SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]	Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~March~~June 3130, 2019

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

For the transition period from _______________ to _______________

Commission File No. 001-38239

FFBW, Inc.

(Exact name of registrant as specified in its charter)

Federal		82-3027075
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1360 South Moorland Road Brookfield, Wisconsin		53005
(Address of Principal Executive Offices)		(Zip Code)

(262) 542-4448

(Registrant’s telephone number)

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

Title of class Trading Symbol Name of exchange on which registered

Title of class	Trading Symbol	Name of exchange on which registered

Common Stock; $0.01 par value	FFBW	The Nasdaq Stock Market

Common Stock; $0.01 par value FFBW The Nasdaq Stock Market

N/A

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

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

YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES [X ] NO [ ]

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

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [X]
	Emerging growth company [X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [ ] NO [X]

6,~~645~~580,~~212~~988 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding as of ~~May~~July 231, 2019.

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FFBW, Inc.

Form 10-Q

Index

		Page
Part I. Financial Information
Item 1.	Financial Statements
	Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018	2
	Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018	2
	Statements of Income for the Three Months Ended March 31, 2019 and 2018 (unaudited)	3
	Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	3
	Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2019 and 2018 (unaudited)	4
	Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	4
	Statements of Changes in Equity for the Three Months Ended March 31, 2019 and 2018 (unaudited)	5
	Statements of Changes in Equity for the Six Months Ended June 30, 2019 and 2018 (unaudited)	5
	Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 (unaudited)	6
	Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited)	6
	Notes to Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2831
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3541
Item 4.	Controls and Procedures	3541
Part II. Other Information
Item 1.	Legal Proceedings	3541
Item 1A.	Risk Factors	3541
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3541
Item 3.	Defaults upon Senior Securities	3642
Item 4.	Mine Safety Disclosures	3642
Item 5.	Other Information	3642
Item 6.	Exhibits	3642
	Signature Page	3743

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Part I. – Financial Information

Item 1.

Financial Statements

FFBW, Inc.

Balance Sheets

~~March~~June 3130, 2019 (Unaudited) and December 31, 2018

(In thousands, except share data)

	March 31,			December 31,
	June 30,			December 31,
	2019			2018
Assets
Cash and due from banks	$	24,~~135~~351		$	1,746
Fed funds sold		~~418~~1,046			2,742
Cash and cash equivalents		25,~~553~~397			4,488
Available for sale securities, stated at fair value		4443,~~169~~478			43,751
Loans held for sale		-1,951			679
Loans, net of allowance for loan and lease losses of $2,188 and $2,118, respectively		198,090			198,694
Loans, net of allowance for loan and lease losses of $2,252 and $2,118, respectively		193,001			198,694
Premises and equipment, net		4,~~975~~888			5,057
Foreclosed assets		6984			69
FHLB stock, at cost		609			739
Accrued interest receivable		~~856~~777			768
Cash value of life insurance		7,~~054~~105			7,007
Other assets		1,~~212~~034			1,474
TOTAL ASSETS	$	~~259~~258,~~587~~324		$	262,726
Liabilities and Equity
Deposits	$	~~180~~177,~~942~~553		$	183,205
Advance payments by borrowers for taxes and insurance		~~430~~771			55
FHLB advances		15,750			17,750
Accrued interest payable		~~364~~648			70
Other liabilities		12,~~260~~418			1,284
Total liabilities	$	~~198~~197,~~746~~140		$	202,364
Preferred stock ($0.01 par value, 1,000,000 authorized, no shares issued or outstanding as of March 31, 2019 and December 31, 2018, respectively)	$	-		$	-
Preferred stock ($0.01 par value, 1,000,000 authorized, no shares issued or outstanding as of June 30, 2019 and December 31, 2018, respectively)	$	-		$	-
Common stock ($0.01 par value, 19,000,000 authorized, 6,696,742 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively)		67			67
Common stock ($0.01 par value, 19,000,000 authorized, 6,706,742 and 6,696,742 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively)		67			67
Additional paid in capital		28,~~406~~489			28,326
Unallocated common stock of Employee Stock Ownership Plan ("ESOP") (240,063 and 243,303 shares at March 31, 2019 and December 31, 2018, respectively)		(2,401	)		(2,433	)
Unallocated common stock of Employee Stock Ownership Plan ("ESOP") (236,823 and 243,303 shares at June 30, 2019 and December 31, 2018, respectively)		(2,368	)		(2,433	)
Retained earnings		35,~~244~~632			34,995
Accumulated other comprehensive loss, net of income taxes		(156	)		(593	)
Accumulated other comprehensive income (loss), net of income taxes		235			(593	)
Less common stock repurchased, 29,436 and 0 shares at cost, at March 31, 2019 and December 31, 2018, respectively		(319	)		-
Less treasury stock, 82,055 and 0 shares at cost, at June 30, 2019 and December 31, 2018, respectively		(871	)		-
Total equity	$	6061,~~841~~184		$	60,362
TOTAL LIABILITIES AND EQUITY	$	~~259~~258,~~587~~324		$	262,726

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

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FFBW, Inc.

Statements of Income

Three and Six Months Ended ~~March~~June 3130, 2019 and 2018 (Unaudited)

(In thousands, except per share data)

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Interest and dividend income:
Loans, including fees	$	2,~~448~~497		$	12,~~968~~326		$	4,945		$	4,294
Securities
Taxable		~~275~~282			~~340~~339			557			679
Tax-exempt		24			2314			6			37
Other		2521			1615			46			31
Total interest and dividend income		2,~~750~~804			2,~~347~~694			5,554			5,041
Interest Expense:
Interest-bearing deposits		~~599~~633			~~346~~342			1,232			688
Borrowed funds		8891			53116			179			169
Total interest expense		~~687~~724			~~399~~458			1,411			857
Net interest income		2,~~063~~080			12,~~948~~236			4,143			4,184
Provision for loan losses		7085			~~115~~189			155			304
Net interest income after provision for loan losses		1,~~993~~995			12,~~833~~047			3,988			3,880
Noninterest income:
Service charges and other fees		3564			6051			99			111
Net gain on sale of loans		41127			3936			168			75
Net gain (loss) on sale of securities		(85	)		81			(3	)		9
Increase in cash surrender value of insurance		4751			4649			98			95
Other noninterest income		2524			2324			49			47
Total noninterest income		~~140~~271			~~176~~161			411			337
Noninterest expense:
Salaries and employee benefits		1,~~097~~031			1,~~057~~139			2,128			2,196
Occupancy and equipment		242			~~233~~226			484			459
Data processing		~~175~~169			~~152~~158			344			310
Technology		7879			5549			157			104
Foreclosed assets, net		1			46(9	)		2			37
Professional fees		~~112~~104			~~118~~57			216			175
Other noninterest expense		~~103~~126			~~172~~151			229			323
Total noninterest expense		1,~~808~~752			1,~~833~~771			3,560			3,604
Income before income taxes		~~325~~514			~~176~~437			839			613
Provision for income taxes		76126			5384			202			137
Net income	$	~~249~~388		$	~~123~~353		$	637		$	476
Earnings per share
Basic	$	0.0406		$	0.0206		$	0.10		$	0.07
Diluted	$	0.0406		$	0.0206		$	0.10		$	0.07

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

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FFBW, Inc.

Statement of Comprehensive Income (Loss)

Three and Six Months Ended ~~March~~June 3130, 2019 and 2018, (Unaudited)

(In thousands)

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Net income	$	~~249~~388		$	~~123~~353		$	637		$	476
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period		~~592~~540			(~~694~~262	)		1,132			(956	)
Reclassification adjustment for losses (gains) realized in net income		8(5	)		(81	)		3			(9	)
Other comprehensive income (loss) before tax effect		~~600~~535			(~~702~~263	)		1,135			(965	)
Tax effect of other comprehensive income (loss) items		(~~163~~144	)		94136			(307	)		230
Other comprehensive income (loss), net of tax		~~437~~391			(~~608~~127	)		828			(735	)
Comprehensive income (loss)	$	~~686~~779		$	~~(485~~226	)	$	1,465		$	(259	)

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

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FFBW, Inc.

Statement of Changes in Equity

For the ~~Three~~Six Months Ended ~~March 31~~June, 2019 and 2018, (Unaudited)

(In thousands, except share data)

	Number of Shares		Common Stock		Additional Paid-In Capital			Unallocated Common Stock of ESOP			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
	Common Stock		Additional Paid-In Capital		Unallocated Common Stock of ESOP			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balance at December 31, 2017	$	~~6,612,500~~66	$	6628,296	$	28(2,~~296~~563	)	$	(233,~~563~~937	)	$	~~33,937~~(247	)	$	~~(247~~-	)	$	-59,489		$	~~59,489~~
Net income		-		-		-			-476			~~123~~-			-			-476			~~123~~
ESOP shares committed to be released (3,240 shares)		-		-		3			32			-			-			-			35
ESOP shares committed to be released (6,480 shares)		-		6		65			-			-			-			71
Other comprehensive loss		-		-		-			-			-(735	)		~~(608~~	)		(735	)		~~(608~~	)
Balance at March 31, 2018		6,612,500	$	66	$	28,299		$	(2,531	)	$	34,060		$	(855	)	$	-		$	59,039
Balance at June 30, 2018	$	66	$	28,302	$	(2,498	)	$	34,413		$	(982	)	$	-		$	59,301
Balance at December 31, 2018	$	~~6,696,742~~67	$	6728,326	$	28(2,~~326~~433	)	$	(234,~~433~~995	)	$	~~34,995~~(593	)	$	~~(593~~-	)	$	-60,362			~~60,362~~
Net income		-		-		-			-637			~~249~~-			-			637			~~249~~
ESOP shares committed to be released (3,240 shares)		-		-		3			32			-			-			-			35
ESOP shares committed to be released (6,480 shares)		-		4		65			-			-			-			69
Stock based compensation expense		-		-159		77-			-			-			-			-159			77
Other comprehensive income		-		-		-			-			-828			~~437~~-			-828			~~437~~
Repurchase of common stock		~~29,436~~-		-		-			-			-			-(871	)		(~~319~~871	)		~~(319~~	)
Balance at March 31, 2019		6,667,306	$	67	$	28,406		$	(2,401	)	$	35,244		$	(156	)	$	(319	)	$	60,841
Balance at June 30, 2019	$	67	$	28,489	$	(2,368	)	$	35,632		$	235		$	(871	)	$	61,184

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

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FFBW, Inc.

Statements of Cash Flows

For the ~~Three~~Six Months Ended ~~March~~June 3130, 2019 and 2018 (Unaudited)

(In thousands)

	For the three months ended March 31,
	For the six months ended June 30,
	2019			2018
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income	$	~~249~~637		$	~~123~~476
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		70155			~~115~~304
Depreciation		84181			83167
Accretion of loan portfolio discount and deposit premium		(3459	)		(3046	)
Net amortization on securities available for sale		~~103~~199			~~138~~272
Loss on sales and impairments of foreclosed assets		-			29
(Gain) loss on sales and impairments of foreclosed assets		(7	)		17
(Gain) loss on sale of available for sale securities		83			(89	)
Increase in cash surrender value of life insurance		(4798	)		(4695	)
ESOP compensation		3569			3571
Stock based compensation		77159			-
Changes in operating assets and liabilities:
Accrued interest receivable		(889	)		(2639	)
Loans held for sale		~~679~~(1,272	)		109
Other assets		99133			966
Accrued interest payable		~~294~~550			~~174~~323
Other liabilities		~~(24~~1,162	)		(~~219~~152	)
Net cash provided by operating activities	$	1,~~505~~803		$	~~486~~1,464
Cash flows from investing activities:
Proceeds from sales of available for sale securities	$	24,~~133~~837		$	36,~~435~~437
Maturities, calls, paydowns on available for sale securities		12,~~147~~316			13,~~659~~079
Purchases of available for sale securities		(35,~~209~~947	)		(7,867	)
Net (increase) decrease in loans		~~572~~5,521			(522,~~427~~259	)
Purchases of premises and equipment		(212	)		(1938	)
Proceeds from redemption of FHLB stock, net		130			2
Proceeds from redemption of FHLB stock		130			-
Proceeds from sale of foreclosed assets		-			505
Purchase of FHLB stock		-			(584	)
Net cash provided by (used in) investing activities	$	771		$	(7,712	)
Proceeds from sale of foreclosed assets		76			823
Net cash provided by (used in) investing activities	$	6,921		$	(20,409	)
Cash flows from financing activities:
Net increase (decrease) in deposits	$	(2,267	)	$	4,223
Net decrease in deposits	$	(5,660	)	$	(16,501	)
Net increase in advance payments by borrowers for taxes and insurance		~~375~~716			~~390~~776
Repayments of FHLB advances		(2,000	)		-
Repurchase of common stock		(319	)		-
Proceeds from FHLB advances		-			25,250
Net cash provided by (used in) financing activities	$	(4,211	)	$	4,613
Repurchase of common stock		(871	)		-
Net decrease in cash and cash equivalents	$	(1,935	)	$	(2,613	)
Net cash provided by (used in) financing activities	$	(7,815	)	$	9,525
Net increase (decrease) in cash and cash equivalents	$	909		$	(9,420	)
Cash and cash equivalents at beginning		4,488			11,813
Cash and cash equivalents at end	$	25,~~553~~397		$	92,~~200~~393
Supplemental Cash Flow Disclosures:
Cash paid for interest	$	~~364~~833		$	~~225~~534
Cash paid for income taxes		-160			2040
Loans transferred to foreclosed assets		-84			221
Financed sales of foreclosed assets		-			21

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

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FFBW, Inc.

Form 10-Q

Notes to Financial Statements (Unaudited – In thousands, except share data)

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of FFBW, Inc. and its wholly-owned subsidiary, First Federal Bank of Wisconsin, (collectively the “Company”) were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America.

In the opinion of management, all adjustments necessary for a fair presentation of the financial statements have been included. The results of operations for the ~~three~~six month ~~periods~~period ended ~~March~~June 3130, 2019 are not necessarily indicative of the results which may be expected for the entire year. These statements should be read in conjunction with the Financial Statements and notes thereto for the year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission (“SEC”) as part of FFBW, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018.

In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

Note 2 – Nature of Business and Summary of Significant Accounting Policies

Organization

On October 10, 2017, First Federal Bank of Wisconsin (“the Bank”) converted to a stock savings bank and was reorganized into 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 Company’s outstanding common upon the completion of the reorganization and stock issuance. FFBW, Inc. is organized as a corporation under the laws of the United States. FFBW, MHC has been organized as a mutual holding company under the laws of the United States and owns 55% of the outstanding common stock of FFBW, Inc.

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

At ~~March~~June 3130, 2019, the significant assets of the Company 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 the Company 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.

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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.

Revenue Recognition

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company's revenue-generating transactions are not subject to ASC 606, including revenue all interest and dividend income generated from financial instruments. Certain noninterest income items, including loan servicing income, gain on sales of loans, gain on sales of securities, and other noninterest income have been evaluated to not fall with the scope of ASC 606. Elements of noninterest income that is within the scope of ASC 606, are as follows:

Service fees - The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Management reviewed the deposit account agreements, and determined that the agreements can be terminated at any time by either the Company or the account holder. Transaction fees, such as balance transfers, wires and overdraft charges are settled the day the performance obligation is satisfied. The Company's monthly service charges and maintenance fees are for services provided to the customer on a monthly basis and are considered a series of services that have the same pattern of transfer each month. The review of service charges assessed on deposit accounts included the amount of variable consideration that is a part of the monthly charges. It was found that the waiver of service charges due to insufficient funds and dormant account fees is immaterial and would not require a change in the accounting treatment for these fees under the new revenue standards. Recognition of revenue under ASC 606 did not materially change the timing or magnitude of revenue recognition.

Interchange fees - Customers use a Bank-issued debit card to purchase goods and services, and the Company earns interchange fees on those transactions, typically a percentage of the sale amount of the transaction. The Company records the amount due when it receives the settlement from the payment network. Payments from the payment network are received and recorded into income on a daily basis. There are no contingent debit card interchange fees recorded by the Company that could be subject to a clawback in future periods. Recognition of revenue under ASC 606 did not materially change the timing or magnitude of revenue recognition.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and balances due from banks and non-maturity deposits in the Federal Home Loan Bank of Chicago (FHLB). The Company may at times maintain balances at financial institutions that exceed federally insured limits. 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.

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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.

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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.

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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 single family 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.

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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.

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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.

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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.

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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 statement of income.

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 Income (Loss)

Other comprehensive income (loss) is shown on the statements of comprehensive income (loss). The Company’s accumulated other comprehensive income (loss) is composed of the unrealized gain (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 income (loss) for gains (losses) realized on sales of securities available for sale comprise the entire balance of “net gain (loss) on sale of securities” on the statements of income.

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 ~~March~~June 3130, 2019, but prior to the release of these financial statements. Based on the results of this review, no subsequent event disclosure or financial statement impacts to these financial statements are required as of ~~May~~July 231, 2019.

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Recent Accounting Pronouncements

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Company is an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies. An emerging growth company may elect to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, but must make such election when the Company is first required to file a registration statement. The Company has elected to use the extended transition period described above and intends to maintain its emerging growth company status as allowed under the JOBS Act.

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The Company recently adopted the following Accounting Standards Updates (ASU) issued by the Financial Accounting Standards Board (FASB).

ASU No. 2014-09, "Revenue from Contracts with Customers."

The objective of this new standard is to provide a common revenue standard for all entities that enter into contracts with customers to transfer goods, services, or nonfinancial assets. The Company adopted this new accounting standard for the effective January 1, 2019. The Company did not identify any changes in the timing of revenue recognition when considering the amended accounting guidance, however, the Company has included additional disclosures as required by the guidance.

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~~ASU ~~standards~~No. ~~make~~2016-01 is a ~~number~~wide-ranging ofstandard ~~changes~~with toseveral ~~the~~elements ~~recognition~~that ~~and~~will ~~measurement~~impact ~~standards~~most of financial ~~instruments,~~institutions. ~~including~~The ~~the~~standard ~~following~~introduces ~~changes:~~new 1)guidance that applies to most equity investments. Under the standard, equity securities ~~with~~can ano ~~readily~~longer ~~determinable~~be ~~fair~~classified as available-for-sale securities. Instead, market value fluctuations on equity securities will have to be ~~measured~~recognized atdirectly ~~fair~~through net income. An entity may elect to value ~~with~~equity ~~changes~~investments inwithout a readily determinable fair value ~~recognized~~at inits ~~net~~cost ~~income;~~minus 2impairment (if any) ~~entities~~plus ~~that~~or ~~are~~minus ~~public~~changes ~~business~~resulting ~~entities~~from ~~will~~observable noprice ~~longer~~changes bein ~~required~~orderly totransactions ~~disclose~~for the ~~method(s)~~identical ~~and~~or ~~significant~~similar ~~assumptions~~investment ~~used~~of the same issuer, with any changes recognized through net income. The standard also eliminates certain disclosure requirements related to ~~estimate~~financial ~~the~~instruments. ~~fair~~Non-PBEs ~~value~~will ~~that~~no islonger ~~required~~have to bedisclose ~~disclosed~~the ~~for~~fair value of financial instruments measured at amortized cost; ~~and~~in 3)the ~~entities~~financial ~~that~~statements. ~~are~~PBEs ~~public~~will ~~business~~still ~~entities~~need to make this disclosure but will no longer be required to ~~use~~disclose the ~~exit~~methods ~~price~~and ~~notion~~significant ~~when~~assumptions ~~measuring~~used to determine the fair value of financial instruments ~~for~~measured ~~disclosure~~at ~~purposes~~amortized cost. ~~The~~ ~~Company~~ASU ~~adopted~~2016-01 ~~this~~is ~~new~~effective ~~accounting~~for ~~standard~~non-PBEs for ~~the~~years ~~effective~~beginning ~~January~~after 1Dec.15, ~~2019. The~~2018, ~~adoption~~and ofwas ~~these~~effective ~~standard~~for ~~did~~PBEs ~~not~~with ~~have~~fiscal ayears ~~material~~beginning ~~impact~~after onDecember ~~the~~15, ~~Company's~~2017. ASU2016-01 ~~financial~~will ~~condition~~require orthe ~~results~~Company ofto ~~operations,~~adjust ~~except~~its ~~that~~reported ~~the~~value ~~Company~~of ~~will~~Bankers' noBank ~~longer~~stock, ~~disclose~~which ~~the~~is ~~method(s)~~considered ~~and~~an ~~significant~~equity ~~assumptions~~security ~~used~~without toa ~~estimate~~readily ~~the~~determinable ~~fair~~market value, ofif ~~financial~~a ~~instruments~~comparable ~~measured~~transaction atis ~~amortized cost~~observed.

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 No. 2019-04, "Codification Improvements to Topic 326."

ASU No. 2019-05, "Financial Instruments-Credit Losses."

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 for periods beginning after December 15, 2019, 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 beginning before December 15, 2019.

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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.

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Note 3 Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding, adjusted for weighted average unallocated ESOP shares, during the applicable period, excluding outstanding participating securities. Participating securities include non-vested restricted stock awards and restricted stock units, though no actual shares of common stock related to restricted stock units are issued until the settlement of such units, to the extent holders of these securities receive non-forfeitable dividends or dividend equivalents at the same rate as holders of the Company'’s common stock. Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. Antidilutive options are disregarded in earnings per share calculations.

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The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share (in thousands, except share and per share data).

	Three Months Ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Net income	$	~~249~~388		$	~~123~~353		$	637		$	476
Basic potential common shares
Weighted average shares outstanding		6,~~692~~644,~~453~~529			6,612,500			6,668,358			6,612,500
Weighted average unallocated Employee Stock Ownership Plan Shares		(~~242~~238,~~187~~947	)		(~~254~~250,~~103~~863	)		(240,558	)		(252,483	)
Basic weighted average shares outstanding		6,~~450~~405,~~266~~582			6,~~358~~361,~~397~~637			6,427,800			6,360,017
Dilutive potential common shares		~~220~~-			-			-			-
Dilutive weighted average shares outstanding		6,~~450~~405,~~486~~582			6,~~358~~361,~~397~~637			6,427,800			6,360,017
Basic earnings per share	$	0.0406		$	0.0206		$	0.10		$	0.07
Diluted earnings per share	$	0.0406		$	0.0206		$	0.10		$	0.07

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
March 31, 2019
June 30, 2019
Obligations of the US government and US government sponsored agencies	$	1,~~187~~102	$	522	$	(6-	)	$	1,~~186~~124
Obligations of states and political subdivisions		87,~~844~~612		2146		(5220	)		87,~~813~~638
Mortgage-backed securities		3130,~~023~~863		~~119~~360		(~~283~~113	)		3031,~~859~~110
Certificates of deposit		1,~~250~~500		-1		(233	)		1,~~227~~498
Corporate debt securities		2,~~078~~079		1229		(6-	)		2,~~084~~108
Total available for sale securities	$	4443,~~382~~156	$	~~157~~458	$	(~~370~~136	)	$	4443,~~169~~478
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

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.

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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
March 31, 2019
June 30, 2019
Obligations of the US government and US government sponsored agencies	$	~~584~~-	$	(6-	)	$	95-	$	-		$	~~679~~-	$	(6-	)
Obligations of states and political subdivisions		-		-			42,~~800~~084		(5220	)		42,~~800~~084		(5220	)
Mortgage-backed securities		-9		-			196,~~244~~898		(~~283~~113	)		196,~~244~~907		(~~283~~113	)
Certificates of deposit		-		-			1,~~227~~247		(233	)		1,~~227~~247		(233	)
Corporate debt securities		-		-			~~1,031~~-		(6-	)		~~1,031~~-		(6-	)
Total	$	~~584~~9	$	(6-	)	$	2610,~~397~~229	$	(~~364~~136	)	$	2610,~~981~~238	$	(~~370~~136	)
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	)

At ~~March~~June 3130, 2019, the investment portfolio included 6027 securities available for sale, which had been in an unrealized loss position for greater than twelve months, and 3one ~~securities~~security available for sale, which had been in an unrealized loss position for less than twelve months. 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. 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 ~~there~~the isCompany nodoes ~~intention~~ not intend to sell them prior to maturity; therefore the Company ~~expects~~ 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.

The Company regularly assesses the securities portfolio for other-than-temporary impairment ("OTTI"). The 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 the Company will have to sell securities prior to expected recovery. The Company did not have any impairment losses recognized in earnings for the ~~three~~six months ended ~~March~~June 3130, 2019 and ~~March~~June 3130, 2018.

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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:

	March 31, 2019
	June 30, 2019
	Amortized Cost		Fair Value
Due in one year or less	$	~~250~~641	$	~~250~~648
Due after one year through 5 years		34,~~696~~053		34,~~692~~079
Due after 5 years through 10 years		43,~~394~~578		43,~~388~~610
Due after 10 years		54,~~019~~021		4,~~980~~031
Subtotal	$	1312,~~359~~293	$	1312,~~310~~368
Mortgage-backed securities		3130,~~023~~863		3031,~~859~~110
Total	$	4443,~~382~~156	$	4443,~~169~~478

Proceeds from sales of available for sale securities during the three months ended ~~March~~June 3130, 2019 and ~~March~~June 3130, 2018 were $2,~~133~~704 and $3,~~435~~002, respectively. Proceeds from sales of available for sale securities during the six months ended June 30, 2019 and June 30, 2018 were $4,837 and $6,437, respectively. Gross realized gains, during the three months ended ~~March~~June 3130, 2019 and ~~March~~June 3130, 2018 on these sales amounted to $22 and $1, respectively, while gross realized losses on these sales were $17 and $0 during the same periods. Gross realized gains during the six months ended June 30, 2019 and June 30, 2018 on these sales amounted to $2322 and $24, respectively. Gross realized losses on these sales were $825 and $15, during the ~~three~~six months ended ~~March~~June 3130, 2019 and ~~March~~June 3130, 2018, respectively.

Available for sale securities with a fair value of $~~986~~1,001 and $960 were pledged securities at ~~March~~June 3130, 2019 and December 31, 2018, respectively.

Note 5 Loans

Major classifications of loans are as follows:

	March 31,			December 31,
	June 30,			December 31,
	2019			2018
Commercial
Development	$	912,~~723~~886		$	7,801
Real estate		6970,~~953~~993			69,425
Commercial and industrial		1112,~~863~~526			13,142
Residential real estate and consumer
1-4 family owner-occupied		3933,~~647~~629			41,018
1-4 family investor-owned		3231,~~162~~339			32,312
Multifamily		3431,~~315~~148			34,467
Consumer		2,~~736~~884			2,733
Subtotal	$	~~200~~195,~~399~~405		$	200,898
Deferred loan fees		(~~121~~152	)		(86	)
Allowance for loan losses		(2,~~188~~252	)		(2,118	)
Net loans	$	~~198~~193,~~090~~001		$	198,694

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Analysis of the allowance for loan losses for the three and six months ended ~~March~~June 3130, 2019 and 2018 follows:

Three Months Ended	Commercial			Residential real estate and consumer			Total
Balance at December 31, 2018	$	940		$	1,178		$	2,118
Provision for loan losses		44			26			70
Loans charged off		-			-			-
Recoveries of loans previously charged off		-			-			-
Balance at March 31, 2019	$	984		$	1,204		$	2,188
Balance at December 31, 2017	$	660		$	1,140		$	1,800
Provision for loan losses		69			16			85
Provision for loan losses		78			37			115
Loans charged off		-			(21	)		(21	)
Loans charged off		-			(106	)		(106	)
Recoveries of loans previously charged off		-			-			-
Balance at June 30, 2019	$	1,053		$	1,199		$	2,252
Balance at March 31, 2018	$	738		$	1,071		$	1,809
Provision for loan losses		92			97			189
Loans charged off		(24	)		(66	)		(90	)
Recoveries of loans previously charged off		-			-			-
Balance at June 30, 2018	$	806		$	1,102		$	1,908

Allowance for loan losses at March 31, 2019:	Commercial			Residential real estate and consumer			Total
Six Months Ended	Commercial			Residential real estate and consumer			Total
Individually evaluated for impairment	$	-		$	-		$	-
Balance at December 31, 2018	$	940		$	1,178		$	2,118
Collectively evaluated for impairment		984			1,204			2,188
Provision for loan losses		113			42			155
Total allowance for loan losses	$	984		$	1,204		$	2,188
Loans charged off		-			(21	)		(21	)
Allowance for loan losses at December 31, 2018:
Recoveries of loans previously charged off		-			-			-
Individually evaluated for impairment	$	-		$	-		$	-
Balance at June 30, 2019	$	1,053		$	1,199		$	2,252
Collectively evaluated for impairment		940			1,178			2,118
Balance at December 31, 2017	$	660		$	1,140		$	1,800
Total allowance for loan losses	$	940		$	1,178		$	2,118
Provision for loan losses		170			134			304
Loans charged off		(24	)		(172	)		(196	)
Recoveries of loans previously charged off		-			-			-
Balance at June 30, 2018	$	806		$	1,102		$	1,908

March 31, 2019	Commercial		Residential real estate and consumer			Total
Allowance for loan losses at June 30, 2019:	Commercial		Residential real estate and consumer		Total
Loans:
Individually evaluated for impairment	$	-	$	-	$	-
Individually evaluated for impairment	$	82	$	1,905	$	1,987
Collectively evaluated for impairment		1,053		1,199		2,252
Collectively evaluated for impairment		91,457		106,955		198,412
Total allowance for loan losses	$	1,053	$	1,199	$	2,252
Total loans	$	91,539	$	108,860	$	200,399
Allowance for loan losses at December 31, 2018:
December 31, 2018
Individually evaluated for impairment	$	-	$	-	$	-
Loans:
Collectively evaluated for impairment		940		1,178		2,118
Individually evaluated for impairment	$	87	$	1,469	$	1,556
Total allowance for loan losses	$	940	$	1,178	$	2,118
Collectively evaluated for impairment		90,281		109,061		199,342
Total loans	$	90,368	$	110,530	$	200,898

1618

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Analysis for loans evaluated for impairment as of March 31, 2019 and December 31, 2018, follows:

June 30, 2019	Commercial		Residential real estate and consumer
Loans:
Individually evaluated for impairment	$	78	$	1,861	$	1,939
Collectively evaluated for impairment		96,327		97,139		193,466
Total loans	$	96,405	$	99,000	$	195,405

December 31, 2018
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

As of March 31, 2019	Principal Balance		Recorded Investment		Related Allowance		Average Investment		Interest Recognized
Loans with no related allowance for loan losses:
Commercial
Commercial and industrial		85		82		-		84		1
Residential real estate and consumer
1-4 family owner-occupied		1,486		1,461		-		1,464		13
1-4 family investor-owned		247		236		-		238		-
Consumer		216		208		-		209		2
Total impaired loans	$	2,034	$	1,987	$	-	$	1,995	$	16

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

Table of Contents

AsAnalysis for loans evaluated for impairment as of ~~March~~June 3130, 2019 and December 31, 2018, ~~no additional funds are committed to be advanced in connection with impaired loans.~~follows:

As of June 30, 2019	Principal Balance		Recorded Investment		Related Allowance		Average Investment		Interest Recognized
Loans with no related allowance for loan losses:
Commercial
Commercial and industrial	$	81	$	78	$	-	$	82	$	2
Residential real estate and consumer
1-4 family owner-occupied		1,136		1,109		-		1,114		17
1-4 family investor-owned		669		653		-		657		-
Consumer		108		99		-		103		-

Total impaired loans	$	1,994	$	1,939	$	-	$	1,956	$	19

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 June 30, 2019 and December 31, 2018, no additional funds are committed to be advanced in connection with impaired loans.

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 collectability 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 collectability of the contractual loan payments is still probable.

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

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

Table of Contents

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.

17Information regarding the credit quality indicators most closely monitored for commercial loans by class as of June 30, 2019 and December 31, 2018, follows:

	Pass		Special Mention		Substandard		Doubtful		Totals
June 30, 2019
Development	$	12,886	$	-	$	-	$	-	$	12,886
Real estate		70,993		-		-		-		70,993
Commercial and industrial		9,886		2,623		17		-		12,526
1-4 family investor-owned		29,616		912		811		-		31,339
Multifamily		31,148		-		-		-		31,148
Totals	$	154,529	$	3,535	$	828	$	-	$	158,892
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

Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class as of June 30, 2019 and December 31, 2018, follows:

	Performing		Non-performing		Totals
June 30, 2019
1-4 family owner-occupied	$	32,967	$	662	$	33,629
Consumer		2,794		90		2,884
	$	35,761	$	752	$	36,513
December 31, 2018
1-4 family owner-occupied	$	39,919	$	1,099	$	41,018
Consumer		2,625		108		2,733
	$	42,544	$	1,207	$	43,751

Table of Contents

~~Information~~Loan ~~regarding~~aging ~~the~~information ~~credit quality indicators most closely monitored for commercial loans by class~~ as of ~~March~~June 3130, 2019 ~~and December 31~~, ~~2018,~~ follows:

	Pass		Special Mention		Substandard		Doubtful		Totals
			Loans Past Due		Loans Past Due				Nonaccrual
March 31, 2019
June 30, 2019	Current Loans		30-89 Days		90+ Days		Total Loans		Loans
Development	$	9,723	$	-	$	-	$	-	$	9,723
Commercial
Real estate		69,953		-		-		-		69,953
Development	$	12,886	$	-	$	-	$	12,886	$	-
Commercial and industrial		10,265		1,580		18		-		11,863
Real estate		70,993		-		-		70,993		-
1-4 family investor-owned		30,423		1,344		395		-		32,162
Commercial and industrial		12,526		-		-		12,526		17
Multifamily		34,315		-		-		-		34,315
Residential real estate and consumer
Totals	$	154,679	$	2,924	$	413	$	-	$	158,016
1-4 family owner-occupied		32,880		749		-		33,629		357
December 31, 2018
1-4 family investor-owned		31,339		-		-		31,339		653
Development	$	7,801	$	-	$	-	$	-	$	7,801
Multifamily		31,148		-		-		31,148		-
Real estate		69,425		-		-		-		69,425
Consumer		2,826		58		-		2,884		90
Commercial and industrial		13,122		-		20		-		13,142
Total	$	194,598	$	807	$	-	$	195,405	$	1,117
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

Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class as of March 31, 2019 and December 31, 2018, follows:

	Performing		Non-performing		Totals
March 31, 2019
1-4 family owner-occupied	$	38,635	$	1,012	$	39,647
Consumer		2,539		197		2,736
	$	41,174	$	1,209	$	42,383
December 31, 2018
1-4 family owner-occupied	$	39,919	$	1,099	$	41,018
Consumer		2,625		108		2,733
	$	42,544	$	1,207	$	43,751

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Loan aging information as of March 31, 2019, follows:

			Loans Past Due		Loans Past Due				Nonaccrual
March 31, 2019	Current Loans		30-89 Days		90+ Days		Total Loans		Loans
Commercial
Development	$	9,723	$	-	$	-	$	9,723	$	-
Real estate		69,953		-		-		69,953		-
Commercial and industrial		11,863		-		-		11,863		18
Residential real estate and consumer
1-4 family owner-occupied		39,502		145		-		39,647		359
1-4 family investor-owned		32,162		-		-		32,162		236
Multifamily		34,315		-		-		34,315		-
Consumer		2,577		159		-		2,736		93
Total	$	200,095	$	304	$	-	$	200,399	$	706

Loan aging information as of December 31, 2018, 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

There were no loans past due ninety days or more and still accruing interest as of ~~March~~June 3130, 2019 and December 31, 2018.

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, interest-only payments for a period of time, and/or extending amortization terms. During the ~~three~~six months ended and as of ~~March~~June 3130, 2019, there was a 1-4 family owner-occupied property totaling $83 and a 1-4 family investor –owned property totaling $421 that ~~was~~ were new troubled debt restructurings. $0 was charged to the allowance for losses related to ~~this~~these ~~loan~~loans. No troubled debt restructurings defaulted within 12 months of their modification date during the ~~three~~six months ended ~~March~~June 3130, 2019. During the year ended and as of December 31, 2018, there were two 1-4 family owner-occupied properties totaling $302, a 1-4 family investor-owned property totaling $250, and a consumer loan totaling $20 that were new troubled debt restructurings. $0 was charged to the allowance for losses related to these loans. No troubled debt restructurings defaulted within 12 months of their modification date during the year ended December 31, 2018.

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

Note 6 Deposits

The composition of deposits are as follows:

	March 31,		December 31,
	June 30,		December 31,
	2019		2018
Non-interest bearing checking	$	1820,~~153~~658	$	22,763
Interest bearing checking		108,~~017~~467		5,424
Money market		4140,~~637~~803		41,910
Statement savings accounts		13,~~722~~129		13,773
Health savings accounts		1110,~~341~~914		11,197
Certificates of deposit		8683,~~072~~582		88,138
Total	$	~~180~~177,~~942~~553	$	183,205

Certificates of deposit that meet or exceed the FDIC insurance limit two hundred fifty thousand dollars totaled $28,~~572~~013 and $30,590 as of ~~March~~June 3130, 2019 and December 31, 2018, respectively.

The scheduled maturities of certificates of deposit are as follows as of ~~March~~June 3130, 2019:

2019	$	5243,~~158~~338
2020		2125,~~162~~108
2021		810,~~575~~522
2022		12,~~958~~258
2023		1,981
2024		~~238~~375
Total	$	8683,~~072~~582

Note 7 FHLB Advances

FHLB advances consist of the following:

	March 31, 2019					December 31, 2018
	June 30, 2019					December 31, 2018
	Rates			Amount		Rates			Amount
Fixed rate, fixed term advances	1.42%	-	2.70%	$	9,750	1.42%	-	2.70%	$	11,750
Fixed term advances with floating spread	1.73%	-	12.9106%		6,000	1.54%	-	2.05%		6,000
				$	15,750				$	17,750

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The following is a summary of scheduled maturities of fixed term FHLB advances as of ~~March~~June 3130, 2019:

	Fixed Rate Advances					Adjustable Rate Advances
	Weighted Average Rate			Amount		Weighted Average Rate			Amount		Total Amount
2019		2.36%	%	$	3,750		1.73%	%	$	2,000	$	5,750
2020		2.34%	%		6,000		1.88%	%		2,000		8,000
2021		0.00%	%		-		12.~~91%~~06	%		2,000		2,000
Total		2.35%	%	$	9,750		1.~~84%~~89	%	$	6,000	$	15,750

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 $~~166~~156,~~402~~985 and $158,923 of 1-4 family, multifamily, and commercial real estate loans to secure FHLB advances at ~~March~~June 3130, 2019 and December 31, 2018, 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 $609 and $739 of FHLB stock owned by the Company at ~~March~~June 3130, 2019 and December 31, 2018, respectively.

At ~~March~~June 3130, 2019 and December 31, 2018, the Company’s available and unused portion of this borrowing agreement was $~~2,000~~0 and $889, respectively. Additionally, the Company has a fluctuating $5,000 letter of credit under this agreement, which collateralizes certain public deposits. 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 ~~March~~June 3130, 2019 or December 31, 2018. The Company also has the authority to borrow through the Federal Reserve’s Discount Window.

Note 8 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 six month periods ended ~~March~~June 3130, 2019 and 2018, 36,~~240~~480 shares were committed to be released. During the period ended ~~March~~June 3130, 2019, the average fair value per share of stock was $10.6657 resulting in total ESOP compensation expense of $3569 for the ~~quarter~~six months ended ~~March~~June 3130, 2019. During the period ended ~~March~~June 3130, 2018, the average fair value per share of stock was $10.9295 resulting in total ESOP compensation expense of $3571 for the ~~quarter~~six months ended ~~March~~June 3130, 2018. The ESOP shares as of ~~March~~June 3130, 2019 and December 31, 2018 were as follows:

	March 31, 2019		December 31, 2018
	June 30, 2019		December 31, 2018
Shares allocated to active participants		15,907		2,947
Shares allocated to active partipicants		15,907		2,947
Shares committed to be released and allocated to participants		36,~~240~~480		12,960
Total unallocated shares		~~240~~236,~~063~~823		243,303
Total ESOP shares		259,210		259,210
Fair value of unallocated shares (based on $10.75 and $10.03 share price at March 31, 2019 and December 31, 2018, respectively)	$	2,581	$	2,440
Fair value of unallocated shares (based on $10.45 and $10.03 share price at June 30, 2019 and December 31, 2018, respectively)	$	2,475	$	2,440

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Note 9 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:

	Three Months Ended March 31, 2019
	Six Months Ended June 30, 2019
Total cost of stock grant plan during the year	$	4593
Total cost of stock option plan during the year		3266
Total cost of share-based payment plans during the year	$	77159
Amount of related income tax benefit recognized in income	$	2144

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 ~~March~~June 3130, 2019, there were 4535,363 restricted stock awards and ~~131~~101,923 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, 20% per year beginning one year from the issuance date.

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Table of Contents

The following table summarizes stock options activity for the ~~year~~six months ended ~~March~~June 3130, 2019:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Options outstanding as of December 31, 2018		192,089	$	10.81
Granted		-30,000		-10.64
Exercised		-		-
Expired or canceled		-		-
Forfeited		-		-
Options outstanding as of March 31, 2019		192,089	$	10.81		9.95	$	-
Options outstanding as of June 30, 2019		222,089	$	10.79		9.51	$	-
Options exercisable as of March 31, 2019		-	$	-		-	$	-
Options exercisable as of June 30, 2019		-	$	-		-	$	-

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~~Since ~~volatility~~the isCompany ~~based~~does onnot ~~the~~have ~~average~~sufficient ~~volatility~~historical fair value estimates of its stock, the Company ~~shares~~calculates ~~and~~expected ~~the~~volatility ~~expectation~~using ofthe ~~future~~historical volatility of ~~Company~~the ~~shares~~Dow Jones U.S. Financial Services Index. 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 ~~three~~six months ended ~~March~~June 3130, 2019 ~~and the year ended December 31, 2018~~:

	For the Three Months Ended March 31,			For the Year Ended December 31,
	For the Six Months Ended June 30,
	2019			~~2018~~
Risk-free interest rate		02.0030	%		~~2.80~~	%
Expected volatility		018.0038	%		~~21.21~~	%
Expected dividend yield		0	%		0	%
Expected life of options (years)		-7.5			~~7.5~~
Weighted average fair value per option of options granted during the year	$	-2.90		$	~~3.40~~

The total intrinsic value of options exercised during the ~~quarter~~six months ended ~~March~~June 3130, 2019 was $0.

The following is a summary of changes in restricted shares for the ~~quarter~~ six months ended ~~March~~June 3130, 2019:

	Number of Shares		Weighted Average Grant Date Fair Value
Shares outstanding as of December 31, 2018		84,242	$	10.82
Granted		-10,000		-10.64
Exercised		-		-
Forfeited		-		-
Shares outstanding as of March 31, 2019		84,242	$	10.82
Shares outstanding as of June 30, 2019		94,242	$	10.80

The total intrinsic value of restricted shares that vested during the ~~three~~six months ended ~~March~~June 3130, 2019 was $0.

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As of ~~March~~June 3130, 2019, there was $1.56 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 ~~March~~June 3130, 2019, the weighted-average period over which the unrecognized compensation expense is expected to be recognized was approximately 2.8272 years.

Note 10 Regulatory Capital Ratios

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

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1, and Total capital to risk-weighted assets and of Tier 1 capital to average assets. It is management's opinion, as of December 31, 2018 and as of ~~March~~June 3130, 2019, that the Bank meets all applicable capital adequacy requirements.

As of ~~March~~June 3130, 2019, and 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 ~~March~~June 3130, 2019 that management believes have changed the Bank's category.

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

Actual

For Capital Adequacy Purposes

To Be Well Capitalized Under Prompt Corrective Action

Amount

Ratio

Amount

Ratio

Amount

Ratio

March 31, 2019

June 30, 2019

Common Equity Tier 1 capital (to risk‑weighted assets)

4849,~~822~~268

2324.95

> 9,~~178~~055

> 4.5

> 13,~~257~~079

> 6.5

Tier 1 capital (to risk‑weighted assets)

4849,~~822~~268

2324.95

> 12,~~237~~073

> 6.0

> 16,~~316~~097

> 8.0

Total capital (to risk‑weighted assets)

51,~~010~~520

25.06

> 16,~~316~~097

> 8.0

> 20,~~395~~122

> 10.0

Tier 1 capital (to average assets)

4849,~~822~~268

1819.70

> 10,~~471~~346

> 4.0

> 1312,~~089~~932

> 5.0

December 31, 2018

Common Equity Tier 1 capital (to risk‑weighted assets)

48,502

23.7

> 9,209

> 4.5

> 13,302

> 6.5

Tier 1 capital (to risk‑weighted assets)

48,502

23.7

> 12,279

> 6.0

> 16,372

> 8.0

Total capital (to risk‑weighted assets)

50,620

24.7

> 16,372

> 8.0

> 20,465

> 10.0

Tier 1 capital (to average assets)

48,502

18.4

> 10,542

> 4.0

> 13,178

> 5.0

Note 11 Fair Value Measurements

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

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

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

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

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

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

Information regarding the fair value of assets measured at fair value on a recurring basis as of ~~March~~June 3130, 2019 and December 31, 2018 follows:

Recurring Fair Value Measurements Using

Assets Measured at

Quoted Prices in Active Markets for Identical Instruments

Significant Other Observable Inputs

Significant Unobservable Inputs

Fair Value

(Level 1)

(Level 2)

(Level 3)

March 31, 2019

June 30, 2019

Assets - Available for sale securities

4443,~~169~~478

December 31, 2018

Assets - Available for sale securities

43,751

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. 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. Fair value measurements of underlying collateral that utilize observable market data, such as independent appraisals reflecting recent comparable sales are considered Level 2 measurements. Other fair value measurements that incorporate estimated assumptions market participants would use to measure fair value are considered Level 3 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.

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Information regarding the fair value of assets measured at fair value on a nonrecurring basis as of ~~March~~June 3130, 2019 and December 31, 2018 follows:

			Nonrecurring Fair Value Measurements Using
	Assets Measured at		Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2019
As of June 30, 2019
Assets:
Loans	$	-	$	-	$	-	$	-
Foreclosed assets		6984		-		-		6984
As of December 31, 2018
Assets :
Loans	$	-	$	-	$	-	$	-
Foreclosed assets		69		-		-		69

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The carrying value and estimated fair value of financial instruments at ~~March~~June 3130, 2019 and December 31, 2018 follow:

	March 31, 2019
	June 30, 2019
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	25,~~553~~397	$	25,~~553~~397	$	-	$	-
Available for sale securities		4443,~~169~~478		-		4443,~~169~~478		-
Loans held for sale		-1,951		-		-1,951		-
Loans		~~198~~193,~~090~~001		-		-		~~200~~194,~~197~~770
Accrued interest receivable		~~856~~777		~~856~~777		-		-
Cash value of life insurance		7,~~054~~105		-		-		7,~~054~~105
FHLB stock		609		-		-		609
Financial liabilities:
Deposits		~~180~~177,~~942~~553		9493,~~870~~971		-		8583,~~828~~719
Advance payments by borrowers for taxes and insurance		~~430~~771		~~430~~771		-		-
FHLB advances		15,750		-		-		15,~~589~~685
Accrued interest payable		~~364~~620		~~364~~620		-		-

	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		-		-

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 of other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of the financial condition and results of operations at and for the three and six months ended ~~March~~June 3130, 2019 and 2018 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:

●

statements of our goals, intentions and expectations;

●

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

●

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

●

estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

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 wethe Company have made and make;

●

adverse changes in the securities or secondary mortgage markets;

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●

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 wethe Company 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 wethe Company own.

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

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Comparison of Financial Condition at ~~March~~June 3130, 2019 and December 31, 2018

Total Assets. Total assets decreased $34.14 million, or 1.7%, to $~~259~~258.63 million at ~~March~~June 3130, 2019 from $262.7 million at December 31, 2018. This decrease was primarily due to the decrease in net loans of $5.7 million offset by the increases in cash and cash equivalents of $~~2.0~~909,000 ~~million~~ and inloans ~~net~~held ~~loans~~for sale of $~~604,000~~1.3 million.

Cash and cash equivalents. Cash and due from banks increased $~~389~~2.6 million,~~000,~~ or 22149.32%, to $24.14 million at ~~March~~June 3130, 2019 from $1.7 million at December 31, 2018. Fed funds sold decreased $21.37 million, or 8461.89%, to $~~418,000~~1.0 million at ~~March~~June 3130, 2019 from $2.7 million at December 31, 2018. The ~~decrease~~change ~~resulted~~in ~~primarily due~~change toin ~~the~~cash ~~use~~and of cash toequivalents ~~pay~~is ~~off~~due ~~maturing~~to ~~FHLB~~normal ~~advances~~fluctuations.

29Net Loans. Net loans decreased $5.7 million, or 2.9%, to $193.0 million at June 30, 2019 from $198.7 million at December 31, 2018. The decrease resulted primarily from decreases in 1-4 family owner-occupied loans of $7.4 million, or 18.0%, and multifamily loans of $3.3 million, or 9.6%, offset by increases in commercial development loans of $5.1 million, or 65.2%, and commercial real estate loans of $1.6 million, or 2.3%.

Table of Contents

~~Net~~During ~~Loans. Net~~the ~~loans~~six ~~decreased~~months ~~$604,000,~~ended orJune ~~0.3%~~30, ~~to $198.1 million at March 31~~2019, ~~2019~~the ~~from~~Company sold $~~198~~6.75 million atof ~~December~~one- ~~31,~~to ~~2018.~~four ~~The decrease resulted primarily from decreases in 1-4~~ family, owner-occupied ~~loan~~residential ofreal ~~$1.4~~estate ~~million~~loans, oron ~~3.3%,~~a ~~and~~servicing-released ~~commercial~~basis. ~~and~~Subject ~~industrial~~to ~~loans~~market ofand ~~$1.2~~economic ~~million~~conditions, ormanagement ~~9.7%~~intends ~~offset~~to bycontinue ~~increases~~this insales ~~commercial~~activity ~~development~~in ~~loans~~future ofperiods ~~$1.9~~to ~~million,~~generate orgain ~~24.6%~~on ~~and~~sale ~~commercial~~of ~~real~~loans ~~estate~~income ~~loans~~and ofmanage ~~$528,000,~~interest orrate 0risk.~~7%.~~

~~During~~Available ~~the~~for ~~three~~sale ~~months~~securities. ~~ended~~Available ~~March~~for ~~31,~~sale ~~2019~~securities decreased $273,000, weor ~~sold~~0.6%, to $243.15 million ofat ~~one-~~June to30, ~~four~~2019 ~~family,~~from ~~owner-occupied~~$43.8 ~~residential~~million ~~real~~at ~~estate~~December ~~loans~~31, on2018. This was a ~~servicing-released~~result ~~basis.~~of ~~Subject~~purchases toof ~~market~~$5.9 million and ~~economic~~a ~~conditions,~~change ~~management~~in ~~intends~~unrealized togain ~~continue~~(loss) ~~this~~of ~~sales~~$1.1 ~~activity~~million inoffset ~~future~~by ~~periods~~sales toof ~~generate~~$4.8 ~~gain~~million onand ~~sale~~maturities, ofnormal ~~loans~~paydowns ~~income~~ and ~~manage~~amortization ~~interest~~of ~~rate~~$2.3 ~~risk~~million.

~~Available~~FHLB ~~for sale securities~~stock. ~~Available~~FHLB ~~for~~stock ~~sale~~decreased ~~securities increased~~ $~~418~~130,000, or 117.06%, to $~~44.2~~609,000 ~~million~~ at ~~March~~June 3130, 2019 from $~~43.8~~739,000 ~~million~~ at December 31, 2018. ~~This was a result of purchases of $3.2 million and a decrease in unrealized loss of $600,000 offset by sales of $2.1 million and maturities, normal paydowns and amortization of $1.2 million.~~

~~FHLB~~Deposits. Deposits ~~stock~~decreased $5.6 ~~FHLB~~million, ~~stock~~or 3.1%, to $177.6 million at June 30, 2019 from $183.2 million at December 31, 2018. Noninterest-bearing checking accounts decreased $~~130~~2.1 million,~~000~~ or 9.2%, to $20.7 million as of June 30, 2019 compared to $22.8 million as of December 31, 2018. Interest-bearing checking accounts increased $3.0 million, or 1756.61%, to $~~609~~8.5 million at June 30, 2019 from $5.4 million at December 31, 2018. Additionally, money market accounts decreased $1.1 million to $40.8 million at June 30, 2019, compared to $41.9 million at December 31, 2018, and savings accounts decreased $644,000 to $13.1 million at ~~March~~June 30, 2019, compared to $13.8 million at December 31, 2018. Certificates of deposit decreased $4.6 million, or 5.2% to $83.6 million as of June 30, 2019 from $~~739~~88.1 million as of December 31, 2018. Health savings accounts decreased $283,000 to $10.9 million at June 30, 2019 from $11.2 million as of December 31, 2018.

~~Deposits~~Borrowings. ~~Deposits~~ ~~decreased $2.3 million~~Borrowings, orconsisting ~~1.2%,~~entirely toof ~~$180.9~~FHLB ~~million at March 31~~advances, ~~2019~~decreased ~~from~~ $~~183.~~2 ~~million at December 31, 2018~~.0 ~~Noninterest-bearing checking accounts decreased $4.6~~ million, or 2011.3%, to $1815.~~2 million as of March 31, 2019 compared to $22.~~8 million ~~as of December 31, 2018. Interest-bearing checking accounts increased $4.6 million, or 84.7%, to $10.0 million~~ at ~~March~~June 3130, 2019 from $517.48 million at December 31, 2018. ~~Additionally,~~The ~~money~~aggregate ~~market~~cost ~~accounts~~of ~~decreased~~outstanding ~~$273,000~~FHLB toadvances ~~$41.6~~was ~~million at March 31, 2019, compared to $41~~2.916% ~~million~~ at ~~December~~June 3130, ~~2018, and savings accounts decreased $51,000 to $13.7 million at March 31,~~ 2019, compared to ~~$13.8~~the ~~million~~cost atof ~~December~~deposits ~~31, 2018. Certificates~~ of ~~deposit decreased $2.~~1 ~~million, or 2~~.351% ~~to $86.1 million as of March 31, 2019 from $88.1 million as of December 31, 2018. Health savings accounts increased $144,000 to $11.3 million~~ at ~~March~~that ~~31, 2019 from $11~~date.~~2 million as of December 31, 2018.~~

~~Borrowings~~Other liabilities. ~~Borrowings,~~Other ~~consisting~~liabilities ~~entirely~~increased ~~of FHLB advances, decreased~~ $21.02 million, or 1190.35%, to $152.84 million at ~~March~~June 3130, 2019 from $171.83 million at December 31, 2018. ~~The aggregate cost of outstanding FHLB advances was 2.12% at March 31, 2019, compared to the cost of deposits of 1.45% at that date.~~

~~Other~~Total ~~liabilities~~Equity. Total ~~Other~~equity ~~liabilities~~increased ~~decreased~~ $24822,000, or 1.94%, to $161.32 million at ~~March~~June 3130, 2019 from $160.34 million at December 31, 2018. The increase resulted from net income of $637,000 for the six months ended June 30, 2019 and the change in net unrealized gain (loss) in available for sale securities offset by the repurchases of common stock of $871,000.

~~Total~~Nonperforming ~~Equity. Total~~Loans, ~~equity~~Potential ~~increased~~Problem ~~$479,000,~~Loans orand 0Foreclosed Properties.~~8%,~~ The Company practice early identification of non-accrual and problem loans in order to ~~$60~~minimize the Company’s risk of loss.8 ~~million~~Non-performing atloans ~~March~~are ~~31,~~defined ~~2019~~as ~~from~~non-accrual ~~$60.4~~loans ~~million~~and restructured loans that were 90 days or more past due at ~~December~~the 31time of their restructure, ~~2018~~or when management determines that such classification is warranted. The ~~increase~~accrual ~~resulted~~of ~~from~~interest ~~net~~income is generally discontinued when contractual payments have become 90 days past due or when management has serious doubts about further collectability of principal or interest. Cash receipts on non-accrual loans are used to reduce principal rather than being recorded as interest income. A troubled debt restructuring typically involves the granting of ~~$249,000~~some ~~for~~concession to the ~~period~~borrower ~~and~~involving a loan modification, such as modifying the ~~decrease~~payment inschedule ~~net~~or ~~unrealized~~making ~~loss~~interest inchanges. ~~available~~TDR ~~for~~loans ~~sale~~may ~~securities~~involve ~~offset~~loans bythat have had a charge-off taken against the ~~repurchases~~loan ofto ~~common~~reduce ~~stock~~the carrying amount of ~~$319,000~~the loan to fair market value as determined pursuant to ASC 310-10.

Nonperforming Loans, Potential Problem Loans and Foreclosed Properties. We practice early identification of non-accrual and problem loans in order to minimize the Company’s risk of loss. Non-performing loans are defined as non-accrual loans and restructured loans that were 90 days or more past due at the time of their restructure, or when management determines that such classification is warranted. The accrual of interest income is generally discontinued when contractual payments have become 90 days past due or when management has serious doubts about further collectability of principal or interest. Cash receipts on non-accrual loans are used to reduce principal rather than being recorded as interest income. A TDR typically involves the granting of some concession to the borrower involving a loan modification, such as modifying the payment schedule or making interest changes. TDR loans may involve loans that have had a charge-off taken against the loan to reduce the carrying amount of the loan to fair market value as determined pursuant to ASC 310-10.33

Table of Contents

The following table identifies the various components of non-performing assets and other balance sheet information as of the dates indicated below and changes in the ALLL for the periods then ended:

	March 31, 2019 and Three Months Then Ended			December 31, 2018 and Twelve Months Then Ended			December 31, 2017 and Twelve Months Then Ended
	June 30, 2019 and Six Months Then Ended			December 31, 2018 and Twelve Months Then Ended			December 31, 2017 and Twelve Months Then Ended
	(in thousands)
Nonperforming assets:
Nonaccrual loans	$	~~706~~1,117		$	720		$	1,243
Accruing loans past due 90 days or more		-			-			-
Total nonperforming loans ("NPLs")	$	~~706~~1,117		$	720		$	1,243
Foreclosed assets		6984			69			619
Total nonperforming assets ("NPAs")	$	~~775~~1,201		$	789		$	1,862
Troubled Debt Restructurings ("TDRs")		1,~~264~~400			1,201			1,630
Nonaccrual TDRs		~~687~~1,100			700			969
Average outstanding loan balance		~~201~~200,~~267~~246			189,233			170,577
Loans, end of period		~~200~~195,~~399~~405			200,898			179,229
ALLL, at beginning of period	$	2,118		$	1,800		$	1,478
Loans charged off:
Commercial		-			(24	)		-
Residential real estate and consumer		-(21	)		(172	)		(133	)
Total loans charged off	$	-(21	)	$	(196	)	$	(133	)
Recoveries of loans previously charged off:
Residential real estate and consumer		-			1			36
Total recoveries of loans previous charged off		-			1			36
Net loans charged off ("NCOs'")	$	-(21	)	$	(195	)	$	(97	)
Additions to ALLL via provision for loan losses charged to operations		70155			513			419
ALLL, at end of period	$	2,~~188~~252		$	2,118		$	1,800
Ratios:
ALLL to NCOs (annualized)		~~N/A~~5440.34	%		1086.15	%		1855.67	%
NCOs (annualized) to average loans		0.0002	%		0.10	%		0.06	%
ALLL to total loans		1.0915	%		1.05	%		1.00	%
NPL to total loans		0.3557	%		0.36	%		0.69	%
NPAs to total assets		0.3046	%		0.30	%		0.73	%
Total Assets	$	~~259~~258,~~587~~324		$	262,726		$	256,481

Loans 30 to 89 days past due ~~decreased~~increased $10493,000 during the ~~three~~six month period ended ~~March~~June 3130, 2019 to $~~304~~807,000 compared to $314,000 at December 31, 2018,. ~~which~~The ~~management~~Company believes ~~is indicative of a decreasing likelihood of loans migrating toward nonaccrual or nonperforming status in~~ the ~~future. We believe our~~ credit and underwriting policies continue to support more effective lending decisions by the Company, which increases the likelihood of maintain loan quality going forward. ~~Moreover,~~The weCompany believe ~~the favorable trends regarding~~ our nonperforming loans and nonperforming assets reflect our continued adherence to improved underwriting criteria and practices along with improvements in macroeconomic factors in our credit markets. We believe our current ALLL is adequate to cover probable losses in our current loan portfolio.

Non-performing loans of $1.1 million at June 30, 2019, which included $1.1 million of non-accrual troubled debt restructured loans, reflected an increase of $397,000 from the non-performing loans balance of $720,000 at December 31, 2018.

Our non-performing assets were $1.2 million at June 30, 2019, or 0.46% of total assets, compared to $789,000, or 0.30% of total assets, at December 31, 2018.

Table of Contents

~~Non-performing~~Foreclosed ~~loans~~assets ofwere $~~706~~84,000 at ~~March~~June 3130, 2019, ~~which~~compared ~~included~~to $~~687~~69,000 ofat ~~non-accrual~~December ~~troubled debt restructured loans~~31, ~~reflected~~2018. aThe ~~decrease~~Company ofstrives ~~$14,000~~to ~~from~~aggressively ~~the~~liquidate ~~non-performing~~foreclosed ~~loans~~assets ~~balance~~as part of ~~$720,000~~our atoverall ~~December~~credit ~~31,~~risk ~~2018~~management strategy.

~~Our~~Net ~~non-performing~~charge ~~assets~~offs for the six month period ended June 30, 2019 were $~~775~~21,000 atcompared ~~March~~to 31$196,000 ~~2019~~for the six month period ended June 30, or2018. The ratio of annualized net charge-offs to average loans receivable was 0.3002% offor ~~total~~the ~~assets,~~six ~~compared~~month toperiod ~~$789~~ended June 30,~~000~~ 2019, orcompared to 0.3010% offor ~~total~~the ~~assets,~~twelve atmonths ended December 31, 2018. Net charge-offs decreased during the current year to date period primarily as a result of selling nonperforming assets during 2018.

~~Foreclosed~~Comparison ~~assets~~of ~~remained~~Operating ~~unchanged~~Results atfor ~~$69,000~~the atThree ~~March~~Months 31Ended June 30, 2019 ~~from~~and ~~December~~June 3130, 2018~~. We strive to aggressively liquidate foreclosed assets as part of our overall credit risk management strategy.~~

~~Net~~General. The ~~charge~~Company ~~offs~~had net income of $388,000 for the three ~~month~~months ~~period~~ ended ~~March~~June 3130, 2019 ~~was $0~~, compared to net income of $~~106~~353,000 for the three ~~month~~months ~~period~~ ended ~~March~~June 3130, 2018., ~~The~~an ~~ratio~~increase of ~~annualized~~$35,000, ~~net~~or ~~charge-offs~~9.9%. toThe ~~average~~increase ~~loans~~in ~~receivable~~net income was ~~0.00%~~the ~~for~~net ~~the~~effect ~~three~~of ~~month~~an ~~period~~increase ~~ended~~in ~~March~~noninterest 31income of $110, ~~2019~~000, ~~compared~~or ~~to 0~~68.103%, ~~for~~a decrease in the ~~twelve~~provision ~~months~~of ~~ended~~loan ~~December~~losses 31of $104,000, ~~2018~~or 55.0%, ~~Net~~and ~~charge-offs~~a ~~decreased~~decrease ~~during~~in ~~the~~noninterest ~~current~~expenses ~~year~~of to$19,000, ~~date~~or ~~period~~1.1%, ~~primarily~~partially offset by a ~~result~~decrease ofin ~~selling~~net ~~nonperforming~~interest ~~assets~~income ~~during~~of ~~2018~~$156,000, or 7.0%.

~~Comparison~~Interest ofand ~~Operating~~dividend ~~Results~~income. Interest and dividend income increased $110,000, or 4.1%, to $2.8 million for the ~~Three~~three ~~Months~~months ~~Ended~~ended ~~March~~June 3130, 2019 ~~and~~from ~~March~~$2.7 31million for the three months ended June 30, 2018. The increase was primarily attributable to a $171,000 increase in interest on loans resulting from an increase of $13.6 million in the average balance of loans quarter to quarter. Excluding second quarter 2018 one-time adjustments of $136,000 in nonaccrual interest recognized from the payoff of nonperforming loans, the yield on loans increased by 29 basis points. This was partially offset by a $67,000 decrease in interest on available for sale securities, a result of the decrease in the average balance of available for sale securities of $14.0 million quarter to quarter while the yield increased by 17 basis points quarter to quarter.

~~General~~ Interest Expense. We ~~had~~Interest ~~net~~expense ~~income~~increased of$266,000, or 58.1%, to $~~249~~724,000 for the three months ended ~~March~~June 3130, 2019, ~~compared~~from ~~to net income of~~ $~~123~~458,000 for the three months ended ~~March~~June 3130, 2018,. anInterest ~~increase~~expense ofon interest-bearing deposits increased $~~126~~291,000, orquarter ~~102~~to quarter.~~4%.~~ The ~~increase~~average incost ~~net~~of ~~income~~our ~~was~~interest-bearing ~~the~~deposits ~~net~~increased ~~effect~~68 ofbasis anpoints ~~increase~~to in1.57% ~~net~~from ~~interest~~0.89%, ~~income~~and the average balance of interest-bearing deposits increased by $~~115~~7.2 million,~~000,~~ or 54.97%, aduring ~~decrease~~the insame ~~the~~period. ~~provision~~Interest ofexpense ~~loan~~on ~~losses~~borrowings, consisting entirely of FHLB advances, decreased $4525,000, or 3921.16%, ~~and~~to a$91,000 ~~decrease~~during inthe ~~noninterest~~three ~~expenses~~months ofended June 30, 2019 from $25116,000 during the three months ended June 30, or2018, 1as the average balance of borrowings decreased $8.~~4%,~~7 ~~offset~~million byto ~~decrease~~$16.5 inmillion ~~noninterest~~for ~~income~~the ofthree months ended June 30, 2019 from $3625.2 million for the three months ended June 30,~~000~~ 2018. Additionally, orthe 20cost of those borrowings increased 37 basis points to 2.521% for the three months ended June 30, 2019 from 1.84% for the three months ended June 30, 2018.

Net Interest ~~and dividend income~~Income. Net ~~Interest~~interest ~~and dividend~~ income ~~increased~~decreased $~~403~~156,000, or 177.20%, to $2.81 million for the three months ended ~~March~~June 3130, 2019 from $2.42 million for the three months ended ~~March~~June 3130, 2018. ~~The~~Average ~~increase~~net ~~was~~interest-earning ~~primarily~~assets ~~attributable~~increased to$1.3 amillion to $~~480,000~~68.3 ~~increase~~million infor ~~interest~~the on2019 ~~loans~~quarter ~~resulting~~ from ~~an increase of~~ $2667.70 million infor the ~~average~~2018 ~~balance~~quarter. The ofincrease ~~loans~~was ~~quarter~~due primarily to ~~quarter~~the ~~with~~decrease ain 36borrowings ~~basis~~to ~~point~~offset ~~increase~~the outflow in ~~yield~~interest-bearing ~~quarter~~deposit ~~to quarter~~accounts. ~~This~~Our ~~was~~net ~~partially~~interest ~~offset~~rate byspread andecreased ~~$86,000~~to ~~decrease~~2.93% infor ~~interest~~the onthree ~~available~~months ~~for~~ended ~~sale~~June ~~securities~~30, a2019 ~~result~~from of3.36% ~~the~~for ~~decrease in~~ the ~~average~~three ~~balance~~months ofended ~~available~~June ~~for~~30, ~~sale~~2018, ~~securities~~while ofour ~~$16.1~~net ~~million~~interest ~~quarter~~margin decreased to ~~quarter~~3.38% ~~while~~for the ~~yield~~2019 ~~increased~~quarter byfrom 113.63% ~~basis~~for ~~points~~the ~~quarter~~2018 to quarter.

~~Interest~~Provision ~~Expense~~for Loan Losses. The ~~Interest~~Company ~~expense~~recorded ~~increased~~a ~~$288,000,~~provision orfor ~~72.2%,~~loan tolosses of $~~687~~85,000 for the three months ended ~~March~~June 3130, 2019, ~~from~~compared to a $~~399~~189,000 provision for the three months ended ~~March~~June 3130, 2018., ~~Interest~~a ~~expense~~decrease onof ~~interest-bearing deposits increased~~ $~~253~~104,000, ~~quarter~~or ~~to quarter~~55.0%. The ~~average~~decrease ~~cost~~in ofthe ~~our~~provision ~~interest-bearing~~for ~~deposits~~loan ~~increased~~losses 59in ~~basis~~the ~~points~~2019 toquarter ~~1.45%~~compared ~~from~~to ~~0.86%,~~the ~~and~~2018 ~~the~~quarter ~~average~~was ~~balance~~a result of ~~interest~~charge-~~bearing~~offs ~~deposits~~in ~~increased~~the prior year quarter. The allowance for loan losses was $42.73 million, or 21.915% of total loans, ~~during~~at ~~the~~June ~~same~~30, ~~period.~~2019, ~~Interest~~compared ~~expense~~to on$1.9 ~~borrowings~~million, ~~consisting~~or ~~entirely~~0.95% of ~~FHLB~~total ~~advances~~loans, ~~increased~~at ~~$35~~June 30,~~000,~~ ~~or 66~~2018.~~0%,~~ toClassified ~~$88~~(substandard,~~000~~ ~~during~~doubtful ~~the~~and ~~three~~loss) ~~months~~commercial ~~ended~~loans ~~March~~increased 31to $828,000 at June 30, 2019 from $53250,000 ~~during~~at ~~the~~June ~~three months ended March 31~~30, 2018,. asTotal ~~the~~nonperforming ~~average~~loans ~~balance of borrowings~~ increased ~~$3.8 million~~ to $161.61 million ~~for~~at ~~the~~June ~~three months ended March 31~~30, 2019 from $12968,000 at June 30, 2018.8 ~~million~~Net charge-offs for the three months ended ~~March~~June 3130, ~~2018.~~2019 ~~Additionally~~were $21,000, ~~the~~compared ~~cost of those borrowings increased 46 basis points~~ to ~~2.12%~~$90,000 for the three months ended ~~March~~June 3130, ~~2019~~2018. ~~from~~At ~~1.66%~~June ~~for~~30, ~~the~~2019, ~~three~~all ~~months~~of ~~ended~~the ~~March~~nonperforming ~~31,~~loans ~~2018~~were contractually current.

Net Interest Income. Net interest income increased $115,000, or 5.9%, to $2.1 million for the three months ended March 31, 2019 from $1.9 million for the three months ended March 31, 2018. Average net interest-earning assets decreased $776,000 to $66.3 million for the 2019 quarter from $67.1 million for the 2018 quarter. The decrease was due primarily to the increase in borrowings to offset the outflow in noninterest-bearing deposit accounts. Our net interest rate spread decreased to 2.92% for the three months ended March 31, 2019 from 2.98% for the three months ended March 31, 2018, while our net interest margin increased to 3.33% for the 2019 quarter from 3.24% for the 2018 quarter.35

Provision for Loan Losses. We recorded a provision for loan losses of $70,000 for the three months ended March 31, 2019, compared to a $115,000 provision for the three months ended March 31, 2018, a decrease of $45,000, or 39.1%. The decrease in the provision for loan losses in the 2019 quarter compared to the 2018 quarter was a result of charge-offs in the prior year quarter. The allowance for loan losses was $2.2 million, or 1.09% of total loans, at March 31, 2019, compared to $1.8 million, or 0.98% of total loans, at March 31, 2018. Classified (substandard, doubtful and loss) commercial loans increased to $413,000 at March 31, 2019 from $255,000 at March 31, 2018. Total nonperforming loans decreased to $706,000 at March 31, 2019 from $942,000 at March 31, 2018. Net charge-offs for the three months ended March 31, 2019 were $0, compared to $106,000 for the prior year period. At March 31, 2019, all of the nonperforming loans were contractually current.

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Noninterest Income. Noninterest income ~~decreased~~increased $36110,000, or 2068.53%, to $~~140~~271,000 for the three months ended ~~March~~June 3130, 2019 from $~~176~~161,000 for the three months ended ~~March~~June 3130, 2018. The ~~decrease~~increase resulted primarily from the ~~decrease~~increase in service charges and fees of $2513,000 and aan ~~decrease~~increase in net gain on sale of securities of $1691,000.

Noninterest Expense. Noninterest expense decreased $2519,000, or 1.41%, to $1.8 million for the three months ended ~~March~~June 3130, 2019 from $1.8 million for the three months ended ~~March~~June 3130, 2018. The decrease was due to a decrease in ~~foreclosed~~salaries ~~assets~~and employee benefits expense, due to staffing efficiencies and vacancies, of $45108,000 and other noninterest expense of $6925,000, which primarily is a reduction in marketing, ~~business development, FDIC,~~ and ~~supervisory~~business ~~expenses~~development. The decrease in noninterest expense was partially offset by increases in ~~salaries~~professional ~~and~~fees ~~employee~~of ~~benefits~~$47,000, net foreclosed assets of $4010,000, occupancy and equipment of $16,000, data processing of $2311,000, and technology of $2330,000.

Income Tax Expense. WeThe Company recorded an income tax expense of $76126,000 for the three months ended ~~March~~June 3130, 2019 compared to an income tax expense of $5384,000 for the three months ended ~~March~~June 3130, 2018, an increase of $2342,000, or 4350.40%. The increase was due to an increase of $~~149~~77,000 in income before income taxes to $~~325~~514,000 for the 2019 quarter compared to $~~176~~437,000 for the 2018 quarter.

Comparison of Operating Results for the Six Months Ended June 30, 2019 and June 30, 2018

General. The Company had net income of $637,000 for the six months ended June 30, 2019, compared to net income of $476,000 for the six months ended June 30, 2018, an increase of $161,000, or 33.8%. The increase in net income was the net effect of an increase in noninterest income of $74,000, or 22.0%, a decrease in the provision of loan losses of $149,000, or 49.0%, and an decrease in noninterest expenses of $44,000, or 1.2%, offset by a decrease in net interest income of $41,000, or 1.0%.

Interest and dividend income. Interest and dividend income increased $513,000, or 10.2%, to $5.6 million for the six months ended June 30, 2019 from $5.0 million for the six months ended June 30, 2018. The increase was primarily attributable to a $651,000 increase in interest on loans resulting from an increase of $19.9 million in the average balance of loans quarter to quarter with an 18 basis point increase in yield period to period. Excluding second quarter 2018 one-time adjustments of $136,000 in nonaccrual interest recognized from the payoff of nonperforming loans, the yield on loans increased by 33 basis points. This was partially offset by a $153,000 decrease in interest on available for sale securities, a result of the decrease in the average balance of available for sale securities of $14.9 million quarter to quarter while the yield increased by 13 basis points quarter to quarter.

Interest Expense. Interest expense increased $554,000, or 64.6%, to $1.4 million for the six months ended June 30, 2019, from $857,000 for the six months ended June 30, 2018. Interest expense on interest-bearing deposits increased $544,000 period to periods. The average cost of our interest-bearing deposits increased 63 basis points to 1.51% from 0.88%, and the average balance of interest-bearing deposits increased $6.5 million, or 4.1%, during the same period. Interest expense on borrowings, consisting entirely of FHLB advances, increased $10,000, or 5.9%, to $179,000 during the six months ended June 30, 2019 from $169,000 during the six months ended June 30, 2018, as the average balance of borrowings decreased $3.3 million to $16.5 million for the six months ended June 30, 2019 from $19.9 million for the six months ended June 30, 2018. Additionally, the cost of those borrowings increased 46 basis points to 2.16% for the six months ended June 30, 2019 from 1.70% for the six months ended June 30, 2018.

Net Interest Income. Net interest income decreased $41,000, or 1.0%, to $4.1 million for the six months ended June 30, 2019 from $4.2 million for the six months ended June 30, 2018. Average net interest-earning assets increased $1.0 million to $67.3 million for the 2019 period from $66.3 million for the 2018 period. The increase was due primarily to the increase in loans and the decrease in borrowings offset by an increase in noninterest-bearing deposit accounts and a decrease in available for sale securities. Our net interest rate spread decreased to 2.93% for the six months ended June 30, 2019 from 3.18% for the six months ended June 30, 2018, while our net interest margin decreased to 3.35% for the 2019 quarter from 3.45% for the 2018 quarter.

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Provision for Loan Losses. The Company recorded a provision for loan losses of $155,000 for the six months ended June 30, 2019, compared to a $304,000 provision for the six months ended June 30, 2018, a decrease of $149,000, or 49.0%. The decrease in the provision for loan losses in the 2019 period compared to the 2018 period was a result of charge-offs in the prior year period. The allowance for loan losses was $2.3 million, or 1.15% of total loans, at June 30, 2019, compared to $1.9 million, or 0.95% of total loans, at June 30, 2018. Classified (substandard, doubtful and loss) commercial loans increased to $828,000 at June 30, 2019 from $250,000 at June 30, 2018. Total nonperforming loans increased to $1.1 million at June 30, 2019 from $968,000 at June 30, 2018. Net charge-offs for the six months ended June 30, 2019 were $21,000, compared to $196,000 for the prior year period. At June 30, 2019, all of the nonperforming loans were contractually current.

Noninterest Income. Noninterest income increased $74,000, or 22.0%, to $411,000 for the six months ended June 30, 2019 from $337,000 for the six months ended June 30, 2018. The increase resulted primarily from the increase in net gain on sale of loans of $93,000 offset by a decrease in service charges and fees of $12,000 and a decrease in net gain on sale of securities of $12,000.

Noninterest Expense. Noninterest expense decreased $44,000, or 1.2%, to $3.6 million for the six months ended June 30, 2019 from $3.6 million for the six months ended June 30, 2018. The decrease was due to a decrease in salaries and employee benefits of $68,000, due to staffing efficiencies and vacancies, as well as foreclosed assets expense of $35,000 and other noninterest expense of $94,000, which primarily is a reduction in marketing, business development, FDIC insurance, and supervisory expenses. The decrease in noninterest expense was partially offset by increases in professional fees of $41,000, data processing of $34,000, and technology of $53,000.

Income Tax Expense. The Company recorded an income tax expense of $202,000 for the six months ended June 30, 2019 compared to an income tax expense of $137,000 for the six months ended June 30, 2018, an increase of $65,000, or 47.4%. The increase was due to an increase of $226,000 in income before income taxes to $839,000 for the 2019 period compared to $613,000 for the 2018 period.

Analysis of Net Interest Income

Net interest income represents the difference between the income wethe ~~earn~~Company earns on interest-earning assets and the interest expense wethe ~~pay~~Company pays on interest-bearing liabilities. Net interest income also depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. Average balances are derived from daily average balances for all periods presented in the table. Non-accrual loans were included in the computation of average balances but have been reflected in the tables as loans carrying a zero yield. No tax-equivalent yield adjustments were made, as the effect thereof was not material. The yields set forth below include the effect of loans fees, discounts and premiums that are amortized or accreted to interest income.

	For the Three Months Ended March 31,
	For the Three Months Ended June 30,
	2019								2018
	Average Outstanding Balance			Interest		Yield/ Rate			Average Outstanding Balance			Interest		Yield/ Rate
	(in thousands)								(in thousands)
Interest-earning assets:
Loans	$	~~201~~199,~~267~~235		$	2,~~448~~497		45.8701	%	$	~~174~~185,~~591~~665		$	12,~~968~~326		45.5101	%
Available for sale securities		43,~~658~~501			~~277~~286		2.5463	%		5957,~~787~~490			~~363~~353		2.4346	%
Interest-bearing deposits		2,~~595~~486			1613		2.4709	%		52,~~526~~071			123		0.8758	%
FHLB stock		~~645~~638			98		5.5802	%		~~513~~841			412		35.1271	%
Total interest-earning assets		~~248~~245,~~165~~860			2,~~750~~804		4.4356	%		~~240~~246,~~417~~067			2,~~347~~694		34.9038	%
Noninterest-earning assets		1615,~~233~~891								1615,~~904~~901
Allowance for loan losses		(2,~~145~~219	)							(1,~~810~~855	)
Total assets	$	~~262~~259,~~253~~532							$	~~255~~260,~~511~~113
Interest-bearing liabilities:
Demand accounts	$	98,~~680~~662			3126		1.2820	%	$	4,~~230~~817			34		0.2833	%
Money market accounts		4140,~~202~~373			~~111~~132		1.0831	%		5352,~~621~~327			82103		0.6179	%
Savings accounts		1413,~~740~~755			54		0.1412	%		15,~~606~~196			87		0.2118	%
Health savings accounts		11,~~370~~199			98		0.3229	%		11,~~579~~642			76		0.2421	%
Certificates of deposit		8887,~~272~~112			~~443~~463		2.0113	%		7569,~~550~~890			~~246~~222		1.3027	%
Total interest-bearing deposits		~~165~~161,~~264~~101			~~599~~633		1.4557	%		~~160~~153,~~586~~872			~~346~~342		0.8689	%
Borrowings		16,~~596~~492			8891		2.1221	%		1225,~~750~~197			53116		1.6684	%
Total interest-bearing liabilities		~~181~~177,~~860~~593			~~687~~724		1.5163	%		~~173~~179,~~336~~069			~~399~~458		01.9202	%
Noninterest-bearing deposits		1718,~~716~~790								2120,~~788~~783
Other non-interest bearing liabilities		12,~~969~~188								1,~~288~~123
Total liabilities		~~201~~198,~~545~~571								~~196~~200,~~412~~975
Equity		60,~~708~~961								59,~~099~~138
Total liabilities and equity	$	~~262~~259,~~253~~532							$	~~255~~260,~~511~~113
Net interest income					2,~~063~~080								12,~~948~~236
Net interest rate spread							2.9293	%							23.9836	%
Net interest-earning assets		6668,~~305~~267								6766,~~081~~998
Net interest margin							3.3338	%							3.2463	%
Average of interest-earning assets to interest-bearing liabilities		~~136~~138	%							~~139~~137	%

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	For the Six Months Ended June 30,
	2019								2018
	Average Outstanding Balance			Interest		Yield/ Rate			Average Outstanding Balance			Interest		Yield/ Rate
	(in thousands)								(in thousands)
Interest-earning assets:
Loans	$	200,246		$	4,945		4.94	%	$	180,390		$	4,294		4.76	%
Available for sale securities		43,579			563		2.58	%		58,451			716		2.45	%
Interest-bearing deposits		2,540			29		2.28	%		3,293			15		0.91	%
FHLB stock		642			17		5.30	%		700			16		4.57	%
Total interest-earning assets		247,007			5,554		4.50	%		242,834			5,041		4.15	%
Noninterest-earning assets		16,683								16,414
Allowance for loan losses		(2,182	)							(1,835	)
Total assets	$	260,885							$	257,413

Interest-bearing liabilities:
Demand accounts	$	9,168			57		1.24	%	$	4,502			7		0.31	%
Money market accounts		40,785			243		1.19	%		52,764			185		0.70	%
Savings accounts		14,245			9		0.13	%		15,329			15		0.20	%
Health savings accounts		11,284			17		0.30	%		11,596			13		0.22	%
Certificates of deposit		87,689			906		2.07	%		72,493			468		1.29	%
Total interest-bearing deposits		163,171			1,232		1.51	%		156,684			688		0.88	%
Borrowings		16,544			179		2.16	%		19,862			169		1.70	%
Total interest-bearing liabilities		179,715			1,411		1.57	%		176,546			857		0.97	%
Noninterest-bearing deposits		18,256								20,538
Other non-interest bearing liabilities		1,406								1,199
Total liabilities		200,050								198,283
Equity		60,835								59,130
Total liabilities and equity	$	260,885							$	257,413

Net interest income					4,143								4,184
Net interest rate spread							2.93	%							3.18	%
Net interest-earning assets		67,292								66,288
Net interest margin							3.35	%							3.45	%
Average of interest-earning assets to interest-bearing liabilities		137	%							138	%

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Rate/Volume Analysis. The following table presents the dollar amount of changes in interest income and interest expense for the components of interest earning assets and interest-bearing liabilities that are presented in the preceding table. For each category of interest earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) changes in volume, which are changes in the average outstanding balances multiplied by the prior period rate (i.e. holding the initial rate constant); and (2) changes in rate, which are changes in average interest rates multiplied by the prior period volume (i.e. holding the initial balance constant). Changes due to both rate and volume which cannot be segregated have been allocated in proportion to the relationship of the dollar amounts of the change in each category.

For Three Months Ended March 31,
For Three Months Ended June 30, 2019 vs. 2018
2019 vs. 2018
	Increase (Decrease) Due to						Total Increase (Decrease)
	Volume			Rate
	(In thousands)
Interest-earning assets:
Loans	$	~~301~~170		$	~~179~~1		$	~~480~~171
Available for sale securities		(9886	)		1219			(8667	)
Interest-bearing deposits		(61	)		109			410
FHLB Stock		1(3	)		4(1	)		5(4	)
Total interest-earning assets	$	~~198~~82		$	~~205~~28		$	~~403~~110
Interest-bearing liabilities:
Demand accounts	$	43		$	2419		$	2822
Money market accounts		(1924	)		4853			29
Savings accounts		-(1	)		(32	)		(3	)
Health savings accounts		-			2			2
Certificates of deposit		4155			~~156~~186			~~197~~241
Total deposits	$	2633		$	~~227~~258		$	~~253~~291
Borrowings		16(40	)		1915			35(25	)
Total interest-bearing liabilities		42(7	)		~~246~~273			~~288~~266
Change in net interest income	$	~~156~~89		$	(41245	)	$	~~115~~(156	)

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 March 31, 2019, we had $15.8 million outstanding in advances from the FHLB-Chicago. At March 31, 2019, due to the FHLB-Chicago’s repurchase of its stock, we had no available capacity for additional FHLB-Chicago advances.39

~~Additionally,~~Table ~~at March 31, 2019 we had a $7.0 million federal funds rate line~~ of ~~credit with the Bankers’ Bank of Wisconsin, of which zero was drawn at March 31, 2019.~~Contents

For Six Months Ended June 30,
	2019 vs. 2018
	Increase (Decrease) Due to						Total Increase (Decrease)
	Volume			Rate
	(In thousands)

Interest-earning assets:
Loans	$	473		$	178		$	651
Available for sale securities		(182	)		29			(153	)
Interest-bearing deposits		(3	)		17			14
FHLB Stock		(1	)		2			1
Total interest-earning assets	$	287		$	226		$	513

Interest-bearing liabilities:
Demand accounts	$	7		$	43		$	50
Money market accounts		(42	)		100			58
Savings accounts		(1	)		(5	)		(6	)
Health savings accounts		-			4			4
Certificates of deposit		98			340			438
Total deposits	$	62		$	482		$	544

Borrowings		(28	)		38			10

Total interest-bearing liabilities		34			520			554

Change in net interest income	$	253		$	(294	)	$	(41	)

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. The Company also has the ability to borrow from the FHLB-Chicago. At June 30, 2019, the Company had $15.8 million outstanding in advances from the FHLB-Chicago. At June 30, 2019, due to the FHLB-Chicago’s repurchase of its stock, the Company had no available capacity for additional FHLB-Chicago advances.

Additionally, at June 30, 2019 the Company had a $7.0 million federal funds rate line of credit with the Bankers’ Bank of Wisconsin, of which zero was drawn at June 30, 2019.

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.

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WeThe ~~are~~Company is committed to maintaining a strong liquidity position. WeThe ~~monitor~~Company monitors our liquidity position on a daily basis. WeThe ~~anticipate~~Company anticipates that wethe Company 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, wethe ~~anticipate~~Company anticipates that wethe Company will continue to allow a significant portion of higher-costing certificates of deposit to run off at maturity. WeThe Company also ~~anticipate~~anticipates continued use of FHLB-Chicago advances as well as continuing to utilize non-core funding sources, such as the Certificate of Depository Registry Service (CDARS), as needed, to fund future loan growth and our operations.

At ~~March~~June 3130, 2019, wethe Company exceeded all of our regulatory capital requirements with a Tier 1 leverage capital of $4849.83 million, or 1819.70% of adjusted total assets, which is above the well-capitalized required level of $1312.19 million, or 5.0%; and total risk-based capital of $51.05 million, or 25.06% of risk-weighted assets, which is above the well-capitalized required level of $20.41 million, or 10.0%. Management is not aware of any conditions or events since the most recent notification that would change our category.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

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

Item 4.

Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of ~~March~~June 3130, 2019. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

During the quarter ended ~~March~~June 3130, 2019, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1.

Legal Proceedings

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

Item 1A.

Risk Factors

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

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

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

(b)

Not applicable.

(c)

Repurchase of Equity Securities.

On January 25, 2019, the Company announced that its Board of Directors had authorized the repurchase of up to 334,834 shares of the Company’s common stock, representing approximately 5.0% of the Company’s then outstanding shares. The shares may be purchased under the current repurchase program in the open market or in privately negotiated transactions from time to time depending on market conditions and other factors. As of March 31, 2019, 29,436 shares had been purchased under the current plan.41

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~~The~~On ~~table~~January ~~below~~25, ~~sets~~2019, ~~forth~~the ~~FFBW~~Company announced that its Board of Directors had authorized the repurchase of up to 334,837 ~~Inc.~~shares of the Company’s common stock, ~~repurchases~~representing ~~during~~approximately 5.00% of the ~~three~~Company’s ~~months~~then ~~ended~~outstanding ~~March~~shares. 31The shares may be purchased under the current repurchase program in the open market or in privately negotiated transactions from time to time depending on market conditions and other factors. As of June 30, 2019, 82,055 shares had been purchased under the current plan.

Period	(a) Total number of shares purchased		(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs		(d) Maximum number of shares that may yet be purchased under the plans or programs
February 1 - February 28, 2019		3,906	$	10.98		3,906		330,928
March 1 - March 31, 2019		25,530	$	10.82		25,530		305,398
Total		29,436				29,436

The table below sets forth FFBW, Inc.’s common stock repurchases during the three months ended June 30, 2019.

Period	(a) Total number of shares purchased		(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs		(d) Maximum number of shares that may yet be purchased under the plans or programs
April 1 - April 30, 2019		22,094	$	10.79		22,094		283,304
May 1 - May 31, 2019		11,604	$	10.37		11,604		271,700
June 1 - June 30, 2019		18,921	$	10.22		18,921		252,779
Total		52,619				52,619

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

3.1

Charter of FFBW, Inc. (1)

3.2

Bylaws of FFBW, Inc. (2)

31.1

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

31.2

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

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

101.0 The following materials for the quarter ended ~~March~~June 3130, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive Income, (iv) Statements of Cash Flows, and (v) Notes to Financial Statements

(1)

Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-218736).

(2)

Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-218736).

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SIGNATURES

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

		FFBW, INC.
Date: May 2, 2019		/s/ Edward H. Schaefer
Date: July 31, 2019		/s/ Edward H. Schaefer
		Edward H. Schaefer
		President and Chief Executive Officer
Date: May 2, 2019		/s/ Nikola B. Schaumberg
Date: July 31, 2019		/s/ Nikola B. Schaumberg
		Nikola B. Schaumberg
		Chief Financial Officer

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Filing Compare · FFBW, Inc.