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

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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 June 30, 2021

☐ 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 August 11, 2021 was 2,933,625.

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Cincinnati Bancorp, Inc.

Form 10-Q

Index


		Page

Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020	1

	Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	2

	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	3

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 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	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43

Item 4.	Controls and Procedures	43

Part II. Other Information

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3.	Defaults upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	47

	Signature Page	48

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Part I. – Financial Information

Item 1. Financial Statements

Cincinnati Bancorp, Inc.

Condensed Consolidated Balance Sheets

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


	June 30,		December 31,
	2021		2020

Assets
Cash and due from banks	$	2,108,054	$	2,951,787
Interest-bearing demand deposits in banks		7,477,440		23,558,019
Federal funds sold		6,152,000		5,838,000

Cash and cash equivalents		15,737,494		32,347,806

Interest-bearing time deposits		1,500,000		3,000,000
Available-for-sale debt securities		9,170,776		5,213,830
Loans held for sale		12,822,300		13,345,370
Loans, net of allowance for loan losses of $1,672,545 and $1,672,545, respectively		192,343,365		166,667,918
Premises and equipment, net		3,474,669		3,487,826
Federal Home Loan Bank stock		3,766,100		2,801,800
Interest receivable		566,796		520,775
Mortgage servicing rights		2,716,301		2,025,323
Federal Home Loan Bank lender risk account receivable		1,927,124		1,947,271
Bank-owned life insurance		4,213,985		4,172,486
Other assets		1,531,028		1,603,150

Total assets	$	249,769,938	$	237,133,555

Liabilities and Stockholders' Equity

Liabilities
Deposits
Demand	$	40,297,353	$	41,945,628
Savings		54,524,077		48,056,629
Certificates of deposit		62,473,051		62,204,786
Total deposits		157,294,481		152,207,043

Federal Home Loan Bank advances		46,312,000		38,412,000
Advances from borrowers for taxes and insurance		1,018,783		1,946,340
Interest payable		59,856		73,585
Directors deferred compensation		688,857		601,536
Deferred tax liabilities		757,791		905,975
Other liabilities		841,213		1,483,105

Total liabilities		206,972,981		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 June 30, 2021 and December 31, 2020; outstanding 2,961,634 at June 30, 2021 and 2,975,625 at December 31, 2020		29,756		29,756
Additional paid-in capital		23,179,224		23,266,485
Unearned ESOP shares		(1,622,235)		(1,673,660)
Retained earnings - substantially restricted		21,576,440		20,173,404
Accumulated other comprehensive loss		(366,228)		(292,014)

Total stockholders' equity		42,796,957		41,503,971

Total liabilities and stockholders' equity	$	249,769,938	$	237,133,555

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

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Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Income

Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

	(Unaudited)				(Unaudited)
Interest and Dividend Income
Loans, including fees	$	1,875,716	$	2,014,550	$	3,756,623	$	4,025,915
Securities		20,596		20,496		33,076		47,214
Dividends on Federal Home Loan Bank stock and other		14,493		25,813		37,484		111,172
Total interest and dividend income		1,910,805		2,060,859		3,827,183		4,184,301

Interest Expense
Deposits		255,061		428,742		547,338		931,846
Federal Home Loan Bank advances		247,850		239,762		455,510		488,144
Total interest expense		502,911		668,504		1,002,848		1,419,990

Net Interest Income		1,407,894		1,392,355		2,824,335		2,764,311

Provision for Loan Losses		—		—		—		65,000

Net Interest Income After Provision for Loan Losses		1,407,894		1,392,355		2,824,335		2,699,311

Noninterest Income
Gain on sales of loans		1,927,553		2,275,977		4,784,820		2,714,331
Mortgage servicing fees (costs)		247,650		(115,769)		333,793		(219,283)
Mortgage derivative income (expense)		(433,875)		—		(129,180)		—
Other		269,292		248,506		575,295		441,249
Total noninterest income		2,010,620		2,408,714		5,564,728		2,936,297

Noninterest Expense
Salaries and employee benefits		2,207,502		1,937,933		4,402,563		3,238,707
Occupancy and equipment		182,222		177,547		378,586		328,613
Directors compensation		42,250		44,583		84,500		90,333
Data processing		180,619		129,124		395,527		250,382
Professional fees		91,376		74,333		183,178		146,062
Franchise tax		72,510		55,202		142,312		110,860
Deposit insurance premiums		15,020		3,019		29,859		3,019
Advertising		97,563		43,595		134,677		111,234
Software licenses		33,626		36,569		60,389		69,540
Loan costs		186,268		150,552		399,691		218,705
Other		219,070		244,025		414,461		463,031
Total noninterest expense		3,328,026		2,896,482		6,625,743		5,030,486

Income Before Income Taxes		90,488		904,587		1,763,320		605,122

Provision for Income Taxes		9,964		180,594		360,284		107,179

Net Income	$	80,524	$	723,993	$	1,403,036	$	497,943

Earnings per common share - basic	$	0.03	$	0.26	$	0.51	$	0.18
Earnings per common share - diluted	$	0.03	$	0.26	$	0.49	$	0.18
Weighted-average shares outstanding - basic		2,747,331		2,738,353		2,750,057		2,749,782
Weighted-average shares outstanding - diluted		2,819,644		2,775,340		2,819,131		2,792,341

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

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Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income

Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

	(Unaudited)				(Unaudited)
Net Income	$	80,524	$	723,993	$	1,403,036	$	497,943

Other Comprehensive Income (Loss):
Net unrealized gains (losses) on available-for-sale securities		(42,270)		92,535		(14,748)		33,582
Tax (expense) benefit		8,877		(19,432)		3,097		(7,052)
Changes in directors' retirement plan prior service costs		10,962		(13,568)		(41,183)		(25,923)
Tax (expense) benefit		(2,302)		2,849		(21,380)		5,444
Other comprehensive income (loss)		(24,733)		62,384		(74,214)		6,051

Comprehensive Income	$	55,791	$	786,377	$	1,328,822	$	503,994

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

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Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Six Months Ended June 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 Ended June 30, 2021:

Balance, April 1, 2021	$	29,756	$	23,265,450	$	(1,647,947)	$	21,495,916	$	(341,495)	$	42,801,680

ESOP shares earned		—		12,170		25,712		—		—		37,882

Stock based compensation expense		—		55,915		—		—		—		55,915

Net income		—		—		—		80,524		—		80,524

Repurchase of common stock		—		(154,311)		—		—		—		(154,311)

Other comprehensive loss		—		—		—		—		(24,733)		(24,733)

Balance, June 30, 2021	$	29,756	$	23,179,224	$	(1,622,235)	$	21,576,440	$	(366,228)	$	42,796,957


									Accumulated
			Additional		Unearned				Other		Total
	Common		Paid-in		ESOP		Retained		Comprehensive		Stockholders'
	Stock		Capital		Shares		Earnings		Loss		Equity
For the Three Ended June 30, 2020:

Balance, April 1, 2020	$	29,756	$	23,187,302	$	(1,750,797)	$	16,791,633	$	(347,322)	$	37,910,572


ESOP shares earned		—		(3,745)		25,712		—		—		21,967

Stock based compensation expense		—		25,790		—		—		—		25,790

Net income		—		—		—		723,993		—		723,993

Other comprehensive income		—		—		—		—		62,384		62,384

Balance, June 30, 2020	$	29,756	$	23,209,347	$	(1,725,085)	$	17,515,626	$	(284,938)	$	38,744,706

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

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Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three and Six Months Ended June 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 Six Months Ended June 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		—		18,162		51,425		—		—		69,587

Stock-based compensation expense		—		84,449		—		—		—		84,449

Net income		—		—		—		1,403,036		—		1,403,036

Repurchase of common stock		—		(189,872)		—		—		—		(189,872)

Other comprehensive loss		—		—		—		—		(74,214)		(74,214)

Balance, June 30, 2021	$	29,756	$	23,179,224	$	(1,622,235)	$	21,576,440	$	(366,228)	$	42,796,957


			Additional		Unearned				Other		Total
	Common		Paid-in		ESOP		Retained		Comprehensive		Stockholders'
	Stock		Capital		Shares		Earnings		Loss		Equity
For the Six Months Ended June 30, 2020:

Balance, January 1, 2020	$	29,607	$	7,529,850	$	(449,313)	$	17,017,683	$	(290,989)	$	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		—		721		46,598		—		—		47,319

Stock-based compensation expense		—		51,582		—		—		—		51,582

Net income		—		—		—		497,943		—		497,943

Other comprehensive income		—		—		—		—		6,051		6,051

Balance, June 30, 2020	$	29,756	$	23,209,347	$	(1,725,085)	$	17,515,626	$	(284,938)	$	38,744,706

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

Six Months Ended June 30, 2021 and 2020 (Unaudited)


	Six Months Ended June 30,
	2021		2020

Operating Activities
Net income	$	1,403,036	$	497,943
Items not requiring (providing) cash:
Depreciation and amortization		114,087		110,327
Provision for loan losses		—		65,000
Amortization of premiums and discounts on securities, net		5,836		11,637
Amortization of deferred prepayment penalty on Federal Home Loan Bank advances		—		2,315
Change in deferred income taxes		148,184		284,693
Gain on sale of loans		(4,784,820)		(2,714,331)
Proceeds from the sale of loans held for sale		158,036,785		121,567,144
Origination of loans held for sale		(152,728,895)		(135,391,885)
Mortgage servicing rights		(690,978)		(43,027)
Earnings on cash surrender value of bank-owned life insurance		(41,499)		(42,497)
Stock-based compensation expense		84,449		51,582
ESOP shares earned		69,587		47,319
Changes in:
Interest receivable		(46,021)		61,716
Federal Home Loan Bank lender risk account receivable		20,147		13,047
Derivative assets		201,121		—
Other assets		(128,999)		(76,364)
Interest payable		(13,729)		(14,813)
Derivative liabilities		(71,941)		—
Other liabilities		(838,464)		(44,599)
Net cash provided by (used in) operating activities		737,886		(15,614,793)

Investing Activities
Net change in interest-bearing deposits		1,500,000		(1,500,000)
Proceeds from maturities of available-for-sale securities		1,056,845		751,761
Purchase of available for sale securities		(5,034,375)		—
Purchase of Federal Home Loan Bank stock		(964,300)		(144,400)
Net change in loans		(25,675,447)		17,273,543
Purchase of premises and equipment		(100,930)		(294,393)
Net cash provided by (used in) investing activities		(29,218,207)		16,086,511

Financing Activities
Net increase (decrease) in deposits		5,087,438		(17,567,513)
Repurchase of common stock		(189,872)		—
Proceeds from issuance of common stock		—		14,060,646
Proceeds from Federal Home Loan Bank advances		17,500,000		14,000,000
Repayment of Federal Home Loan Bank advances		(9,600,000)		(19,400,000)
Net decrease in advances from borrowers for taxes and insurance		(927,557)		997
Net cash provided by (used in) financing activities		11,870,009		(8,905,870)

Decrease in Cash and Cash Equivalents		(16,610,312)		(8,434,152)
Cash and Cash Equivalents, Beginning of Period		32,347,806		37,735,266
Cash and Cash Equivalents, End of Period	$	15,737,494	$	29,301,114

Supplemental Cash Flows Information
Interest paid	$	1,016,577	$	1,434,803
Income taxes paid		455,000		—

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.

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.

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Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Principles of Consolidation

The accompanying condensed consolidated financial statements as of June 30, 2021 and December 31, 2020 and for the three and six months ended June 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 June 30, 2021, and for the three and six months ended June 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 six months ended June 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 June 30, 2021 and December 31, 2020 and for the three and six months ended June 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.

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.

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

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Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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:

June 30, 2021 (unaudited):
Mortgage-backed securities of government sponsored entities	$	9,142,213	$	55,718	$	(27,155)	$	9,170,776

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 six month periods ended June 30, 2021 or 2020. The Company had not pledged any of its investment securities as of June 30, 2021 or December 31, 2020.

The amortized cost and fair value of available-for-sale securities at June 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 June 30, 2021 and December 31, 2020 was $4,872,946 and $192,587, respectively, which was approximately 53.1% 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 June 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
June 30, 2021 (unaudited):
Mortgage-backed securities of government sponsored entities	$	4,824,200	$	(26,646)	$	48,746	$	(509)	$	4,872,946	$	(27,155)

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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Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 3: Loans and Allowance for Loan Losses

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


	June 30,		December 31,
	2021		2020
	(unaudited)

One to four family mortgage loans - owner occupied	$	77,823,417	$	72,697,588
One to four family - investment		10,788,072		12,058,824
Multi-family mortgage loans		52,010,529		41,749,223
Nonresidential mortgage loans		37,425,392		29,531,917
Construction and land loans		15,711,968		5,841,415
Real estate secured lines of credit		10,189,144		9,934,387
Commercial loans		404,961		736,979
Other consumer loans		361,919		338,709
Total loans		204,715,402		172,889,042

Less:
Net deferred loan costs		(390,098)		(332,908)
Undisbursed portion of loans		11,089,590		4,881,487
Allowance for loan losses		1,672,545		1,672,545

Net loans	$	192,343,365	$	166,667,918

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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 six months ended June 30, 2021 and 2020 and the year ended December 31, 2020:


	At or For the Six Months Ended June 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		(55,596)		(37,314)		1,511		(134)		134,230		(20,228)		(16,705)		(5,764)		—
Losses charged off		—		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		—		—		—		—
Balance, end of period	$	360,808	$	62,664	$	672,333	$	316,198	$	230,665	$	29,108	$	406	$	363	$	1,672,545

Ending balance: Individually evaluated for impairment	$	61,431	$	54,071	$	—	$	—	$	—	$	—	$	—	$	—	$	115,502

Ending balance: Collectively evaluated for impairment	$	299,377	$	8,593	$	672,333	$	316,198	$	230,665	$	29,108	$	406	$	363	$	1,557,043
Loans:
Ending balance	$	77,823,417	$	10,788,072	$	52,010,529	$	37,425,392	$	15,711,968	$	10,189,144	$	404,961	$	361,919	$	204,715,402

Ending balance: Individually evaluated for impairment	$	1,307,857	$	444,164	$	128,886	$	—	$	—	$	56,671	$	—	$	—	$	1,937,578

Ending balance: Collectively evaluated for impairment	$	76,515,560	$	10,343,908	$	51,881,643	$	37,425,392	$	15,711,968	$	10,132,473	$	404,961	$	361,919	$	202,777,824


	At or For Three Months Ended June 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	$	362,568	$	121,520	$	680,132	$	293,812	$	160,203	$	36,936	$	11,677	$	5,697	$	1,672,545
Provision (credit) charged to expense		(1,760)		(58,856)		(7,799)		22,386		70,462		(7,828)		(11,271)		(5,334)		—
Losses charged off		—		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		—		—		—		—
Balance, end of period	$	360,808	$	62,664	$	672,333	$	316,198	$	230,665	$	29,108	$	406	$	363	$	1,672,545


	At or For the Six Months Ended June 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		124,866		15,522		(176,066)		120,196		6,137		(39,465)		20,812		(7,002)		65,000
Losses charged off		—		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		—		—		—		—
Balance, end of period	$	449,513	$	97,741	$	348,117	$	397,222	$	75,594	$	65,722	$	32,220	$	6,416	$	1,472,545


	At or For Three Months Ended June 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	$	218,676	$	154,898	$	480,541	$	416,193	$	81,451	$	99,062	$	16,401	$	5,323	$	1,472,545
Provision (credit) charged to expense		230,837		(57,157)		(132,424)		(18,971)		(5,857)		(33,340)		15,819		1,093		—
Losses charged off		—		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		—		—		—		—
Balance, end of period	$	449,513	$	97,741	$	348,117	$	397,222	$	75,594	$	65,722	$	32,220	$	6,416	$	1,472,545

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Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)


	At or For the Year Ended December 31, 2020
	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 loans:
Balance, beginning of year	$	324,647	$	82,219	$	524,183	$	277,026	$	69,457	$	105,187	$	11,408	$	13,418	$	1,407,545
Provision (credit) charged to expense		91,757		17,759		146,639		39,306		26,978		(55,851)		5,703		(7,291)		265,000
(Charge-offs) recoveries		—		—		—		—		—		—		—		—		—
Balance, end of year	$	416,404	$	99,978	$	670,822	$	316,332	$	96,435	$	49,336	$	17,111	$	6,127	$	1,672,545

Ending balance: Individually evaluated for impairment	$	20,722	$	40,075	$	—	$	—	$	—	$	—	$	—	$	—	$	60,797

Ending balance: Collectively evaluated for impairment	$	395,682	$	59,903	$	670,822	$	316,332	$	96,435	$	49,336	$	17,111	$	6,127	$	1,611,748
Loans:
Ending balance	$	72,697,588	$	12,058,824	$	41,749,223	$	29,531,917	$	5,841,415	$	9,934,387	$	736,979	$	338,709	$	172,889,042

Ending balance: Individually evaluated for impairment	$	1,236,597	$	561,660	$	210,524	$	—	$	—	$	58,557	$	—	$	—	$	2,067,338

Ending balance: Collectively evaluated for impairment	$	71,460,991	$	11,497,164	$	41,538,699	$	29,531,917	$	5,841,415	$	9,875,830	$	736,979	$	338,709	$	170,821,704

The Company has adopted a standard grading system for all loans.

Definitions are as follows:

Prime (1) loans are of superior quality with excellent credit strength and repayment ability proving a nominal credit risk.

Good (2) loans are of above average credit strength and repayment ability proving only a minimal credit risk.

Satisfactory (3) loans are of reasonable credit strength and repayment ability proving an average credit risk due to one or more underlying weaknesses.

Acceptable (4) loans are of the lowest acceptable credit strength and weakened repayment ability providing a cautionary credit risk due to one or more underlying weaknesses. New borrowers are typically not underwritten within this classification.

Special Mention (5) loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Ordinarily, special mention credits have characteristics which corrective management action would remedy.

Substandard (6) loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful (7) loans have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable and improbable.

Loss (8) loans are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off even though partial recovery may be realized in the future.

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Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of June 30, 2021 and December 31, 2020:


	June 30, 2021 (unaudited)
	One- to Four-		One- to Four-
	Family Mortgage		Family Mortgage								Real Estate				Other
	Loans - Owner		Loans -		Multi-Family		Nonresidential		Construction &		Secured Lines of		Commercial		Consumer
	Occupied		Investment		Mortgage Loans		Mortgage Loans		Land Loans		Credit		Loans		Loans		Total

Pass	$	77,091,650	$	10,478,842	$	52,010,529	$	36,977,920	$	15,711,968	$	10,063,226	$	404,961	$	361,919	$	203,101,015
Special mention		—		309,230		—		447,472		—		—		—		—		756,702
Substandard		731,767		—		—		—		—		125,918		—		—		857,685
Doubtful		—		—		—		—		—		—		—		—		—
Loss		—		—		—		—		—		—		—		—		—

Total	$	77,823,417	$	10,788,072	$	52,010,529	$	37,425,392	$	15,711,968	$	10,189,144	$	404,961	$	361,919	$	204,715,402


	December 31, 2020
	One- to Four-		One- to Four-
	Family Mortgage		Family Mortgage								Real Estate				Other
	Loans - Owner		Loans -		Multi-Family		Nonresidential		Construction &		Secured Lines of		Commercial		Consumer
	Occupied		Investment		Mortgage Loans		Mortgage Loans		Land Loans		Credit		Loans		Loans		Total

Pass	$	71,930,902	$	11,538,993	$	41,669,892	$	29,063,783	$	5,841,415	$	9,783,448	$	736,979	$	338,709	$	170,904,121
Special mention		113,516		519,831		—		468,134		—		—		—		—		1,101,481
Substandard		653,170		—		79,331		—		—		150,939		—		—		883,440
Doubtful		—		—		—		—		—		—		—		—		—
Loss		—		—		—		—		—		—		—		—		—

Total	$	72,697,588	$	12,058,824	$	41,749,223	$	29,531,917	$	5,841,415	$	9,934,387	$	736,979	$	338,709	$	172,889,042

Pass portfolio within the tables above consists of loans graded Prime (1) through Acceptable (4).

The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the three or six months ended June 30, 2021.

Table of Contents

Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following tables present the loan portfolio aging analysis of the recorded investment in loans as of June 30, 2021 and December 31, 2020:


	June 30, 2021 (unaudited)
					90 Days and								Total Loans >
	30‑59 Days Past		60‑89 Days		Greater		Total Past				Total Loans		90 Days Past
	Due		Past Due		Past Due		Due		Current		Receivable		Due & Accruing

One to four-family mortgage loans	$	243,145	$	—	$	258,904	$	502,049	$	77,321,368	$	77,823,417	$	—
One to four family - investment		—		—		—		—		10,788,072		10,788,072		—
Multi-family mortgage loans		—		—		—		—		52,010,529		52,010,529		—
Nonresidential mortgage loans		—		—		—		—		37,425,392		37,425,392		—
Construction & land loans		—		—		—		—		15,711,968		15,711,968		—
Real estate secured lines of credit		—		—		—		—		10,189,144		10,189,144		—
Commercial loans		—		—		—		—		404,961		404,961		—
Other consumer loans		—		—		—		—		361,919		361,919		—

Total	$	243,145	$	—	$	258,904	$	502,049	$	204,213,353	$	204,715,402	$	—


	December 31, 2020
					90 Days and								Total Loans >
	30‑59 Days Past		60‑89 Days		Greater		Total Past				Total Loans		90 Days Past
	Due		Past Due		Past Due		Due		Current		Receivable		Due & Accruing

One to four-family mortgage loans	$	96,826	$	127,616	$	173,877	$	398,319	$	72,299,269	$	72,697,588	$	—
One to four family - investment		—		—		—		—		12,058,824		12,058,824		—
Multi-family mortgage loans		—		—		—		—		41,749,223		41,749,223		—
Nonresidential mortgage loans		—		—		—		—		29,531,917		29,531,917		—
Construction & land loans		—		—		—		—		5,841,415		5,841,415		—
Real estate secured lines of credit		—		—		—		—		9,934,387		9,934,387		—
Commercial loans		—		—		—		—		736,979		736,979		—
Other consumer loans		—		—		—		—		338,709		338,709		—

Total	$	96,826	$	127,616	$	173,877	$	398,319	$	172,490,723	$	172,889,042	$	—

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310, Receivables), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans and loans modified in troubled debt restructurings (“TDRs”).

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Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)