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Cincinnati Bancorp, Inc. - Quarter Report: 2021 September (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2021

OR

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

For the transition period from                             to                            

Commission File Number: 001-39188

CINCINNATI BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland

84-2848636

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6581 Harrison Avenue, Cincinnati, Ohio

45247

(Address of principal executive offices)

(Zip Code)

(513) 574-3025

(Registrant’s telephone number, including area code)

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

Common stock, $0.01 par value per share

CNNB

The Nasdaq Stock Market, LLC

(Title of Each Class)

(Trading Symbol(s))

 

(Name of Each Exchange on Which Registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).     Yes      No

The number of outstanding shares of the registrant’s common stock as of November 8, 2021 was 2,929,622.

Table of Contents

Cincinnati Bancorp, Inc.

Form 10-Q

Index

Page

Part I. Financial Information

Item 1.

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020

1

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

3

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (Unaudited)

6

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

Item 2.

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

30

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

42

Item 4.

Controls and Procedures

42

Part II. Other Information

Item 1.

Legal Proceedings

43

Item 1A.

Risk Factors

43

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 3.

Defaults upon Senior Securities

45

Item 4.

Mine Safety Disclosures

45

Item 5.

Other Information

45

Item 6.

Exhibits

46

Signature Page

47

Table of Contents

Part I. – Financial Information

Item 1.     Financial Statements

Cincinnati Bancorp, Inc.

Condensed Consolidated Balance Sheets

September 30, 2021 (Unaudited) and December 31, 2020

    

September 30,

    

December 31, 

2021

2020

Assets

 

  

 

  

Cash and due from banks

$

2,195,909

$

2,951,787

Interest-bearing demand deposits in banks

 

8,359,573

 

23,558,019

Federal funds sold

 

4,519,000

 

5,838,000

Cash and cash equivalents

 

15,074,482

 

32,347,806

Interest-bearing time deposits

1,000,000

3,000,000

Available-for-sale debt securities

 

8,325,831

 

5,213,830

Loans held for sale

 

11,198,388

 

13,345,370

Loans, net of allowance for loan losses of $1,672,545 and $1,672,545, respectively

 

194,649,045

 

166,667,918

Premises and equipment, net

 

3,533,754

 

3,487,826

Federal Home Loan Bank stock

 

4,149,300

 

2,801,800

Interest receivable

 

578,907

 

520,775

Mortgage servicing rights

 

2,517,284

 

2,025,323

Federal Home Loan Bank lender risk account receivable

 

1,933,663

 

1,947,271

Bank-owned life insurance

 

4,235,317

 

4,172,486

Other assets

 

1,268,321

 

1,603,150

Total assets

$

248,464,292

$

237,133,555

Liabilities and Stockholders' Equity

 

 

Liabilities

 

 

Deposits

 

 

Demand

$

42,780,338

$

41,945,628

Savings

 

56,843,443

 

48,056,629

Certificates of deposit

 

86,069,004

 

62,204,786

Total deposits

 

185,692,785

 

152,207,043

Federal Home Loan Bank advances

 

16,200,000

 

38,412,000

Advances from borrowers for taxes and insurance

 

1,433,140

 

1,946,340

Interest payable

 

11,038

 

73,585

Directors deferred compensation

692,576

601,536

Deferred tax liabilities

 

741,820

 

905,975

Other liabilities

 

1,258,319

 

1,483,105

Total liabilities

 

206,029,678

 

195,629,584

Commitments and Contingent Liabilities

 

 

Stockholders' Equity

 

  

 

Preferred stock - authorized 1,000,000 shares, $0.01 par value, none issued

 

 

Common stock - authorized 14,000,000 shares, $0.01 par value; issued 2,975,625 at September 30, 2021 and December 31, 2020; outstanding 2,934,109 at September 30, 2021 and 2,975,625 at December 31, 2020

 

29,307

 

29,756

Additional paid-in capital

 

22,882,227

 

23,266,485

Unearned ESOP shares

 

(1,596,522)

 

(1,673,660)

Retained earnings - substantially restricted

 

21,481,619

 

20,173,404

Accumulated other comprehensive loss

 

(362,017)

 

(292,014)

Total stockholders' equity

 

42,434,614

 

41,503,971

Total liabilities and stockholders' equity

$

248,464,292

$

237,133,555

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

1

Table of Contents

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Operations

Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

    

2021

    

2020

    

2021

    

2020

(Unaudited)

(Unaudited)

Interest and Dividend Income

 

  

 

  

 

  

 

  

Loans, including fees

$

2,226,780

$

1,917,455

$

5,983,403

$

5,943,370

Securities

 

14,675

 

8,140

 

56,655

 

55,354

Dividends on Federal Home Loan Bank stock and other

 

15,789

 

22,796

 

44,368

 

133,968

Total interest and dividend income

 

2,257,244

 

1,948,391

 

6,084,426

 

6,132,692

Interest Expense

 

 

 

 

Deposits

 

243,973

 

385,543

 

791,311

 

1,317,389

Federal Home Loan Bank advances

 

74,234

 

228,812

 

529,744

 

716,956

Total interest expense

 

318,207

 

614,355

 

1,321,055

 

2,034,345

Net Interest Income

 

1,939,037

 

1,334,036

 

4,763,371

 

4,098,347

Provision for Loan Losses

 

 

 

 

65,000

Net Interest Income After Provision for Loan Losses

 

1,939,037

 

1,334,036

 

4,763,371

 

4,033,347

Noninterest Income

 

 

 

 

Gain on sales of loans

 

2,108,495

 

3,202,816

 

6,893,315

 

5,917,147

Mortgage servicing fees (costs)

 

(228,722)

 

(144,748)

 

105,071

 

(364,031)

Mortgage derivative income (expense)

(31,142)

(160,322)

Other

 

265,991

 

209,215

 

832,286

 

650,464

Total noninterest income

 

2,114,622

 

3,267,283

 

7,670,350

 

6,203,580

Noninterest Expense

 

 

 

 

Salaries and employee benefits

 

2,176,393

 

2,271,612

 

6,578,956

 

5,510,319

Occupancy and equipment

 

214,327

 

184,583

 

592,913

 

513,196

Directors compensation

 

42,250

 

42,251

 

126,750

 

132,583

Data processing

 

189,038

 

182,821

 

584,565

 

433,203

Professional fees

 

106,103

 

100,444

 

289,281

 

246,505

Franchise tax

 

67,500

 

55,202

 

209,812

 

166,062

Deposit insurance premiums

 

15,187

 

14,875

 

45,046

 

17,894

Advertising

 

101,958

 

79,575

 

236,635

 

190,809

Software licenses

 

36,748

 

38,483

 

97,137

 

108,023

Loan costs

 

194,981

 

194,191

 

594,672

 

412,896

FHLB advance prepayment penalties

763,319

763,319

Other

 

248,407

 

244,360

 

653,867

 

707,391

Total noninterest expense

 

4,156,211

 

3,408,397

 

10,772,953

 

8,438,881

Income (Loss) Before Income Taxes

 

(102,552)

 

1,192,922

 

1,660,768

 

1,798,046

Provision for Income Taxes (Benefit)

 

(7,731)

 

254,389

 

352,553

 

361,568

Net Income (Loss)

$

(94,821)

$

938,533

$

1,308,215

$

1,436,478

Earnings (loss) per common share - basic

$

(0.03)

$

0.34

$

0.47

$

0.52

Earnings (loss) per common share - diluted

$

(0.03)

$

0.33

$

0.46

$

0.51

Weighted-average shares outstanding - basic

 

2,740,335

 

2,748,310

 

2,746,781

 

2,749,292

Weighted-average shares outstanding - diluted

 

2,740,335

 

2,788,483

 

2,819,729

 

2,791,101

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

2

Table of Contents

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30,

    

2021

    

2020

    

2021

    

2020

(Unaudited)

(Unaudited)

Net Income (Loss)

$

(94,821)

$

938,533

$

1,308,215

$

1,436,478

Other Comprehensive Income (Loss):

 

  

 

  

 

  

 

  

Net unrealized gains (losses) on available-for-sale securities

 

(5,631)

 

13,411

 

(20,379)

 

46,993

Tax (expense) benefit

 

1,183

 

(2,816)

 

4,280

 

(9,869)

Changes in directors' retirement plan prior service costs

 

10,962

 

(12,962)

 

(30,222)

 

(38,885)

Tax (expense) benefit

 

(2,303)

 

2,722

 

(23,682)

 

8,166

Other comprehensive income (loss)

 

4,211

 

355

 

(70,003)

 

6,405

Comprehensive Income (Loss)

$

(90,610)

$

938,888

$

1,238,212

$

1,442,883

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

3

Table of Contents

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

    

    

    

    

    

    

    

    

    

Accumulated

    

    

Additional

Unearned

Other

Total

Common

Paid-in

ESOP

Retained

Comprehensive

Stockholders’

Stock

Capital

Shares

Earnings

Loss

Equity

For the Three Months Ended September 30, 2021:

Balance, July 1, 2021

$

29,756

$

23,179,224

$

(1,622,235)

$

21,576,440

$

(366,228)

$

42,796,957

ESOP shares earned

 

 

11,391

 

25,713

 

 

 

37,104

Stock based compensation expense

 

 

111,133

 

 

 

 

111,133

Net loss

 

 

 

 

(94,821)

 

 

(94,821)

Repurchase of common stock

 

(449)

 

(419,521)

 

 

 

 

(419,970)

Other comprehensive income

 

 

 

 

 

4,211

 

4,211

Balance, September 30, 2021

$

29,307

$

22,882,227

$

(1,596,522)

$

21,481,619

$

(362,017)

$

42,434,614

    

    

    

    

Accumulated

    

Additional

Unearned

Other

Total

Common

Paid-in

ESOP

Retained

Comprehensive

Stockholders'

    

Stock

    

Capital

    

Shares

    

Earnings

    

Loss

    

Equity

For the Three Months Ended September 30, 2020:

Balance, July 1, 2020

$

29,756

$

23,209,347

$

(1,725,085)

$

17,515,627

$

(284,938)

$

38,744,707

ESOP shares earned

 

 

(2,649)

 

25,713

 

 

 

23,064

Stock based compensation expense

 

 

30,392

 

 

 

 

30,392

Net income

 

 

 

 

938,533

 

 

938,533

Other comprehensive income

 

 

 

 

 

355

 

355

Balance, September 30, 2020

$

29,756

$

23,237,090

$

(1,699,372)

$

18,454,160

$

(284,583)

$

39,737,051

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

4

Table of Contents

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

Accumulated

Additional

Unearned

Other

Total

Common

Paid-in

ESOP

Retained

Comprehensive

Stockholders'

    

Stock

    

Capital

    

Shares

    

Earnings

    

Loss

    

Equity

For the Nine Months Ended September 30, 2021:

Balance, January 1, 2021

$

29,756

$

23,266,485

$

(1,673,660)

$

20,173,404

$

(292,014)

$

41,503,971

ESOP shares earned

 

 

29,551

 

77,138

 

 

 

106,689

 

  

 

  

 

  

 

  

 

  

 

  

Stock-based compensation expense

 

 

195,583

 

 

 

 

195,583

 

  

 

 

  

 

  

 

  

 

  

Net income

 

 

 

 

1,308,215

 

 

1,308,215

 

  

 

  

 

  

 

  

 

  

 

Repurchase of common stock

(449)

(609,392)

(609,841)

Other comprehensive loss

 

 

 

 

 

(70,003)

 

(70,003)

Balance, September 30, 2021

$

29,307

$

22,882,227

$

(1,596,522)

$

21,481,619

$

(362,017)

$

42,434,614

Accumulated

Additional

Unearned

Other

Total

Common

Paid-in

ESOP

Retained

Comprehensive

Stockholders'

    

Stock

    

Capital

    

Shares

    

Earnings

    

Loss

    

Equity

For the Nine Months Ended September 30, 2020:

Balance, January 1, 2020

$

29,607

$

7,529,850

$

(449,313)

$

17,017,682

$

(290,988)

$

23,836,838

Proceeds from issuance of 1,652,960 shares of common stock (which included 132,237 shares to the ESOP), net of the offering costs of $1.2 million

29,756

15,577,194

(1,322,370)

14,284,580

Contribution by CF Mutual Holding Company

50,000

50,000

Exchange of common stock

 

(29,607)

 

 

 

 

 

(29,607)

 

 

 

 

  

 

  

 

ESOP shares earned

 

 

(1,927)

 

72,311

 

 

 

70,384

 

 

 

 

  

 

  

 

  

Stock-based compensation expense

 

 

81,973

 

 

 

 

81,973

 

 

 

 

  

 

 

Net income

 

 

 

 

1,436,478

 

 

1,436,478

 

 

 

 

  

 

  

 

  

Other comprehensive income

 

 

 

 

 

6,405

 

6,405

Balance, September 30, 2020

$

29,756

$

23,237,090

$

(1,699,372)

$

18,454,160

$

(284,583)

$

39,737,051

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

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Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2021 and 2020 (Unaudited)

Nine Months Ended September 30,

    

2021

    

2020

(Unaudited)

Operating Activities

  

  

Net income

$

1,308,215

$

1,436,478

Items not requiring (providing) cash:

Depreciation and amortization

 

173,860

 

166,090

Provision for loan losses

 

 

65,000

Amortization of premiums and discounts on securities, net

 

12,764

 

18,138

Amortization of deferred prepayment penalty on Federal Home Loan Bank advances

3,086

Change in deferred income taxes

 

164,155

 

155,766

Gain on sale of loans

 

(6,893,315)

 

(5,917,147)

Proceeds from the sale of loans held for sale

 

219,434,532

 

251,935,816

Origination of loans held for sale

 

(210,394,235)

 

(261,024,458)

Mortgage servicing rights

(491,961)

(402,158)

Earnings on cash surrender value of bank-owned life insurance

 

(62,831)

 

(64,265)

Stock-based compensation expense

 

195,583

 

81,973

ESOP shares earned

 

106,689

 

70,384

Changes in:

 

 

Interest receivable

 

(58,132)

 

71,802

Federal Home Loan Bank lender risk account receivable

 

13,608

 

(53,931)

Derivative assets

226,475

Other assets

 

108,354

 

52,839

Interest payable

 

(62,547)

 

(16,105)

Derivative liabilities

(66,153)

Other liabilities

 

(445,527)

 

742,074

Net cash provided by (used in) operating activities

 

3,269,534

 

(12,678,618)

Investing Activities

 

 

Net change in interest-bearing deposits

2,000,000

(1,000,000)

Proceeds from maturities of available-for-sale securities

 

1,889,231

 

1,222,330

Purchase of available for sale securities

(5,034,375)

Purchase of Federal Home Loan Bank stock

 

(1,347,500)

 

(144,400)

Net change in loans

 

(27,981,127)

 

9,422,055

Purchase of premises and equipment

 

(219,788)

 

(305,569)

Net cash provided by (used in) investing activities

 

(30,693,559)

 

9,194,416

Financing Activities

Net increase (decrease) in deposits

33,485,742

(19,270,344)

Repurchase of common stock

(609,841)

Proceeds from issuance of common stock

14,060,646

Proceeds from Federal Home Loan Bank advances

196,500,000

14,000,000

Repayment of Federal Home Loan Bank advances

(218,712,000)

(20,663,152)

Net decrease in advances from borrowers for taxes and insurance

(513,200)

(506,211)

Net cash provided by (used in) financing activities

10,150,701

(12,379,061)

Decrease in Cash and Cash Equivalents

(17,273,324)

(15,863,263)

Cash and Cash Equivalents, Beginning of Period

32,347,806

37,735,266

Cash and Cash Equivalents, End of Period

$

15,074,482

$

21,872,003

Supplemental Cash Flows Information

Interest paid

$

1,383,602

$

2,050,450

Income taxes paid

455,000

231,193

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

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Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1:       Nature of Operations and Summary of Significant Account Policies

Nature of Operations

Cincinnati Bancorp (“Bancorp”), the predecessor to Cincinnati Bancorp, Inc. (“Company”), was the mid-tier holding company for Cincinnati Federal (the “Bank”), a federally chartered stock savings and loan association that is primarily engaged in providing a full range of banking and financial services to individual and corporate customers. Our business operations are conducted in the larger Greater Cincinnati/Northern Kentucky metropolitan area which includes Hamilton, Warren, Butler and Clermont Counties in Ohio, Boone, Kenton and Campbell Counties in Kentucky, and Dearborn County, Indiana.

On October 14, 2015, the Bank had reorganized into the mutual holding company structure. As part of the reorganization, the Bancorp sold 773,663 shares of common stock at a price of $10.00 per share in a public offering and issued 945,587 shares of common stock to CF Mutual Holding Company, the Bancorp’s parent mutual holding company.

On December 20, 2019, the Bancorp’s shareholders approved a plan of conversion and reorganization, whereby CF Mutual Holding Company and Cincinnati Bancorp would convert and reorganize from the mutual holding company structure to the stock holding company structure. The conversion and reorganization were completed effective January 22, 2020, whereby the Company, a Maryland corporation and successor to the Bancorp, sold a total of 1,652,960 shares of common stock at a price of $10.00 per share in the subscription offering, which included 132,237 shares sold to Cincinnati Federal’s Employee Stock Ownership Plan, and issued 1,322,665 shares of common stock in exchange for the outstanding shares of common stock of the Bancorp owned by stockholders other than CF Mutual Holding Company. The exchange ratio for previously held shares of Cincinnati Bancorp was 1.6351 as applied in the conversion offering. References herein to the “Company” include Cincinnati Bancorp, Inc. and Cincinnati Bancorp before completion of the conversion.

The Company is subject to competition from other financial institutions. The Company is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

Principles of Consolidation

The accompanying condensed consolidated financial statements as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020 include the accounts of the Company and the Bank. All significant intercompany items have been eliminated in consolidation.

Interim Financial Statements

The interim condensed consolidated financial statements as of September 30, 2021, and for the three and nine months ended September 30, 2021 and 2020, are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments contained in these unaudited consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been omitted. The results of operations for the three and nine months ended September 30, 2021, are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 2021, or any other period.

The accompanying condensed consolidated financial statements as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020, should be read in conjunction with the audited consolidated financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020 and 2019 contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Use of Estimates

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

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

Revisions

Certain immaterial revisions have been made to the 2020 condensed consolidated financial statements for a change in earnings per share and diluted earnings per share more fully discussed in Note 4. These revisions did not have a significant impact on the financial line items impacted.

Revenue Recognition

The Company accounts for revenues in accordance with accounting guidance that provides that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Interest income, net securities gains (losses), gains from the sale of mortgage loans and earnings on bank-owned life insurance are not covered under ASC 606 and are recognized as contractually earned. For other revenue streams including service charges on deposits and electronic banking fees, there are no significant judgments related to the amount and timing of revenue recognition. All of the Company’s revenue from contracts with customers is recognized within other noninterest income.

Service charges on deposit accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance and overdraft services. Transaction-based fees, which include services such as stop payment charges, statement rendering and other fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs.

Service charges on deposits are withdrawn from the customer’s account balance. Service charges are recorded in other noninterest income.

Interchange income: The Company earns interchange income from cardholder transactions conducted through the various payment networks. Interchange income from cardholder transactions represent a percentage of the underlying transaction value and is recognized daily, concurrently with the transaction processing services provided to the cardholder. The gross amount of these fees is processed through noninterest income. Interchange fees are recorded in other noninterest income.

NOTE 2:        Securities

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

For debt securities with fair value below amortized cost, when the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, the Company recognizes the credit

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Table of Contents

Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.

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

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Cost

Gains

Losses

Fair Value

Available-for-Sale Debt Securities:

September 30, 2021 (unaudited):

 

  

 

  

 

  

 

  

Mortgage-backed securities of government sponsored entities

$

8,302,899

$

46,513

$

(23,581)

$

8,325,831

December 31, 2020:

 

  

 

  

 

  

 

  

Mortgage-backed securities of government sponsored entities

$

5,170,519

$

46,278

$

(2,967)

$

5,213,830

The Company had no sales of investment securities during the three and nine month periods ended September 30, 2021 or 2020. The Company had not pledged any of its investment securities as of September 30, 2021 or December 31, 2020.

The amortized cost and fair value of available-for-sale securities at September 30, 2021 and December 31, 2020, by contractual maturity is not disclosed for mortgage-backed securities, as expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Certain investments in debt securities have fair values at an amount less than their historical cost. The total fair value of these investments at September 30, 2021 and December 31, 2020 was $4,365,705 and $192,587, respectively, which was approximately 52.4% and 3.7%, respectively, of the Company’s investment portfolio at those respective dates.

The following tables show the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment class and length of time that the individual securities have been in continuous unrealized loss position at September 30, 2021 and December 31, 2020:

Less than 12 Months

12 Months or More

Total

    

    

Unrealized

    

    

Unrealized

    

    

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

September 30, 2021 (unaudited):

 

  

 

  

 

  

 

  

 

  

 

  

Mortgage-backed securities of government sponsored entities

$

4,243,219

$

(20,905)

$

122,486

$

(2,676)

$

4,365,705

$

(23,581)

December 31, 2020:

 

  

 

  

 

 

 

 

Mortgage-backed securities of government sponsored entities

$

51,122

$

(617)

$

141,465

$

(2,350)

$

192,587

$

(2,967)

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Table of Contents

Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 3:       Loans and Allowance for Loan Losses

Categories of loans at September 30, 2021 and December 31, 2020 include:

    

September 30,

    

December 31, 

2021

2020

(unaudited)

One to four family mortgage loans - owner occupied

$

73,357,873

$

72,697,588

One to four family - investment

 

10,453,543

 

12,058,824

Multi-family mortgage loans

 

52,128,040

 

41,749,223

Nonresidential mortgage loans

 

41,687,527

 

29,531,917

Construction and land loans

 

17,516,603

 

5,841,415

Real estate secured lines of credit

 

10,425,302

 

9,934,387

Commercial loans

 

314,512

 

736,979

Other consumer loans

 

358,909

 

338,709

Total loans

 

206,242,309

 

172,889,042

Less:

 

 

Net deferred loan costs

 

(414,784)

 

(332,908)

Undisbursed portion of loans

 

10,335,503

 

4,881,487

Allowance for loan losses

 

1,672,545

 

1,672,545

Net loans

$

194,649,045

$

166,667,918

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Table of Contents

Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following tables present the activity in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method for the three and nine months ended September 30, 2021 and 2020 and the year ended December 31, 2020:

At or for the Nine Months Ended September 30, 2021 (Unaudited)

    

One- to Four-

    

One- to Four-

    

    

    

    

    

    

    

Family

Family

Real Estate

Mortgage

Mortgage

Multi-Family

Nonresidential

Construction

Secured

Other

Loans Owner

Loans

Mortgage

Mortgage

& Land

Lines of

Commercial

Consumer

Occupied

Investment

Loans

Loans

Loans

Credit

Loans

Loans

Total

Allowance for loan losses:

Balance, beginning of period

$

416,404

$

99,978

$

670,822

$

316,332

$

96,435

$

49,336

$

17,111

$

6,127

$

1,672,545

Provision (credit) charged to expense

(107,622)

(45,381)

2,065

33,960

158,920

(19,368)

(16,802)

(5,772)

Losses charged off

 

 

 

-

 

 

 

 

 

Recoveries

 

 

 

 

 

 

 

 

 

Balance, end of period

$

308,782

$

54,597

$

672,887

$

350,292

$

255,355

$

29,968

$

309

$

355

$

1,672,545

Ending balance: Individually evaluated for impairment

$

61,430

$

40,075

$

$

$

$

$

$

$

101,505

Ending balance: Collectively evaluated for impairment

$

247,352

$

14,522

$

672,887

$

350,292

$

255,355

$

29,968

$

309

$

355

$

1,571,040

Loans:

 

 

 

 

 

 

 

 

 

Ending balance

$

73,357,873

$

10,453,543

$

52,128,040

$

41,687,527

$

17,516,603

$

10,425,302

$

314,512

$

358,909

$

206,242,309

Ending balance: Individually evaluated for impairment

$

1,172,313

$

438,395

$

127,591

$

$

$

55,788

$

$

$

1,794,087

Ending balance: Collectively evaluated for impairment

$

72,185,560

$

10,015,148

$

52,000,449

$

41,687,527

$

17,516,603

$

10,369,514

$

314,512

$

358,909

$

204,448,222

At or for the Three Months Ended September 30, 2021 (Unaudited)

    

One- to Four-

    

One- to Four-

    

    

    

    

    

    

    

Family

Family

Real Estate

Mortgage

Mortgage

Multi-Family

Nonresidential

Construction

Secured

Other

Loans Owner

Loans

Mortgage

Mortgage

& Land

Lines of

Commercial

Consumer

Occupied

Investment

Loans

Loans

Loans

Credit

Loans

Loans

Total

Allowance for loan losses:

  

  

    

  

    

  

    

  

    

  

    

  

    

  

Balance, beginning of period

$

360,808

$

62,664

$

672,333

$

316,198

$

230,665

$

29,108

$

406

$

363

$

1,672,545

Provision (credit) charged to expense

(52,026)

(8,067)

554

34,094

24,690

860

(97)

(8)

-

Losses charged off

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Recoveries

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Balance, end of period

$

308,782

$

54,597

$

672,887

$

350,292

$

255,355

$

29,968

$

309

$

355

$

1,672,545

At or for the Nine Months Ended September 30, 2020 (Unaudited)

One- to Four-
Family
Mortgage
Loans Owner
Occupied

One- to Four-
Family
Mortgage
Loans
Investment

Multi-Family
Mortgage
Loans

Nonresidential
Mortgage
Loans

Construction
& Land
 Loans

Real Estate
Secured
Lines of
Credit

Commercial
Loans

Other
Consumer
Loans

Total

    

    

    

    

    

    

    

    

    

Allowance for loan losses:

Balance, beginning of period

$

324,647

$

82,219

$

524,183

$

277,026

$

69,457

$

105,187

$

11,408

$

13,418

$

1,407,545

Provision (credit) charged to expense

 

53,694

 

1,349

 

(155,411)

 

157,250

 

15,485

 

(18,670)

 

19,080

 

(7,777)

 

65,000

Losses charged off

 

 

 

 

 

 

 

 

 

Recoveries

 

 

 

 

 

 

 

 

 

Balance, end of period

$

378,341

$

83,568

$

368,772

$

434,276

$

84,942

$

86,517

$

30,488

$

5,641

$

1,472,545

At or for the Three Months Ended September 30, 2020 (Unaudited)

One- to Four-
Family
Mortgage
Loans Owner
Occupied

One- to Four-
Family
Mortgage
Loans
Investment

Multi-Family
Mortgage
Loans

Nonresidential
Mortgage
Loans

Construction
& Land
 Loans

Real Estate
Secured
Lines of
Credit

Commercial
Loans

Other
Consumer
Loans

Total

    

    

    

    

    

    

    

    

    

Allowance for loan losses: