value

   

Unrealized

Losses

 

December 31, 2018

                                               

Obligations of the US government and US government sponsored agencies

  $ 175     $ -     $ 113     $ -     $ 288     $ -  

Obligations of states and political subdivisions

    -       -       6,142       (103 )     6,142       (103 )

Mortgage-backed securities

    1,171       (24 )     24,725       (628 )     25,896       (652 )

Certificates of deposit

    -       -       1,195       (55 )     1,195       (55 )

Corporate debt securities

    384       (2 )     3,128       (53 )     3,512       (55 )

Total

  $ 1,730     $ (26 )   $ 35,303     $ (839 )   $ 37,033     $ (865 )

December 31, 2017

                                               

Obligations of the US government and US government sponsored agencies

  $ 235     $ (2 )   $ -     $ -     $ 235     $ (2 )

Obligations of states and political subdivisions

    3,180       (23 )     2,660       (46 )     5,840       (69 )

Mortgage-backed securities

    22,685       (213 )     9,270       (242 )     31,955       (455 )

Certificates of deposit

    2,492       (9 )     -       -       2,492       (9 )

Corporate debt securities

    2,683       (8 )     250       (1 )     2,933       (9 )

Total

  $ 31,275     $ (255 )   $ 12,180     $ (289 )   $ 43,455     $ (544 )

 

At December 31, 2018, the investment portfolio included 79 securities available for sale, which had been in an unrealized loss position for greater than twelve months, and 6 securities available for sale, which had been in an unrealized loss position for less than twelve months. At December 31, 2017, the investment portfolio included 27 securities available for sale, which had been in an unrealized loss position for greater than twelve months, and 73 securities available for sale, which had been in an unrealized loss position for less than twelve months. Because these securities have a fixed interest rate, their fair value is sensitive to movements in market interest rates. These unrealized losses are considered temporary because the Company does not currently have the intent to sell the securities before recovery of the losses; therefore we expect to collect all contractually due amounts from these securities. Accordingly, these investments were reduced to their fair values through accumulated other comprehensive income, not through earnings.

 

We regularly assess our securities portfolio for OTTI. These assessments are based on the nature of the securities, the underlying collateral, the financial condition of the issuer, the extent and duration of the loss, our intent related to the individual securities, and the likelihood that we will have to sell securities prior to expected recovery. We did not have any impairment losses recognized in earnings for the years ended December 31, 2018 or December 31, 2017.

 

F-17

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 4 Available for Sale Securities (cont.)


 

The amortized cost and fair value of available for sale securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities in mortgage-backed securities since the anticipated maturities are not readily determinable. Therefore, these securities are not included in the maturity categories in the following maturity summary listed below:

 

   

December 31, 2018

 
   

Amortized Cost

   

Fair Value

 

Due in one year or less

  $ 2,642     $ 2,632  

Due after one year through 5 years

    3,282       3,238  

Due after 5 years through 10 years

    4,888       4,818  

Due after 10 years

    4,588       4,527  

Subtotal

  $ 15,400     $ 15,215  

Mortgage-backed securities

    29,164       28,536  

Total

  $ 44,564     $ 43,751  

 

 

The following is a summary of the proceeds from sales of securities available for sale, as well as gross gains and losses:

 

   

Years ended December 31,

 
   

2018

   

2017

 

Proceeds from sale of securities

  $ 12,874     $ 6,856  

Gross gains

    35       86  

Gross losses

    (239 )     (66 )

 

 

Available for sale securities with a fair value of $960 were pledged at December 31, 2018. No securities were pledged at December 31, 2017. 

 

F-18

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

NOTE 5 - Loans


 

Major classifications of loans are as follows:

 

   

December 31,

   

December 31,

 
   

2018

   

2017

 

Commercial

               

Development

  $ 7,801     $ 1,498  

Real estate

    69,425       53,202  

Commercial and industrial

    13,142       10,135  

Residential real estate and consumer

               

1-4 family owner-occupied

    41,018       41,446  

1-4 family investor-owned

    32,312       33,658  

Multifamily

    34,467       31,677  

Consumer

    2,733       1,613  

Subtotal

  $ 200,898     $ 173,229  

Deferred loan fees

    (86 )     (74 )

Allowance for loan losses

    (2,118 )     (1,800 )

Net loans

  $ 198,694     $ 171,355  

 

Deposit accounts in an overdraft position and reclassified as loans approximated $7 and $2 at December 31, 2018 and 2017, respectively.

 

A summary of the activity in the allowance for loan losses by portfolio segment is as follows:

 

   

Commercial

   

Residential real estate

and consumer

   

Total

 

December 31, 2018

                       

Beginning balance

  $ 660     $ 1,140     $ 1,800  

Provision for loan losses

    304       209       513  

Loans charged off

    (24 )     (172 )     (196 )

Recoveries of loans previously charged off

    -       1       1  

Total ending allowance balance

  $ 940     $ 1,178     $ 2,118  
                         

December 31, 2017

                       

Beginning balance

  $ 348     $ 1,130     $ 1,478  

Provision for loan losses

    312       107       419  

Loans charged off

    -       (133 )     (133 )

Recoveries of loans previously charged off

    -       36       36  

Total ending allowance balance

  $ 660     $ 1,140     $ 1,800  

 

F-19

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 5 - Loans (cont.)


 

Information about how loans were evaluated for impairment and the related allowance for loan losses follows:

 

December 31, 2018

 

Commercial

   

Residential real

estate and consumer

   

Total

 

Loans:

                       

Individually evaluated for impairment

  $ 87     $ 1,469     $ 1,556  

Collectively evaluated for impairment

    90,281       109,061       199,342  

Total loans

  $ 90,368     $ 110,530     $ 200,898  
                         

Allowance for loan losses:

                       

Individually evaluated for impairment

  $ -       -     $ -  

Collectively evaluated for impairment

    940       1,178       2,118  

Total allowance for loan losses

  $ 940     $ 1,178     $ 2,118  

 

December 31, 2017

 

Commercial

   

Residential real

estate and consumer

   

Total

 

Loans:

                       

Individually evaluated for impairment

  $ 192     $ 2,112     $ 2,304  

Collectively evaluated for impairment

    64,643       106,282       170,925  

Total loans

  $ 64,835     $ 108,394     $ 173,229  
                         

Allowance for loan losses:

                       

Individually evaluated for impairment

  $ -       179     $ 179  

Collectively evaluated for impairment

    660       961       1,621  

Total allowance for loan losses

  $ 660     $ 1,140     $ 1,800  

 

F-20

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 5 - Loans (cont.)


 

Information regarding impaired loans follows:

 

As of December 31, 2018

 

Principal

Balance

   

Recorded

Investment

   

Related

Allowance

   

Average

Investment

   

Interest

Recognized

 

Loans with no related allowance for loan losses:

                                       

Commercial

                                       

Commercial and industrial

  $ 89     $ 87     $ -     $ 93     $ 5  

Residential real estate and consumer

                                       

1-4 family owner-occupied

    1,142       1,120       -       1,137       26  

1-4 family investor-owned

    248       241       -       246       -  

Consumer

    114       108       -       114       -  
                                         

Total impaired loans

  $ 1,593     $ 1,556     $ -     $ 1,590     $ 31  

 

As of December 31, 2017

 

Principal

Balance

   

Recorded

Investment

   

Related

Allowance

   

Average

Investment

   

Interest

Recognized

 

Loans with related allowance for loan losses:

                                       

Residential real estate and consumer

                                       

1-4 family investor-owned

  $ 375     $ 330     $ 179     $ 312     $ 8  
                                         

Loans with no related allowance for loan losses:

                                       

Commercial

                                       

Commercial and industrial

    198       192       -       204       -  

Residential real estate and consumer

                                       

1-4 family owner-occupied

    1,158       1,099       -       1,443       1  

1-4 family investor-owned

    716       683       -       1,289       24  
                                         

Total loans with no related allowance

    2,072       1,974       -       2,936       25  
                                         

Total impaired loans

  $ 2,447     $ 2,304     $ 179     $ 3,248     $ 33  

 

There were no additional funds committed to impaired loans as of December 31, 2018. As of December 31, 2017, approximately $50 is committed to one impaired loan relationship to finance costs relating to the disposal of several properties.

 

F-21

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 5 - Loans (cont.)


 

The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan losses. The credit quality indicators monitored differ depending on the class of loan.

 

Commercial loans are generally evaluated using the following internally prepared ratings:

 

“Pass” ratings are assigned to loans with adequate collateral and debt service ability such that collectibility of the contractual loan payments is highly probable.

 

“Special mention” ratings are assigned to loans where management has some concern that the collateral or debt service ability may not be adequate, though the collectibility of the contractual loan payments is still probable.

 

“Substandard” ratings are assigned to loans that do not have adequate collateral and/or debt service ability such that collectibility of the contractual loan payments is no longer probable.

 

“Doubtful” ratings are assigned to loans that do not have adequate collateral and/or debt service ability, and collectibility of the contractual loan payments is unlikely.

 

Information regarding the credit quality indicators most closely monitored for commercial loans by class follows:

 

   

Pass

   

Special

Mention

   

Substandard

   

Doubtful

   

Totals

 

December 31, 2018

                                       

Development

  $ 7,801     $ -     $ -     $ -     $ 7,801  

Real estate

    69,425       -       -       -       69,425  

Commercial and industrial

    13,122       -       20       -       13,142  

1-4 family investor-owned

    30,558       1,353       401       -       32,312  

Multifamily

    34,467       -       -       -       34,467  

Totals

  $ 155,373     $ 1,353     $ 421     $ -     $ 157,147  

December 31, 2017

                                       

Development

  $ 1,498     $ -     $ -     $ -     $ 1,498  

Real estate

    51,939       1,263       -       -       53,202  

Commercial and industrial

    9,435       586       114       -       10,135  

1-4 family investor-owned

    31,964       1,449       149       96       33,658  

Multifamily

    31,677       -       -       -       31,677  

Totals

  $ 126,513     $ 3,298     $ 263     $ 96     $ 130,170  

 

F-22

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 5 - Loans (cont.)


 

Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing according to the contractual terms of the loan.

 

Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class follows: 

 

   

Performing

   

Non-performing

   

Totals

 

December 31, 2018

                       

1-4 family owner-occupied

    39,919       1,099       41,018  

Consumer

    2,625       108       2,733  
Total   $ 42,544     $ 1,207     $ 43,751  

December 31, 2017

                       

1-4 family owner-occupied

    40,347       1,099       41,446  

Consumer

    1,613       -       1,613  
Total   $ 41,960     $ 1,099     $ 43,059  

 

 

Loan aging information follows:

 

           

Loans Past Due

   

Loans Past Due

           

Nonaccrual

 

December 31, 2018

 

Current Loans

   

30-89 Days

   

90+ Days

   

Total Loans

   

Loans

 

Commercial

                                       

Development

  $ 7,801     $ -     $ -     $ 7,801     $ -  

Real estate

    69,425       -       -       69,425       -  

Commercial and industrial

    13,076       66       -       13,142       20  

Residential real estate and consumer

                                       

1-4 family owner-occupied

    41,013       5       -       41,018       365  

1-4 family investor-owned

    32,069       243       -       32,312       241  

Multifamily

    34,467       -       -       34,467       -  

Consumer

    2,733       -       -       2,733       94  

Total

  $ 200,584     $ 314     $ -     $ 200,898     $ 720  
                                         

December 31, 2017

                                       

Commercial

                                       

Development

  $ 1,498     $ -     $ -     $ 1,498     $ -  

Real estate

    53,202       -       -       53,202       -  

Commercial and industrial

    9,946       75       114       10,135       114  

Residential real estate and consumer

                                       

1-4 family owner-occupied

    40,941       436       69       41,446       580  

1-4 family investor-owned

    33,209       205       244       33,658       549  

Multifamily

    31,677       -       -       31,677       -  

Consumer

    1,607       6       -       1,613       -  

Total

  $ 172,080     $ 722     $ 427     $ 173,229     $ 1,243  

 

 

There are no loans 90 or more days past due and accruing interest as of December 31, 2018 or 2017.

 

F-23

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 5 - Loans (cont.)


 

Management regularly monitors impaired loan relationships. In the event facts and circumstances change, an additional provision for loan losses may be necessary.

 

Nonaccrual loans are as follows:

 

As of December 31

 

2018

   

2017

 

Nonaccrual loans, other than troubled debt restructurings

  $ 20     $ 274  

Nonaccrual loans, troubled debt restructurings

    700       969  

Total nonaccrual loans

    720       1,243  

Restructured loans, accruing

  $ 501     $ 661  

 

When, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that the Company would not otherwise consider, the modified loan is classified as a troubled debt-restructuring. Loan modifications may consist of forgiveness of interest and/or principal, a reduction of the interest rate, allowing interest-only payments for a period of time, and/or extending amortization terms.

 

The following presents information regarding new modifications of loans classified as troubled debt restructurings during the years ended December 31, 2018 and 2017. All troubled debt restructurings are classified as impaired loans. The recorded investment presented in the following tables does not include specific reserves for loan losses recognized for these loans, which totaled $0 at December 31, 2018 and December 31, 2017.

 

   

Number of

Modifications

   

Pre-Modification

Investment

   

Post-

Modification

Investment

 

December 31, 2018

                       

Residential real estate and consumer:

                       

1-4 family owner-occupied

    2     $ 302     $ 302  

1-4 family investor-owned

    1       250       250  

Consumer

    1       20       20  
      4     $ 572     $ 572  

December 31, 2017

                       

Commercial:

                       

Commercial and industrial

    1     $ 88     $ 88  
      1     $ 88     $ 88  

 

No troubled debt restructurings defaulted within 12 months of their modification date during the year ended December 31, 2018. The Company considers a troubled debt restructuring in default if it becomes past due more than 90 days. Two 1-4 family investor-owned properties totaling $331 defaulted in 2017 that were restructured within twelve months, $82 was charged to the allowance for loan losses relating to these properties.

 

F-24

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 5 - Loans (cont.)


 

The Company continues to evaluate purchased loans for impairment. The purchased loans were considered impaired at the acquisition date if there was evidence of deterioration since origination and if it was probable that not all contractually required principal and interest payments would be collected under the loans. The following table reflects the carrying value of all purchased loans:

 

   

Contractually Required Payments Receivable

         

As of December 31, 2018

 

Credit Impaired

   

Non-Credit Impaired

   

Carrying Value of

Purchased Loans

 

Commercial

                       

Real estate

  $ -     $ 7,687     $ 7,673  

Residential real estate and consumer

                       

1-4 family owner-occupied

    -       5,075       5,014  

1-4 family investor-owned

    -       9,269       9,164  

Multifamily

    -       3,953       3,943  

Consumer

    -       -       -  

Totals

  $ -     $ 25,984     $ 25,794  

 

   

Contractually Required Payments Receivable

         

As of December 31, 2017

 

Credit Impaired

   

Non-Credit Impaired

   

Carrying Value of

Purchased Loans

 

Commercial

                       

Real estate

  $ -     $ 8,444     $ 8,380  

Residential real estate and consumer

                       

1-4 family owner-occupied

    146       6,709       6,753  

1-4 family investor-owned

    149       10,558       10,591  

Multifamily

    -       5,425       5,372  

Consumer

    -       -       -  

Totals

  $ 295     $ 31,136     $ 31,096  

 

As of December 31, 2018, the estimated contractually-required payments receivable on credit impaired and non-credit impaired loans was $0 and $25,984, respectively. The cash flows expected to be collected related to principal as of December 31, 2018 on all purchased loans is $25,794. As a result, there was approximately $190 of remaining discount on the purchased loans. These amounts are based upon the estimate of the underlying collateral or discounted cash flows as of December 31, 2018. Any excess of cash flows expected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan as the purchased loans pay down, mature, renew or pay off.

 

As of December 31, 2017, the estimated contractually-required payments receivable on credit impaired and non-credit impaired loans was $295 and $31,136, respectively. The cash flows expected to be collected related to principal as of December 31, 2017 on all purchased loans is $31,096. As a result, there was approximately $334 of remaining discount on the purchased loans. These amounts are based upon the estimate of the underlying collateral or discounted cash flows as of December 31, 2017. Any excess of cash flows expected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan as the purchased loans pay down, mature, renew or pay off.

 

F-25

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 5 - Loans (cont.)


 

The change in carrying amount of accretable yield for purchased loans was as follows:

 

   

For years ended December 31,

 
   

2018

   

2017

 
                 

Beginning Balance

  $ 334     $ 739  

Additions

    -       -  

Accretion

    (144 )     (405 )

Ending Balance

  $ 190     $ 334  

 

  

 

NOTE 6 - Premises and Equipment


Premises and equipment are stated at cost less accumulated depreciation and are summarized as follows:

 

   

December 31,

 
   

2018

   

2017

 
                 

Land

  $ 479     $ 479  

Buildings

    4,929       4,919  

Leasehold improvements

    153       153  

Furniture and equipment

    1,332       1,233  
                 

Totals

    6,893       6,784  
                 

Less: Accumulated depreciation

    1,836       1,494  
                 

Premises and equipment, net

  $ 5,057     $ 5,290  

 

Depreciation expense was $342 and $460 for the years ended December 31, 2018 and 2017, respectively.

 

During 2017, the Company sold and leased back two of its office buildings. The Bay View building was sold for $700, resulting in a net loss of approximately $8. The Racine Avenue building was sold for $1,200, resulting in a gain of approximately $59. In conjunction with the sales, the Company entered into ten-year leases, with options to renew for two additional five-year terms. Rent expense for all operating leases was $165 and $46 in 2018 and 2017, respectively.

 

Rent commitments, before considering renewal options that are present, are as follows as of December 31, 2018:

 

2019

  $ 167  

2020

    153  

2021

    144  

2022

    146  

2023

    148  

Thereafter

    575  
Total   $ 1,333  

 

The Company made a charitable donation of the former branch office located in downtown Waukesha during July 2017, valued at $273.

 

F-26

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 6 - Premises and Equipment (cont.)


 

The Company also entered into a lease with a tenant for a portion of the Brookfield branch, commencing June 1, 2017 through May 31, 2024. As of December 31, 2018, minimum future rents receivable are as follows:

 

2019

  $ 97  

2020

    99  

2021

    101  

2022

    103  

2023

    106  

Thereafter

    44  
Total   $ 550  

 

 

 

NOTE 7 - Deposits


 

The composition of deposits are as follows:

 

   

At December 31,

 
   

2018

   

2017

 
                 

Non-interest bearing checking

  $ 22,763     $ 22,271  

Interest bearing checking

    5,424       4,017  

Money market

    41,910       54,472  

Statement savings accounts

    13,773       14,030  

Health savings accounts

    11,197       11,335  

Certificates of deposit

    88,138       76,788  

Total

  $ 183,205     $ 182,913  

 

Certificates of deposit that meet or exceed the FDIC insurance limit of $250 totaled $30,590 and $12,424 at December 31, 2018 and 2017, respectively.

 

The scheduled maturities of certificates of deposit are as follows as of December 31, 2018:

 

2019

  $ 62,303  

2020

    16,570  

2021

    5,391  

2022

    1,910  

2023

    1,964  
         

Total

  $ 88,138  

 

F-27

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

NOTE 8 – FHLB Advances


 

FHLB advances consist of the following as of December 31:

 

   

2018

   

2017

 
   

Rates

   

Amount

   

Rates

   

Amount

 
                                       

Fixed rate, fixed term advances

  1.42% - 2.70%     $ 11,750       1.42% -  1.92%     $ 4,750  

Fixed term advances with floating spread

  1.54% -  2.05%       6,000       1.39% -  1.96%       8,000  
                                       

Total

            $ 17,750                 $ 12,750  

 

The following is a summary of scheduled maturities of fixed term FHLB advances as of December 31, 2018:

 

   

Fixed Rate Advances

   

Adjustable Rate Advances

         
   

Weighted

Average Rate

   

Amount

   

Weighted

Average Rate

   

Amount

   

Total

Amount

 

2019

    2.21 %   $ 5,750       1.54 %   $ 2,000     $ 7,750  

2020

    2.34 %     6,000       1.69 %     2,000       8,000  

2021

            -       2.05 %     2,000       2,000  
                                         

Total

    2.28 %   $ 11,750       1.76 %   $ 6,000     $ 17,750  

 

Actual maturities may differ from the scheduled principal maturities due to call options on the various advances.

 

The Company has a master contract agreement with the FHLB that provides for a borrowing up to the lesser of a determined multiple of FHLB stock owned or a determined percentage of the book value of the Company’s qualifying 1-4 family, multifamily, and commercial real estate loans. The Company pledged approximately $158,923 and $135,760 of 1-4 family, multifamily, and commercial real estate loans to secure FHLB advances at December 31, 2018 and 2017, respectively. FHLB provides both fixed and floating rate advances. Floating rates are tied to short-term market rates of interest, such as LIBOR, Federal funds or Treasury Bill rates. Fixed rate advances are priced in reference to market rates of interest at the time of the advance, namely the rates that FHLB pays to borrowers at various maturities. FHLB advances are subject to a prepayment penalty if they are repaid prior to maturity. FHLB advances are also secured by $739 and $514 of FHLB stock owned by the Company at December 31, 2018 and 2017, respectively.

 

At December 31, 2018, the Company’s available and unused portion of this borrowing agreement was $889.

 

In addition, the Company has a $7,000 federal funds line of credit through Bankers’ Bank of Wisconsin, which was not drawn on as of December 31, 2018. The Company also has the authority to borrow through the Federal Reserve’s Discount Window.

 

F-28

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

 NOTE 9 401(k) Plan


 

The Company sponsors a 401(k) profit sharing plan that covers substantially all employees. To be eligible to participate, an employee must have completed 1,000 hours of service and be 21 years of age or older. The Company matches 100% of employee contributions up to 4% of their annual compensation. The Company may also make nonelective contributions to the plan at the discretion of the Board of Directors. Expense charged to operations for this plan was $154 and $127 for the years ended December 31, 2018 and 2017, respectively.

 

 

NOTE 10 - Income Taxes


 

The provision for income taxes included in the accompanying financial statements consists of the following components:

 

   

Years ended December 31,

 
   

2018

   

2017

 

Current Taxes (Benefit)

               

Federal

  $ 114     $ 192  

State

    83       76  
Total Current Taxes     197       268  

Deferred Income Taxes

               

Federal

    107       (311 )

State

    14       (46 )
Total Deferred Income Taxes     121       (357 )
                 

Impact of Deferred Tax Asset Restatement

    -       353  
                 

Total Provision for Income Taxes

  $ 318     $ 264  

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

 

The net deferred tax asset in the accompanying balance sheet includes the following amounts of deferred tax assets and liabilities:

 

   

As of December 31,

 

 

 

2018

   

2017

 
Deferred Tax Assets                

Allowance for loan losses

  $ 577     $ 490  

Deferred compensation

    121       120  

Non-accrual interest

    18       30  

Purchase accounting

    18       17  

Equity compensation

    4       -  

AMT credit

    -       108  

Unrealized loss on available for sale securities

    219       133  

Charitable contribution carryforward

    191       235  

Other

    10       11  

Deferred Tax Assets

  $ 1,158     $ 1,144  
                 

Deferred Tax Liabilities

               

Depreciation and amortization

    (73 )     (17 )

FHLB stock

    (30 )     (30 )

Other

    -       (7 )

Deferred Tax Liabilities

  $ (103 )   $ (54 )
                 

Net Deferred Tax Asset

  $ 1,055     $ 1,090  

 

F-29

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 10 - Income Taxes (cont.)


 

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”). The Act amends the Internal Revenue Code to reduce corporate tax rates and modify various tax policies, credits, and deductions. The Act reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate, which was effective for the Company beginning January 1, 2018. As a result of the tax rate reduction in the Act, the Company reduced its net deferred tax asset during the year ended December 31, 2017, by $353, which was recognized as additional income tax expense.

 

A summary of the sources of differences between income taxes at the federal statutory rate and the provision for income taxes follows:

 

   

Years ended December 31,

 
   

2018

   

2017

 

 

 

Amount

   

% of Pretax

Income

   

Amount

   

% of Pretax

Income

 
Reconciliation of statutory to effective rates                                

Federal income taxes at statutory rate

  $ 289       21.00 %   $ 27       34.00 %

Adjustments for

                               

Tax exempt interest on municipal obligations

    (10 )     -0.73 %     (45 )     -57.69 %

State income taxes, net of federal income tax benefit

    75       5.45 %     20       25.64 %

Increase in CSV of life insurance

    (41 )     -2.98 %     (67 )     -85.90 %

Other

    5       0.36 %     (24 )     -30.77 %

Valuation of deferred tax asset

    -       0.00 %     353       452.56 %

Provision for income taxes

  $ 318       23.11 %   $ 264       337.84 %

 

With few exceptions, the Company is no longer subject to federal or state examinations by taxing authorities for years before 2014.

 

At December 31, 2018 and December 31, 2017, the Company did not have any state or federal net operating loss carryover.

 

 

NOTE 11 - Commitments and Contingencies


 

In the normal course of business, the Company may be involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company's financial statements. No legal proceedings existed at December 31, 2018.

 

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets.

 

The Company’s exposure to credit loss is represented by the contractual, or notional, amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments. Since some of the commitments are expected to expire without being drawn upon, and some of the commitments may not be drawn upon to the total extent of the commitment, the notional amount of these commitments does not necessarily represent future cash requirements of the Company.

 

F-30

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 11 - Commitments and Contingencies (cont.)


 

The contract amounts of credit-related financial instruments at December 31, 2018 and 2017 are summarized below:

 

   

Notional Amount

 
   

2018

   

2017

 

Unused lines of credit

               

Fixed

    7,467       4,497  

Variable

    11,307       10,807  

Undisbursed portion of loan proceeds, fixed

    5,890       6,002  

Standby letters of credit, variable

    1,277       822  

 

 

Unused commitments under lines of credit are commitments for possible future extensions of credit to existing customers. These lines of credit may or may not require collateral and may or may not contain a specific maturity date.

 

The undisbursed portion of loan proceeds represents undrawn amounts under construction loans. These loans are generally secured by real estate and generally have a specific maturity date.

 

Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, all standby letters of credit issued have expiration dates within one year. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting these commitments. Standby letters of credit are not reflected in the financial statements, since recording the fair value of these guarantees would not have a significant impact on the financial statements.

 

The Company sells loans to investors and does not retain servicing responsibilities. Upon sale, the risk of credit loss is passed to the investor, unless the loan is sold with recourse. For loans sold without recourse, the Company does not retain the risk of loss should a loan, previously sold, go into default, unless it is determined that such loan was not within the agreed-upon underwriting guidelines due to negligence on the part of the Company or fraud on the part of the borrower. Such risk retention is standard within the mortgage banking industry. The Company’s exposure relating to the fair value of the representations and warranties and other recourse obligations is not material. The Company is contingently liable in the amount of $5,370 relating to loans sold with recourse at December 31, 2018 and $3,647 as of December 31, 2017. All recourse provisions expire within four months from when the loan is sold.

 

 

NOTE 12 - Concentration of Credit Risk


 

Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents, investments, and loans. The Company's cash and cash equivalents are held in demand accounts with various institutions. The Company's investments are held in a variety of interest bearing investments including obligations from the U.S. government and government sponsored agencies and certificates of deposit. Such deposits are generally in excess of insured limits. The Company has not experienced any historical losses on its deposits of cash and cash equivalents. Practically all of the Company's loans and commitments have been granted to customers in the Company's market area. Although the Company has a diversified loan portfolio, the ability of their debtors to honor their contracts is dependent on the economic conditions of the counties surrounding the Company. The concentration of credit by type of loan is set forth in Note 5.

 

F-31

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

NOTE 13 Related-Party Transactions


 

A summary of loans to directors, executive officers, and their affiliates follows:

 

   

Years ended December 31,

 
   

2018

   

2017

 
                 

Beginning balance

  $ 6,697     $ 2,853  

Adjustments for changes in directors and executive officers

    -       -  

New loans

    2,121       9,976  

Less: Participations sold

    (310 )     (5,913 )

Repayments

    (1,683 )     (219 )
                 

Ending balance

  $ 6,825     $ 6,697  

 

Deposits from directors, executive officers, and their affiliates totaled $3,467 and $1,333 at December 31, 2018 and 2017, respectively.

 

The Company utilizes the services of a law firm in which one of the Company’s directors is a partner. Fees paid to the firm were $11 and $38 during the years ended 2018 and 2017, respectively. The Company also has an operating lease with the law firm for office space through 2020. Rent paid in 2018 and 2017 pertaining to this lease was $28 and $16, respectively.

 

To further the Company’s commitment to the local community, $250,000 cash as well as 25,000 shares of stock were donated to a charitable foundation established by the Company as part of the reorganization and offering in 2017.

 

 

NOTE 14 Foreclosed Assets


 

Foreclosed assets consists of one owner-occupied 1-4 family property as of December 31, 2018 totaling $69 and two foreclosed one owner-occupied 1-4 family properties totaling $619 at December 31, 2017. Residential real estate loans that are in the process of foreclosure totaled $0 and $165 at December 31, 2018 and 2017, respectively.

 

 

NOTE 15 Fair Value


 

Accounting standards describe three levels of inputs that may be used to measure fair value (the fair value hierarchy). The level of an asset or liability within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement of that asset or liability.

 

Following is a brief description of each level of the fair value hierarchy:

 

Level 1 - Fair value measurement is based on quoted prices for identical assets or liabilities in active markets.

 

Level 2 - Fair value measurement is based on: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; or (3) valuation models and methodologies for which all significant assumptions are or can be corroborated by observable market data.

 

F-32

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 15 Fair Value (cont.)


 

Level 3 - Fair value measurement is based on valuation models and methodologies that incorporate at least one significant assumption that cannot be corroborated by observable market data. Level 3 measurements reflect the Company’s estimates about assumptions market participants would use in measuring fair value of the asset or liability.

 

Some assets and liabilities, such as securities available for sale, are measured at fair value on a recurring basis under accounting principles generally accepted in the United States. Other assets and liabilities, such as impaired loans, may be measured at fair value on a nonrecurring basis.

 

Following is a description of the Company’s valuation methodology and significant inputs used for each asset and liability measured at fair value on a recurring or nonrecurring basis, as well as the classification of the asset or liability within the fair value hierarchy.

 

Available for sale securities - Available for sale securities may be classified as Level 1 or Level 2 measurements within the fair value hierarchy. Level 1 securities include equity securities traded on a national exchange. The fair value measurement of a Level 1 security is based on the quoted price of the security. Level 2 securities include U.S. government and agency securities, obligations of states and political subdivisions, corporate debt securities, and mortgage related securities. The fair value measurement of a Level 2 security is obtained from an independent pricing service and is based on recent sales of similar securities and other observable market data.

 

Loans - Loans are not measured at fair value on a recurring basis. However, loans considered to be impaired may be measured at fair value on a nonrecurring basis. The fair value measurement of an impaired loan that is collateral dependent is based on the fair value of the underlying collateral. Independent appraisals are obtained that utilize one or more valuation methodologies - typically they will incorporate a comparable sales approach and an income approach. Management routinely evaluates the fair value measurements of independent appraisers and adjusts those valuations based on differences noted between actual selling prices of collateral and the most recent appraised value. Such adjustments are usually significant, which results in a Level 3 classification. All other impaired loan measurements are based on the present value of expected future cash flows discounted at the applicable effective interest rate and, thus, are not fair value measurements.

 

Foreclosed assets- Real estate acquired through or in lieu of loan foreclosure are not measured at fair value on a recurring basis. However, foreclosed assets are initially measured at fair value (less estimated costs to sell) when they are acquired and may also be measured at fair value (less estimated costs to sell) if they become subsequently impaired. The fair value measurement for each asset may be obtained from an independent appraiser or prepared internally. Fair value measurements obtained from independent appraisers generally utilize a market approach based on sales of comparable assets and/or an income approach. Such measurements are usually considered Level 2 measurements. However, management routinely evaluates fair value measurements of independent appraisers by comparing actual selling prices to the most recent appraisals. If management determines significant adjustments should be made to the independent appraisals based on these evaluations, these measurements are considered Level 3 measurements. Fair value measurements prepared internally are based on management's comparisons to sales of comparable assets, but include significant unobservable data and are therefore considered Level 3 measurements.

 

F-33

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 NOTE 15 Fair Value (cont.)


 

Assets measured at fair value on a recurring basis are summarized below:

 

   

Recurring Fair Value Measurements Using

         
   

Quoted Prices in Active Markets for Identical Instruments

   

Significant Other Observable Inputs

   

Significant Unobservable Inputs

         
   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Total

 
                                 

As of December 31, 2018

                               

Assets:

                               

Available for sale securities:

                               

Obligations of the US government and US government sponsored agencies

  $ -     $ 1,307     $ -     $ 1,307  

Obligations of states and political subdivisions

    -       8,295       -       8,295  

Mortgage-backed securities

    -       28,536       -       28,536  

Certificates of deposit

    -       1,446       -       1,446  

Corporate debt securities

    -       4,167       -       4,167  

Total

  $ -     $ 43,751     $ -     $ 43,751  
                                 

As of December 31, 2017

                               

Assets:

                               

Available for sale securities:

                               

Obligations of the US government and US government sponsored agencies

  $ -     $ 2,220     $ -     $ 2,220  

Obligations of states and political subdivisions

    -       13,137       -       13,137  

Mortgage-backed securities

    -       33,467       -       33,467  

Certificates of deposit

    -       3,997       -       3,997  

Corporate debt securities

    -       5,191       -       5,191  

Total

  $ -     $ 58,012     $ -     $ 58,012  

 

F-34

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 15 Fair Value (cont.)


 

Information regarding the fair value of assets measured at fair value on a nonrecurring basis follows:

 

   

Nonrecurring Fair Value Measurements Using

         
   

Quoted Prices in

Active Markets for

Identical Instruments

   

Significant Other

Observable Inputs

   

Significant

Unobservable Inputs

         
   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Total

 
                                 

As of December 31, 2018

                               

Assets:

                               

Foreclosed assets

  $ -     $ -     $ 69     $ 69  
                                 

As of December 31, 2017

                               

Assets:

                               

Loans

  $ -     $ -     $ 151     $ 151  

Foreclosed assets

    -       -       619       619  

 

 

There were no loans recognized at fair value as of December 31, 2018. Loans with a carrying amount of $330 were considered impaired and were written down to their estimated fair value of $151 as of December 31, 2017. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling $179 as of December 31, 2017.

 

Foreclosed assets with a carrying amount of $69 and $619 were determined to be at their fair value as of December 31, 2018 and December 31, 2017, respectively.

 

The following presents quantitative information about nonrecurring Level 3 fair value measurements:

 

   

Fair Value

 

Valuation Technique

 

Unobservable Input(s)

 

Range/Weighted

Average

 

As of December 31, 2018

                       

Foreclosed assets

  $ 69  

Market and/or income approach

 

Management discount on appraised values

  10% - 20%  
                         

As of December 31, 2017

                       

Impaired loans

  $ 151  

Market and/or income approach

 

Management discount on appraised values

  10% - 20%  

Foreclosed assets

  $ 619  

Market and/or income approach

 

Management discount on appraised values

  10% - 20%  

 

F-35

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 15 Fair Value (cont.)


 

The Company estimates fair value of all financial instruments regardless of whether such instruments are measured at fair value. The following methods and assumptions were used by the Company to estimate fair value of financial instruments not previously discussed.

 

Cash and cash equivalents – Fair value approximates the carrying value.

 

Loans held for sale – Fair value is based on commitments on hand from investors or prevailing market prices.

 

Loans – Fair value of variable rate loans that reprice frequently is based on carrying values. Fair value of other loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings. Fair value of impaired and other nonperforming loans is estimated using discounted expected future cash flows or the fair value of the underlying collateral, if applicable.

 

FHLB stock – Fair value is the redeemable (carrying) value based on the redemption provisions of the Federal Home Loan Bank.

 

Accrued interest receivable and payable – Fair value approximates the carrying value.

 

Cash value of life insurance – Fair value is based on reported values of the assets.

 

Deposits and advance payments by borrowers for taxes and insurance – Fair value of deposits with no stated maturity, such as demand deposits, savings, and money market accounts, including advance payments by borrowers for taxes and insurance, by definition, is the amount payable on demand on the reporting date. Fair value of fixed rate time deposits is estimated using discounted cash flows applying interest rates currently being offered on similar time deposits.

 

FHLB advances – Fair value of fixed rate, fixed term borrowings is estimated by discounting future cash flows using the current rates at which similar borrowings would be made. Fair value of borrowings with variable rates or maturing within 90 days approximates the carrying value of those borrowings.

 

F-36

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 15 Fair Value (cont.)


 

The carrying value and estimated fair value of financial instruments follow:

 

   

December 31, 2018

 
   

Carrying Value

   

Level 1

   

Level 2

   

Level 3

 

Financial assets:

                               

Cash and cash equivalents

  $ 4,488     $ 4,488     $ -     $ -  

Available for sale securities

    43,751       -       43,751       -  

Loans held for sale

    679       -       679          

Loans

    198,694       -       -       199,048  

Accrued interest receivable

    768       768       -       -  

Cash value of life insurance

    7,007       -       -       7,007  

FHLB stock

    739       -       -       739  
                                 

Financial liabilities:

                               

Deposits

    183,205       95,067       -       87,531  

Advance payments by borrowers for taxes and insurance

    55       55       -       -  

FHLB advances

    17,750       -       -       17,505  

Accrued interest payable

    70       70       -       -  

 

   

December 31, 2017

 
   

Carrying Value

   

Level 1

   

Level 2

   

Level 3

 

Financial assets:

                               

Cash and cash equivalents

  $ 11,813     $ 11,813     $ -     $ -  

Available for sale securities

    58,012       -       58,012       -  

Loans held for sale

    109       -       109       -  

Loans

    171,355       -       -       171,729  

Accrued interest receivable

    782       782       -       -  

Cash value of life insurance

    6,558       -       -       6,558  

FHLB stock

    514       -       -       514  
                                 

Financial liabilities:

                               

Deposits

    182,913       106,125       -       76,099  

Advance payments by borrowers for taxes and insurance

    36       36       -       -  

FHLB advances

    12,750       -       -       12,597  

Accrued interest payable

    37       37       -       -  

 

F-37

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 15 Fair Value (cont.)


 

Limitations - The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based on quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

 

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters that could affect the estimates. Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business. Deposits with no stated maturities are defined as having a fair value equivalent to the amount payable on demand. This prohibits adjusting fair value derived from retaining those deposits for an expected future period of time. This component, commonly referred to as a deposit base intangible, is neither considered in the above amounts, nor is it recorded as an intangible asset on the consolidated balance sheets. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

 

F-38

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

NOTE 16 Equity and Regulatory Matters


 

The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

 

Effective January 1, 2015, the Bank became subject to the regulatory capital reforms in accordance with Basel III, which established higher minimum risk-based capital ratio requirements, a new common equity Tier 1 risk-based capital ratio and a new capital conservation buffer (“CCB.”) The regulations also included revisions to the definition of capital and changes in the risk-weighting of certain assets, in addition to redefining “well capitalized” as a 6.5% common equity Tier 1 risk-based capital ratio, an 8.0% Tier 1 risk-based capital ratio, a 10.0% total risk-based capital ratio and a 5.0% Tier 1 leverage ratio.

 

Additionally, the CCB, which is applicable to the above minimum risk-based capital requirement, was introduced. The CCB will eventually be 2.5% and is being phased in over a five year period. The current CCB is equal to 1.25% and increases 0.625% annually through 2019 to 2.5%. The Bank, in order to avoid limitations on capital distributions, including dividend payments, engaging in share repurchases and certain discretionary bonus payments to executive officers, must maintain the CCB at the appropriate level.

 

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1, and Total capital to risk-weighted assets and of Tier 1 capital to average assets. It is management's opinion, as of December 31, 2018, that the Bank meet all applicable capital adequacy requirements.

 

As of December 31, 2018, the Bank is categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum regulatory capital ratios as set forth in the table. There are no conditions or events since December 31, 2018 that management believes have changed the category.

 

The Bank's actual capital amounts and ratios are presented in the following tables:

 

   

Actual

   

For Capital Adequacy

   

To Be Well Capitalized

 
                    Purposes    

Under Prompt Corrective Action Provisions

 

 

 

Amount

   

Ratio

   

Amount

   

Ratio

   

Amount

   

Ratio

 

December 31, 2018:

                                               

First Federal Bank of Wisconsin

                                               

Leverage (Tier 1)

  $ 48,502       18.4 %   $ 10,542       4.0 %   $ 13,178       5.0 %

Risk Based:

                                               

Common Tier 1

    48,502       23.7       9,209       4.5       13,302       6.5  

Tier 1

    48,502       23.7       12,279       6.0       16,372       8.0  

Total

    50,620       24.7       16,372       8.0       20,465       10.0  
                                                 

December 31, 2017:

                                               

First Federal Bank of Wisconsin

                                               

Leverage (Tier 1)

  $ 47,513       17.2 %   $ 11,051       4.0 %   $ 13,813       5.0 %

Risk Based:

                                               

Common Tier 1

    47,513       26.8       7,973       4.5       11,517       6.5  

Tier 1

    47,513       26.8       10,631       6.0       14,174       8.0  

Total

    49,313       27.8       14,174       8.0       17,718       10.0  

 

F-39

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

 NOTE 17 Intangible Assets


 

The core deposit premium intangible asset had a gross carrying amount of $161 and accumulated amortization of $74 at December 31, 2018. The core deposit premium intangible asset had a gross carrying amount of $161 and accumulated amortization of $58 at December 31, 2017. Aggregate amortization expense for the years ended December 31, 2018 and 2017 was $16 and $16.

 

The following table shows the estimated future amortization of the core deposit premium intangible asset for the next five years. The projections of amortization expense are based on existing asset balances:

 

   

As of December 31, 2018

 

2019

    16  

2020

    16  

2021

    16  

2022

    16  

2023

    16  

 

 

NOTE 18 Deferred Compensation


 

The Company has entered into various deferred compensation agreements with key officers. The liability outstanding under the agreements was $443 at December 31, 2018 and $442 at December 31, 2017. The amount charged to operations was $52 and $51 for the twelve months ended December 31, 2018 and 2017, respectively.

 

In addition, the Company is party to a life insurance agreement with an executive officer pursuant to which the Company has purchased a life insurance policy on the executive officer's life. Under the agreement, the beneficiary is entitled to a death benefit paid by the insurer from the policy proceeds equal to $85. At December 31, 2018, the cash surrender value of this policy was $252.

 

 

NOTE 19 Employee Stock Ownership Plan


 

The Company maintains a leveraged employee stock ownership plan (“ESOP”) that covers substantially all employees. The ESOP was established in conjunction with the Company’s stock offering completed in October 2017 and operates on a plan year ending December 31. The loan to fund the acquisition of stock by the ESOP was made by the Company. The Bank makes annual contributions to the ESOP equal to the ESOP’s debt service. The ESOP shares initially were pledged as collateral for this debt. As the debt is repaid, shares are released from collateral and allocated to active participants, based on the proportion of debt service paid in the year. Because the debt is intercompany, it is eliminated in consolidation for presentation in these financial statements. The shares pledged as collateral are reported as unearned ESOP shares in the balance sheet.

 

As shares are committed to be released from collateral and allocated to active participants, the Company reports compensation expense equal to the current market price of the shares and the shares will become outstanding for earnings-per-shares (EPS) computations. During the years ended December 31, 2018 and 2017, 12,960 and 2,947 shares were committed to be released, respectively. During the years ended December 31, 2018 the average fair value per share of stock was $11.03 resulting in total ESOP compensation expense of $143 for the years ended December 31, 2018. During the years ended December 31, 2017 the average fair value per share of stock was $11.00 resulting in total ESOP compensation expense of $32 for the years ended December 31, 2017. The ESOP shares as of December 31 were as follows:

 

   

2018

   

2017

 

Shares allocated to active participants

    2,947       -  

Shares committed to be released and allocated to participants

    12,960       2,947  

Total unallocated shares

    243,303       256,263  

Total ESOP shares

    259,210       259,210  

Fair value of unallocated shares (based on $10.03 and $11.02 share price as of December 31, 2018 and 2017, respectively)

  $ 2,440     $ 2,824  

 

F-40

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

 

NOTE 20 - Share-based Compensation Plans


 

ASC Topic 718 requires that the grant date fair value of equity awards to employees be recognized as compensation expense over the period during which an employee is required to provide service in exchange for such awards.

 

The following table summarizes the impact of the Company’s share-based payment plans in the financial statements for the period shown:

 

   

Year Ended

December 31, 2018

 

Total cost of stock grant plan during the year

  $ 11  

Total cost of stock option plan during the year

    7  

Total cost of share-based payment plans during the year

  $ 18  
         

Amount of related income tax benefit recognized in income

  $ 5  

 

The Company adopted the FFBW, Inc. 2018 Equity Incentive Plan (the “2018 Equity Incentive Plan”) in 2018. In November 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan which authorized the issuance of up to 129,605 restricted stock awards and up to 324,012 stock options. As of December 31, 2018 there were 45,363 restricted stock awards and 131,923 options available for future grants. Shares granted under the 2018 Equity Incentive Plan may be authorized but unissued, currently held or, to the extent permitted by applicable law, subsequently acquired by the Company as treasury shares, including shares purchased in the open market or in private transactions.  Forfeited or canceled shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of stock available for delivery under the Plan.

 

Options are granted with an exercise price equal to no less than the market price of the Company’s shares at the date of grant: those option awards generally vest pro-rata over five years of service and have 10-year contractual terms. Restricted shares typically vest pro-rata over a five year period.

 

The following table summarizes stock options activity for the year ended December 31, 2018:

 

   

Number of Options

   

Weighted

Average

Exercise

Price

   

Weighted

Average

Remaining

Contractual

Term (in years)

   

Aggregate

Intrinsic Value

 

Options outstanding as of December 31, 2017

    -     $ -                  

Granted

    192,089       10.81                  

Exercised

    -       -                  

Expired or canceled

    -       -                  

Forfeited

    -       -                  

Options outstanding as of December 31, 2018

    192,089     $ 10.81       9.95     $ -  

Options exercisable as of December 31, 2018

    -     $ -       -     $ -  

 

 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model based on certain assumptions. Expected volatility is based on the average volatility of Company shares and the expectation of future volatility of Company shares. The risk free interest rate for periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life of options is estimated based on the assumption that options will be exercised evenly throughout their life after vesting and represents the period of time that options granted are expected to remain outstanding.

 

F-41

 

FFBW, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

(Dollars in thousands, except share data)


 

NOTE 20 - Share-based Compensation Plans (cont.)


 

The following assumptions were used for options granted during the year ended December 31, 2018:

 

   

For the Year Ended December 31,

 
   

2018

 

Risk-free interest rate

    2.80 %

Expected volatility

    21.21 %

Expected dividend yield

    0 %

Expected life of options (years)

    7.5  

Weighted average fair value per option of options granted during the year

  $ 3.40  

 

The total intrinsic value of options exercised during the year ended December 31, 2018 was $0.

 

The following is a summary of changes in restricted shares for the year ended December 31, 2018:

 

   

Number of Shares

   

Weighted Average

Grant Date Fair Value

 

Shares outstanding as of December 31, 2017

    -     $ -  

Granted

    84,242       10.82  

Vested

    -       -  

Forfeited

    -       -  

Shares outstanding as of December 31, 2018

    84,242     $ 10.82  

 

The total intrinsic value of restricted shares that vested during the year ended December 31, 2018 was $0.

 

As of December 31, 2018, there was $1.5 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share option and non-vested share awards) granted under the 2018 Equity Incentive Plan. At December 31, 2018, the weighted-average period over which the unrecognized compensation expense is expected to be recognized was approximately 2.97 years.

 

F-42

 

 

Signatures

 

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

FFBW, Inc.

 

 

 

 

 

Date: March 27, 2019

By:

/s/ Edward H. Schaefer

 

 

 

Edward H. Schaefer

President and Chief Executive Officer

(Duly Authorized Representative)

 

 

Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signatures

  

Title

  

Date

 

 

 

 

 

/s/ Edward H. Schaefer

  

President, Chief Executive Officer

and Director (Principal Executive

  

 March 27, 2019

Edward H. Schaefer

  

Officer)

  

  

 

 

 

 

 

/s/ Nikola B. Schaumberg

  

Principal Financial Officer (Principal Financial and

  

March 27, 2019

Nikola B. Schaumberg

 

Accounting Officer)

 

 

 

 

 

 

 

/s/ James A. Tarantino

  

Chairman of the Board

  

March 27, 2019

James A. Tarantino

 

 

 

 

 

 

 

 

 

/s/ Kathryn Gutenkunst

  

Director

  

March 27, 2019

Kathryn Gutenkunst

 

 

 

 

 

 

 

 

 

/s/ Stephen W. Johnson

  

Director

  

March 27, 2019

Stephen W. Johnson

 

 

 

 

 

 

 

 

 

/s/ Thomas C. Martin

  

Director

  

March 27, 2019

Thomas C. Martin

 

 

 

 

 

 

 

 

 

/s/ Thomas L. McKeever

  

Director

  

March 27, 2019

Thomas L. McKeever

 

 

 

 

         
/s/ Michael J. Pjevach

  

Director

  

March 27, 2019

Michael J. Pjevach

 

 

 

 

         
/s/ Daniel D. Resheter

  

Director

  

March 27, 2019

Daniel D. Resheter

 

 

 

 

         
/s/ Gary D. Riley

  

Director

  

March 27, 2019

Gary D. Riley

 

 

 

 

 

 

ex_133273.htm

 

Exhibit 21

 

 

 

 

SUBSIDIARIES OF THE REGISTRANT

  

  

  

  

  

  

  

  

  

Subsidiary

Ownership

State of Incorporation

  

  

  

First Federal Bank of Wisconsin

100%

Federal

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

SUBSIDIARIES OF FIRST FEDERAL BANK OF WISCONSIN

  

  

  

None 

 

 

ex_137833.htm

 

Exhibit 23

 

 

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

 

We consent to the incorporation by reference in the Registration Statement (No. 333-22897) on Form S-8 of FFBW, Inc. of our report dated March 27, 2019, relating to the consolidated financial statements of FFBW, Inc., appearing in this Annual Report on Form 10-K of FFBW, Inc. for the year ended December 31, 2018.

 

 

Wipfli LLP 

 

 

Milwaukee, Wisconsin

March 27, 2019 

 

ex_133274.htm

 

EXHIBITS 31.1 AND 31.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION

302 OF THE SARBANES-OXLEY ACT OF 2002

 

 

Certification of Chief Executive Officer

 

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Edward H. Schaefer, certify that:

 

1.

I have reviewed this annual report on Form 10-K of FFBW, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
 

c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

 

 

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

March 27, 2019

/s/ Edward H. Schaefer  

Date

Edward H. Schaefer

 

 

President and Chief Executive Officer

 

 

ex_133275.htm

 

EXHIBITS 31.1 AND 31.2

  

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION

302 OF THE SARBANES-OXLEY ACT OF 2002

 

 

Certification of Chief Financial Officer

 

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Nikola Schaumberg, certify that:

 

1.

I have reviewed this annual report on Form 10-K of FFBW, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
 

c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

 

 

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

March 27, 2019

/s/ Nikola B. Schaumberg  
 

Nikola B. Schaumberg

 

 

Chief Financial Officer and Principal Financial Officer

 

 

ex_133276.htm

 

EXHIBIT 32

 

CERTIFICATE PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

Edward H. Schaefer, President and Chief Executive Officer and Nikola Schaumberg, Chief Financial Officer and Principal Financial Officer of FFBW, Inc. (the “Company”) each certify in their capacity as officers of the Company that they have reviewed the Annual Report of the Company on Form 10-K for the year ended December 31, 2018 and that to the best of their knowledge:

 

 

 

 

 

 

 

(1)

the Report fully complies with the requirements of Sections 13(a) of the Securities Exchange Act of 1934; and

 

 

 

 

 

(2)

the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

March 27, 2019

/s/ Edward H. Schaefer  

Date

Edward H. Schaefer

 

 

President and Chief Executive Officer

 

  

  

 

  

  

 

March 27, 2019

/s/ Nikola B. Schaumberg  

Date

Nikola Schaumberg

 

 

Chief Financial Officer and Principal Financial Officer

 

 

 

 

v3.19.1
Document And Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Mar. 27, 2019
Jun. 29, 2018
Document Information [Line Items]      
Entity Registrant Name FFBW, Inc.    
Entity Central Index Key 0001709017    
Trading Symbol ffbw    
Current Fiscal Year End Date --12-31    
Entity Filer Category Non-accelerated Filer    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer No    
Entity Emerging Growth Company true    
Entity Ex Transition Period false    
Entity Small Business true    
Entity Common Stock, Shares Outstanding (in shares)   6,682,606  
Entity Public Float     $ 28.7
Entity Shell Company false    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Amendment Flag false    
v3.19.1
Consolidated Balance Sheets - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Assets    
Cash and due from banks $ 1,746,000 $ 3,285,000
Fed funds sold 2,742,000 8,528,000
Cash and cash equivalents 4,488,000 11,813,000
Available for sale securities, stated at fair value 43,751,000 58,012,000
Loans held for sale 679,000 109,000
Loans, net of allowance for loan and lease losses of $2,118 and $1,800, respectively 198,694,000 171,355,000
Premises and equipment, net 5,057,000 5,290,000
Foreclosed assets 69,000 619,000
FHLB stock, at cost 739,000 514,000
Accrued interest receivable 768,000 782,000
Cash value of life insurance 7,007,000 6,558,000
Other assets 1,474,000 1,429,000
TOTAL ASSETS 262,726,000 256,481,000
Liabilities and Equity    
Deposits 183,205,000 182,913,000
Advance payments by borrowers for taxes and insurance 55,000 36,000
FHLB advances 17,750,000 12,750,000
Accrued interest payable 70,000 37,000
Other liabilities 1,284,000 1,256,000
Total liabilities 202,364,000 196,992,000
Preferred stock ($0.01 par value, 1,000,000 authorized, no shares issued or outstanding as of December 31, 2018 and 2017, respectively)
Common stock ($0.01 par value, 19,000,000 authorized, 6,696,742 and 6,612,500 issued and outstanding as of December 31, 2018 and 2017, respectively) 67,000 66,000
Additional paid in capital 28,326,000 28,296,000
Unallocated common stock of Employee Stock Ownership Plan ("ESOP") (243,303 and 256,263 shares at December 31, 2018 and 2017, respectively) (2,433,000) (2,563,000)
Retained earnings 34,995,000 33,937,000
Accumulated other comprehensive loss, net of income taxes (593,000) (247,000)
Total equity 60,362,000 59,489,000
TOTAL LIABILITIES AND EQUITY $ 262,726,000 $ 256,481,000
v3.19.1
Consolidated Balance Sheets (Parentheticals) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Allowance for loan and lease losses $ 2,118 $ 1,800
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, authorized (in shares) 1,000,000 1,000,000
Preferred stock, issued (in shares) 0 0
Preferred stock, outstanding (in shares) 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, authorized (in shares) 19,000,000 19,000,000
Common stock, issued (in shares) 6,696,742 6,612,500
Common stock, outstanding (in shares) 6,696,742 6,612,500
Unallocated common stock of Employee Stock Ownership Plan, shares (in shares) 243,303 256,263
v3.19.1
Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Interest and dividend income:    
Loans, including fees $ 9,192 $ 7,817
Securities    
Taxable 1,290 943
Tax-exempt 49 142
Other 78 93
Total interest and dividend income 10,609 8,995
Interest expense:    
Interest-bearing deposits 1,677 1,314
Borrowed funds 432 240
Total interest expense 2,109 1,554
Net interest income 8,500 7,441
Provision for loan losses 513 419
Net interest income after provision for loan losses 7,987 7,022
Noninterest income:    
Service charges and other fees 371 279
Net gain on sale of loans 244 266
Net gain (loss) on sale of securities (204) 20
Increase in cash surrender value of insurance 194 196
Other noninterest income 95 130
Total noninterest income 700 891
Noninterest expense:    
Salaries and employee benefits 4,248 3,960
Occupancy and equipment 1,002 1,109
Data processing 719 605
Foreclosed assets, net 36 27
Professional fees 508 506
Other 798 1,628
Total noninterest expense 7,311 7,835
Income before income taxes 1,376 78
Provision for income taxes 318 264
Net income (loss) $ 1,058 $ (186) [1]
Basic earnings (loss) per share (in dollars per share) $ 0.17 $ (0.03) [1]
Diluted earnings (loss) per share (in dollars per share) $ 0.17 $ (0.03) [1]
[1] Loss per shares for the year ended December 31, 2017, includes income attributed to the period prior to the initial public offering for the common shares issued.
v3.19.1
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Net income (loss) $ 1,058 $ (186) [1]
Other comprehensive loss:    
Unrealized holding losses arising during the period (637) (168)
Reclassification adjustment for (gains) losses realized in net income 204 (20)
Other comprehensive loss before tax effect (433) (188)
Tax effect of other comprehensive loss items 87 66
Other comprehensive loss, net of tax (346) (122)
Comprehensive income (loss) $ 712 $ (308)
[1] Loss per shares for the year ended December 31, 2017, includes income attributed to the period prior to the initial public offering for the common shares issued.
v3.19.1
Consolidated Statements of Changes in Equity - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Unallocated Common Stock of ESOP [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Total
Balance (in shares) at Dec. 31, 2016          
Balance at Dec. 31, 2016 $ 34,123 $ (125) $ 33,998
Net income (loss)   (186) (186) [1]
Other comprehensive loss (122) (122)
Issuance of common stock, net of issuance costs (in shares) 6,587,500          
Issuance of common stock, net of issuance costs $ 66 28,293 $ 28,359
Issuance of common stock to FFBW Community Foundation, Inc. (in shares) 25,000         25,000
Stock purchased by the ESOP (259,210 shares) (2,592) $ (2,592)
ESOP shares committed to be released 3 29 32
Balance (in shares) at Dec. 31, 2017 6,612,500          
Balance at Dec. 31, 2017 $ 66 28,296 (2,563) 33,937 (247) 59,489
Net income (loss) 1,058 1,058
Other comprehensive loss (346) (346)
ESOP shares committed to be released 13 130 143
Stock based compensation expense (in shares) 84,242          
Stock based compensation expense $ 1 17 18
Balance (in shares) at Dec. 31, 2018 6,696,742          
Balance at Dec. 31, 2018 $ 67 $ 28,326 $ (2,433) $ 34,995 $ (593) $ 60,362
[1] Loss per shares for the year ended December 31, 2017, includes income attributed to the period prior to the initial public offering for the common shares issued.
v3.19.1
Consolidated Statements of Changes in Equity (Parentheticals) - shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Stock purchased by the ESOP, Shares (in shares) 259,210
ESOP shares committed to be released (in shares) 12,960 2,947
v3.19.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities:    
Net income (loss) $ 1,058 $ (186) [1]
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Provision for loan losses 513 419
Depreciation 342 460
Gain on sale of premises and equipment 64
Accretion of loan portfolio discount (144) (405)
Net amortization on securities available for sale 526 525
(Gain) loss on sales and impairments of foreclosed assets 17 (12)
(Gain) loss on sale of securities 204 (20)
Increase in cash surrender value of life insurance (194) (196)
Accretion of discount on FHLB advances (27)
ESOP compensation 143 32
Stock based compensation 18
Changes in operating assets and liabilities:    
Accrued interest receivable 14 (22)
Loans held for sale (570) 483
Other assets 42 366
Accrued interest payable 33 8
Other liabilities 28 (323)
Net cash provided by operating activities 2,030 1,166
Cash flows from investing activities:    
Proceeds from sales of available for sale securities 12,874 6,856
Maturities, calls, paydowns on available for sale securities 8,091 8,081
Purchases of available for sale securities (7,867) (25,029)
Net increase in loans (27,967) (5,793)
Purchases of premises and equipment (109) (357)
Proceeds from redemption of FHLB stock 833
Purchases of FHLB stock (225)
Proceeds from sale of equipment 2,153
Purchase of life insurance (255) (10)
Proceeds from sale of foreclosed assets 792 1,458
Net cash used by investing activities (14,666) (11,808)
Cash flows from financing activities:    
Net increase (decrease) in deposits 292 (1,726)
Net increase in escrow 19 3
Net decrease in FHLB open line of credit (2,500)
Repayments of FHLB advances (2,000) (6,000)
Proceeds from FHLB advances 7,000
Net proceeds from issuance of common stock 25,767
Net cash provided in financing activities 5,311 15,544
Net increase (decrease) in cash and cash equivalents (7,325) 4,902
Cash and cash equivalents at beginning 11,813 6,911
Cash and cash equivalents at end 4,488 11,813
Supplemental Cash Flow Disclosures:    
Cash paid for interest 2,076 1,546
Cash paid for income taxes 120
Loans transferred to foreclosed assets 238 1,118
Financed sales of foreclosed assets $ 21 $ 280
[1] Loss per shares for the year ended December 31, 2017, includes income attributed to the period prior to the initial public offering for the common shares issued.
v3.19.1
Note 1 - Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Business Description and Accounting Policies [Text Block]
NOTE
1
-
Summary
of
Significant
A
ccounting
Policies

 
Organization
 
On
October 10, 2017,
First Federal Bank of Wisconsin (“the Bank”) converted to a stock savings bank and is now organized in the mutual holding company structure.  The Bank issued all of its outstanding stock to a new holding company, FFBW, Inc., (“the Company”) which sold
2,950,625
shares of common stock to the public at
$10.00
per share, and contributed an additional
25,000
shares to FFBW Community Foundation, representing
45%
of its outstanding shares of common stock.  This amount included shares purchased by the Bank’s employee stock ownership plan (“ESOP”), which purchased
3.92%
of the common stock of the new holding company outstanding upon the completion of the reorganization and stock issuance.  FFBW, Inc. is organized as a corporation under the laws of the United States.  FFBW, MHC has been organized as a mutual holding company under the laws of the United States and owns
3,636,875
shares, or
55%
of the outstanding common stock of FFBW, Inc.    
 
The cost of the reorganization and the issuing of the common stock totaling
$1,394
were deferred and deducted from the sales proceeds of the offering.  
 
At
December 31, 2018,
the significant assets of FFBW, Inc. were the capital stock of the Bank, and a loan to the First Federal Bank of Wisconsin Employee Stock Ownership Plan (“ESOP”). The liabilities of FFBW, Inc. were insignificant. The Company is subject to the financial reporting requirements of the Securities Exchange Act of
1934,
as amended. The Company is subject to regulation and examination by the Board of Governors of the Federal Reserve System (“the Federal Reserve Board”).
 
First Federal Bank of Wisconsin is a community bank headquartered in Waukesha, Wisconsin that provides financial services to individuals and businesses from our offices in Waukesha, Brookfield, and the Bay View neighborhood of Milwaukee.
 
Jumpstart Our Business Startups Act
 
The Jumpstart Our Business Startups Act (the JOBS Act), which was signed into law on
April 5, 2012,
has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than
$1.07
billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as an “emerging growth company” and believes that it will continue to qualify as an “emerging growth company” until
five
years from the completion of the stock offering.
 
As an “emerging growth company,” the Company has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, the financial statements
may
not
be comparable to the financial statements of companies that comply with such new or revised accounting standards.
 
Use
of
Estimates
 
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the fair values of securities, fair value of financial instruments, the valuation of other real estate owned and the valuation of deferred income tax assets.
 
Cash
and
Cash
Equivalents
 
For purposes of reporting cash flows, cash and cash equivalents include cash and balances due from banks, non-maturity deposits in the Federal Home Loan Bank of Chicago (FHLB), and fed funds sold. The Company has
not
experienced any losses in such accounts.
 
Available for Sale Securities
 
Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but
not
necessarily to maturity.  Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company's assets and liabilities, liquidity needs, regulatory capital requirements, and other similar factors.  Securities classified as available for sale are carried at fair value.  Unrealized gains or losses are reported as increases or decreases in other comprehensive income, net of the related deferred tax effect.  Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings. Gains and losses on the sale of securities are recorded on the trade date and determined using the specific-identification method.
 
Declines in fair value of securities that are deemed to be other than temporary, if applicable, are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient enough to allow for any anticipated recovery in fair value.
 
Loans Acquired in a Transfer
 
 
The Company acquires loans (including debt securities) individually and in groups or portfolios. These loans are initially measured at fair value with
no
allowance for loan losses. The Company's allowance for loan losses on all acquired loans reflect only those losses incurred subsequent to acquisition.
 
Certain acquired loans
may
have experienced deterioration of credit quality between origination and the Company's acquisition of the loans. At acquisition, the Company reviews each loan to determine whether there is evidence of deterioration of credit quality since origination and if it is probable that the Company will be unable to collect all amounts due according to the loan's contractual terms. If both conditions exist, the Company determines whether each such loan is to be accounted for individually or whether such loans will be assembled into pools of loans based on common risk characteristics (for example, credit score, loan type, and date of origination). The Company considers expected prepayments and estimates the amount and timing of undiscounted principal, interest, and other cash flows expected at acquisition for each loan and aggregated pool of loans. The excess of the loan's or pool's scheduled contractual principal and interest payments over all cash flows expected at acquisition is calculated as the nonaccretable difference. The excess of cash flows expected to be collected over the fair value of each loan or pool (accretable yield) is accreted into interest income over the remaining life of the loan or pool.
 
At each reporting date, the Company continues to estimate cash flows expected to be collected for each loan or pool. If expected cash flows have decreased from the acquisition date estimate, the Company recognizes an allowance for loan losses. If expected cash flows have increased from the acquisition date estimate, the Company increases the amount of accretable yield to be recognized as interest income over the remaining life of the loan or pool.
 
Loans Held for Sale
 
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Mortgage loans held for sale are sold with the mortgage servicing rights released by the Company. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loan sold.
 
Loans
 
 
 
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances adjusted for deferred loan fees and costs, charge-offs, and an allowance for loan losses. Interest on loans is accrued and credited to income based on the unpaid principal balance. Loan-origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.
 
The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication that the borrower
may
be unable to make payments as they become due. When loans are placed on nonaccrual status or charged off, all unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
 
Allowance
for
Loan
Losses
 
The allowance for loan losses is maintained at the level considered adequate by management to provide for losses that are probable as of the balance sheet date. The allowance for loan losses is established through a provision for loan losses charged to expense as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. In determining the adequacy of the allowance balance, the Company makes evaluations of the loan portfolio and related off-balance sheet commitments, considers current economic conditions and historical loss experience, and reviews specific problem loans and other factors.
 
When establishing the allowance for loan losses, management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment. These risk categories and their relevant risk characteristics are as follows:
 
Commercial development:
These loans are secured by vacant land and/or property that are in the process of improvement. Repayment of these loans can be dependent on the sale of the property to
third
parties or the successful completion of the improvements by the builder for the end user. Construction loans include
not
only construction of new structures, but loans originated to finance additions to or alterations of existing structures. Until a permanent loan originates, or payoff occurs, all commercial construction loans secured by real estate are reported in this loan pool. Development loans also have the risk that improvements will
not
be completed on time, or in accordance with specifications and projected costs.
 
Commercial real estate:
These loans are primarily secured by office and industrial buildings, warehouses, small retail shopping facilities, and various special purpose properties, including restaurants. These loans are subject to underwriting standards and processes similar to commercial and industrial loans. Loans to closely held businesses are generally guaranteed in full by the owners of the business. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property. The cash flows of the borrowers, however,
may
not
behave as forecasted and collateral securing loans
may
fluctuate in value due to the general economic factors or conditions specific to the real estate market, such as geographic location and/or purpose type.
 
Commercial and industrial:
Commercial and industrial loans are extended primarily to small and middle market customers. Such credits typically comprise working capital loans, asset acquisition loans, and loans for other business purposes. Loans to closely held businesses are generally guaranteed in full by the owners of the business. Commercial and industrial loans are made based primarily on the historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of the borrowers, however,
may
not
behave as forecasted and collateral securing loans
may
fluctuate in value due to economic or individual performance factors. Minimum standards and underwriting guidelines have been established for commercial and industrial loans.
 
1
-
4
family owner-occupied:
These loans are generally to individuals and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations, the underlying collateral, and the loan to collateral value. Also included in this category are junior liens on
1
-
4
family residential properties. Underwriting standards for
1
-
4
family owner-occupied loans are heavily influenced by statutory requirements, which include, but are
not
limited to, loan-to-value and affordability ratios, risk-based pricing strategies, and documentation requirements.
 
1
-
4
family investor-owned:
These loans
may
be to individuals or businesses and are subject to underwriting standards and processes similar to commercial and industrial loans. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property(ies). The cash flows of the borrowers, however,
may
not
behave as forecasted and collateral securing loans
may
fluctuate in value due to the general economic factors or conditions specific to the real estate market, such as geographic location and/or purpose type.
 
Multifamily real estate:
These loans include loans to finance non-farm properties with
five
or more units in structures primarily to accommodate households. Such credits are typically originated to finance the acquisition or refinancing of an apartment building. These loans are subject to underwriting standards and processes similar to commercial and industrial loans. Loans to closely held businesses are generally guaranteed in full by the owners of the business. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the subject multifamily property, with assumptions made for vacancy rates. Cash flows of the borrowers rely on the receipt of rental income from the tenants of the property who are themselves subject to fluctuations in national and local economic conditions and unemployment trends.
 
Consumer:
These loans
may
take the form of installment loans, demand loans, or single payment loans, and are extended to individuals for household, family, and other personal expenditures. These loans generally include direct consumer automobile loans and credit card loans. These loans are generally smaller in size and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations.
 
Management regularly evaluates the allowance for loan losses using the Company’s past loan loss experience, known and inherent risks in the loan portfolio, composition of the loan portfolio, adverse situations that
may
affect the borrower’s ability to repay, estimated value of any underlying collateral, current economic conditions, and other relevant factors. This evaluation is inherently subjective since it requires material estimates that
may
be susceptible to significant change.
 
A loan is impaired when, based on current information, it is probable that the Company will
not
collect all amounts due in accordance with the contractual terms of the loan agreement. Management determines whether a loan is impaired on a case-by-case basis, taking into consideration the payment status, collateral value, length and reason of any payment delays, the borrower’s prior payment record, and any other relevant factors. Large groups of smaller-balance homogeneous loans, such as residential mortgage and consumer loans, are collectively evaluated in the allowance for loan losses analysis and are
not
subject to impairment analysis unless such loans have been subject to a restructuring agreement. Specific allowances for impaired loans are based on discounted cash flows of expected future payments using the loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent.
 
In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies
may
require the Company to make additions to the allowance for loan losses based on their judgments of collectability based on information available to them at the time of their examination.
 
Troubled Debt Restructurings
 
 
Loans are accounted for as troubled debt restructurings when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and the Company grants a “concession” to the borrower that they would
not
otherwise consider. These concessions include a modification of terms such as a reduction of the stated interest rate or loan balance, a reduction of accrued interest, an extension of the maturity date at an interest rate lower than a current market rate for a new loan with similar risk, or some combination thereof to facilitate repayment. Troubled debt restructurings are considered impaired loans.
 
Foreclosed Assets
 
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value, less costs to sell, at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less costs to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.
 
Premises
and
Equipment
 
Depreciable assets are stated at cost less accumulated depreciation. Provisions for depreciation are computed on straight-line and accelerated methods over the estimated useful lives of the assets.
 
Federal
Home
Loan
Bank
Stock
 
The Company's investment in Federal Home Loan Bank ("FHLB") stock is carried at cost, which approximates fair value. The Company is required to hold the stock as a member of the FHLB, and transfer of the stock is substantially restricted. The stock is evaluated for impairment on an annual basis.
 
Income
Taxes
 
Amounts provided for income tax expense are based on income reported for financial statement purposes and do
not
necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
 
As changes in tax laws or rates are enacted, deferred income tax assets and liabilities are adjusted through the provision for income taxes. The differences relate principally to the allowances for loan losses, deferred compensation, depreciation, FHLB stock dividends and non-accrual interest. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
The tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than
not
to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than
not
sustain the position following an audit. For tax positions meeting the more likely than
not
threshold, the amount recognized in the financial statements is the largest benefit that has a greater than
50
percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Based on its evaluation, the Company has concluded that there are
no
significant uncertain tax positions requiring recognition in its financial statements.
 
The Company's policy is to recognize interest and penalties related to income tax issues as components of income tax expense. During the periods shown, the Company did
not
recognize any interest or penalties related to income tax expense in its statements of operations.
 
Transfers of Financial Assets
 
 
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (
1
) the assets have been isolated from the Company, (
2
) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (
3
) the Company does
not
maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
 
Advertising
 
 
Advertising costs are expensed as incurred.
 
Other Comprehensive Loss
 
Other comprehensive loss is shown on the statements of comprehensive income (loss). The Company’s accumulated other comprehensive income (loss) is composed of the unrealized loss on securities available for sale, net of tax and is shown on the statements of changes in equity. Reclassification adjustments out of other comprehensive loss for gains realized on sales of securities available for sale comprise the entire balance of “net gain (loss) on sale of securities” on the statements of operations. As part of this reclassification, income tax credit of approximately
$56
was recognized for the year ended
December 31, 2018
and income tax expense of approximately
$5
was recognized for the years ended
December 31, 2017
in “provision for income taxes” on the statements of operations.
 
Off-Balance
Sheet
Financial
Instruments
 
In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, unfunded commitments under lines of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.
 
Life Insurance
 
The Company has purchased life insurance policies on certain key executives. Life insurance is measured at the amount that could be realized under the insurance contract as of the balance sheet date, which is generally the cash surrender value of the policy.
 
Subsequent Events
 
 
Management has reviewed the Company’s operations for potential disclosure or financial statement impacts related to events occurring after
December 31, 2018,
but prior to the release of these financial statements. Based on the results of this review, on
January 25, 2019,
the Company announced that it has adopted a stock repurchase program for up to approximately
5%
of its outstanding common stock. Other than the repurchase program,
no
subsequent event disclosure or financial statement impacts to these financial statements are required as of
March 27, 2019.
 
Reclassifications
 
Certain reclassifications have been made to the
2017
consolidated financial statements to conform to the
2018
classifications.
 
Recent Accounting Pronouncements
 
The following Accounting Standards Updates (ASUs) have been issued by the Financial Accounting Standards Board (FASB) and
may
impact the Company's financial statements in future reporting periods:
 
ASU
No.
2016
-
13,
“Credit Losses (Topic
326
).”
 
ASU
2016
-
13
requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2021.
Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018.
The Company is currently assessing the impact of adopting ASU
2016
-
13
on its financial statements.
 
ASU
No.
 
2016
-
02
“Leases (Topic
842
): Amendments to the Leases Analysis.”
ASU
No.
2018
-
10
"Codification Improvements to Topic
842."
ASU
No.
2018
-
11
"Targeted Improvements"
 
For lessees, Topic
842
requires leases to be recognized on the balance sheet, along with disclosure of key information about leasing arrangements. Topic
842
was subsequently amended by ASU
2018
-
01,
2018
-
10
and
2018
-
11.
The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than
12
months. Leases will be classified as finance or operating, with classification affecting the pattern and classification expense recognition in the income statement.
 
For lessors, Topic
842
requires lessors to classify leases as sales-type, direct financing or operating leases. A lease is a sales-type lease if any
one
of
five
criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If
none
of those
five
criteria are met, but
two
additional criteria are both met, indicating the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee and a
third
party, the lease is a direct financing lease. All leases that are
not
sales-type or direct financing leases are operating leases.
 
The new standard is effective for the Company on
January 1, 2020,
with early adoption permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity
may
choose to use either (
1
) the new standard's effective date or (
2
) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company expects to adopt the new standard on
January 1, 2020
using the effective date as its date of initial application. Consequently, financial information will
not
be updated and the disclosures required under the new standard will
not
be provided for dates and periods before
January 1, 2020.
 
ASU
No.
2016
-
01,
“Recognition and Measurement of Financial Assets and Financial Liabilities”
ASU
No.
2018
-
03,
“Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic
825
-
10
)”
 
These standards make a number of changes to the recognition and measurement standards of financial instruments, including the following changes:
1
) equity securities with a readily determinable fair value will have to be measured at fair value with changes in fair value recognized in net income;
2
) entities that are public business entities will
no
longer be required to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost; and
3
) entities that are public business entities will be required to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. These standards are effective for financial statements issued for annual reporting periods, and interim periods within those annual periods, beginning after
December 15, 2018.
The adoption of these standard is
not
expected to have a material impact on our financial condition or results of operations, except that the Company will
no
longer disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost.
 
ASU
No.
2014
-
09,
“Revenue from Contracts with Customers (Topic
606
)”
 
The amendment supersedes and replaces nearly all existing revenue recognition guidance. Under the amended guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual and interim periods beginning after
December 15, 2018.
Adoption of ASU
No.
2014
-
09
is
not
expected to have a material impact on the Company’s financial statements.
 
ASU
No.
2018
-
02,
“Income Statement - Reporting Comprehensive Income (Topic
220
): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”
 
This ASU allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The reclassification is
not
required but is an accounting policy election that must be disclosed during the year of adoption. This ASU will be effective for fiscal years beginning after
December 15, 2018
with earlier adoption permitted. At this time, the Company does
not
expect to elect the reclassification option.
 
ASU
No.
2018
-
09,
“Codification Improvements”
 
This ASU represents changes in various Subtopics to clarify, correct errors, or make minor improvements. The amendments are
not
expected to have a significant effect on current accounting practice. Subtopics impacted by this ASU that are relevant to the Company include Subtopic
220
-
10
Income Statement - Reporting Comprehensive Income-Overall, Subtopic
718
-
740
Compensation - Stock Compensation-Income Taxes, and Subtopic
820
-
10
Fair Value Measurement-Overall. Many of the amendments within this ASU do
not
require transition and are effective upon issuance. However, some are
not
effective until fiscal years beginning after
December 15, 2018.
The amendments within this ASU are
not
expected to materially impact the Company's financial statements.    
ASU
No.
2018
-
13,
“Fair Value Measurement (Topic
820
): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”
This ASU modifies the disclosure requirements on fair value measurements in Topic
820,
including the removal, modification to, and addition of certain disclosure requirements. This ASU will be effective for fiscal years beginning after
December 15, 2019
with early adoption permitted. The majority of the disclosure changes are to be applied on a prospective basis. The Company is currently in the process of reviewing this ASU to determine whether the modifications within will be adopted prior to the effective date. Although this ASU has a significant impact to the Company’s fair value disclosures,
no
additional impact to the financial statements is expected.
 
Recent Accounting Pronouncements Adopted in
2018
 
The following Accounting Standards Update has been issued by the Financial Accounting Standards Board and has been adopted by the Company in
2018:
 
ASU
No.
2018
-
07,
“Compensation - Stock Compensation (Topic
718
): Improvements to Nonemployee Share-Based Payment Accounting”'
 
This ASU expands the scope of Topic
718
to include share-based payment transactions for acquiring goods or services from nonemployees. Key improvements from this ASU include clarifying the measurement date to the grant date and eliminating the requirement to reassess classification of such awards upon vesting. Any share-based awards to nonemployees classified as a liability that are
not
settled prior to adoption and any equity classified awards for which a measurement date has
not
been established will require remeasurement through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Upon transition, nonemployee awards are required to be measured at fair value as of the adoption date and must
not
remeasure assets that are completed. The Company has early adopted this ASU beginning
October 1, 2018.
This ASU did
not
have a material impact the Company's financial statements.
v3.19.1
Note 2 - Earnings Per Share
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Earnings Per Share [Text Block]
NOTE
2
Earnings Per Share

 
Earnings (loss) per share is based on net income (loss) divided by the weighted average number of shares outstanding during the period, including allocated and committed-to-be-released Employee Stock Ownership Plan (“ESOP”) shares.
 
   
Year Ended December 31,
 
   
2018
   
 
2017*
 
Net income (loss)
  $
1,058
    $
(186
)
Basic potential common shares
               
Weighted average shares outstanding
   
6,617,507
     
6,612,500
 
Weighted average unallocated Employee Stock Ownership Plan Shares
   
(249,783
)    
(257,245
)
Basic weighted average shares outstanding
   
6,367,724
     
6,355,255
 
Dilutive potential common shares
   
-
     
-
 
Diluted weighted average shares outstanding
   
6,367,724
     
6,355,255
 
                 
Basic earnings (loss) per share
  $
0.17
    $
(0.03
)
Diluted earnings (loss) per share
  $
0.17
    $
(0.03
)
 
*Loss per shares for the year ended
December 31, 2017,
includes income attributed to the period prior to the initial public offering for the common shares issued.
v3.19.1
Note 3 - Cash and Due from Banks
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Cash and Cash Equivalents Disclosure [Text Block]
NOTE
3
-
Cash
and
Due
from
Banks

 
Under Regulation D, savings institutions are generally required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank, based upon a percentage of deposits. The Company was required to maintain reserve balances on deposit with the Federal Reserve Bank of
$
0
as of both
December 31, 2018
and
2017.
 
In the normal course of business, the Company maintains cash and due from bank balances with correspondent banks. Balances in these accounts
may
exceed the Federal Deposit Insurance Corporation's insured limit of
$250.
Management believes these financial institutions have strong credit ratings and that the credit risk related to these deposits is minimal.
v3.19.1
Note 4 - Available for Sale Securities
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE
4
Available for Sale
Securities

 
Amortized costs and fair values of available for sale securities are summarized as follows:
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Estimated
Fair Value
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of the US government and US government sponsored agencies
  $
1,299
    $
8
    $
-
    $
1,307
 
Obligations of states and political subdivisions
   
8,381
     
17
     
(103
)    
8,295
 
Mortgage-backed securities
   
29,164
     
24
     
(652
)    
28,536
 
Certificates of deposit
   
1,500
     
1
     
(55
)    
1,446
 
Corporate debt securities
   
4,220
     
2
     
(55
)    
4,167
 
Total available for sale securities
  $
44,564
    $
52
    $
(865
)   $
43,751
 
                                 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of the US government and US government sponsored agencies
  $
2,211
    $
11
    $
(2
)   $
2,220
 
Obligations of states and political subdivisions
   
13,102
     
104
     
(69
)    
13,137
 
Mortgage-backed securities
   
33,908
     
14
     
(455
)    
33,467
 
Certificates of deposit
   
4,000
     
6
     
(9
)    
3,997
 
Corporate debt securities
   
5,171
     
29
     
(9
)    
5,191
 
Total available for sale securities
  $
58,392
    $
164
    $
(544
)   $
58,012
 
 
 
Fair values of securities are estimated based on financial models or prices paid for similar securities. It is possible interest rates could change considerably, resulting in a material change in estimated fair value.
 
The following table presents the portion of the Company's portfolio which has gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position:
 
   
Less Than 12 Months
   
12 Months or More
   
Total
 
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of the US government and US government sponsored agencies
  $
175
    $
-
    $
113
    $
-
    $
288
    $
-
 
Obligations of states and political subdivisions
   
-
     
-
     
6,142
     
(103
)    
6,142
     
(103
)
Mortgage-backed securities
   
1,171
     
(24
)    
24,725
     
(628
)    
25,896
     
(652
)
Certificates of deposit
   
-
     
-
     
1,195
     
(55
)    
1,195
     
(55
)
Corporate debt securities
   
384
     
(2
)    
3,128
     
(53
)    
3,512
     
(55
)
Total
  $
1,730
    $
(26
)   $
35,303
    $
(839
)   $
37,033
    $
(865
)
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of the US government and US government sponsored agencies
  $
235
    $
(2
)   $
-
    $
-
    $
235
    $
(2
)
Obligations of states and political subdivisions
   
3,180
     
(23
)    
2,660
     
(46
)    
5,840
     
(69
)
Mortgage-backed securities
   
22,685
     
(213
)    
9,270
     
(242
)    
31,955
     
(455
)
Certificates of deposit
   
2,492
     
(9
)    
-
     
-
     
2,492
     
(9
)
Corporate debt securities
   
2,683
     
(8
)    
250
     
(1
)    
2,933
     
(9
)
Total
  $
31,275
    $
(255
)   $
12,180
    $
(289
)   $
43,455
    $
(544
)
 
At
December 31, 2018,
the investment portfolio included
79
securities available for sale, which had been in an unrealized loss position for greater than
twelve
months, and
6
securities available for sale, which had been in an unrealized loss position for less than
twelve
months. At
December 31, 2017,
the investment portfolio included
27
securities available for sale, which had been in an unrealized loss position for greater than
twelve
months, and
73
securities available for sale, which had been in an unrealized loss position for less than
twelve
months. Because these securities have a fixed interest rate, their fair value is sensitive to movements in market interest rates. These unrealized losses are considered temporary because the Company does
not
currently have the intent to sell the securities before recovery of the losses; therefore we expect to collect all contractually due amounts from these securities. Accordingly, these investments were reduced to their fair values through accumulated other comprehensive income,
not
through earnings.
 
We regularly assess our securities portfolio for OTTI. These assessments are based on the nature of the securities, the underlying collateral, the financial condition of the issuer, the extent and duration of the loss, our intent related to the individual securities, and the likelihood that we will have to sell securities prior to expected recovery. We did
not
have any impairment losses recognized in earnings for the years ended
December 31, 2018
or
December 31, 2017.
 
The amortized cost and fair value of available for sale securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities in mortgage-backed securities since the anticipated maturities are
not
readily determinable. Therefore, these securities are
not
included in the maturity categories in the following maturity summary listed below:
 
   
December 31, 2018
 
   
Amortized Cost
   
Fair Value
 
Due in one year or less
  $
2,642
    $
2,632
 
Due after one year through 5 years
   
3,282
     
3,238
 
Due after 5 years through 10 years
   
4,888
     
4,818
 
Due after 10 years
   
4,588
     
4,527
 
Subtotal
  $
15,400
    $
15,215
 
Mortgage-backed securities
   
29,164
     
28,536
 
Total
  $
44,564
    $
43,751
 
 
 
The following is a summary of the proceeds from sales of securities available for sale, as well as gross gains and losses:
 
   
Years ended December 31,
 
   
2018
   
2017
 
Proceeds from sale of securities
  $
12,874
    $
6,856
 
Gross gains
   
35
     
86
 
Gross losses
   
(239
)    
(66
)
 
 
Available for sale securities with a fair value of
$960
were pledged at
December 31, 2018.
No
securities were pledged at
December 31, 2017. 
 
v3.19.1
Note 5 - Loans
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
NOTE
5
-
Loans

 
Major classifications of loans are as follows:
 
   
December 31,
   
December 31,
 
   
2018
   
2017
 
Commercial
               
Development
  $
7,801
    $
1,498
 
Real estate
   
69,425
     
53,202
 
Commercial and industrial
   
13,142
     
10,135
 
Residential real estate and consumer
               
1-4 family owner-occupied
   
41,018
     
41,446
 
1-4 family investor-owned
   
32,312
     
33,658
 
Multifamily
   
34,467
     
31,677
 
Consumer
   
2,733
     
1,613
 
Subtotal
  $
200,898
    $
173,229
 
Deferred loan fees
   
(86
)    
(74
)
Allowance for loan losses
   
(2,118
)    
(1,800
)
Net loans
  $
198,694
    $
171,355
 
 
Deposit accounts in an overdraft position and reclassified as loans approximated
$7
and
$2
at
December 31, 2018
and 
2017,
respectively.
 
A summary of the activity in the allowance for loan losses by portfolio segment is as follows:
 
   
Commercial
   
Residential real estate
and consumer
   
Total
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
  $
660
    $
1,140
    $
1,800
 
Provision for loan losses
   
304
     
209
     
513
 
Loans charged off
   
(24
)    
(172
)    
(196
)
Recoveries of loans previously charged off
   
-
     
1
     
1
 
Total ending allowance balance
  $
940
    $
1,178
    $
2,118
 
                         
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
  $
348
    $
1,130
    $
1,478
 
Provision for loan losses
   
312
     
107
     
419
 
Loans charged off
   
-
     
(133
)    
(133
)
Recoveries of loans previously charged off
   
-
     
36
     
36
 
Total ending allowance balance
  $
660
    $
1,140
    $
1,800
 
 
Information about how loans were evaluated for impairment and the related allowance for loan losses follows:
 
December 31, 2018
 
Commercial
   
Residential real
estate and consumer
   
Total
 
Loans:
                       
Individually evaluated for impairment
  $
87
    $
1,469
    $
1,556
 
Collectively evaluated for impairment
   
90,281
     
109,061
     
199,342
 
Total loans
  $
90,368
    $
110,530
    $
200,898
 
                         
Allowance for loan losses:
                       
Individually evaluated for impairment
  $
-
     
-
    $
-
 
Collectively evaluated for impairment
   
940
     
1,178
     
2,118
 
Total allowance for loan losses
  $
940
    $
1,178
    $
2,118
 
 
December 31, 2017
 
Commercial
   
Residential real
estate and consumer
   
Total
 
Loans:
                       
Individually evaluated for impairment
  $
192
    $
2,112
    $
2,304
 
Collectively evaluated for impairment
   
64,643
     
106,282
     
170,925
 
Total loans
  $
64,835
    $
108,394
    $
173,229
 
                         
Allowance for loan losses:
                       
Individually evaluated for impairment
  $
-
     
179
    $
179
 
Collectively evaluated for impairment
   
660
     
961
     
1,621
 
Total allowance for loan losses
  $
660
    $
1,140
    $
1,800
 
 
Information regarding impaired loans follows:
 
As of December 31, 2018
 
Principal
Balance
   
Recorded
Investment
   
Related
Allowance
   
Average
Investment
   
Interest
Recognized
 
Loans with no related allowance for loan losses:
                                       
Commercial
                                       
Commercial and industrial
  $
89
    $
87
    $
-
    $
93
    $
5
 
Residential real estate and consumer
                                       
1-4 family owner-occupied
   
1,142
     
1,120
     
-
     
1,137
     
26
 
1-4 family investor-owned
   
248
     
241
     
-
     
246
     
-
 
Consumer
   
114
     
108
     
-
     
114
     
-
 
                                         
Total impaired loans
  $
1,593
    $
1,556
    $
-
    $
1,590
    $
31
 
 
As of December 31, 2017
 
Principal
Balance
   
Recorded
Investment
   
Related
Allowance
   
Average
Investment
   
Interest
Recognized
 
Loans with related allowance for loan losses:
                                       
Residential real estate and consumer
                                       
1-4 family investor-owned
  $
375
    $
330
    $
179
    $
312
    $
8
 
                                         
Loans with no related allowance for loan losses:
                                       
Commercial
                                       
Commercial and industrial
   
198
     
192
     
-
     
204
     
-
 
Residential real estate and consumer
                                       
1-4 family owner-occupied
   
1,158
     
1,099
     
-
     
1,443
     
1
 
1-4 family investor-owned
   
716
     
683
     
-
     
1,289
     
24
 
                                         
Total loans with no related allowance
   
2,072
     
1,974
     
-
     
2,936
     
25
 
                                         
Total impaired loans
  $
2,447
    $
2,304
    $
179
    $
3,248
    $
33
 
 
There were
no
additional funds committed to impaired loans as of
December 31, 2018.
As of
December 31, 2017,
approximately
$50
is committed to
one
impaired loan relationship to finance costs relating to the disposal of several properties.
 
The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan losses. The credit quality indicators monitored differ depending on the class of loan.
 
Commercial loans are generally evaluated using the following internally prepared ratings:
 
“Pass” ratings are assigned to loans with adequate collateral and debt service ability such that collectibility of the contractual loan payments is highly probable.
 
“Special mention” ratings are assigned to loans where management has some concern that the collateral or debt service ability
may
not
be adequate, though the collectibility of the contractual loan payments is still probable.
 
“Substandard” ratings are assigned to loans that do
not
have adequate collateral and/or debt service ability such that collectibility of the contractual loan payments is
no
longer probable.
 
“Doubtful” ratings are assigned to loans that do
not
have adequate collateral and/or debt service ability, and collectibility of the contractual loan payments is unlikely.
 
Information regarding the credit quality indicators most closely monitored for commercial loans by class follows:
 
   
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Totals
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development
  $
7,801
    $
-
    $
-
    $
-
    $
7,801
 
Real estate
   
69,425
     
-
     
-
     
-
     
69,425
 
Commercial and industrial
   
13,122
     
-
     
20
     
-
     
13,142
 
1-4 family investor-owned
   
30,558
     
1,353
     
401
     
-
     
32,312
 
Multifamily
   
34,467
     
-
     
-
     
-
     
34,467
 
Totals
  $
155,373
    $
1,353
    $
421
    $
-
    $
157,147
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development
  $
1,498
    $
-
    $
-
    $
-
    $
1,498
 
Real estate
   
51,939
     
1,263
     
-
     
-
     
53,202
 
Commercial and industrial
   
9,435
     
586
     
114
     
-
     
10,135
 
1-4 family investor-owned
   
31,964
     
1,449
     
149
     
96
     
33,658
 
Multifamily
   
31,677
     
-
     
-
     
-
     
31,677
 
Totals
  $
126,513
    $
3,298
    $
263
    $
96
    $
130,170
 
 
Residential real estate and consumer loans are generally evaluated based on whether or
not
the loan is performing according to the contractual terms of the loan.
 
Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class follows:
 
 
   
Performing
   
Non-performing
   
Totals
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family owner-occupied
   
39,919
     
1,099
     
41,018
 
Consumer
   
2,625
     
108
     
2,733
 
Total   $
42,544
    $
1,207
    $
43,751
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family owner-occupied
   
40,347
     
1,099
     
41,446
 
Consumer
   
1,613
     
-
     
1,613
 
Total   $
41,960
    $
1,099
    $
43,059
 
 
 
Loan aging information follows:
 
           
Loans Past Due
   
Loans Past Due
           
Nonaccrual
 
December 31, 2018
 
Current Loans
   
30-89 Days
   
90+ Days
   
Total Loans
   
Loans
 
Commercial
                                       
Development
  $
7,801
    $
-
    $
-
    $
7,801
    $
-
 
Real estate
   
69,425
     
-
     
-
     
69,425
     
-
 
Commercial and industrial
   
13,076
     
66
     
-
     
13,142
     
20
 
Residential real estate and consumer
                                       
1-4 family owner-occupied
   
41,013
     
5
     
-
     
41,018
     
365
 
1-4 family investor-owned
   
32,069
     
243
     
-
     
32,312
     
241
 
Multifamily
   
34,467
     
-
     
-
     
34,467
     
-
 
Consumer
   
2,733
     
-
     
-
     
2,733
     
94
 
Total
  $
200,584
    $
314
    $
-
    $
200,898
    $
720
 
                                         
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
                                       
Development
  $
1,498
    $
-
    $
-
    $
1,498
    $
-
 
Real estate
   
53,202
     
-
     
-
     
53,202
     
-
 
Commercial and industrial
   
9,946
     
75
     
114
     
10,135
     
114
 
Residential real estate and consumer
                                       
1-4 family owner-occupied
   
40,941
     
436
     
69
     
41,446
     
580
 
1-4 family investor-owned
   
33,209
     
205
     
244
     
33,658
     
549
 
Multifamily
   
31,677
     
-
     
-
     
31,677
     
-
 
Consumer
   
1,607
     
6
     
-
     
1,613
     
-
 
Total
  $
172,080
    $
722
    $
427
    $
173,229
    $
1,243
 
 
 
There are
no
loans
90
or more days past due and accruing interest as of
December 31, 2018
or
2017.
 
Management regularly monitors impaired loan relationships. In the event facts and circumstances change, an additional provision for loan losses
may
be necessary.
 
Nonaccrual loans are as follows:
 
As of
December 31
 
2018
   
2017
 
Nonaccrual loans, other than troubled debt restructurings
  $
20
    $
274
 
Nonaccrual loans, troubled debt restructurings
   
700
     
969
 
Total nonaccrual loans
   
720
     
1,243
 
Restructured loans, accruing
  $
501
    $
661
 
 
When, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that the Company would
not
otherwise consider, the modified loan is classified as a troubled debt-restructuring. Loan modifications
may
consist of forgiveness of interest and/or principal, a reduction of the interest rate, allowing interest-only payments for a period of time, and/or extending amortization terms.
 
The following presents information regarding new modifications of loans classified as troubled debt restructurings during the years ended
December 31, 2018
and
2017.
All troubled debt restructurings are classified as impaired loans. The recorded investment presented in the following tables does
not
include specific reserves for loan losses recognized for these loans, which totaled
$0
at
December 31, 2018
and
December 31, 2017.
 
   
Number of
Modifications
   
Pre-Modification
Investment
   
Post-
Modification
Investment
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate and consumer:
                       
1-4 family owner-occupied
   
2
    $
302
    $
302
 
1-4 family investor-owned
   
1
     
250
     
250
 
Consumer
   
1
     
20
     
20
 
     
4
    $
572
    $
572
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
                       
Commercial and industrial
   
1
    $
88
    $
88
 
     
1
    $
88
    $
88
 
 
No
troubled debt restructurings defaulted within
12
months of their modification date during the year ended
December 31, 2018.
The Company considers a troubled debt restructuring in default if it becomes past due more than
90
days.
Two
1
-
4
family investor-owned properties totaling
$331
defaulted in
2017
that were restructured within
twelve
months,
$82
was charged to the allowance for loan losses relating to these properties.
 
The Company continues to evaluate purchased loans for impairment. The purchased loans were considered impaired at the acquisition date if there was evidence of deterioration since origination and if it was probable that
not
all contractually required principal and interest payments would be collected under the loans. The following table reflects the carrying value of all purchased loans:
 
   
Contractually Required Payments Receivable
         
As of December 31, 2018
 
Credit Impaired
   
Non-Credit Impaired
   
Carrying Value of
Purchased Loans
 
Commercial
                       
Real estate
  $
-
    $
7,687
    $
7,673
 
Residential real estate and consumer
                       
1-4 family owner-occupied
   
-
     
5,075
     
5,014
 
1-4 family investor-owned
   
-
     
9,269
     
9,164
 
Multifamily
   
-
     
3,953
     
3,943
 
Consumer
   
-
     
-
     
-
 
Totals
  $
-
    $
25,984
    $
25,794
 
 
   
Contractually Required Payments Receivable
         
As of December 31, 2017
 
Credit Impaired
   
Non-Credit Impaired
   
Carrying Value of
Purchased Loans
 
Commercial
                       
Real estate
  $
-
    $
8,444
    $
8,380
 
Residential real estate and consumer
                       
1-4 family owner-occupied
   
146
     
6,709
     
6,753
 
1-4 family investor-owned
   
149
     
10,558
     
10,591
 
Multifamily
   
-
     
5,425
     
5,372
 
Consumer
   
-
     
-
     
-
 
Totals
  $
295
    $
31,136
    $
31,096
 
 
As of
December 31, 2018,
the estimated contractually-required payments receivable on credit impaired and non-credit impaired loans was
$0
and
$25,984,
respectively. The cash flows expected to be collected related to principal as of
December 31, 2018
on all purchased loans is
$25,794.
As a result, there was approximately
$190
of remaining discount on the purchased loans. These amounts are based upon the estimate of the underlying collateral or discounted cash flows as of
December 31, 2018.
Any excess of cash flows expected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan as the purchased loans pay down, mature, renew or pay off.
 
As of
December 31, 2017,
the estimated contractually-required payments receivable on credit impaired and non-credit impaired loans was
$295
and
$31,136,
respectively. The cash flows expected to be collected related to principal as of
December 31, 2017
on all purchased loans is
$31,096.
As a result, there was approximately
$334
of remaining discount on the purchased loans. These amounts are based upon the estimate of the underlying collateral or discounted cash flows as of
December 31, 2017.
Any excess of cash flows expected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan as the purchased loans pay down, mature, renew or pay off.
 
The change in carrying amount of accretable yield for purchased loans was as follows:
 
   
For years ended December 31,
 
   
2018
   
2017
 
                 
Beginning Balance
  $
334
    $
739
 
Additions
   
-
     
-
 
Accretion
   
(144
)    
(405
)
Ending Balance
  $
190
    $
334
 
v3.19.1
Note 6 - Premises and Equipment
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Property, Plant and Equipment Disclosure [Text Block]
NOTE
6
-
Premises
and
Equipment

Premises and equipment are stated at cost less accumulated depreciation and are summarized as follows:
 
   
December 31,
 
   
2018
   
2017
 
                 
Land
  $
479
    $
479
 
Buildings
   
4,929
     
4,919
 
Leasehold improvements
   
153
     
153
 
Furniture and equipment
   
1,332
     
1,233
 
                 
Totals
   
6,893
     
6,784
 
                 
Less: Accumulated depreciation
   
1,836
     
1,494
 
                 
Premises and equipment, net
  $
5,057
    $
5,290
 
 
Depreciation expense was
$342
and
$460
for the years ended
December 31, 2018
and
2017,
respectively.
 
During
2017,
the Company sold and leased back
two
of its office buildings. The Bay View building was sold for
$700,
resulting in a net loss of approximately
$8.
The Racine Avenue building was sold for
$1,200,
resulting in a gain of approximately
$59.
In conjunction with the sales, the Company entered into
ten
-year leases, with options to renew for
two
additional
five
-year terms. Rent expense for all operating leases was
$165
and
$46
in
2018
and
2017,
respectively.
 
Rent commitments, before considering renewal options that are present, are as follows as of
December 31, 2018:
 
2019
  $
167
 
2020
   
153
 
2021
   
144
 
2022
   
146
 
2023
   
148
 
Thereafter
   
575
 
Total   $
1,333
 
 
The Company made a charitable donation of the former branch office located in downtown Waukesha during
July 2017,
valued at
$273.
 
The Company also entered into a lease with a tenant for a portion of the Brookfield branch, commencing
June 1, 2017
through
May 31, 2024.
As of
December 31, 2018,
minimum future rents receivable are as follows:
 
2019
  $
97
 
2020
   
99
 
2021
   
101
 
2022
   
103
 
2023
   
106
 
Thereafter
   
44
 
Total   $
550
 
v3.19.1
Note 7 - Deposits
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Deposit Liabilities Disclosures [Text Block]
NOTE
7
-
Deposits

 
The composition of deposits are as follows:
 
   
At December 31,
 
   
2018
   
2017
 
                 
Non-interest bearing checking
  $
22,763
    $
22,271
 
Interest bearing checking
   
5,424
     
4,017
 
Money market
   
41,910
     
54,472
 
Statement savings accounts
   
13,773
     
14,030
 
Health savings accounts
   
11,197
     
11,335
 
Certificates of deposit
   
88,138
     
76,788
 
Total
  $
183,205
    $
182,913
 
 
Certificates of deposit that meet or exceed the FDIC insurance limit of
$250
totaled
$30,590
and
$12,424
at
December 31, 2018
and
2017,
respectively.
 
The scheduled maturities of certificates of deposit are as follows as of
December 31, 2018:
 
2019
  $
62,303
 
2020
   
16,570
 
2021
   
5,391
 
2022
   
1,910
 
2023
   
1,964
 
         
Total
  $
88,138
 
 
v3.19.1
Note 8 - FHLB Advances
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Federal Home Loan Bank Advances, Disclosure [Text Block]
NOTE
8
FHLB Advances

 
FHLB advances consist of the following as of
December 31:
 
   
2018
   
2017
 
   
Rates
   
Amount
   
Rates
   
Amount
 
                                       
Fixed rate, fixed term advances
 
1.42%
-
2.70%
    $
11,750
     
1.42%
-
 1.92%
    $
4,750
 
Fixed term advances with floating spread
 
1.54%
-
 2.05%
     
6,000
     
1.39%
-
 1.96%
     
8,000
 
                                       
Total
 
 
 
 
    $
17,750
     
 
 
 
    $
12,750
 
 
The following is a summary of scheduled maturities of fixed term FHLB advances as of
December 31, 2018:
 
   
Fixed Rate Advances
   
Adjustable Rate Advances
         
   
Weighted
Average Rate
   
Amount
   
Weighted
Average Rate
   
Amount
   
Total
Amount
 
2019
   
2.21
%   $
5,750
     
1.54
%   $
2,000
    $
7,750
 
2020
   
2.34
%    
6,000
     
1.69
%    
2,000
     
8,000
 
2021
   
 
     
-
     
2.05
%    
2,000
     
2,000
 
                                         
Total
   
2.28
%   $
11,750
     
1.76
%   $
6,000
    $
17,750
 
 
Actual maturities
may
differ from the scheduled principal maturities due to call options on the various advances.
 
The Company has a master contract agreement with the FHLB that provides for a borrowing up to the lesser of a determined multiple of FHLB stock owned or a determined percentage of the book value of the Company’s qualifying
1
-
4
family, multifamily, and commercial real estate loans. The Company pledged approximately
$158,923
and
$135,760
of
1
-
4
family, multifamily, and commercial real estate loans to secure FHLB advances at
December 31, 2018
and
2017,
respectively. FHLB provides both fixed and floating rate advances. Floating rates are tied to short-term market rates of interest, such as LIBOR, Federal funds or Treasury Bill rates. Fixed rate advances are priced in reference to market rates of interest at the time of the advance, namely the rates that FHLB pays to borrowers at various maturities. FHLB advances are subject to a prepayment penalty if they are repaid prior to maturity. FHLB advances are also secured by
$739
and
$514
of FHLB stock owned by the Company at
December 31, 2018
and
2017,
respectively.
 
At
December 31, 2018,
the Company’s available and unused portion of this borrowing agreement was
$889.
 
In addition, the Company has a
$7,000
federal funds line of credit through Bankers’ Bank of Wisconsin, which was
not
drawn on as of
December 31, 2018.
The Company also has the authority to borrow through the Federal Reserve’s Discount Window.
 
v3.19.1
Note 9 - 401(k) Plan
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Pension and Other Postretirement Benefits Disclosure [Text Block]
 NOTE
9
401
(k) Plan

 
The Company sponsors a
401
(k) profit sharing plan that covers substantially all employees. To be eligible to participate, an employee must have completed
1,000
hours of service and be
21
years of age or older. The Company matches
100%
of employee contributions up to
4%
of their annual compensation. The Company
may
also make nonelective contributions to the plan at the discretion of the Board of Directors. Expense charged to operations for this plan was
$154
and
$127
for the years ended
December 31, 2018
and
2017,
respectively.
v3.19.1
Note 10 - Income Taxes
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
NOTE
10
-
Income
Taxes

 
The provision for income taxes included in the accompanying financial statements consists of the following components:
 
   
Years ended December 31,
 
   
2018
   
2017
 
Current Taxes (Benefit)
               
Federal
  $
114
    $
192
 
State
   
83
     
76
 
Total Current Taxes    
197
     
268
 
Deferred Income Taxes
               
Federal
   
107
     
(311
)
State
   
14
     
(46
)
Total Deferred Income Taxes    
121
     
(357
)
                 
Impact of Deferred Tax Asset Restatement
   
-
     
353
 
                 
Total Provision for Income Taxes
  $
318
    $
264
 
 
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
 
The net deferred tax asset in the accompanying balance sheet includes the following amounts of deferred tax assets and liabilities:
 
   
As of December 31,
 
 
 
2018
   
2017
 
Deferred Tax Assets                
Allowance for loan losses
  $
577
    $
490
 
Deferred compensation
   
121
     
120
 
Non-accrual interest
   
18
     
30
 
Purchase accounting
   
18
     
17
 
Equity compensation
   
4
     
-
 
AMT credit
   
-
     
108
 
Unrealized loss on available for sale securities
   
219
     
133
 
Charitable contribution carryforward
   
191
     
235
 
Other
   
10
     
11
 
Deferred Tax Assets
  $
1,158
    $
1,144
 
                 
Deferred Tax Liabilities
               
Depreciation and amortization
   
(73
)    
(17
)
FHLB stock
   
(30
)    
(30
)
Other
   
-
     
(7
)
Deferred Tax Liabilities
  $
(103
)   $
(54
)
                 
Net Deferred Tax Asset
  $
1,055
    $
1,090
 
 
On
December 22, 2017,
the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”). The Act amends the Internal Revenue Code to reduce corporate tax rates and modify various tax policies, credits, and deductions. The Act reduces the corporate federal tax rate from a maximum of
35%
to a flat
21%
rate, which was effective for the Company beginning
January 1, 2018.
As a result of the tax rate reduction in the Act, the Company reduced its net deferred tax asset during the year ended
December 31, 2017,
by
$353,
which was recognized as additional income tax expense.
 
A summary of the sources of differences between income taxes at the federal statutory rate and the provision for income taxes follows:
 
   
Years ended December 31,
 
   
2018
   
2017
 
 
 
Amount
   
% of Pretax
Income
   
Amount
   
% of Pretax
Income
 
Reconciliation of statutory to effective rates                                
Federal income taxes at statutory rate
  $
289
     
21.00
%   $
27
     
34.00
%
Adjustments for
                               
Tax exempt interest on municipal obligations
   
(10
)    
-0.73
%    
(45
)    
-57.69
%
State income taxes, net of federal income tax benefit
   
75
     
5.45
%    
20
     
25.64
%
Increase in CSV of life insurance
   
(41
)    
-2.98
%    
(67
)    
-85.90
%
Other
   
5
     
0.36
%    
(24
)    
-30.77
%
Valuation of deferred tax asset
   
-
     
0.00
%    
353
     
452.56
%
Provision for income taxes
  $
318
     
23.11
%   $
264
     
337.84
%
 
With few exceptions, the Company is
no
longer subject to federal or state examinations by taxing authorities for years before
2014.
 
At
December 31, 2018
and
December 31, 2017,
the Company did
not
have any state or federal net operating loss carryover.
v3.19.1
Note 11 - Commitments and Contingencies
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]
NOTE
11
-
Commitments
and
Contingencies

 
In the normal course of business, the Company
may
be involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would
not
have a material adverse effect on the Company's financial statements.
No
legal proceedings existed at
December 31, 2018.
 
The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets.
 
The Company’s exposure to credit loss is represented by the contractual, or notional, amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments. Since some of the commitments are expected to expire without being drawn upon, and some of the commitments
may
not
be drawn upon to the total extent of the commitment, the notional amount of these commitments does
not
necessarily represent future cash requirements of the Company.
 
The contract amounts of credit-related financial instruments at
December 31, 2018
and
2017
are summarized below:
 
   
Notional Amount
 
   
2018
   
2017
 
Unused lines of credit
               
Fixed
   
7,467
     
4,497
 
Variable
   
11,307
     
10,807
 
Undisbursed portion of loan proceeds, fixed
   
5,890
     
6,002
 
Standby letters of credit, variable
   
1,277
     
822
 
 
 
Unused commitments under lines of credit are commitments for possible future extensions of credit to existing customers. These lines of credit
may
or
may
not
require collateral and
may
or
may
not
contain a specific maturity date.
 
The undisbursed portion of loan proceeds represents undrawn amounts under construction loans. These loans are generally secured by real estate and generally have a specific maturity date.
 
Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a
third
party. Generally, all standby letters of credit issued have expiration dates within
one
year. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting these commitments. Standby letters of credit are
not
reflected in the financial statements, since recording the fair value of these guarantees would
not
have a significant impact on the financial statements.
 
The Company sells loans to investors and does
not
retain servicing responsibilities. Upon sale, the risk of credit loss is passed to the investor, unless the loan is sold with recourse. For loans sold without recourse, the Company does
not
retain the risk of loss should a loan, previously sold, go into default, unless it is determined that such loan was
not
within the agreed-upon underwriting guidelines due to negligence on the part of the Company or fraud on the part of the borrower. Such risk retention is standard within the mortgage banking industry. The Company’s exposure relating to the fair value of the representations and warranties and other recourse obligations is
not
material. The Company is contingently liable in the amount of
$5,370
relating to loans sold with recourse at
December 31, 2018
and
$3,647
as of
December 31, 2017.
All recourse provisions expire within
four
months from when the loan is sold.
v3.19.1
Note 12 - Concentration of Credit Risk
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Concentration Risk Disclosure [Text Block]
NOTE
12
-
Concentration
of
Credit
Risk

 
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents, investments, and loans. The Company's cash and cash equivalents are held in demand accounts with various institutions. The Company's investments are held in a variety of interest bearing investments including obligations from the U.S. government and government sponsored agencies and certificates of deposit. Such deposits are generally in excess of insured limits. The Company has
not
experienced any historical losses on its deposits of cash and cash equivalents. Practically all of the Company's loans and commitments have been granted to customers in the Company's market area. Although the Company has a diversified loan portfolio, the ability of their debtors to honor their contracts is dependent on the economic conditions of the counties surrounding the Company. The concentration of credit by type of loan is set forth in Note
5.
 
v3.19.1
Note 13 - Related-party Transactions
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]
NOTE
13
Related-Party Transactions

 
A summary of loans to directors, executive officers, and their affiliates follows:
 
   
Years ended December 31,
 
   
2018
   
2017
 
                 
Beginning balance
  $
6,697
    $
2,853
 
Adjustments for changes in directors and executive officers
   
-
     
-
 
New loans
   
2,121
     
9,976
 
Less: Participations sold
   
(310
)    
(5,913
)
Repayments
   
(1,683
)    
(219
)
                 
Ending balance
  $
6,825
    $
6,697
 
 
Deposits from directors, executive officers, and their affiliates totaled
$3,467
and
$1,333
at
December 31, 2018
and
2017,
respectively.
 
The Company utilizes the services of a law firm in which
one
of the Company’s directors is a partner. Fees paid to the firm were
$11
and
$38
during the years ended
2018
and
2017,
respectively. The Company also has an operating lease with the law firm for office space through
2020.
Rent paid in
2018
and
2017
pertaining to this lease was
$28
and
$16,
respectively.
 
To further the Company’s commitment to the local community,
$250,000
cash as well as
25,000
shares of stock were donated to a charitable foundation established by the Company as part of the reorganization and offering in
2017.
v3.19.1
Note 14 - Foreclosed Assets
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Foreclosed Assets Disclosure [Text Block]
NOTE
14
Foreclosed Assets

 
Foreclosed assets consists of
one
owner-occupied
1
-
4
family property as of
December 31, 2018
totaling
$69
and
two
foreclosed
one
owner-occupied
1
-
4
family properties totaling
$619
at
December 31, 2017.
Residential real estate loans that are in the process of foreclosure totaled
$0
and
$165
at
December 31, 2018
and
2017,
respectively.
v3.19.1
Note 15 - Fair Value
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
NOTE
15
Fair Value

 
Accounting standards describe
three
levels of inputs that
may
be used to measure fair value (the fair value hierarchy). The level of an asset or liability within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement of that asset or liability.
 
Following is a brief description of each level of the fair value hierarchy:
 
Level
1
- Fair value measurement is based on quoted prices for identical assets or liabilities in active markets.
 
Level
2
- Fair value measurement is based on: (
1
) quoted prices for similar assets or liabilities in active markets; (
2
) quoted prices for identical or similar assets or liabilities in markets that are
not
active; or (
3
) valuation models and methodologies for which all significant assumptions are or can be corroborated by observable market data.
 
Level
3
- Fair value measurement is based on valuation models and methodologies that incorporate at least
one
significant assumption that cannot be corroborated by observable market data. Level
3
measurements reflect the Company’s estimates about assumptions market participants would use in measuring fair value of the asset or liability.
 
Some assets and liabilities, such as securities available for sale, are measured at fair value on a recurring basis under accounting principles generally accepted in the United States. Other assets and liabilities, such as impaired loans,
may
be measured at fair value on a nonrecurring basis.
 
Following is a description of the Company’s valuation methodology and significant inputs used for each asset and liability measured at fair value on a recurring or nonrecurring basis, as well as the classification of the asset or liability within the fair value hierarchy.
 
Available for sale
securities
- Available for sale securities
may
be classified as Level
1
or Level
2
measurements within the fair value hierarchy. Level
1
securities include equity securities traded on a national exchange. The fair value measurement of a Level
1
security is based on the quoted price of the security. Level
2
securities include U.S. government and agency securities, obligations of states and political subdivisions, corporate debt securities, and mortgage related securities. The fair value measurement of a Level
2
security is obtained from an independent pricing service and is based on recent sales of similar securities and other observable market data.
 
Loans
- Loans are
not
measured at fair value on a recurring basis. However, loans considered to be impaired
may
be measured at fair value on a nonrecurring basis. The fair value measurement of an impaired loan that is collateral dependent is based on the fair value of the underlying collateral. Independent appraisals are obtained that utilize
one
or more valuation methodologies - typically they will incorporate a comparable sales approach and an income approach. Management routinely evaluates the fair value measurements of independent appraisers and adjusts those valuations based on differences noted between actual selling prices of collateral and the most recent appraised value. Such adjustments are usually significant, which results in a Level
3
classification. All other impaired loan measurements are based on the present value of expected future cash flows discounted at the applicable effective interest rate and, thus, are
not
fair value measurements.
 
Foreclosed assets
- Real estate acquired through or in lieu of loan foreclosure are
not
measured at fair value on a recurring basis. However, foreclosed assets are initially measured at fair value (less estimated costs to sell) when they are acquired and
may
also be measured at fair value (less estimated costs to sell) if they become subsequently impaired. The fair value measurement for each asset
may
be obtained from an independent appraiser or prepared internally. Fair value measurements obtained from independent appraisers generally utilize a market approach based on sales of comparable assets and/or an income approach. Such measurements are usually considered Level
2
measurements. However, management routinely evaluates fair value measurements of independent appraisers by comparing actual selling prices to the most recent appraisals. If management determines significant adjustments should be made to the independent appraisals based on these evaluations, these measurements are considered Level
3
measurements. Fair value measurements prepared internally are based on management's comparisons to sales of comparable assets, but include significant unobservable data and are therefore considered Level
3
measurements.
 
Assets measured at fair value on a recurring basis are summarized below:
 
   
Recurring Fair Value Measurements Using
         
   
Quoted Prices in Active Markets for Identical Instruments
   
Significant Other Observable Inputs
   
Significant Unobservable Inputs
         
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
                                 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
                               
Available for sale securities:
                               
Obligations of the US government and US government sponsored agencies
  $
-
    $
1,307
    $
-
    $
1,307
 
Obligations of states and political subdivisions
   
-
     
8,295
     
-
     
8,295
 
Mortgage-backed securities
   
-
     
28,536
     
-
     
28,536
 
Certificates of deposit
   
-
     
1,446
     
-
     
1,446
 
Corporate debt securities
   
-
     
4,167
     
-
     
4,167
 
Total
  $
-
    $
43,751
    $
-
    $
43,751
 
                                 
As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
                               
Available for sale securities:
                               
Obligations of the US government and US government sponsored agencies
  $
-
    $
2,220
    $
-
    $
2,220
 
Obligations of states and political subdivisions
   
-
     
13,137
     
-
     
13,137
 
Mortgage-backed securities
   
-
     
33,467
     
-
     
33,467
 
Certificates of deposit
   
-
     
3,997
     
-
     
3,997
 
Corporate debt securities
   
-
     
5,191
     
-
     
5,191
 
Total
  $
-
    $
58,012
    $
-
    $
58,012
 
 
Information regarding the fair value of assets measured at fair value on a nonrecurring basis follows:
 
   
Nonrecurring Fair Value Measurements Using
         
   
Quoted Prices in
Active Markets for
Identical Instruments
   
Significant Other
Observable Inputs
   
Significant
Unobservable Inputs
         
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
                                 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
                               
Foreclosed assets
  $
-
    $
-
    $
69
    $
69
 
                                 
As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
                               
Loans
  $
-
    $
-
    $
151
    $
151
 
Foreclosed assets
   
-
     
-
     
619
     
619
 
 
 
There were
no
loans recognized at fair value as of
December 31, 2018.
Loans with a carrying amount of
$330
were considered impaired and were written down to their estimated fair value of
$151
as of
December 31, 2017.
As a result, the Company recognized a specific valuation allowance against these impaired loans totaling
$179
as of
December 31, 2017.
 
Foreclosed assets with a carrying amount of
$69
and
$619
were determined to be at their fair value as of
December 31, 2018
and
December 31, 2017,
respectively.
 
The following presents quantitative information about nonrecurring Level
3
fair value measurements:
 
   
Fair Value
 
Valuation Technique
 
Unobservable Input(s)
 
Range/Weighted
Average
 
As of December 31, 2018
 
 
 
 
           
 
 
Foreclosed assets
  $
69
 
Market and/or income approach
 
Management discount on appraised values
 
10%
-
20%
 
                         
As of December 31, 2017
 
 
 
 
           
 
 
Impaired loans
  $
151
 
Market and/or income approach
 
Management discount on appraised values
 
10%
-
20%
 
Foreclosed assets
  $
619
 
Market and/or income approach
 
Management discount on appraised values
 
10%
-
20%
 
 
The Company estimates fair value of all financial instruments regardless of whether such instruments are measured at fair value. The following methods and assumptions were used by the Company to estimate fair value of financial instruments
not
previously discussed.
 
Cash and cash equivalents –
Fair value approximates the carrying value.
 
Loans held for sale –
Fair value is based on commitments on hand from investors or prevailing market prices.
 
Loans –
Fair value of variable rate loans that reprice frequently is based on carrying values. Fair value of other loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings. Fair value of impaired and other nonperforming loans is estimated using discounted expected future cash flows or the fair value of the underlying collateral, if applicable.
 
FHLB stock
– Fair value is the redeemable (carrying) value based on the redemption provisions of the Federal Home Loan Bank.
 
Accrued interest receivable and payable
– Fair value approximates the carrying value.
 
Cash value of life insurance
– Fair value is based on reported values of the assets.
 
Deposits and advance payments by borrowers for taxes and insurance
– Fair value of deposits with
no
stated maturity, such as demand deposits, savings, and money market accounts, including advance payments by borrowers for taxes and insurance, by definition, is the amount payable on demand on the reporting date. Fair value of fixed rate time deposits is estimated using discounted cash flows applying interest rates currently being offered on similar time deposits.
 
FHLB advances
– Fair value of fixed rate, fixed term borrowings is estimated by discounting future cash flows using the current rates at which similar borrowings would be made. Fair value of borrowings with variable rates or maturing within
90
days approximates the carrying value of those borrowings.
 
The carrying value and estimated fair value of financial instruments follow:
 
   
December 31, 2018
 
   
Carrying Value
   
Level 1
   
Level 2
   
Level 3
 
Financial assets:
                               
Cash and cash equivalents
  $
4,488
    $
4,488
    $
-
    $
-
 
Available for sale securities
   
43,751
     
-
     
43,751
     
-
 
Loans held for sale
   
679
     
-
     
679
     
 
 
Loans
   
198,694
     
-
     
-
     
199,048
 
Accrued interest receivable
   
768
     
768
     
-
     
-
 
Cash value of life insurance
   
7,007
     
-
     
-
     
7,007
 
FHLB stock
   
739
     
-
     
-
     
739
 
                                 
Financial liabilities:
                               
Deposits
   
183,205
     
95,067
     
-
     
87,531
 
Advance payments by borrowers for taxes and insurance
   
55
     
55
     
-
     
-
 
FHLB advances
   
17,750
     
-
     
-
     
17,505
 
Accrued interest payable
   
70
     
70
     
-
     
-
 
 
   
December 31, 2017
 
   
Carrying Value
   
Level 1
   
Level 2
   
Level 3
 
Financial assets:
                               
Cash and cash equivalents
  $
11,813
    $
11,813
    $
-
    $
-
 
Available for sale securities
   
58,012
     
-
     
58,012
     
-
 
Loans held for sale
   
109
     
-
     
109
     
-
 
Loans
   
171,355
     
-
     
-
     
171,729
 
Accrued interest receivable
   
782
     
782
     
-
     
-
 
Cash value of life insurance
   
6,558
     
-
     
-
     
6,558
 
FHLB stock
   
514
     
-
     
-
     
514
 
                                 
Financial liabilities:
                               
Deposits
   
182,913
     
106,125
     
-
     
76,099
 
Advance payments by borrowers for taxes and insurance
   
36
     
36
     
-
     
-
 
FHLB advances
   
12,750
     
-
     
-
     
12,597
 
Accrued interest payable
   
37
     
37
     
-
     
-
 
 
Limitations -
The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based on quoted market prices. However, in many instances, there are
no
quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are
not
available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates
may
not
be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented
may
not
necessarily represent the underlying fair value of the Company.
 
Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do
not
reflect any premium or discount that could result from offering for sale at
one
time the Company’s entire holdings of a particular instrument. Because
no
market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters that could affect the estimates. Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business. Deposits with
no
stated maturities are defined as having a fair value equivalent to the amount payable on demand. This prohibits adjusting fair value derived from retaining those deposits for an expected future period of time. This component, commonly referred to as a deposit base intangible, is neither considered in the above amounts, nor is it recorded as an intangible asset on the consolidated balance sheets. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have
not
been considered in the estimates.
 
v3.19.1
Note 16 - Equity and Regulatory Matters
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Regulatory Capital Requirements under Banking Regulations [Text Block]
NOTE
16
Equity and Regulatory Matters

 
The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
 
Effective
January 1, 2015,
the Bank became subject to the regulatory capital reforms in accordance with Basel III, which established higher minimum risk-based capital ratio requirements, a new common equity Tier
1
risk-based capital ratio and a new capital conservation buffer (“CCB.”) The regulations also included revisions to the definition of capital and changes in the risk-weighting of certain assets, in addition to redefining “well capitalized” as a
6.5%
common equity Tier
1
risk-based capital ratio, an
8.0%
Tier
1
risk-based capital ratio, a
10.0%
total risk-based capital ratio and a
5.0%
Tier
1
leverage ratio.
 
Additionally, the CCB, which is applicable to the above minimum risk-based capital requirement, was introduced. The CCB will eventually be
2.5%
and is being phased in over a
five
year period. The current CCB is equal to
1.25%
and increases
0.625%
annually through
2019
to
2.5%.
The Bank, in order to avoid limitations on capital distributions, including dividend payments, engaging in share repurchases and certain discretionary bonus payments to executive officers, must maintain the CCB at the appropriate level.
 
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier
1,
Tier
1,
and Total capital to risk-weighted assets and of Tier
1
capital to average assets. It is management's opinion, as of
December 31, 2018,
that the Bank meet all applicable capital adequacy requirements.
 
As of
December 31, 2018,
the Bank is categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum regulatory capital ratios as set forth in the table. There are
no
conditions or events since
December 31, 2018
that management believes have changed the category.
 
The Bank's actual capital amounts and ratios are presented in the following tables:
 
   
Actual
   
For Capital Adequacy
   
To Be Well Capitalized
 
                    Purposes    
Under Prompt Corrective Action Provisions
 
 
 
Amount
   
Ratio
   
Amount
   
Ratio
   
Amount
   
Ratio
 
December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Federal Bank of Wisconsin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leverage (Tier 1)
  $
48,502
     
18.4
%   $
10,542
     
4.0
%   $
13,178
     
5.0
%
Risk Based:
                                               
Common Tier 1
   
48,502
     
23.7
     
9,209
     
4.5
     
13,302
     
6.5
 
Tier 1
   
48,502
     
23.7
     
12,279
     
6.0
     
16,372
     
8.0
 
Total
   
50,620
     
24.7
     
16,372
     
8.0
     
20,465
     
10.0
 
                                                 
December 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Federal Bank of Wisconsin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leverage (Tier 1)
  $
47,513
     
17.2
%   $
11,051
     
4.0
%   $
13,813
     
5.0
%
Risk Based:
                                               
Common Tier 1
   
47,513
     
26.8
     
7,973
     
4.5
     
11,517
     
6.5
 
Tier 1
   
47,513
     
26.8
     
10,631
     
6.0
     
14,174
     
8.0
 
Total
   
49,313
     
27.8
     
14,174
     
8.0
     
17,718
     
10.0
 
 
v3.19.1
Note 17 - Intangible Assets
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Intangible Assets Disclosure [Text Block]
 NOTE
17
Intangible Assets

 
The core deposit premium intangible asset had a gross carrying amount of
$161
and accumulated amortization of
$74
at
December 31, 2018.
The core deposit premium intangible asset had a gross carrying amount of
$161
and accumulated amortization of
$58
at
December 31, 2017.
Aggregate amortization expense for the years ended
December 31, 2018
and
2017
was
$16
and
$16.
 
The following table shows the estimated future amortization of the core deposit premium intangible asset for the next
five
years. The projections of amortization expense are based on existing asset balances:
 
   
As of December 31, 2018
 
2019
   
16
 
2020
   
16
 
2021
   
16
 
2022
   
16
 
2023
   
16
 
v3.19.1
Note 18 - Deferred Compensation
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Compensation Related Costs, General [Text Block]
NOTE
18
Deferred Compensation

 
The Company has entered into various deferred compensation agreements with key officers. The liability outstanding under the agreements was
$443
at
December 31, 2018
and
$442
at
December 31, 2017.
The amount charged to operations was
$52
and
$51
for the
twelve
months ended
December 31, 2018
and
2017,
respectively.
 
In addition, the Company is party to a life insurance agreement with an executive officer pursuant to which the Company has purchased a life insurance policy on the executive officer's life. Under the agreement, the beneficiary is entitled to a death benefit paid by the insurer from the policy proceeds equal to
$85.
At
December 31, 2018,
the cash surrender value of this policy was
$252.
v3.19.1
Note 19 - Employee Stock Ownership Plan
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Employee Stock Ownership Plan [Text Block]
NOTE
1
9
Employee Stock Ownership Plan

 
The Company maintains a leveraged employee stock ownership plan (“ESOP”) that covers substantially all employees. The ESOP was established in conjunction with the Company’s stock offering completed in
October 2017
and operates on a plan year ending
December 31.
The loan to fund the acquisition of stock by the ESOP was made by the Company. The Bank makes annual contributions to the ESOP equal to the ESOP’s debt service. The ESOP shares initially were pledged as collateral for this debt. As the debt is repaid, shares are released from collateral and allocated to active participants, based on the proportion of debt service paid in the year. Because the debt is intercompany, it is eliminated in consolidation for presentation in these financial statements. The shares pledged as collateral are reported as unearned ESOP shares in the balance sheet.
 
As shares are committed to be released from collateral and allocated to active participants, the Company reports compensation expense equal to the current market price of the shares and the shares will become outstanding for earnings-per-shares (EPS) computations. During the years ended
December 31, 2018
and
2017,
12,960
and
2,947
shares were committed to be released, respectively. During the years ended
December 31, 2018
the average fair value per share of stock was
$11.03
resulting in total ESOP compensation expense of
$143
for the years ended
December 31, 2018.
During the years ended
December 31, 2017
the average fair value per share of stock was
$11.00
resulting in total ESOP compensation expense of
$32
for the years ended
December 31, 2017.
The ESOP shares as of
December 31
were as follows:
 
   
2018
   
2017
 
Shares allocated to active participants
   
2,947
     
-
 
Shares committed to be released and allocated to participants
   
12,960
     
2,947
 
Total unallocated shares
   
243,303
     
256,263
 
Total ESOP shares
   
259,210
     
259,210
 
Fair value of unallocated shares (based on $10.03 and $11.02 share price as of December 31, 2018 and 2017, respectively)
  $
2,440
    $
2,824
 
 
v3.19.1
Note 20 - Share-based Compensation Plans
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
NOTE
20
- Share-based Compensation
 Plans

 
ASC Topic
718
requires that the grant date fair value of equity awards to employees be recognized as compensation expense over the period during which an employee is required to provide service in exchange for such awards.
 
The following table summarizes the impact of the Company’s share-based payment plans in the financial statements for the period shown:
 
   
Year Ended
December 31, 2018
 
Total cost of stock grant plan during the year
  $
11
 
Total cost of stock option plan during the year
   
7
 
Total cost of share-based payment plans during the year
  $
18
 
         
Amount of related income tax benefit recognized in income
  $
5
 
 
The Company adopted the FFBW, Inc.
2018
Equity Incentive Plan (the
“2018
Equity Incentive Plan”) in
2018.
In
November 2018,
the Company’s stockholders approved the
2018
Equity Incentive Plan which authorized the issuance of up to
129,605
restricted stock awards and up to
324,012
stock options. As of
December 31, 2018
there were
45,363
restricted stock awards and
131,923
options available for future grants. Shares granted under the
2018
Equity Incentive Plan
may
be authorized but unissued, currently held or, to the extent permitted by applicable law, subsequently acquired by the Company as treasury shares, including shares purchased in the open market or in private transactions.  Forfeited or canceled shares shall
not
be deemed to have been delivered for purposes of determining the maximum number of shares of stock available for delivery under the Plan.
 
Options are granted with an exercise price equal to
no
less than the market price of the Company’s shares at the date of grant: those option awards generally vest pro-rata over
five
years of service and have
10
-year contractual terms. Restricted shares typically vest pro-rata over a
five
year period.
 
The following table summarizes stock options activity for the year ended
December 31, 2018:
 
   
Number of Options
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Term (in years)
   
Aggregate
Intrinsic Value
 
Options outstanding as of December 31, 2017
   
-
    $
-
     
 
     
 
 
Granted
   
192,089
     
10.81
     
 
     
 
 
Exercised
   
-
     
-
     
 
     
 
 
Expired or canceled
   
-
     
-
     
 
     
 
 
Forfeited
   
-
     
-
     
 
     
 
 
Options outstanding as of December 31, 2018
   
192,089
    $
10.81
     
9.95
    $
-
 
Options exercisable as of December 31, 2018
   
-
    $
-
     
-
    $
-
 
 
 
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model based on certain assumptions. Expected volatility is based on the average volatility of Company shares and the expectation of future volatility of Company shares. The risk free interest rate for periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life of options is estimated based on the assumption that options will be exercised evenly throughout their life after vesting and represents the period of time that options granted are expected to remain outstanding.
 
The following assumptions were used for options granted during the year ended
December 31, 2018:
 
   
For the Year Ended December 31,
 
   
2018
 
Risk-free interest rate
   
2.80
%
Expected volatility
   
21.21
%
Expected dividend yield
   
0
%
Expected life of options (years)
   
7.5
 
Weighted average fair value per option of options granted during the year
  $
3.40
 
 
The total intrinsic value of options exercised during the year ended
December 31, 2018
was
$0.
 
The following is a summary of changes in restricted shares for the year ended
December 31, 2018:
 
   
Number of Shares
   
Weighted Average
Grant Date Fair Value
 
Shares outstanding as of December 31, 2017
   
-
    $
-
 
Granted
   
84,242
     
10.82
 
Vested
   
-
     
-
 
Forfeited
   
-
     
-
 
Shares outstanding as of December 31, 2018
   
84,242
    $
10.82
 
 
The total intrinsic value of restricted shares that vested during the year ended
December 31, 2018
was
$0.
 
As of
December 31, 2018,
there was
$1.5
million of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share option and non-vested share awards) granted under the
2018
Equity Incentive Plan. At
December 31, 2018,
the weighted-average period over which the unrecognized compensation expense is expected to be recognized was approximately
2.97
years.
 
v3.19.1
Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Use of Estimates, Policy [Policy Text Block]
Use
of
Estimates
 
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the fair values of securities, fair value of financial instruments, the valuation of other real estate owned and the valuation of deferred income tax assets.
Cash and Cash Equivalents, Policy [Policy Text Block]
Cash
and
Cash
Equivalents
 
For purposes of reporting cash flows, cash and cash equivalents include cash and balances due from banks, non-maturity deposits in the Federal Home Loan Bank of Chicago (FHLB), and fed funds sold. The Company has
not
experienced any losses in such accounts.
Marketable Securities, Policy [Policy Text Block]
Available for Sale Securities
 
Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but
not
necessarily to maturity.  Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company's assets and liabilities, liquidity needs, regulatory capital requirements, and other similar factors.  Securities classified as available for sale are carried at fair value.  Unrealized gains or losses are reported as increases or decreases in other comprehensive income, net of the related deferred tax effect.  Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings. Gains and losses on the sale of securities are recorded on the trade date and determined using the specific-identification method.
 
Declines in fair value of securities that are deemed to be other than temporary, if applicable, are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient enough to allow for any anticipated recovery in fair value.
Certain Loans and Debt Securities Acquired in Transfer, Recognizing Interest Income on Impaired Loans, Policy [Policy Text Block]
Loans Acquired in a Transfer
 
 
The Company acquires loans (including debt securities) individually and in groups or portfolios. These loans are initially measured at fair value with
no
allowance for loan losses. The Company's allowance for loan losses on all acquired loans reflect only those losses incurred subsequent to acquisition.
 
Certain acquired loans
may
have experienced deterioration of credit quality between origination and the Company's acquisition of the loans. At acquisition, the Company reviews each loan to determine whether there is evidence of deterioration of credit quality since origination and if it is probable that the Company will be unable to collect all amounts due according to the loan's contractual terms. If both conditions exist, the Company determines whether each such loan is to be accounted for individually or whether such loans will be assembled into pools of loans based on common risk characteristics (for example, credit score, loan type, and date of origination). The Company considers expected prepayments and estimates the amount and timing of undiscounted principal, interest, and other cash flows expected at acquisition for each loan and aggregated pool of loans. The excess of the loan's or pool's scheduled contractual principal and interest payments over all cash flows expected at acquisition is calculated as the nonaccretable difference. The excess of cash flows expected to be collected over the fair value of each loan or pool (accretable yield) is accreted into interest income over the remaining life of the loan or pool.
 
At each reporting date, the Company continues to estimate cash flows expected to be collected for each loan or pool. If expected cash flows have decreased from the acquisition date estimate, the Company recognizes an allowance for loan losses. If expected cash flows have increased from the acquisition date estimate, the Company increases the amount of accretable yield to be recognized as interest income over the remaining life of the loan or pool.
Finance, Loan and Lease Receivables, Held-for-sale, Policy [Policy Text Block]
Loans Held for Sale
 
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Mortgage loans held for sale are sold with the mortgage servicing rights released by the Company. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loan sold.
Finance, Loan and Lease Receivables, Held-for-investment, Policy [Policy Text Block]
Loans
 
 
 
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances adjusted for deferred loan fees and costs, charge-offs, and an allowance for loan losses. Interest on loans is accrued and credited to income based on the unpaid principal balance. Loan-origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.
 
The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication that the borrower
may
be unable to make payments as they become due. When loans are placed on nonaccrual status or charged off, all unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]
Allowance
for
Loan
Losses
 
The allowance for loan losses is maintained at the level considered adequate by management to provide for losses that are probable as of the balance sheet date. The allowance for loan losses is established through a provision for loan losses charged to expense as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. In determining the adequacy of the allowance balance, the Company makes evaluations of the loan portfolio and related off-balance sheet commitments, considers current economic conditions and historical loss experience, and reviews specific problem loans and other factors.
 
When establishing the allowance for loan losses, management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment. These risk categories and their relevant risk characteristics are as follows:
 
Commercial development:
These loans are secured by vacant land and/or property that are in the process of improvement. Repayment of these loans can be dependent on the sale of the property to
third
parties or the successful completion of the improvements by the builder for the end user. Construction loans include
not
only construction of new structures, but loans originated to finance additions to or alterations of existing structures. Until a permanent loan originates, or payoff occurs, all commercial construction loans secured by real estate are reported in this loan pool. Development loans also have the risk that improvements will
not
be completed on time, or in accordance with specifications and projected costs.
 
Commercial real estate:
These loans are primarily secured by office and industrial buildings, warehouses, small retail shopping facilities, and various special purpose properties, including restaurants. These loans are subject to underwriting standards and processes similar to commercial and industrial loans. Loans to closely held businesses are generally guaranteed in full by the owners of the business. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property. The cash flows of the borrowers, however,
may
not
behave as forecasted and collateral securing loans
may
fluctuate in value due to the general economic factors or conditions specific to the real estate market, such as geographic location and/or purpose type.
 
Commercial and industrial:
Commercial and industrial loans are extended primarily to small and middle market customers. Such credits typically comprise working capital loans, asset acquisition loans, and loans for other business purposes. Loans to closely held businesses are generally guaranteed in full by the owners of the business. Commercial and industrial loans are made based primarily on the historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of the borrowers, however,
may
not
behave as forecasted and collateral securing loans
may
fluctuate in value due to economic or individual performance factors. Minimum standards and underwriting guidelines have been established for commercial and industrial loans.
 
1
-
4
family owner-occupied:
These loans are generally to individuals and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations, the underlying collateral, and the loan to collateral value. Also included in this category are junior liens on
1
-
4
family residential properties. Underwriting standards for
1
-
4
family owner-occupied loans are heavily influenced by statutory requirements, which include, but are
not
limited to, loan-to-value and affordability ratios, risk-based pricing strategies, and documentation requirements.
 
1
-
4
family investor-owned:
These loans
may
be to individuals or businesses and are subject to underwriting standards and processes similar to commercial and industrial loans. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property(ies). The cash flows of the borrowers, however,
may
not
behave as forecasted and collateral securing loans
may
fluctuate in value due to the general economic factors or conditions specific to the real estate market, such as geographic location and/or purpose type.
 
Multifamily real estate:
These loans include loans to finance non-farm properties with
five
or more units in structures primarily to accommodate households. Such credits are typically originated to finance the acquisition or refinancing of an apartment building. These loans are subject to underwriting standards and processes similar to commercial and industrial loans. Loans to closely held businesses are generally guaranteed in full by the owners of the business. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the subject multifamily property, with assumptions made for vacancy rates. Cash flows of the borrowers rely on the receipt of rental income from the tenants of the property who are themselves subject to fluctuations in national and local economic conditions and unemployment trends.
 
Consumer:
These loans
may
take the form of installment loans, demand loans, or single payment loans, and are extended to individuals for household, family, and other personal expenditures. These loans generally include direct consumer automobile loans and credit card loans. These loans are generally smaller in size and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations.
 
Management regularly evaluates the allowance for loan losses using the Company’s past loan loss experience, known and inherent risks in the loan portfolio, composition of the loan portfolio, adverse situations that
may
affect the borrower’s ability to repay, estimated value of any underlying collateral, current economic conditions, and other relevant factors. This evaluation is inherently subjective since it requires material estimates that
may
be susceptible to significant change.
 
A loan is impaired when, based on current information, it is probable that the Company will
not
collect all amounts due in accordance with the contractual terms of the loan agreement. Management determines whether a loan is impaired on a case-by-case basis, taking into consideration the payment status, collateral value, length and reason of any payment delays, the borrower’s prior payment record, and any other relevant factors. Large groups of smaller-balance homogeneous loans, such as residential mortgage and consumer loans, are collectively evaluated in the allowance for loan losses analysis and are
not
subject to impairment analysis unless such loans have been subject to a restructuring agreement. Specific allowances for impaired loans are based on discounted cash flows of expected future payments using the loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent.
 
In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies
may
require the Company to make additions to the allowance for loan losses based on their judgments of collectability based on information available to them at the time of their examination.
Loans and Leases Receivable, Troubled Debt Restructuring Policy [Policy Text Block]
Troubled Debt Restructurings
 
 
Loans are accounted for as troubled debt restructurings when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and the Company grants a “concession” to the borrower that they would
not
otherwise consider. These concessions include a modification of terms such as a reduction of the stated interest rate or loan balance, a reduction of accrued interest, an extension of the maturity date at an interest rate lower than a current market rate for a new loan with similar risk, or some combination thereof to facilitate repayment. Troubled debt restructurings are considered impaired loans.
Finance Loan and Lease Receivables Held for Sale Foreclosed Assets [Policy Text Block]
Foreclosed Assets
 
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value, less costs to sell, at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less costs to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.
Property, Plant and Equipment, Policy [Policy Text Block]
Premises
and
Equipment
 
Depreciable assets are stated at cost less accumulated depreciation. Provisions for depreciation are computed on straight-line and accelerated methods over the estimated useful lives of the assets.
Federal Home Loan Bank Stock [Policy Text Block]
Federal
Home
Loan
Bank
Stock
 
The Company's investment in Federal Home Loan Bank ("FHLB") stock is carried at cost, which approximates fair value. The Company is required to hold the stock as a member of the FHLB, and transfer of the stock is substantially restricted. The stock is evaluated for impairment on an annual basis.
Income Tax, Policy [Policy Text Block]
Income
Taxes
 
Amounts provided for income tax expense are based on income reported for financial statement purposes and do
not
necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
 
As changes in tax laws or rates are enacted, deferred income tax assets and liabilities are adjusted through the provision for income taxes. The differences relate principally to the allowances for loan losses, deferred compensation, depreciation, FHLB stock dividends and non-accrual interest. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
The tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than
not
to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than
not
sustain the position following an audit. For tax positions meeting the more likely than
not
threshold, the amount recognized in the financial statements is the largest benefit that has a greater than
50
percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Based on its evaluation, the Company has concluded that there are
no
significant uncertain tax positions requiring recognition in its financial statements.
 
The Company's policy is to recognize interest and penalties related to income tax issues as components of income tax expense. During the periods shown, the Company did
not
recognize any interest or penalties related to income tax expense in its statements of operations.
Transfers and Servicing of Financial Assets, Transfers of Financial Assets, Sales, Policy [Policy Text Block]
Transfers of Financial Assets
 
 
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (
1
) the assets have been isolated from the Company, (
2
) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (
3
) the Company does
not
maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Advertising Costs, Policy [Policy Text Block]
Advertising
 
 
Advertising costs are expensed as incurred.
Comprehensive Income, Policy [Policy Text Block]
Other Comprehensive Loss
 
Other comprehensive loss is shown on the statements of comprehensive income (loss). The Company’s accumulated other comprehensive income (loss) is composed of the unrealized loss on securities available for sale, net of tax and is shown on the statements of changes in equity. Reclassification adjustments out of other comprehensive loss for gains realized on sales of securities available for sale comprise the entire balance of “net gain (loss) on sale of securities” on the statements of operations. As part of this reclassification, income tax credit of approximately
$56
was recognized for the year ended
December 31, 2018
and income tax expense of approximately
$5
was recognized for the years ended
December 31, 2017
in “provision for income taxes” on the statements of operations.
Off-Balance-Sheet Credit Exposure, Policy [Policy Text Block]
Off-Balance
Sheet
Financial
Instruments
 
In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, unfunded commitments under lines of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.
Life Insurance [Policy Text Block]
Life Insurance
 
The Company has purchased life insurance policies on certain key executives. Life insurance is measured at the amount that could be realized under the insurance contract as of the balance sheet date, which is generally the cash surrender value of the policy.
Subsequent Events, Policy [Policy Text Block]
Subsequent Events
 
 
Management has reviewed the Company’s operations for potential disclosure or financial statement impacts related to events occurring after
December 31, 2018,
but prior to the release of these financial statements. Based on the results of this review, on
January 25, 2019,
the Company announced that it has adopted a stock repurchase program for up to approximately
5%
of its outstanding common stock. Other than the repurchase program,
no
subsequent event disclosure or financial statement impacts to these financial statements are required as of
March 27, 2019.
Reclassification, Policy [Policy Text Block]
Reclassifications
 
Certain reclassifications have been made to the
2017
consolidated financial statements to conform to the
2018
classifications.
New Accounting Pronouncements, Policy [Policy Text Block]
Recent Accounting Pronouncements
 
The following Accounting Standards Updates (ASUs) have been issued by the Financial Accounting Standards Board (FASB) and
may
impact the Company's financial statements in future reporting periods:
 
ASU
No.
2016
-
13,
“Credit Losses (Topic
326
).”
 
ASU
2016
-
13
requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2021.
Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018.
The Company is currently assessing the impact of adopting ASU
2016
-
13
on its financial statements.
 
ASU
No.
 
2016
-
02
“Leases (Topic
842
): Amendments to the Leases Analysis.”
ASU
No.
2018
-
10
"Codification Improvements to Topic
842."
ASU
No.
2018
-
11
"Targeted Improvements"
 
For lessees, Topic
842
requires leases to be recognized on the balance sheet, along with disclosure of key information about leasing arrangements. Topic
842
was subsequently amended by ASU
2018
-
01,
2018
-
10
and
2018
-
11.
The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than
12
months. Leases will be classified as finance or operating, with classification affecting the pattern and classification expense recognition in the income statement.
 
For lessors, Topic
842
requires lessors to classify leases as sales-type, direct financing or operating leases. A lease is a sales-type lease if any
one
of
five
criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If
none
of those
five
criteria are met, but
two
additional criteria are both met, indicating the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee and a
third
party, the lease is a direct financing lease. All leases that are
not
sales-type or direct financing leases are operating leases.
 
The new standard is effective for the Company on
January 1, 2020,
with early adoption permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity
may
choose to use either (
1
) the new standard's effective date or (
2
) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company expects to adopt the new standard on
January 1, 2020
using the effective date as its date of initial application. Consequently, financial information will
not
be updated and the disclosures required under the new standard will
not
be provided for dates and periods before
January 1, 2020.
 
ASU
No.
2016
-
01,
“Recognition and Measurement of Financial Assets and Financial Liabilities”
ASU
No.
2018
-
03,
“Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic
825
-
10
)”
 
These standards make a number of changes to the recognition and measurement standards of financial instruments, including the following changes:
1
) equity securities with a readily determinable fair value will have to be measured at fair value with changes in fair value recognized in net income;
2
) entities that are public business entities will
no
longer be required to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost; and
3
) entities that are public business entities will be required to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. These standards are effective for financial statements issued for annual reporting periods, and interim periods within those annual periods, beginning after
December 15, 2018.
The adoption of these standard is
not
expected to have a material impact on our financial condition or results of operations, except that the Company will
no
longer disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost.
 
ASU
No.
2014
-
09,
“Revenue from Contracts with Customers (Topic
606
)”
 
The amendment supersedes and replaces nearly all existing revenue recognition guidance. Under the amended guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual and interim periods beginning after
December 15, 2018.
Adoption of ASU
No.
2014
-
09
is
not
expected to have a material impact on the Company’s financial statements.
 
ASU
No.
2018
-
02,
“Income Statement - Reporting Comprehensive Income (Topic
220
): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”
 
This ASU allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The reclassification is
not
required but is an accounting policy election that must be disclosed during the year of adoption. This ASU will be effective for fiscal years beginning after
December 15, 2018
with earlier adoption permitted. At this time, the Company does
not
expect to elect the reclassification option.
 
ASU
No.
2018
-
09,
“Codification Improvements”
 
This ASU represents changes in various Subtopics to clarify, correct errors, or make minor improvements. The amendments are
not
expected to have a significant effect on current accounting practice. Subtopics impacted by this ASU that are relevant to the Company include Subtopic
220
-
10
Income Statement - Reporting Comprehensive Income-Overall, Subtopic
718
-
740
Compensation - Stock Compensation-Income Taxes, and Subtopic
820
-
10
Fair Value Measurement-Overall. Many of the amendments within this ASU do
not
require transition and are effective upon issuance. However, some are
not
effective until fiscal years beginning after
December 15, 2018.
The amendments within this ASU are
not
expected to materially impact the Company's financial statements.    
ASU
No.
2018
-
13,
“Fair Value Measurement (Topic
820
): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”
This ASU modifies the disclosure requirements on fair value measurements in Topic
820,
including the removal, modification to, and addition of certain disclosure requirements. This ASU will be effective for fiscal years beginning after
December 15, 2019
with early adoption permitted. The majority of the disclosure changes are to be applied on a prospective basis. The Company is currently in the process of reviewing this ASU to determine whether the modifications within will be adopted prior to the effective date. Although this ASU has a significant impact to the Company’s fair value disclosures,
no
additional impact to the financial statements is expected.
 
Recent Accounting Pronouncements Adopted in
2018
 
The following Accounting Standards Update has been issued by the Financial Accounting Standards Board and has been adopted by the Company in
2018:
 
ASU
No.
2018
-
07,
“Compensation - Stock Compensation (Topic
718
): Improvements to Nonemployee Share-Based Payment Accounting”'
 
This ASU expands the scope of Topic
718
to include share-based payment transactions for acquiring goods or services from nonemployees. Key improvements from this ASU include clarifying the measurement date to the grant date and eliminating the requirement to reassess classification of such awards upon vesting. Any share-based awards to nonemployees classified as a liability that are
not
settled prior to adoption and any equity classified awards for which a measurement date has
not
been established will require remeasurement through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Upon transition, nonemployee awards are required to be measured at fair value as of the adoption date and must
not
remeasure assets that are completed. The Company has early adopted this ASU beginning
October 1, 2018.
This ASU did
not
have a material impact the Company's financial statements.
v3.19.1
Note 2 - Earnings Per Share (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
   
Year Ended December 31,
 
   
2018
   
 
2017*
 
Net income (loss)
  $
1,058
    $
(186
)
Basic potential common shares
               
Weighted average shares outstanding
   
6,617,507
     
6,612,500
 
Weighted average unallocated Employee Stock Ownership Plan Shares
   
(249,783
)    
(257,245
)
Basic weighted average shares outstanding
   
6,367,724
     
6,355,255
 
Dilutive potential common shares
   
-
     
-
 
Diluted weighted average shares outstanding
   
6,367,724
     
6,355,255
 
                 
Basic earnings (loss) per share
  $
0.17
    $
(0.03
)
Diluted earnings (loss) per share
  $
0.17
    $
(0.03
)
v3.19.1
Note 4 - Available for Sale Securities (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Available-for-sale Securities Reconciliation [Table Text Block]
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Estimated
Fair Value
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of the US government and US government sponsored agencies
  $
1,299
    $
8
    $
-
    $
1,307
 
Obligations of states and political subdivisions
   
8,381
     
17
     
(103
)    
8,295
 
Mortgage-backed securities
   
29,164
     
24
     
(652
)    
28,536
 
Certificates of deposit
   
1,500
     
1
     
(55
)    
1,446
 
Corporate debt securities
   
4,220
     
2
     
(55
)    
4,167
 
Total available for sale securities
  $
44,564
    $
52
    $
(865
)   $
43,751
 
                                 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of the US government and US government sponsored agencies
  $
2,211
    $
11
    $
(2
)   $
2,220
 
Obligations of states and political subdivisions
   
13,102
     
104
     
(69
)    
13,137
 
Mortgage-backed securities
   
33,908
     
14
     
(455
)    
33,467
 
Certificates of deposit
   
4,000
     
6
     
(9
)    
3,997
 
Corporate debt securities
   
5,171
     
29
     
(9
)    
5,191
 
Total available for sale securities
  $
58,392
    $
164
    $
(544
)   $
58,012
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Table Text Block]
   
Less Than 12 Months
   
12 Months or More
   
Total
 
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of the US government and US government sponsored agencies
  $
175
    $
-
    $
113
    $
-
    $
288
    $
-
 
Obligations of states and political subdivisions
   
-
     
-
     
6,142
     
(103
)    
6,142
     
(103
)
Mortgage-backed securities
   
1,171
     
(24
)    
24,725
     
(628
)    
25,896
     
(652
)
Certificates of deposit
   
-
     
-
     
1,195
     
(55
)    
1,195
     
(55
)
Corporate debt securities
   
384
     
(2
)    
3,128
     
(53
)    
3,512
     
(55
)
Total
  $
1,730
    $
(26
)   $
35,303
    $
(839
)   $
37,033
    $
(865
)
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of the US government and US government sponsored agencies
  $
235
    $
(2
)   $
-
    $
-
    $
235
    $
(2
)
Obligations of states and political subdivisions
   
3,180
     
(23
)    
2,660
     
(46
)    
5,840
     
(69
)
Mortgage-backed securities
   
22,685
     
(213
)    
9,270
     
(242
)    
31,955
     
(455
)
Certificates of deposit
   
2,492
     
(9
)    
-
     
-
     
2,492
     
(9
)
Corporate debt securities
   
2,683
     
(8
)    
250
     
(1
)    
2,933
     
(9
)
Total
  $
31,275
    $
(255
)   $
12,180
    $
(289
)   $
43,455
    $
(544
)
Investments Classified by Contractual Maturity Date [Table Text Block]
   
December 31, 2018
 
   
Amortized Cost
   
Fair Value
 
Due in one year or less
  $
2,642
    $
2,632
 
Due after one year through 5 years
   
3,282
     
3,238
 
Due after 5 years through 10 years
   
4,888
     
4,818
 
Due after 10 years
   
4,588
     
4,527
 
Subtotal
  $
15,400
    $
15,215
 
Mortgage-backed securities
   
29,164
     
28,536
 
Total
  $
44,564
    $
43,751
 
Schedule of Realized Gain (Loss) [Table Text Block]
   
Years ended December 31,
 
   
2018
   
2017
 
Proceeds from sale of securities
  $
12,874
    $
6,856
 
Gross gains
   
35
     
86
 
Gross losses
   
(239
)    
(66
)
v3.19.1
Note 5 - Loans (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]
   
December 31,
   
December 31,
 
   
2018
   
2017
 
Commercial
               
Development
  $
7,801
    $
1,498
 
Real estate
   
69,425
     
53,202
 
Commercial and industrial
   
13,142
     
10,135
 
Residential real estate and consumer
               
1-4 family owner-occupied
   
41,018
     
41,446
 
1-4 family investor-owned
   
32,312
     
33,658
 
Multifamily
   
34,467
     
31,677
 
Consumer
   
2,733
     
1,613
 
Subtotal
  $
200,898
    $
173,229
 
Deferred loan fees
   
(86
)    
(74
)
Allowance for loan losses
   
(2,118
)    
(1,800
)
Net loans
  $
198,694
    $
171,355
 
Allowance for Credit Losses on Financing Receivables [Table Text Block]
   
Commercial
   
Residential real estate
and consumer
   
Total
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
  $
660
    $
1,140
    $
1,800
 
Provision for loan losses
   
304
     
209
     
513
 
Loans charged off
   
(24
)    
(172
)    
(196
)
Recoveries of loans previously charged off
   
-
     
1
     
1
 
Total ending allowance balance
  $
940
    $
1,178
    $
2,118
 
                         
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
  $
348
    $
1,130
    $
1,478
 
Provision for loan losses
   
312
     
107
     
419
 
Loans charged off
   
-
     
(133
)    
(133
)
Recoveries of loans previously charged off
   
-
     
36
     
36
 
Total ending allowance balance
  $
660
    $
1,140
    $
1,800
 
December 31, 2018
 
Commercial
   
Residential real
estate and consumer
   
Total
 
Loans:
                       
Individually evaluated for impairment
  $
87
    $
1,469
    $
1,556
 
Collectively evaluated for impairment
   
90,281
     
109,061
     
199,342
 
Total loans
  $
90,368
    $
110,530
    $
200,898
 
                         
Allowance for loan losses:
                       
Individually evaluated for impairment
  $
-
     
-
    $
-
 
Collectively evaluated for impairment
   
940
     
1,178
     
2,118
 
Total allowance for loan losses
  $
940
    $
1,178
    $
2,118
 
December 31, 2017
 
Commercial
   
Residential real
estate and consumer
   
Total
 
Loans:
                       
Individually evaluated for impairment
  $
192
    $
2,112
    $
2,304
 
Collectively evaluated for impairment
   
64,643
     
106,282
     
170,925
 
Total loans
  $
64,835
    $
108,394
    $
173,229
 
                         
Allowance for loan losses:
                       
Individually evaluated for impairment
  $
-
     
179
    $
179
 
Collectively evaluated for impairment
   
660
     
961
     
1,621
 
Total allowance for loan losses
  $
660
    $
1,140
    $
1,800
 
Impaired Financing Receivables [Table Text Block]
As of December 31, 2018
 
Principal
Balance
   
Recorded
Investment
   
Related
Allowance
   
Average
Investment
   
Interest
Recognized
 
Loans with no related allowance for loan losses:
                                       
Commercial
                                       
Commercial and industrial
  $
89
    $
87
    $
-
    $
93
    $
5
 
Residential real estate and consumer
                                       
1-4 family owner-occupied
   
1,142
     
1,120
     
-
     
1,137
     
26
 
1-4 family investor-owned
   
248
     
241
     
-
     
246
     
-
 
Consumer
   
114
     
108
     
-
     
114
     
-
 
                                         
Total impaired loans
  $
1,593
    $
1,556
    $
-
    $
1,590
    $
31
 
As of December 31, 2017
 
Principal
Balance
   
Recorded
Investment
   
Related
Allowance
   
Average
Investment
   
Interest
Recognized
 
Loans with related allowance for loan losses:
                                       
Residential real estate and consumer
                                       
1-4 family investor-owned
  $
375
    $
330
    $
179
    $
312
    $
8
 
                                         
Loans with no related allowance for loan losses:
                                       
Commercial
                                       
Commercial and industrial
   
198
     
192
     
-
     
204
     
-
 
Residential real estate and consumer
                                       
1-4 family owner-occupied
   
1,158
     
1,099
     
-
     
1,443
     
1
 
1-4 family investor-owned
   
716
     
683
     
-
     
1,289
     
24
 
                                         
Total loans with no related allowance
   
2,072
     
1,974
     
-
     
2,936
     
25
 
                                         
Total impaired loans
  $
2,447
    $
2,304
    $
179
    $
3,248
    $
33
 
Financing Receivable Credit Quality Indicators [Table Text Block]
   
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Totals
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development
  $
7,801
    $
-
    $
-
    $
-
    $
7,801
 
Real estate
   
69,425
     
-
     
-
     
-
     
69,425
 
Commercial and industrial
   
13,122
     
-
     
20
     
-
     
13,142
 
1-4 family investor-owned
   
30,558
     
1,353
     
401
     
-
     
32,312
 
Multifamily
   
34,467
     
-
     
-
     
-
     
34,467
 
Totals
  $
155,373
    $
1,353
    $
421
    $
-
    $
157,147
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development
  $
1,498
    $
-
    $
-
    $
-
    $
1,498
 
Real estate
   
51,939
     
1,263
     
-
     
-
     
53,202
 
Commercial and industrial
   
9,435
     
586
     
114
     
-
     
10,135
 
1-4 family investor-owned
   
31,964
     
1,449
     
149
     
96
     
33,658
 
Multifamily
   
31,677
     
-
     
-
     
-
     
31,677
 
Totals
  $
126,513
    $
3,298
    $
263
    $
96
    $
130,170
 
   
Performing
   
Non-performing
   
Totals
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family owner-occupied
   
39,919
     
1,099
     
41,018
 
Consumer
   
2,625
     
108
     
2,733
 
Total   $
42,544
    $
1,207
    $
43,751
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family owner-occupied
   
40,347
     
1,099
     
41,446
 
Consumer
   
1,613
     
-
     
1,613
 
Total   $
41,960
    $
1,099
    $
43,059
 
Past Due Financing Receivables [Table Text Block]
           
Loans Past Due
   
Loans Past Due
           
Nonaccrual
 
December 31, 2018
 
Current Loans
   
30-89 Days
   
90+ Days
   
Total Loans
   
Loans
 
Commercial
                                       
Development
  $
7,801
    $
-
    $
-
    $
7,801
    $
-
 
Real estate
   
69,425
     
-
     
-
     
69,425
     
-
 
Commercial and industrial
   
13,076
     
66
     
-
     
13,142
     
20
 
Residential real estate and consumer
                                       
1-4 family owner-occupied
   
41,013
     
5
     
-
     
41,018
     
365
 
1-4 family investor-owned
   
32,069
     
243
     
-
     
32,312
     
241
 
Multifamily
   
34,467
     
-
     
-
     
34,467
     
-
 
Consumer
   
2,733
     
-
     
-
     
2,733
     
94
 
Total
  $
200,584
    $
314
    $
-
    $
200,898
    $
720
 
                                         
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
                                       
Development
  $
1,498
    $
-
    $
-
    $
1,498
    $
-
 
Real estate
   
53,202
     
-
     
-
     
53,202
     
-
 
Commercial and industrial
   
9,946
     
75
     
114
     
10,135
     
114
 
Residential real estate and consumer
                                       
1-4 family owner-occupied
   
40,941
     
436
     
69
     
41,446
     
580
 
1-4 family investor-owned
   
33,209
     
205
     
244
     
33,658
     
549
 
Multifamily
   
31,677
     
-
     
-
     
31,677
     
-
 
Consumer
   
1,607
     
6
     
-
     
1,613
     
-
 
Total
  $
172,080
    $
722
    $
427
    $
173,229
    $
1,243
 
Schedule of Financing Receivables, Non Accrual Status [Table Text Block]
As of
December 31
 
2018
   
2017
 
Nonaccrual loans, other than troubled debt restructurings
  $
20
    $
274
 
Nonaccrual loans, troubled debt restructurings
   
700
     
969
 
Total nonaccrual loans
   
720
     
1,243
 
Restructured loans, accruing
  $
501
    $
661
 
Troubled Debt Restructurings on Financing Receivables [Table Text Block]
   
Number of
Modifications
   
Pre-Modification
Investment
   
Post-
Modification
Investment
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate and consumer:
                       
1-4 family owner-occupied
   
2
    $
302
    $
302
 
1-4 family investor-owned
   
1
     
250
     
250
 
Consumer
   
1
     
20
     
20
 
     
4
    $
572
    $
572
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
                       
Commercial and industrial
   
1
    $
88
    $
88
 
     
1
    $
88
    $
88
 
Schedule of Carrying Value of All Purchased Loans [Table Text Block] <div style="display: inline; font-family: times new roman; font-size: 10pt"><table border="0" cellpadding="0" cellspacing="0" style="; text-indent: 0px; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-right: 5%; margin-left: 18pt; min-; min-width: 700px;"> <tr style="vertical-align: bottom;"> <td colspan="1" style="width: 52%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="6" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> <div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Contractually Required Payments Receivable</div> </td> <td style="padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom;"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;">As of December 31, 2018</div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Credit Impaired</div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Non-Credit Impaired</div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Carrying Value of</div> <div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Purchased Loans</div> </td> <td style="padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Commercial</div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Real estate</div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">7,687</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">7,673</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Residential real estate and consumer</div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">1-4 family owner-occupied</div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">5,075</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">5,014</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">1-4 family investor-owned</div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">9,269</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">9,164</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Multifamily</div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">3,953</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">3,943</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Consumer</div> </td> <td style="width: 1%; padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Totals</div> </td> <td style="width: 1%; padding-bottom: 3px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">25,984</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">25,794</div></td> <td nowrap="nowrap" style="width: 1%; padding-bottom: 3px; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> </table></div><div style="display: inline; font-family: times new roman; font-size: 10pt"><table border="0" cellpadding="0" cellspacing="0" style="; text-indent: 0px; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-right: 5%; margin-left: 18pt; min-; min-width: 700px;"> <tr style="vertical-align: bottom;"> <td colspan="1" style="width: 52%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="6" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> <div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Contractually Required Payments Receivable</div> </td> <td style="padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom;"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;">As of December 31, 2017</div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Credit Impaired</div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Non-Credit Impaired</div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Carrying Value of</div> <div style=" margin: 0pt; text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Purchased Loans</div> </td> <td style="padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Commercial</div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Real estate</div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">8,444</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">8,380</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Residential real estate and consumer</div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">1-4 family owner-occupied</div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">146</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">6,709</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">6,753</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">1-4 family investor-owned</div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">149</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">10,558</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">10,591</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Multifamily</div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">5,425</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">5,372</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Consumer</div> </td> <td style="width: 1%; padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"> </td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 1px; border-bottom-style: solid;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">-</div></td> <td nowrap="nowrap" style="width: 1%; padding-bottom: 1px; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td colspan="1" style="width: 52%; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" margin: 0pt 0pt 0pt 27pt; text-align: left; font-family: "Times New Roman", Times, serif; font-size: 10pt;">Totals</div> </td> <td style="width: 1%; padding-bottom: 3px; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">295</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">31,136</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;">$</td> <td style="width: 13%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom-color: rgb(0, 0, 0); border-bottom-width: 3px; border-bottom-style: double;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">31,096</div></td> <td nowrap="nowrap" style="width: 1%; padding-bottom: 3px; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> </table></div>
Schedule of Carrying Amount of Accretable Yield for Purchased Loans [Table Text Block]
   
For years ended December 31,
 
   
2018
   
2017
 
                 
Beginning Balance
  $
334
    $
739
 
Additions
   
-
     
-
 
Accretion
   
(144
)    
(405
)
Ending Balance
  $
190
    $
334
 
v3.19.1
Note 6 - Premises and Equipment (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Property, Plant and Equipment [Table Text Block]
   
December 31,
 
   
2018
   
2017
 
                 
Land
  $
479
    $
479
 
Buildings
   
4,929
     
4,919
 
Leasehold improvements
   
153
     
153
 
Furniture and equipment
   
1,332
     
1,233
 
                 
Totals
   
6,893
     
6,784
 
                 
Less: Accumulated depreciation
   
1,836
     
1,494
 
                 
Premises and equipment, net
  $
5,057
    $
5,290
 
Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]
2019
  $
167
 
2020
   
153
 
2021
   
144
 
2022
   
146
 
2023
   
148
 
Thereafter
   
575
 
Total   $
1,333
 
Lessor, Operating Lease, Payments to be Received, Maturity [Table Text Block]
2019
  $
97
 
2020
   
99
 
2021
   
101
 
2022
   
103
 
2023
   
106
 
Thereafter
   
44
 
Total   $
550
 
v3.19.1
Note 7 - Deposits (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Deposit Liabilities, Type [Table Text Block]
   
At December 31,
 
   
2018
   
2017
 
                 
Non-interest bearing checking
  $
22,763
    $
22,271
 
Interest bearing checking
   
5,424
     
4,017
 
Money market
   
41,910
     
54,472
 
Statement savings accounts
   
13,773
     
14,030
 
Health savings accounts
   
11,197
     
11,335
 
Certificates of deposit
   
88,138
     
76,788
 
Total
  $
183,205
    $
182,913
 
Time Deposit Maturities [Table Text Block]
2019
  $
62,303
 
2020
   
16,570
 
2021
   
5,391
 
2022
   
1,910
 
2023
   
1,964
 
         
Total
  $
88,138
 
v3.19.1
Note 8 - FHLB Advances (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Federal Home Loan Bank, Advances, by Branch of FHLB Bank [Table Text Block]
   
2018
   
2017
 
   
Rates
   
Amount
   
Rates
   
Amount
 
                                       
Fixed rate, fixed term advances
 
1.42%
-
2.70%
    $
11,750
     
1.42%
-
 1.92%
    $
4,750
 
Fixed term advances with floating spread
 
1.54%
-
 2.05%
     
6,000
     
1.39%
-
 1.96%
     
8,000
 
                                       
Total
 
 
 
 
    $
17,750
     
 
 
 
    $
12,750
 
Schedule of Federal Home Loan Bank Advances, Maturities Summary [Table Text Block]
   
Fixed Rate Advances
   
Adjustable Rate Advances
         
   
Weighted
Average Rate
   
Amount
   
Weighted
Average Rate
   
Amount
   
Total
Amount
 
2019
   
2.21
%   $
5,750
     
1.54
%   $
2,000
    $
7,750
 
2020
   
2.34
%    
6,000
     
1.69
%    
2,000
     
8,000
 
2021
   
 
     
-
     
2.05
%    
2,000
     
2,000
 
                                         
Total
   
2.28
%   $
11,750
     
1.76
%   $
6,000
    $
17,750
 
v3.19.1
Note 10 - Income Taxes (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]
   
Years ended December 31,
 
   
2018
   
2017
 
Current Taxes (Benefit)
               
Federal
  $
114
    $
192
 
State
   
83
     
76
 
Total Current Taxes    
197
     
268
 
Deferred Income Taxes
               
Federal
   
107
     
(311
)
State
   
14
     
(46
)
Total Deferred Income Taxes    
121
     
(357
)
                 
Impact of Deferred Tax Asset Restatement
   
-
     
353
 
                 
Total Provision for Income Taxes
  $
318
    $
264
 
Schedule of Deferred Tax Assets and Liabilities [Table Text Block]
   
As of December 31,
 
 
 
2018
   
2017
 
Deferred Tax Assets                
Allowance for loan losses
  $
577
    $
490
 
Deferred compensation
   
121
     
120
 
Non-accrual interest
   
18
     
30
 
Purchase accounting
   
18
     
17
 
Equity compensation
   
4
     
-
 
AMT credit
   
-
     
108
 
Unrealized loss on available for sale securities
   
219
     
133
 
Charitable contribution carryforward
   
191
     
235
 
Other
   
10
     
11
 
Deferred Tax Assets
  $
1,158
    $
1,144
 
                 
Deferred Tax Liabilities
               
Depreciation and amortization
   
(73
)    
(17
)
FHLB stock
   
(30
)    
(30
)
Other
   
-
     
(7
)
Deferred Tax Liabilities
  $
(103
)   $
(54
)
                 
Net Deferred Tax Asset
  $
1,055
    $
1,090
 
Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]
   
Years ended December 31,
 
   
2018
   
2017
 
 
 
Amount
   
% of Pretax
Income
   
Amount
   
% of Pretax
Income
 
Reconciliation of statutory to effective rates                                
Federal income taxes at statutory rate
  $
289
     
21.00
%   $
27
     
34.00
%
Adjustments for
                               
Tax exempt interest on municipal obligations
   
(10
)    
-0.73
%    
(45
)    
-57.69
%
State income taxes, net of federal income tax benefit
   
75
     
5.45
%    
20
     
25.64
%
Increase in CSV of life insurance
   
(41
)    
-2.98
%    
(67
)    
-85.90
%
Other
   
5
     
0.36
%    
(24
)    
-30.77
%
Valuation of deferred tax asset
   
-
     
0.00
%    
353
     
452.56
%
Provision for income taxes
  $
318
     
23.11
%   $
264
     
337.84
%
v3.19.1
Note 11 - Commitments and Contingencies (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Loss Contingencies by Contingency [Table Text Block]
   
Notional Amount
 
   
2018
   
2017
 
Unused lines of credit
               
Fixed
   
7,467
     
4,497
 
Variable
   
11,307
     
10,807
 
Undisbursed portion of loan proceeds, fixed
   
5,890
     
6,002
 
Standby letters of credit, variable
   
1,277
     
822
 
v3.19.1
Note 13 - Related-party Transactions (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Related Party Transactions [Table Text Block]
   
Years ended December 31,
 
   
2018
   
2017
 
                 
Beginning balance
  $
6,697
    $
2,853
 
Adjustments for changes in directors and executive officers
   
-
     
-
 
New loans
   
2,121
     
9,976
 
Less: Participations sold
   
(310
)    
(5,913
)
Repayments
   
(1,683
)    
(219
)
                 
Ending balance
  $
6,825
    $
6,697
 
v3.19.1
Note 15 - Fair Value (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]
   
Recurring Fair Value Measurements Using
         
   
Quoted Prices in Active Markets for Identical Instruments
   
Significant Other Observable Inputs
   
Significant Unobservable Inputs
         
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
                                 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
                               
Available for sale securities:
                               
Obligations of the US government and US government sponsored agencies
  $
-
    $
1,307
    $
-
    $
1,307
 
Obligations of states and political subdivisions
   
-
     
8,295
     
-
     
8,295
 
Mortgage-backed securities
   
-
     
28,536
     
-
     
28,536
 
Certificates of deposit
   
-
     
1,446
     
-
     
1,446
 
Corporate debt securities
   
-
     
4,167
     
-
     
4,167
 
Total
  $
-
    $
43,751
    $
-
    $
43,751
 
                                 
As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
                               
Available for sale securities:
                               
Obligations of the US government and US government sponsored agencies
  $
-
    $
2,220
    $
-
    $
2,220
 
Obligations of states and political subdivisions
   
-
     
13,137
     
-
     
13,137
 
Mortgage-backed securities
   
-
     
33,467
     
-
     
33,467
 
Certificates of deposit
   
-
     
3,997
     
-
     
3,997
 
Corporate debt securities
   
-
     
5,191
     
-
     
5,191
 
Total
  $
-
    $
58,012
    $
-
    $
58,012
 
Fair Value Measurements, Nonrecurring [Table Text Block]
   
Nonrecurring Fair Value Measurements Using
         
   
Quoted Prices in
Active Markets for
Identical Instruments
   
Significant Other
Observable Inputs
   
Significant
Unobservable Inputs
         
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
                                 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
                               
Foreclosed assets
  $
-
    $
-
    $
69
    $
69
 
                                 
As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
                               
Loans
  $
-
    $
-
    $
151
    $
151
 
Foreclosed assets
   
-
     
-
     
619
     
619
 
Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]
   
Fair Value
 
Valuation Technique
 
Unobservable Input(s)
 
Range/Weighted
Average
 
As of December 31, 2018
 
 
 
 
           
 
 
Foreclosed assets
  $
69
 
Market and/or income approach
 
Management discount on appraised values
 
10%
-
20%
 
                         
As of December 31, 2017
 
 
 
 
           
 
 
Impaired loans
  $
151
 
Market and/or income approach
 
Management discount on appraised values
 
10%
-
20%
 
Foreclosed assets
  $
619
 
Market and/or income approach
 
Management discount on appraised values
 
10%
-
20%
 
Fair Value, by Balance Sheet Grouping [Table Text Block]
   
December 31, 2018
 
   
Carrying Value
   
Level 1
   
Level 2
   
Level 3
 
Financial assets:
                               
Cash and cash equivalents
  $
4,488
    $
4,488
    $
-
    $
-
 
Available for sale securities
   
43,751
     
-
     
43,751
     
-
 
Loans held for sale
   
679
     
-
     
679
     
 
 
Loans
   
198,694
     
-
     
-
     
199,048
 
Accrued interest receivable
   
768
     
768
     
-
     
-
 
Cash value of life insurance
   
7,007
     
-
     
-
     
7,007
 
FHLB stock
   
739
     
-
     
-
     
739
 
                                 
Financial liabilities:
                               
Deposits
   
183,205
     
95,067
     
-
     
87,531
 
Advance payments by borrowers for taxes and insurance
   
55
     
55
     
-
     
-
 
FHLB advances
   
17,750
     
-
     
-
     
17,505
 
Accrued interest payable
   
70
     
70
     
-
     
-
 
   
December 31, 2017
 
   
Carrying Value
   
Level 1
   
Level 2
   
Level 3
 
Financial assets:
                               
Cash and cash equivalents
  $
11,813
    $
11,813
    $
-
    $
-
 
Available for sale securities
   
58,012
     
-
     
58,012
     
-
 
Loans held for sale
   
109
     
-
     
109
     
-
 
Loans
   
171,355
     
-
     
-
     
171,729
 
Accrued interest receivable
   
782
     
782
     
-
     
-
 
Cash value of life insurance
   
6,558
     
-
     
-
     
6,558
 
FHLB stock
   
514
     
-
     
-
     
514
 
                                 
Financial liabilities:
                               
Deposits
   
182,913
     
106,125
     
-
     
76,099
 
Advance payments by borrowers for taxes and insurance
   
36
     
36
     
-
     
-
 
FHLB advances
   
12,750
     
-
     
-
     
12,597
 
Accrued interest payable
   
37
     
37
     
-
     
-
 
v3.19.1
Note 16 - Equity and Regulatory Matters (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]
   
Actual
   
For Capital Adequacy
   
To Be Well Capitalized
 
                    Purposes    
Under Prompt Corrective Action Provisions
 
 
 
Amount
   
Ratio
   
Amount
   
Ratio
   
Amount
   
Ratio
 
December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Federal Bank of Wisconsin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leverage (Tier 1)
  $
48,502
     
18.4
%   $
10,542
     
4.0
%   $
13,178
     
5.0
%
Risk Based:
                                               
Common Tier 1
   
48,502
     
23.7
     
9,209
     
4.5
     
13,302
     
6.5
 
Tier 1
   
48,502
     
23.7
     
12,279
     
6.0
     
16,372
     
8.0
 
Total
   
50,620
     
24.7
     
16,372
     
8.0
     
20,465
     
10.0
 
                                                 
December 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Federal Bank of Wisconsin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leverage (Tier 1)
  $
47,513
     
17.2
%   $
11,051
     
4.0
%   $
13,813
     
5.0
%
Risk Based:
                                               
Common Tier 1
   
47,513
     
26.8
     
7,973
     
4.5
     
11,517
     
6.5
 
Tier 1
   
47,513
     
26.8
     
10,631
     
6.0
     
14,174
     
8.0
 
Total
   
49,313
     
27.8
     
14,174
     
8.0
     
17,718
     
10.0
 
v3.19.1
Note 17 - Intangible Assets (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]
   
As of December 31, 2018
 
2019
   
16
 
2020
   
16
 
2021
   
16
 
2022
   
16
 
2023
   
16
 
v3.19.1
Note 19 - Employee Stock Ownership Plan (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Employee Stock Ownership Plan (ESOP) Disclosures [Table Text Block]
   
2018
   
2017
 
Shares allocated to active participants
   
2,947
     
-
 
Shares committed to be released and allocated to participants
   
12,960
     
2,947
 
Total unallocated shares
   
243,303
     
256,263
 
Total ESOP shares
   
259,210
     
259,210
 
Fair value of unallocated shares (based on $10.03 and $11.02 share price as of December 31, 2018 and 2017, respectively)
  $
2,440
    $
2,824
 
v3.19.1
Note 20 - Share-based Compensation Plans (Tables)
12 Months Ended
Dec. 31, 2018
Notes Tables  
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]
   
Year Ended
December 31, 2018
 
Total cost of stock grant plan during the year
  $
11
 
Total cost of stock option plan during the year
   
7
 
Total cost of share-based payment plans during the year
  $
18
 
         
Amount of related income tax benefit recognized in income
  $
5
 
Share-based Compensation, Stock Options, Activity [Table Text Block]
   
Number of Options
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Term (in years)
   
Aggregate
Intrinsic Value
 
Options outstanding as of December 31, 2017
   
-
    $
-
     
 
     
 
 
Granted
   
192,089
     
10.81
     
 
     
 
 
Exercised
   
-
     
-
     
 
     
 
 
Expired or canceled
   
-
     
-
     
 
     
 
 
Forfeited
   
-
     
-
     
 
     
 
 
Options outstanding as of December 31, 2018
   
192,089
    $
10.81
     
9.95
    $
-
 
Options exercisable as of December 31, 2018
   
-
    $
-
     
-
    $
-
 
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
   
For the Year Ended December 31,
 
   
2018
 
Risk-free interest rate
   
2.80
%
Expected volatility
   
21.21
%
Expected dividend yield
   
0
%
Expected life of options (years)
   
7.5
 
Weighted average fair value per option of options granted during the year
  $
3.40
 
Nonvested Restricted Stock Shares Activity [Table Text Block]
   
Number of Shares
   
Weighted Average
Grant Date Fair Value
 
Shares outstanding as of December 31, 2017
   
-
    $
-
 
Granted
   
84,242
     
10.82
 
Vested
   
-
     
-
 
Forfeited
   
-
     
-
 
Shares outstanding as of December 31, 2018
   
84,242
    $
10.82
 
v3.19.1
Note 1 - Summary of Significant Accounting Policies (Details Textual) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Jan. 25, 2019
Oct. 10, 2017
Dec. 31, 2018
Dec. 31, 2017
Stock Issued During Period, Shares, New Issues   2,950,625    
Sale of Stock, Price Per Share   $ 10    
Payments of Stock Issuance Costs   $ 1,394    
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense, Total     $ 0 $ 0
Income Tax Expense (Benefit), Total     318 264
Subsequent Event [Member]        
Stock Repurchase Program, Percentage of Shares Authorized to be Repurchased 5.00%      
Reclassification out of Accumulated Other Comprehensive Income [Member] | Net Gain on Sale of Securities [Member]        
Income Tax Expense (Benefit), Total     $ 56 $ 5
FFBW Community Foundation [Member]        
Stock Issued During Period, Shares, New Issues   25,000    
Percentage of Common Stock Outstanding to Bank Eligible Members   45.00%    
Percentage of Common Stock Subscribe to Adopt Employee Stock Ownership Plan   3.92%    
FFBW, MHC [Member]        
Stock Issued During Period, Shares, New Issues   3,636,875    
Percentage of Common Stock Outstanding Upon Completion of Reorganization and Stock Issuance   55.00%    
v3.19.1
Note 2 - Earnings Per Share - Earnings Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Net income (loss) $ 1,058 $ (186) [1]
Weighted average shares outstanding (in shares) 6,617,507 6,612,500 [1]
Weighted average unallocated Employee Stock Ownership Plan Shares (in shares) (249,783) (257,245) [1]
Basic weighted average shares outstanding (in shares) 6,367,724 6,355,255 [1]
Dilutive potential common shares (in shares) [1]
Diluted weighted average shares outstanding (in shares) 6,367,724 6,355,255
Basic earnings (loss) per share (in dollars per share) $ 0.17 $ (0.03) [1]
Diluted earnings (loss) per share (in dollars per share) $ 0.17 $ (0.03) [1]
[1] Loss per shares for the year ended December 31, 2017, includes income attributed to the period prior to the initial public offering for the common shares issued.
v3.19.1
Note 3 - Cash and Due from Banks (Details Textual) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Amount of Required Reserve Balance with Federal Reserve Bank $ 0 $ 0
v3.19.1
Note 4 - Available for Sale Securities (Details Textual)
$ in Thousands
12 Months Ended
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year 79 27
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year 6 73
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities, Total $ 0 $ 0
Security Owned and Pledged as Collateral, Fair Value, Total $ 960 $ 0
v3.19.1
Note 4 - Available for Sale Securities - Amortized Cost and Fair Value (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Amortized cost $ 44,564 $ 58,392
Gross unrealized gains 52 164
Gross unrealized losses (865) (544)
Estimated fair value 43,751 58,012
US Government Corporations and Agencies Securities [Member]    
Amortized cost 1,299 2,211
Gross unrealized gains 8 11
Gross unrealized losses (2)
Estimated fair value 1,307 2,220
US States and Political Subdivisions Debt Securities [Member]    
Amortized cost 8,381 13,102
Gross unrealized gains 17 104
Gross unrealized losses (103) (69)
Estimated fair value 8,295 13,137
Collateralized Mortgage Backed Securities [Member]    
Amortized cost 29,164 33,908
Gross unrealized gains 24 14
Gross unrealized losses (652) (455)
Estimated fair value 28,536 33,467
Certificates of Deposit [Member]    
Amortized cost 1,500 4,000
Gross unrealized gains 1 6
Gross unrealized losses (55) (9)
Estimated fair value 1,446 3,997
Corporate Debt Securities [Member]    
Amortized cost 4,220 5,171
Gross unrealized gains 2 29
Gross unrealized losses (55) (9)
Estimated fair value $ 4,167 $ 5,191
v3.19.1
Note 4 - Available for Sale Securities - Continuous Unrealized Loss Position (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Less Than 12 Months Fair Value $ 1,730 $ 31,275
Less Than 12 Months Unrealized Losses (26) (255)
12 Months or More Fair Value 35,303 12,180
12 Months or More Unrealized Losses (839) (289)
Total Fair Value 37,033 43,455
Total Unrealized Losses (865) (544)
US Government Corporations and Agencies Securities [Member]    
Less Than 12 Months Fair Value 175 235
Less Than 12 Months Unrealized Losses (2)
12 Months or More Fair Value 113
12 Months or More Unrealized Losses
Total Fair Value 288 235
Total Unrealized Losses (2)
US States and Political Subdivisions Debt Securities [Member]    
Less Than 12 Months Fair Value 3,180
Less Than 12 Months Unrealized Losses (23)
12 Months or More Fair Value 6,142 2,660
12 Months or More Unrealized Losses (103) (46)
Total Fair Value 6,142 5,840
Total Unrealized Losses (103) (69)
Collateralized Mortgage Backed Securities [Member]    
Less Than 12 Months Fair Value 1,171 22,685
Less Than 12 Months Unrealized Losses (24) (213)
12 Months or More Fair Value 24,725 9,270
12 Months or More Unrealized Losses (628) (242)
Total Fair Value 25,896 31,955
Total Unrealized Losses (652) (455)
Certificates of Deposit [Member]    
Less Than 12 Months Fair Value 2,492
Less Than 12 Months Unrealized Losses (9)
12 Months or More Fair Value 1,195
12 Months or More Unrealized Losses (55)
Total Fair Value 1,195 2,492
Total Unrealized Losses (55) (9)
Corporate Debt Securities [Member]    
Less Than 12 Months Fair Value 384 2,683
Less Than 12 Months Unrealized Losses (2) (8)
12 Months or More Fair Value 3,128 250
12 Months or More Unrealized Losses (53) (1)
Total Fair Value 3,512 2,933
Total Unrealized Losses $ (55) $ (9)
v3.19.1
Note 4 - Available for Sale Securities - Contractual Maturity (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Due in one year or less, amortized cost $ 2,642  
Due in one year or less, fair value 2,632  
Due after one year through 5 years, amortized cost 3,282  
Due after one year through 5 years, fair value 3,238  
Due after 5 years through 10 years, amortized cost 4,888  
Due after 5 years through 10 years, fair value 4,818  
Due after 10 years, amortized cost 4,588  
Due after 10 years, fair value 4,527  
Subtotal, amortized cost 15,400  
Subtotal, fair value 15,215  
Amortized cost 44,564 $ 58,392
Estimated fair value 43,751 58,012
Collateralized Mortgage Backed Securities [Member]    
Amortized cost 29,164 33,908
Estimated fair value $ 28,536 $ 33,467
v3.19.1
Note 4 - Available for Sale Securities - Gain (Loss) From Securities Available for Sale (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Proceeds from sale of securities $ 12,874 $ 6,856
Gross gains 35 86
Gross losses $ (239) $ (66)
v3.19.1
Note 5 - Loans (Details Textual)
12 Months Ended
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Dec. 31, 2016
USD ($)
Deposit Liabilities Reclassified as Loans Receivable $ 7,000 $ 2,000  
Loans and Leases Receivable, Commitments to Purchase or Sell 0 $ 50,000  
Loans and Leases Receivable, Impaired Commitment, Number of Contracts   1  
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing 0 $ 0  
Financing Receivable Modifications Specific Reserves $ 0 0  
Financing Receivable, Modifications, Subsequent Default, Number of Contracts 0    
Loans and Leases Receivable, Allowance, Ending Balance $ 2,118,000 1,800,000 $ 1,478,000
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net 25,794,000 31,096,000  
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Allowance for Loan Losses 190,000 334,000  
Financial Asset Acquired with Credit Deterioration [Member]      
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Outstanding Balance, Total 0 295,000  
Financial Asset Acquired and No Credit Deterioration [Member]      
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Outstanding Balance, Total 25,984,000 31,136,000  
Residential Real Estate and Consumer [Member]      
Loans and Leases Receivable, Allowance, Ending Balance 1,178,000 $ 1,140,000 $ 1,130,000
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member]      
Financing Receivable, Modifications, Subsequent Default, Number of Contracts   2  
Financing Receivable, Modifications, Subsequent Default, Recorded Investment   $ 331,000  
Loans and Leases Receivable, Allowance, Ending Balance   82,000  
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net 9,164,000 10,591,000  
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Financial Asset Acquired with Credit Deterioration [Member]      
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Outstanding Balance, Total 149,000  
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Financial Asset Acquired and No Credit Deterioration [Member]      
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Outstanding Balance, Total $ 9,269,000 $ 10,558,000  
v3.19.1
Note 5 - Loans - Major Classifications of Loans (Details) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Subtotal $ 200,898,000 $ 173,229,000  
Deferred loan fees (86,000) (74,000)  
Allowance for loan losses (2,118,000) (1,800,000) $ (1,478,000)
Net loans 198,694,000 171,355,000  
Commercial Portfolio Segment [Member]      
Subtotal 90,368,000 64,835,000  
Allowance for loan losses (940,000) (660,000) (348,000)
Commercial Portfolio Segment [Member] | Development [Member]      
Subtotal 7,801,000 1,498,000  
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]      
Subtotal 69,425,000 53,202,000  
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]      
Subtotal 13,142,000 10,135,000  
Residential Real Estate and Consumer [Member]      
Subtotal 110,530,000 108,394,000  
Allowance for loan losses (1,178,000) (1,140,000) $ (1,130,000)
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member]      
Subtotal 41,018,000 41,446,000  
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member]      
Subtotal 32,312,000 33,658,000  
Allowance for loan losses   (82,000)  
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member]      
Subtotal 34,467,000 31,677,000  
Residential Real Estate and Consumer [Member] | Consumer [Member]      
Subtotal $ 2,733,000 $ 1,613,000  
v3.19.1
Note 5 - Loans - Allowance for Loan Losses (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Beginning balance $ 1,800 $ 1,478    
Provision for loan losses 513 419    
Loans charged off (196) (133)    
Recoveries of loans previously charged off 1 36    
Total ending allowance balance 2,118 1,800    
Loans, individually evaluated for impairment     $ 1,556 $ 2,304
Loans, collectively evaluated for impairment     199,342 170,925
Total loans     200,898 173,229
Allowance for loan losses, individually evaluated for impairment     179
Allowance for loan losses, collectively evaluated for impairment     2,118 1,621
Total allowance for loan losses 2,118 1,800 2,118 1,800
Commercial Portfolio Segment [Member]        
Beginning balance 660 348    
Provision for loan losses 304 312    
Loans charged off (24)    
Recoveries of loans previously charged off    
Total ending allowance balance 940 660    
Loans, individually evaluated for impairment     87 192
Loans, collectively evaluated for impairment     90,281 64,643
Total loans     90,368 64,835
Allowance for loan losses, individually evaluated for impairment    
Allowance for loan losses, collectively evaluated for impairment     940 660
Total allowance for loan losses 660 660 940 660
Residential Real Estate and Consumer [Member]        
Beginning balance 1,140 1,130    
Provision for loan losses 209 107    
Loans charged off (172) (133)    
Recoveries of loans previously charged off 1 36    
Total ending allowance balance 1,178 1,140    
Loans, individually evaluated for impairment     1,469 2,112
Loans, collectively evaluated for impairment     109,061 106,282
Total loans     110,530 108,394
Allowance for loan losses, individually evaluated for impairment     179
Allowance for loan losses, collectively evaluated for impairment     1,178 961
Total allowance for loan losses $ 1,140 $ 1,140 $ 1,178 $ 1,140
v3.19.1
Note 5 - Loans - Impaired Financing Receivable (Details) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2018
Dec. 31, 2017
Principal balance with no related allowance   $ 2,072
Recorded investment with no related allowance   1,974
Average investment with no related allowance   2,936
Interest recognized with no related allowance   25
Principal balance $ 1,593 2,447
Recorded investment 1,556 2,304
Average investment 1,590 3,248
Interest recognized 31 33
Related allowance   179
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]    
Principal balance with no related allowance 89 198
Recorded investment with no related allowance 87 192
Average investment with no related allowance 93 204
Interest recognized with no related allowance 5
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member]    
Principal balance with no related allowance 248 716
Recorded investment with no related allowance 241 683
Average investment with no related allowance 246 1,289
Interest recognized with no related allowance 24
Principal balance with related allowance   375
Recorded investment with related allowance   330
Related allowance   179
Average investment with related allowance   312
Interest recognized with related allowance   8
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member]    
Principal balance with no related allowance 1,142 1,158
Recorded investment with no related allowance 1,120 1,099
Average investment with no related allowance 1,137 1,443
Interest recognized with no related allowance 26 $ 1
Residential Real Estate and Consumer [Member] | Consumer [Member]    
Principal balance with no related allowance 114  
Recorded investment with no related allowance 108  
Average investment with no related allowance 114  
Interest recognized with no related allowance  
v3.19.1
Note 5 - Loans - Credit Quality Indicators (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Total loans for credit quality indicators $ 157,147 $ 130,170
Pass [Member]    
Total loans for credit quality indicators 155,373 126,513
Special Mention [Member]    
Total loans for credit quality indicators 1,353 3,298
Substandard [Member]    
Total loans for credit quality indicators 421 263
Doubtful [Member]    
Total loans for credit quality indicators 96
Commercial Portfolio Segment [Member] | Development [Member]    
Total loans for credit quality indicators 7,801 1,498
Commercial Portfolio Segment [Member] | Development [Member] | Pass [Member]    
Total loans for credit quality indicators 7,801 1,498
Commercial Portfolio Segment [Member] | Development [Member] | Special Mention [Member]    
Total loans for credit quality indicators
Commercial Portfolio Segment [Member] | Development [Member] | Substandard [Member]    
Total loans for credit quality indicators
Commercial Portfolio Segment [Member] | Development [Member] | Doubtful [Member]    
Total loans for credit quality indicators
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]    
Total loans for credit quality indicators 69,425 53,202
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Pass [Member]    
Total loans for credit quality indicators 69,425 51,939
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Special Mention [Member]    
Total loans for credit quality indicators 1,263
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Substandard [Member]    
Total loans for credit quality indicators
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Doubtful [Member]    
Total loans for credit quality indicators
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]    
Total loans for credit quality indicators 13,142 10,135
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Pass [Member]    
Total loans for credit quality indicators 13,122 9,435
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Special Mention [Member]    
Total loans for credit quality indicators 586
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Substandard [Member]    
Total loans for credit quality indicators 20 114
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Doubtful [Member]    
Total loans for credit quality indicators
Residential Real Estate and Consumer [Member]    
Total loans for credit quality indicators 43,751 43,059
Residential Real Estate and Consumer [Member] | Performing Financial Instruments [Member]    
Total loans for credit quality indicators 42,544 41,960
Residential Real Estate and Consumer [Member] | Nonperforming Financial Instruments [Member]    
Total loans for credit quality indicators 1,207 1,099
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member]    
Total loans for credit quality indicators 41,018 41,446
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member] | Performing Financial Instruments [Member]    
Total loans for credit quality indicators 39,919 40,347
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member] | Nonperforming Financial Instruments [Member]    
Total loans for credit quality indicators 1,099 1,099
Residential Real Estate and Consumer [Member] | Consumer [Member]    
Total loans for credit quality indicators 2,733 1,613
Residential Real Estate and Consumer [Member] | Consumer [Member] | Performing Financial Instruments [Member]    
Total loans for credit quality indicators 2,625 1,613
Residential Real Estate and Consumer [Member] | Consumer [Member] | Nonperforming Financial Instruments [Member]    
Total loans for credit quality indicators 108
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member]    
Total loans for credit quality indicators 32,312 33,658
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Pass [Member]    
Total loans for credit quality indicators 30,558 31,964
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Special Mention [Member]    
Total loans for credit quality indicators 1,353 1,449
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Substandard [Member]    
Total loans for credit quality indicators 401 149
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Doubtful [Member]    
Total loans for credit quality indicators 96
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member]    
Total loans for credit quality indicators 34,467 31,677
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member] | Pass [Member]    
Total loans for credit quality indicators 34,467 31,677
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member] | Special Mention [Member]    
Total loans for credit quality indicators
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member] | Substandard [Member]    
Total loans for credit quality indicators
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member] | Doubtful [Member]    
Total loans for credit quality indicators
v3.19.1
Note 5 - Loans - Loans Aging Information (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Current loans $ 200,584 $ 172,080
Loans past due 200,898 173,229
Nonaccrual loans 720 1,243
Financing Receivables, 30 to 89 Days Past Due [Member]    
Loans past due 314 722
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]    
Loans past due 427
Commercial Portfolio Segment [Member] | Development [Member]    
Current loans 7,801 1,498
Loans past due 7,801 1,498
Nonaccrual loans
Commercial Portfolio Segment [Member] | Development [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]    
Loans past due
Commercial Portfolio Segment [Member] | Development [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]    
Loans past due
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]    
Current loans 69,425 53,202
Loans past due 69,425 53,202
Nonaccrual loans
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]    
Loans past due
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]    
Loans past due
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]    
Current loans 13,076 9,946
Loans past due 13,142 10,135
Nonaccrual loans 20 114
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]    
Loans past due 66 75
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]    
Loans past due 114
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member]    
Current loans 41,013 40,941
Loans past due 41,018 41,446
Nonaccrual loans 365 580
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]    
Loans past due 5 436
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]    
Loans past due 69
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member]    
Current loans 32,069 33,209
Loans past due 32,312 33,658
Nonaccrual loans 241 549
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]    
Loans past due 243 205
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]    
Loans past due 244
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member]    
Current loans 34,467 31,677
Loans past due 34,467 31,677
Nonaccrual loans
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]    
Loans past due
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]    
Loans past due
Residential Real Estate and Consumer [Member] | Consumer [Member]    
Current loans 2,733 1,607
Loans past due 2,733 1,613
Nonaccrual loans 94
Residential Real Estate and Consumer [Member] | Consumer [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]    
Loans past due 6
Residential Real Estate and Consumer [Member] | Consumer [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]    
Loans past due
v3.19.1
Note 5 - Loans - Nonaccrual Loans (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Total nonaccrual loans $ 720 $ 1,243
Nonaccrual loans, Other Than Troubled Debt Restructurings [Member]    
Total nonaccrual loans 20 274
Nonaccrual Loans, Troubled Debt Restructurings [Member]    
Total nonaccrual loans 700 969
Accruing Loans, Troubled Debt Restructurings [Member]    
Restructured loans, accruing $ 501 $ 661
v3.19.1
Note 5 - Loans - Troubled Debt Restructuring (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Number of Modifications 4 1
Pre-Modification Investment $ 572 $ 88
Post- Modification Investment $ 572 $ 88
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member]    
Number of Modifications 2  
Pre-Modification Investment $ 302  
Post- Modification Investment $ 302  
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member]    
Number of Modifications 1  
Pre-Modification Investment $ 250  
Post- Modification Investment $ 250  
Residential Real Estate and Consumer [Member] | Consumer [Member]    
Number of Modifications 1  
Pre-Modification Investment $ 20  
Post- Modification Investment $ 20  
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]    
Number of Modifications   1
Pre-Modification Investment   $ 88
Post- Modification Investment   $ 88
v3.19.1
Note 5 - Loans - Purchased Loans (Details) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Carrying Value of Purchased Loans $ 25,794,000 $ 31,096,000
Financial Asset Acquired with Credit Deterioration [Member]    
Contractually Required Payments Receivable 0 295,000
Financial Asset Acquired and No Credit Deterioration [Member]    
Contractually Required Payments Receivable 25,984,000 31,136,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]    
Carrying Value of Purchased Loans 7,673,000 8,380,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]    
Contractually Required Payments Receivable
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financial Asset Acquired and No Credit Deterioration [Member]    
Contractually Required Payments Receivable 7,687,000 8,444,000
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member]    
Carrying Value of Purchased Loans 5,014,000 6,753,000
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member] | Financial Asset Acquired with Credit Deterioration [Member]    
Contractually Required Payments Receivable 146,000
Residential Real Estate and Consumer [Member] | One to Four Family Owner-occupied [Member] | Financial Asset Acquired and No Credit Deterioration [Member]    
Contractually Required Payments Receivable 5,075,000 6,709,000
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member]    
Carrying Value of Purchased Loans 9,164,000 10,591,000
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Financial Asset Acquired with Credit Deterioration [Member]    
Contractually Required Payments Receivable 149,000
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member] | Financial Asset Acquired and No Credit Deterioration [Member]    
Contractually Required Payments Receivable 9,269,000 10,558,000
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member]    
Carrying Value of Purchased Loans 3,943,000 5,372,000
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member] | Financial Asset Acquired with Credit Deterioration [Member]    
Contractually Required Payments Receivable
Residential Real Estate and Consumer [Member] | Multifamily Loan [Member] | Financial Asset Acquired and No Credit Deterioration [Member]    
Contractually Required Payments Receivable 3,953,000 5,425,000
Residential Real Estate and Consumer [Member] | Consumer [Member]    
Carrying Value of Purchased Loans
Residential Real Estate and Consumer [Member] | Consumer [Member] | Financial Asset Acquired with Credit Deterioration [Member]    
Contractually Required Payments Receivable
Residential Real Estate and Consumer [Member] | Consumer [Member] | Financial Asset Acquired and No Credit Deterioration [Member]    
Contractually Required Payments Receivable
v3.19.1
Note 5 - Loans - Accretable Yield for Purchased Loans (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Beginning Balance $ 334 $ 739
Additions
Accretion (144) (405)
Ending Balance $ 190 $ 334
v3.19.1
Note 6 - Premises and Equipment (Details Textual)
$ in Thousands
1 Months Ended 12 Months Ended
Jul. 31, 2017
USD ($)
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Depreciation, Total   $ 342 $ 460
Number of Buildings Sold and Leased Back     2
Sale Lease back Transaction Lease Term of Contract     10 years
Sale Lease back Transaction Lease Renewal Term     5 years
Sale Leaseback Transaction, Rent Expense   $ 165 $ 46
Charitable Donation $ 273    
Building [Member]      
Sale Leaseback Transaction, Net Proceeds, Investing Activities, Total     700
Sale Lease back Transaction Gain (Loss) Recognized     (8)
Racine Avenue Building [Member]      
Sale Leaseback Transaction, Net Proceeds, Investing Activities, Total     1,200
Sale Lease back Transaction Gain (Loss) Recognized     $ 59
v3.19.1
Note 6 - Premises and Equipment - Premises and Equipment (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Premises and equipment, gross $ 6,893 $ 6,784
Less: Accumulated depreciation 1,836 1,494
Premises and equipment, net 5,057 5,290
Land [Member]    
Premises and equipment, gross 479 479
Building [Member]    
Premises and equipment, gross 4,929 4,919
Leasehold Improvements [Member]    
Premises and equipment, gross 153 153
Furniture and Fixtures [Member]    
Premises and equipment, gross $ 1,332 $ 1,233
v3.19.1
Note 6 - Premises and Equipment - Rent Commitments (Details)
$ in Thousands
Dec. 31, 2018
USD ($)
2019 $ 167
2020 153
2021 144
2022 146
2023 148
Thereafter 575
Total $ 1,333
v3.19.1
Note 6 - Premises and Equipment - Minimum Future Rents Receivable (Details)
$ in Thousands
Dec. 31, 2018
USD ($)
2019 $ 97
2020 99
2021 101
2022 103
2023 106
Thereafter 44
Total $ 550
v3.19.1
Note 7 - Deposits (Details Textual) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Time Deposits, at or Above FDIC Insurance Limit $ 30,590 $ 12,424
v3.19.1
Note 7 - Deposits - Composition of Deposits (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Non-interest bearing checking $ 22,763 $ 22,271
Interest bearing checking 5,424 4,017
Money market 41,910 54,472
Statement savings accounts 13,773 14,030
Health savings accounts 11,197 11,335
Certificates of deposit 88,138 76,788
Total $ 183,205 $ 182,913
v3.19.1
Note 7 - Deposits - Maturities of Certificates of Deposit (Details)
$ in Thousands
Dec. 31, 2018
USD ($)
2019 $ 62,303
2020 16,570
2021 5,391
2022 1,910
2023 1,964
Total $ 88,138
v3.19.1
Note 8 - FHLB Advances (Details Textual) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged $ 158,923 $ 135,760
Federal Home Loan Bank Advances, Total 739 $ 514
Federal Home Loan Bank, Advances, General Debt Obligations, Amount of Available, Unused Funds 889  
Federal Home Loan Bank Advances, Federal Funds Line of Credit not Withdrawn $ 7,000  
v3.19.1
Note 8 - FHLB Advances - FHLB Advances (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Fixed rate, fixed term advances, amount $ 11,750 $ 4,750
Fixed term advances with floating spread, amount 6,000 8,000
FHLB advances $ 17,750 $ 12,750
Minimum [Member]    
Fixed rate advances, weighted average rate, Total 1.42% 1.42%
Fixed term advances with floating spread 1.54% 1.39%
Maximum [Member]    
Fixed rate advances, weighted average rate, Total 2.70% 1.92%
Fixed term advances with floating spread 2.05% 1.96%
v3.19.1
Note 8 - FHLB Advances - Summary of Scheduled Maturities of Fixed Term FHLB Advances (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Fixed rate advances, amount, 2019 $ 5,750  
Adjustable rate advances, amount, 2019 2,000  
2019 7,750  
Fixed rate advances, amount, 2020 6,000  
Adjustable rate advances, amount, 2020 2,000  
2020 8,000  
Fixed rate advances, amount, 2021  
Adjustable rate advances, amount, 2021 2,000  
2021 2,000  
Fixed rate advances, amount, Total 11,750  
Adjustable rate advances, amount, Total 6,000  
Total $ 17,750 $ 12,750
Weighted Average [Member]    
Fixed rate advances, weighted average rate, 2019 2.21%  
Adjustable rate advances, weighted average rate, 2019 1.54%  
Fixed rate advances, weighted average rate, 2020 2.34%  
Adjustable rate advances, weighted average rate, 2020 1.69%  
Fixed rate advances, weighted average rate, 2021  
Adjustable rate advances, weighted average rate, 2021 2.05%  
Fixed rate advances, weighted average rate, Total 2.28%  
Adjustable rate advances, weighted average rate, Total 1.76%  
v3.19.1
Note 9 - 401(k) Plan (Details Textual) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Defined Contribution Plan, Employer Matching Contribution, Percent of Match 100.00%  
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent 4.00%  
Defined Contribution Plan, Cost $ 154 $ 127
v3.19.1
Note 10 - Income Taxes (Details Textual) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability $ 353
Operating Loss Carryforwards, Total $ 0 $ 0
v3.19.1
Note 10 - Income Taxes - Provision for Income Taxes (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Federal $ 114 $ 192
State 83 76
Total Current Taxes 197 268
Federal 107 (311)
State 14 (46)
Total Deferred Income Taxes 121 (357)
Impact of Deferred Tax Asset Restatement 353
Total Provision for Income Taxes $ 318 $ 264
v3.19.1
Note 10 - Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Allowance for loan losses $ 577 $ 490
Deferred compensation 121 120
Non-accrual interest 18 30
Purchase accounting 18 17
Equity compensation 4
AMT credit 108
Unrealized loss on available for sale securities 219 133
Charitable contribution carryforward 191 235
Other 10 11
Deferred Tax Assets 1,158 1,144
Depreciation and amortization (73) (17)
FHLB stock (30) (30)
Other (7)
Deferred Tax Liabilities (103) (54)
Net Deferred Tax Asset $ 1,055 $ 1,090
v3.19.1
Note 10 - Income Taxes - Reconciliation of Statutory to Effective Rates (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Federal income taxes at statutory rate, amount $ 289 $ 27
Federal income taxes at statutory rate, percentage 21.00% 34.00%
Tax exempt interest on municipal obligations, amount $ (10) $ (45)
Tax exempt interest on municipal obligations, percentage (0.73%) (57.69%)
State income taxes, net of federal income tax benefit, amount $ 75 $ 20
State income taxes, net of federal income tax benefit, percentage 5.45% 25.64%
Increase in CSV of life insurance, amount $ (41) $ (67)
Increase in CSV of life insurance, percentage (2.98%) (85.90%)
Other, amount $ 5 $ (24)
Other, percentage 0.36% (30.77%)
Valuation of deferred tax asset, amount $ 353
Valuation of deferred tax asset, percentage 0.00% 452.56%
Total Provision for Income Taxes $ 318 $ 264
Provision for income taxes, percentage 23.11% 337.84%
v3.19.1
Note 11 - Commitments and Contingencies (Details Textual) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Contingently Liability Related to Loans Sold $ 5,370 $ 3,647
Contingently Liability Recourse Provisions Expiry Period 120 days 120 days
v3.19.1
Note 11 - Commitments and Contingencies - Contract Amounts of Credit-related Financial Instruments (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Unused Lines of Credit, Fixed [Member]    
Contract amounts of credit-related financial instruments $ 7,467 $ 4,497
Unused Lines of Credit, Variable [Member]    
Contract amounts of credit-related financial instruments 11,307 10,807
Undisbursed Portion of Loan Proceeds, Fixed [Member]    
Contract amounts of credit-related financial instruments 5,890 6,002
Standby Letters of Credit, Variable [Member]    
Contract amounts of credit-related financial instruments $ 1,277 $ 822
v3.19.1
Note 13 - Related-party Transactions (Details Textual) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Related Party Deposit Liabilities $ 3,467 $ 1,333
Cash Donated to Charitable Foundation   $ 250,000
Stock Issued During Period, Shares, Issued to Fund Charitable Foundation   25,000
Lease for Office Space with Related Party [Member]    
Payments for Rent 28 $ 16
Law Firm, Directors [Member] | Services of Law Firm [Member]    
Related Party Transaction, Amounts of Transaction $ 11 $ 38
v3.19.1
Note 13 - Related-party Transactions - Summary of Loans to Related Parties (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Beginning balance $ 6,697 $ 2,853
New loans 2,121 9,976
Less: Participations sold (310) (5,913)
Repayments (1,683) (219)
Ending balance $ 6,825 $ 6,697
v3.19.1
Note 14 - Foreclosed Assets (Details Textual) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Repossessed Assets, Total $ 69,000 $ 619,000
Mortgage Loans in Process of Foreclosure, Amount $ 0 $ 165,000
v3.19.1
Note 15 - Fair Value (Details Textual) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Impaired Financing Receivable, Related Allowance   $ 179
Foreclosed Asset, Fair Value Disclosure $ 69 619
Residential Real Estate and Consumer [Member] | One to Four Family Investor-owned [Member]    
Impaired Financing Receivable, with Related Allowance, Recorded Investment   330
Impaired Loans Receivable, Fair Value Disclosure   151
Impaired Financing Receivable, Related Allowance   $ 179
v3.19.1
Note 15 - Fair Value - Fair Value of Assets on Recurring Basis (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Available for sale securities $ 43,751 $ 58,012
Fair Value, Measurements, Recurring [Member]    
Available for sale securities 43,751 58,012
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]    
Available for sale securities 43,751 58,012
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | US Government Corporations and Agencies Securities [Member]    
Available for sale securities 1,307 2,220
Fair Value, Measurements, Recurring [Member] | US Government Corporations and Agencies Securities [Member] | Fair Value, Inputs, Level 1 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | US Government Corporations and Agencies Securities [Member] | Fair Value, Inputs, Level 2 [Member]    
Available for sale securities 1,307 2,220
Fair Value, Measurements, Recurring [Member] | US Government Corporations and Agencies Securities [Member] | Fair Value, Inputs, Level 3 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]    
Available for sale securities 8,295 13,137
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]    
Available for sale securities 8,295 13,137
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member]    
Available for sale securities 28,536 33,467
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]    
Available for sale securities 28,536 33,467
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | Certificates of Deposit [Member]    
Available for sale securities 1,446 3,997
Fair Value, Measurements, Recurring [Member] | Certificates of Deposit [Member] | Fair Value, Inputs, Level 1 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | Certificates of Deposit [Member] | Fair Value, Inputs, Level 2 [Member]    
Available for sale securities 1,446 3,997
Fair Value, Measurements, Recurring [Member] | Certificates of Deposit [Member] | Fair Value, Inputs, Level 3 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member]    
Available for sale securities 4,167 5,191
Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]    
Available for sale securities
Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]    
Available for sale securities 4,167 5,191
Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]    
Available for sale securities
v3.19.1
Note 15 - Fair Value - Fair Value of Assets on Nonrecurring Basis (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Foreclosed Asset, Fair Value Disclosure $ 69 $ 619
Fair Value, Measurements, Nonrecurring [Member]    
Foreclosed Asset, Fair Value Disclosure 69 619
Impaired Loans Receivable, Fair Value Disclosure   151
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]    
Foreclosed Asset, Fair Value Disclosure
Impaired Loans Receivable, Fair Value Disclosure  
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]    
Foreclosed Asset, Fair Value Disclosure
Impaired Loans Receivable, Fair Value Disclosure  
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]    
Foreclosed Asset, Fair Value Disclosure $ 69 619
Impaired Loans Receivable, Fair Value Disclosure   $ 151
v3.19.1
Note 15 - Fair Value - Quantitative Information (Details)
$ in Thousands
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Foreclosed assets $ 69 $ 619
Measurement Input, Discount Rate [Member] | Valuation, Market and Income Approach [Member]    
Foreclosed assets $ 69 619
Impaired loans   $ 151
Measurement Input, Discount Rate [Member] | Valuation, Market and Income Approach [Member] | Minimum [Member]    
Foreclosed assets 0.1 0.1
Impaired loans   0.1
Measurement Input, Discount Rate [Member] | Valuation, Market and Income Approach [Member] | Maximum [Member]    
Foreclosed assets 0.2 0.2
Impaired loans   0.2
v3.19.1
Note 15 - Fair Value - Carrying Value and Estimated Fair Value (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Estimated fair value $ 43,751 $ 58,012
Reported Value Measurement [Member]    
Cash and cash equivalents 4,488 11,813
Estimated fair value 43,751 58,012
Loans held for sale 679 109
Loans 198,694 171,355
Accrued interest receivable 768 782
Cash value of life insurance 7,007 6,558
FHLB stock 739 514
Deposits 183,205 182,913
Advance payments by borrowers for taxes and insurance 55 36
FHLB advances 17,750 12,750
Accrued interest payable 70 37
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]    
Cash and cash equivalents 4,488 11,813
Estimated fair value
Loans held for sale
Loans
Accrued interest receivable 768 782
Cash value of life insurance
FHLB stock
Deposits 95,067 106,125
Advance payments by borrowers for taxes and insurance 55 36
FHLB advances
Accrued interest payable 70 37
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]    
Cash and cash equivalents
Estimated fair value 43,751 58,012
Loans held for sale 679 109
Loans
Accrued interest receivable
Cash value of life insurance
FHLB stock
Deposits
Advance payments by borrowers for taxes and insurance
FHLB advances
Accrued interest payable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]    
Cash and cash equivalents
Estimated fair value
Loans held for sale
Loans 199,048 171,729
Accrued interest receivable
Cash value of life insurance 7,007 6,558
FHLB stock 739 514
Deposits 87,531 76,099
Advance payments by borrowers for taxes and insurance
FHLB advances 17,505 12,597
Accrued interest payable
v3.19.1
Note 16 - Equity and Regulatory Matters (Details Textual)
Dec. 31, 2018
Dec. 31, 2017
Common Equity Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Asset 6.50% 6.50%
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets 8.00% 8.00%
Capital Required to be Well Capitalized to Risk Weighted Assets 10.00% 10.00%
Tier One Leverage Capital Required to be Well Capitalized to Average Assets 5.00% 5.00%
v3.19.1
Note 16 - Equity and Regulatory Matters - Capital Amounts and Ratios (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Tier 1 capital (to average assets) $ 48,502 $ 47,513
Tier 1 capital (to average assets), ratio 18.40% 17.20%
Tier 1 capital (to average assets), for capital adequacy $ 10,542 $ 11,051
Tier 1 capital (to average assets), for capital adequacy, ratio 4.00% 4.00%
Tier 1 capital (to average assets), to be capitalized $ 13,178 $ 13,813
Tier 1 capital (to average assets), to be capitalized, ratio 5.00% 5.00%
Common Equity Tier 1 capital (to risk-weighted assets) $ 48,502 $ 47,513
Common Equity Tier 1 capital (to risk-weighted assets), ratio 23.70% 26.80%
Common Equity Tier 1 capital (to risk-weighted assets), for capital adequacy $ 9,209 $ 7,973
Common Equity Tier 1 capital (to risk-weighted assets), for capital adequacy, ratio 4.50% 4.50%
Common Equity Tier 1 capital (to risk-weighted assets), to be capitalized $ 13,302 $ 11,517
Common Equity Tier 1 capital (to risk-weighted assets), to be capitalized, ratio 6.50% 6.50%
Tier 1 capital (to risk-weighted assets) $ 48,502 $ 47,513
Tier 1 capital (to risk-weighted assets), ratio 23.70% 26.80%
Tier 1 capital (to risk-weighted assets), for capital adequacy $ 12,279 $ 10,631
Tier 1 capital (to risk-weighted assets), for capital adequacy, ratio 6.00% 6.00%
Tier 1 capital (to risk-weighted assets), to be capitalized $ 16,372 $ 14,174
Tier 1 capital (to risk-weighted assets), to be capitalized, ratio 8.00% 8.00%
Total capital (to risk-weighted assets) $ 50,620 $ 49,313
Total capital (to risk-weighted assets), ratio 24.70% 27.80%
Total capital (to risk-weighted assets), for capital adequacy $ 16,372 $ 14,174
Total capital (to risk-weighted assets), for capital adequacy, ratio 8.00% 8.00%
Total capital (to risk-weighted assets), to be capitalized $ 20,465 $ 17,718
Total capital (to risk-weighted assets), to be capitalized, ratio 10.00% 10.00%
v3.19.1
Note 17 - Intangible Assets (Details Textual) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Finite-Lived Intangible Assets, Gross, Total $ 161 $ 161
Finite-Lived Intangible Assets, Accumulated Amortization 74 58
Amortization of Intangible Assets, Total $ 16 $ 16
v3.19.1
Note 17 - Intangible Assets - Projections of Amortization Expense (Details)
$ in Thousands
Dec. 31, 2018
USD ($)
2019 $ 16
2020 16
2021 16
2022 16
2023 $ 16
v3.19.1
Note 18 - Deferred Compensation (Details Textual) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Deferred Compensation Liability, Current and Noncurrent, Total $ 443 $ 442
Deferred Compensation Arrangement with Individual, Compensation Expense 52 51
Cash Surrender Value of Life Insurance 7,007 $ 6,558
Executive Officer [Member]    
Bank Owned Life Insurance 85  
Cash Surrender Value of Life Insurance $ 252  
v3.19.1
Note 19 - Employee Stock Ownership Plan (Details Textual) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Employee Stock Ownership Plan (ESOP), Number of Committed-to-be-Released Shares 12,960 2,947
Average Fair Value of Per Share $ 11.03 $ 11
Employee Stock Ownership Plan (ESOP), Compensation Expense $ 143 $ 32
v3.19.1
Note 19 - Employee Stock Ownership Plan - ESOP Shares (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Shares allocated to active participants (in shares) 2,947
Shares committed to be released and allocated to participants (in shares) 12,960 2,947
Total unallocated shares (in shares) 243,303 256,263
Total ESOP shares (in shares) 259,210 259,210
Fair value of unallocated shares (based on $10.03 and $11.02 share price as of December 31, 2018 and 2017, respectively) $ 2,440 $ 2,824
v3.19.1
Note 19 - Employee Stock Ownership Plan - ESOP Shares (Details) (Parentheticals) - $ / shares
Dec. 31, 2018
Dec. 31, 2017
Share price (in dollars per share) $ 10.03 $ 11.02
v3.19.1
Note 20 - Share-based Compensation Plans (Details Textual) - The 2018 Equity Incentive Plan [Member] - USD ($)
12 Months Ended
Dec. 31, 2018
Nov. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value $ 0  
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total $ 1,500,000  
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition 2 years 354 days  
Restricted Stock [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized   129,605
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant 45,363  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested $ 0  
Employee Stock Option [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized   324,012
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant 131,923  
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period 5 years  
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period 10 years  
v3.19.1
Note 20 - Share-based Compensation Plans - Impact of Share-based Payment Plans in Financial Statements (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2018
USD ($)
Cost of share-based payment plans $ 18
Amount of related income tax benefit recognized in income 5
Restricted Stock [Member]  
Cost of share-based payment plans 11
Employee Stock Option [Member]  
Cost of share-based payment plans $ 7
v3.19.1
Note 20 - Share-based Compensation Plans - Stock Options Activity (Details)
12 Months Ended
Dec. 31, 2018
$ / shares
shares
Options outstanding, number of options (in shares) | shares
Options outstanding, weighted average exercise price (in dollars per share) | $ / shares
Granted, number of options (in shares) | shares 192,089
Granted, weighted average exercise price (in dollars per share) | $ / shares $ 10.81
Exercised, number of options (in shares) | shares
Exercised, weighted average exercise price (in dollars per share) | $ / shares
Expired or canceled, number of options (in shares) | shares
Expired or canceled, weighted average exercise price (in dollars per share) | $ / shares
Forfeited, number of options (in shares) | shares
Forfeited, weighted average exercise price (in dollars per share) | $ / shares
Options outstanding, number of options (in shares) | shares 192,089
Options outstanding, weighted average exercise price (in dollars per share) | $ / shares $ 10.81
Options outstanding, weighted average remaining contractual term (Year) 9 years 346 days
Options exercisable, number of options (in shares) | shares
Options exercisable, weighted average exercise price (in dollars per share) | $ / shares
v3.19.1
Note 20 - Share-based Compensation Plans - Assumptions (Details)
12 Months Ended
Dec. 31, 2018
$ / shares
Risk-free interest rate 2.80%
Expected volatility 21.21%
Expected dividend yield 0.00%
Expected life of options (years) (Year) 7 years 182 days
Weighted average fair value per option of options granted during the year (in dollars per share) $ 3.40
v3.19.1
Note 20 - Share-based Compensation Plans - Summary of Changes in Restricted Shares (Details) - Restricted Stock [Member]
12 Months Ended
Dec. 31, 2018
$ / shares
shares
Shares outstanding, number of shares (in shares) | shares
Shares outstanding, weighted average grant date fair value (in dollars per share) | $ / shares
Granted, number of shares (in shares) | shares 84,242
Granted, weighted average grant date fair value (in dollars per share) | $ / shares $ 10.82
Vested, number of shares (in shares) | shares
Vested, weighted average grant date fair value (in dollars per share) | $ / shares
Forfeited, number of shares (in shares) | shares
Forfeited, weighted average grant date fair value (in dollars per share) | $ / shares
Shares outstanding, number of shares (in shares) | shares 84,242
Shares outstanding, weighted average grant date fair value (in dollars per share) | $ / shares $ 10.82