Employee Stock Ownership Plan

3 Months Ended

Mar. 31, 2019

Employee Stock Ownership Plan [Abstract]

NOTE 8: Employee Stock Ownership Plan

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

ESOP expense for the three months ended March 31, 2019 and 2018 (unaudited) was $37,000 and $40,000, respectively.

	March 31,		December 31,
	2019		2018
	(Unaudited)
Allocated shares		35,159		35,159
Unreleased shares		72,852		72,852
Total ESOP shares		108,011		108,011

Fair value of unreleased shares at March 31, 2019, and December 31, 2018 (in thousands)	$	1,985	$	1,909

At March 31, 2019 (unaudited) and December 31, 2018 the fair value of the 35,159 and 35,159 allocated shares held by the ESOP was $958,000 and $921,000, respectively, based on the quoted per share price of $27.25 and $26.20 at March 31, 2019 (unaudited) and December 31, 2018 respectively.

In the event the ESOP is unable to satisfy the obligation to repurchase the shares held by each beneficiary upon the beneficiary’s termination or retirement, the Company is obligated to purchase such shares at their fair market value based on the most recent valuation report any time within 60 days of the distribution date. If this right is not exercised, an additional 60-day exercise period is available in the year following the year in which the distribution is made and begins after a new valuation of the stock has been determined and communicated to the participant or beneficiary. The allocated shares held by the ESOP and the outstanding shares held by former employee’s subject to the repurchase option totaled 35,458 at both March 31, 2019 (unaudited) and December 31, 2018. At March 31, 2019, the 35,458 shares had a fair value of $904,000 ($25.50 per share based on the most recent valuation report) and have been classified as mezzanine capital. At December 31, 2018, the 35,458 shares had a fair value of $1,028,000 ($29.00 per share) based on the most recent valuation report) and have been classified as mezzanine capital.

West End Indiana Bancshares, Inc. 10-Q