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Cincinnati Bancorp, Inc. - Quarter Report: 2022 June (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 June 30, 2022

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 August 10, 2022 was 2,964,571.

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 June 30, 2022 (Unaudited) and December 31, 2021

1

Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)

2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)

3

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (Unaudited)

6

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

Item 2.

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

29

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

39

Item 4.

Controls and Procedures

40

Part II. Other Information

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 3.

Defaults upon Senior Securities

42

Item 4.

Mine Safety Disclosures

42

Item 5.

Other Information

42

Item 6.

Exhibits

43

Signature Page

44

Table of Contents

Part I. – Financial Information

Item 1.     Financial Statements

Cincinnati Bancorp, Inc.

Condensed Consolidated Balance Sheets

June 30, 2022 (Unaudited) and December 31, 2021

    

June 30,

    

December 31, 

2022

2021

(Unaudited)

Assets

 

  

 

  

Cash and due from banks

$

2,324,450

$

2,505,136

Interest-bearing demand deposits in banks

 

12,065,186

 

12,831,650

Federal funds sold

 

2,075,000

 

6,515,000

Cash and cash equivalents

 

16,464,636

 

21,851,786

Available-for-sale debt securities

 

7,013,946

 

7,891,232

Loans held for sale

 

3,300,184

 

8,121,375

Loans, net of allowance for loan losses of $1,806,545 and $1,672,545, respectively

 

236,888,203

 

195,541,821

Premises and equipment, net

 

2,692,700

 

3,488,822

Assets held for sale

691,451

Federal Home Loan Bank stock

 

4,230,900

 

4,149,300

Interest receivable

 

683,673

 

577,002

Mortgage servicing rights

 

2,579,250

 

2,230,751

Federal Home Loan Bank lender risk account receivable

 

2,239,151

 

2,286,690

Bank-owned life insurance

 

4,297,839

 

4,256,570

Other assets

 

968,479

 

1,068,690

Total assets

$

282,050,412

$

251,464,039

Liabilities and Stockholders’ Equity

 

 

Liabilities

 

 

Deposits

 

 

Demand

$

48,759,497

$

45,787,848

Savings

 

77,962,984

 

75,527,958

Certificates of deposit

 

96,206,201

 

83,137,755

Total deposits

 

222,928,682

 

204,453,561

Federal Home Loan Bank advances

 

16,000,000

 

Advances from borrowers for taxes and insurance

 

1,079,704

 

1,808,971

Interest payable

 

10,583

 

24

Directors deferred compensation

704,523

696,295

Deferred tax liabilities

 

1,094,378

 

1,090,765

Other liabilities

 

347,100

 

514,705

Total liabilities

 

242,164,970

 

208,564,321

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 3,044,839; outstanding 2,964,571 at June 30, 2022 and 2,930,550 at December 31, 2021

 

29,616

 

29,275

Additional paid-in capital

 

22,717,222

 

22,953,608

Unearned ESOP shares

 

(1,519,385)

 

(1,570,810)

Retained earnings - substantially restricted

 

19,266,250

 

21,821,948

Accumulated other comprehensive loss

 

(608,261)

 

(334,303)

Total stockholders’ equity

 

39,885,442

 

42,899,718

Total liabilities and stockholders’ equity

$

282,050,412

$

251,464,039

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

1

Table of Contents

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Income

Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

(Unaudited)

(Unaudited)

Interest and Dividend Income

 

  

 

  

 

  

 

  

Loans, including fees

$

2,201,068

$

1,875,716

$

4,191,795

$

3,756,623

Securities

 

22,264

 

20,596

 

37,227

 

33,076

Dividends on Federal Home Loan Bank stock and other

 

52,916

 

14,493

 

77,074

 

37,484

Total interest and dividend income

 

2,276,248

 

1,910,805

 

4,306,096

 

3,827,183

Interest Expense

 

 

 

 

Deposits

 

252,631

 

255,061

 

444,886

 

547,338

Federal Home Loan Bank advances

 

10,569

 

247,850

 

11,907

 

455,510

Total interest expense

 

263,200

 

502,911

 

456,793

 

1,002,848

Net Interest Income

 

2,013,048

 

1,407,894

 

3,849,303

 

2,824,335

Provision for Loan Losses

 

113,000

 

 

134,000

 

Net Interest Income After Provision for Loan Losses

 

1,900,048

 

1,407,894

 

3,715,303

 

2,824,335

Noninterest Income

 

 

 

 

Gain on sales of loans

 

604,159

 

1,927,553

 

1,551,443

 

4,784,820

Mortgage servicing fees

 

325,540

 

247,650

 

597,105

 

333,793

Mortgage derivative income (expense)

(160,258)

(433,875)

(67,685)

(129,180)

Other

 

298,457

 

269,292

 

596,789

 

575,295

Total noninterest income

 

1,067,898

 

2,010,620

 

2,677,652

 

5,564,728

Noninterest Expense

 

 

 

 

Salaries and employee benefits

 

1,762,129

 

2,207,502

 

3,636,090

 

4,402,563

Occupancy and equipment

 

164,214

 

182,222

 

345,619

 

378,586

Directors compensation

 

42,250

 

42,250

 

84,500

 

84,500

Data processing

 

187,871

 

180,619

 

399,357

 

395,527

Professional fees

 

97,561

 

91,376

 

194,904

 

183,178

Franchise tax

 

76,968

 

72,510

 

151,018

 

142,312

Deposit insurance premiums

 

16,103

 

15,020

 

32,187

 

29,859

Advertising

 

129,923

 

97,563

 

217,621

 

134,677

Software licenses

 

45,049

 

33,626

 

87,868

 

60,389

Loan costs

 

146,481

 

186,268

 

267,193

 

399,691

Net loss on sale of foreclosed assets

48,343

48,343

Other

 

160,765

 

219,070

 

390,958

 

414,461

Total noninterest expense

 

2,877,657

 

3,328,026

 

5,855,658

 

6,625,743

Income Before Income Taxes

 

90,289

 

90,488

 

537,297

 

1,763,320

Provision for Income Taxes

 

24,034

 

9,964

 

122,223

 

360,284

Net Income

$

66,255

$

80,524

$

415,074

$

1,403,036

Earnings per common share - basic

$

0.02

$

0.03

$

0.15

$

0.51

Earnings per common share - diluted

$

0.02

$

0.03

$

0.14

$

0.49

Weighted-average shares outstanding - basic

 

2,710,990

 

2,747,331

 

2,719,267

 

2,750,057

Weighted-average shares outstanding - diluted

 

2,794,693

 

2,819,644

 

2,793,441

 

2,819,131

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 Six Months Ended June 30, 2022 and 2021 (Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30,

    

2022

    

2021

    

2022

    

2021

(Unaudited)

(Unaudited)

Net Income

$

66,255

$

80,524

$

415,074

$

1,403,036

Other Comprehensive Loss:

 

  

 

  

 

  

 

  

Net unrealized losses on available-for-sale securities

 

(235,777)

 

(42,270)

 

(401,922)

 

(14,748)

Tax (expense) benefit

 

49,511

 

8,877

 

84,404

 

3,097

Changes in directors’ retirement plan prior service costs

 

10,291

 

10,962

 

17,586

 

(41,183)

Tax (expense) benefit

 

(2,160)

 

(2,302)

 

25,974

 

(21,380)

Other comprehensive loss

 

(178,135)

 

(24,733)

 

(273,958)

 

(74,214)

Comprehensive Income (Loss)

$

(111,880)

$

55,791

$

141,116

$

1,328,822

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 Six Months Ended June 30, 2022 and 2021 (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, 2022:

Balance, April 1, 2022

$

29,250

$

23,040,454

$

(1,545,097)

$

22,170,767

$

(430,126)

$

43,265,248

Dividends paid

(2,970,772)

(2,970,772)

ESOP shares earned

12,368

25,712

38,080

Stock based compensation expense

111,132

111,132

Net income

66,255

66,255

Repurchase of common stock

(294)

(446,072)

(446,366)

Issuance of common stock

660

(660)

Other comprehensive loss

(178,135)

(178,135)

Balance, June 30, 2022

$

29,616

$

22,717,222

$

(1,519,385)

$

19,266,250

$

(608,261)

$

39,885,442

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

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 Six Months Ended June 30, 2022 and 2021 (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, 2022:

Balance, January 1, 2022

$

29,275

$

22,953,608

$

(1,570,810)

$

21,821,948

$

(334,303)

$

42,899,718

Dividends paid

(2,970,772)

(2,970,772)

ESOP shares earned

 

 

25,250

 

51,425

 

 

 

76,675

 

  

 

  

 

  

 

  

 

  

 

  

Stock-based compensation expense

 

 

222,265

 

 

 

 

222,265

 

  

 

 

  

 

  

 

  

 

  

Net income

 

 

 

 

415,074

 

 

415,074

 

  

 

  

 

  

 

  

 

  

 

Repurchase of common stock

(319)

(483,241)

(483,560)

Issuance of common stock

660

(660)

Other comprehensive loss

 

 

 

 

 

(273,958)

 

(273,958)

Balance, June 30, 2022

$

29,616

$

22,717,222

$

(1,519,385)

$

19,266,250

$

(608,261)

$

39,885,442

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

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

5

Table of Contents

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2022 and 2021 (Unaudited)

    

2022

    

2021

(Unaudited)

Operating Activities

  

  

Net income

$

415,074

$

1,403,036

Items not requiring (providing) cash:

Depreciation and amortization

 

113,272

 

114,087

Provision for loan losses

 

134,000

 

Amortization of premiums and discounts on securities, net

 

3,062

 

5,836

Change in deferred income taxes

 

348,221

 

148,184

Gain on sale of loans

 

(1,551,443)

 

(4,784,820)

Impairment of foreclosed assets held for sale

60,000

Proceeds from the sale of loans held for sale

 

73,280,593

 

158,036,785

Origination of loans held for sale

 

(66,907,959)

 

(152,728,895)

Net loss on sale of foreclosed assets

48,343

Mortgage servicing rights

(348,499)

(690,978)

Earnings on cash surrender value of bank-owned life insurance

 

(41,269)

 

(41,499)

Stock-based compensation expense

 

222,265

 

84,449

ESOP shares earned

 

76,675

 

69,587

Changes in:

 

 

Interest receivable

 

(106,671)

 

(46,021)

Federal Home Loan Bank lender risk account receivable

 

47,539

 

20,147

Derivative assets

71,587

201,121

Other assets

 

28,624

 

(128,999)

Interest payable

 

10,559

 

(13,729)

Derivative liabilities

(3,902)

(71,941)

Other liabilities

 

(372,119)

 

(838,464)

Net cash provided by operating activities

 

5,527,952

 

737,886

Investing Activities

 

 

Net change in interest-bearing deposits

1,500,000

Proceeds from maturities of available-for-sale debt securities

 

472,302

 

1,056,845

Purchase of available for sale debt securities

(5,034,375)

Purchase of Federal Home Loan Bank stock

 

(81,600)

 

(964,300)

Net change in loans

 

(41,547,700)

 

(25,675,447)

Purchase of premises and equipment

 

(8,601)

 

(100,930)

Proceeds from sale of foreclosed assets

 

(41,025)

 

Net cash used in investing activities

 

(41,206,624)

 

(29,218,207)

Financing Activities

Net increase in deposits

18,475,121

5,087,438

Repurchase of common stock

(483,560)

(189,872)

Proceeds from Federal Home Loan Bank advances

52,750,000

17,500,000

Repayment of Federal Home Loan Bank advances

(36,750,000)

(9,600,000)

Dividends paid

(2,970,772)

Net change in advances from borrowers for taxes and insurance

(729,267)

(927,557)

Net cash provided by financing activities

30,291,522

11,870,009

Decrease in Cash and Cash Equivalents

(5,387,150)

(16,610,312)

Cash and Cash Equivalents, Beginning of Period

21,851,786

32,347,806

Cash and Cash Equivalents, End of Period

$

16,464,636

$

15,737,494

Supplemental Cash Flows Information

Interest paid

$

434,327

$

1,016,577

Income taxes paid

255,000

455,000

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

6

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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, 2022 and December 31, 2021 and for the three and six months ended June 30, 2022 and 2021 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, 2022, and for the three and six months ended June 30, 2022 and 2021, 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, 2022, are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 2022, or any other period.

The accompanying condensed consolidated financial statements as of June 30, 2022 and December 31, 2021 and for the three and six months ended June 30, 2022 and 2021, should be read in conjunction with the audited consolidated financial statements as of and for the years ended December 31, 2021 and 2020 contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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.

NOTE 2:        Debt 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, 2022 (unaudited):

 

  

 

  

 

  

 

  

Mortgage-backed securities of government sponsored entities

$

7,368,816

$

1,101

$

(355,971)

$

7,013,946

December 31, 2021:

 

  

 

  

 

  

 

  

Mortgage-backed securities of government sponsored entities

$

7,844,180

$

49,809

$

(2,757)

$

7,891,232

The Company had no sales of investment securities during the six-month periods ended June 30, 2022 or 2021. The Company had not pledged any of its investment securities as of June 30, 2022 or December 31, 2021.

The amortized cost and fair value of available-for-sale securities at June 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021 was $5,795,189 and $126,007, respectively, which was approximately 82.6% and 1.6%, 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, 2022 and December 31, 2021:

Less than 12 Months

12 Months or More

Total

    

    

Unrealized

    

    

Unrealized

    

    

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

June 30, 2022 (unaudited):

 

  

 

  

 

  

 

  

 

  

 

  

Mortgage-backed securities of government sponsored entities

$

1,939,178

$

(24,719)

$

3,856,011

$

(331,252)

$

5,795,189

$

(355,971)

December 31, 2021:

 

  

 

  

 

 

 

 

Mortgage-backed securities of government sponsored entities

$

12,977

$

(48)

$

113,030

$

(2,709)

$

126,007

$

(2,757)

Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality, values have only been impacted by changes in interest rates since the securities were purchased, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date.

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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, 2022 and December 31, 2021 include:

    

June 30,

    

December 31, 

2022

2021

(Unaudited)

One to four family mortgage loans - owner occupied

$

99,620,694

$

70,336,846

One to four family - investment

 

12,541,083

 

10,361,388

Multifamily mortgage loans

 

60,456,411

 

55,029,111

Nonresidential mortgage loans

 

50,791,764

 

41,761,964

Construction and land loans

 

20,430,708

 

19,425,025

Real estate secured lines of credit

 

12,910,392

 

11,403,262

Commercial loans

 

262,669

 

299,851

Other consumer loans

 

331,261

 

348,386

Total loans

 

257,344,982

 

208,965,833

Less:

 

 

Net deferred loan costs

 

(619,181)

 

(404,884)

Undisbursed portion of loans

 

19,269,415

 

12,156,351

Allowance for loan losses

 

1,806,545

 

1,672,545

Net loans

$

236,888,203

$

195,541,821

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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, 2022 and 2021 and the year ended December 31, 2021:

At or For the Six Months Ended June 30, 2022 (Unaudited)

One- to Four-Family

One- to Four-Family

Construction &

Real Estate

Mortgage Loans Owner

Mortgage Loans

Multi-Family

Nonresidential

 Land

Secured Lines of

Commercial

Other Consumer

    

Occupied

    

Investment

    

Mortgage Loans

    

Mortgage Loans

    

Loans

    

Credit

    

Loans

    

Loans

    

Total

Allowance for loan losses:

Balance, beginning of period

$

285,080

$

51,763

$

691,619

$

336,100

$

278,828

$

28,750

$

187

$

218

$

1,672,545

Provision (credit) charged to expense

(16,783)

847

59,545

66,918

21,146

2,434

(55)

(52)

134,000

Losses charged off

 

 

 

 

 

 

 

 

Recoveries

 

 

 

 

 

 

 

 

 

Balance, end of period

$

268,297

$

52,610

$

751,164

$

403,018

$

299,974

$

31,184

$

132

$

166

$

1,806,545

Ending balance: Individually evaluated for impairment

$

18,924

$

40,075

$

$

$

$

$

$

$

58,999

Ending balance: Collectively evaluated for impairment

$

249,373

$

12,535

$

751,164

$

403,018

$

299,974

$

31,184

$

132

$

166

$

1,747,546

Loans:

 

 

 

 

 

 

 

 

 

Ending balance

$

99,620,694

$

12,541,083

$

60,456,411

$

50,791,764

$

20,430,708

$

12,910,392

$

262,669

$

331,261

$

257,344,982

Ending balance: Individually evaluated for impairment

$

1,074,213

$

422,556

$

123,600

$

$

$

48,831

$

$

$

1,669,200

Ending balance: Collectively evaluated for impairment

$

98,546,481

$

12,118,527

$

60,332,811

$

50,791,764

$

20,430,708

$

12,861,561

$

262,669

$

331,261

$

255,675,782

At or For Three Months Ended June 30, 2022 (Unaudited)

One- to Four-Family

One- to Four-Family

Construction &

Real Estate

Mortgage Loans Owner

Mortgage Loans

Multi-Family

Nonresidential

 Land

Secured Lines of

Commercial

Other Consumer

    

Occupied

    

Investment

    

Mortgage Loans

    

Mortgage Loans

    

Loans

    

Credit

    

Loans

    

Loans

    

Total

Allowance for loan losses:

  

  

    

  

    

  

    

  

    

  

    

  

    

  

Balance, beginning of period

$

217,579

$

52,183

$

716,343

$

387,407

$

290,494

$

29,214

$

149

$

176

$

1,693,545

Provision (credit) charged to expense

50,718

427

34,821

15,611

9,480

1,970

(17)

(10)

113,000

Losses charged off

 

 

 

 

 

 

 

 

 

Recoveries

 

 

 

 

 

 

 

 

 

Balance, end of period

$

268,297

$

52,610

$

751,164

$

403,018

$

299,974

$

31,184

$

132

$

166

$

1,806,545

At or For the Six Months Ended June 30, 2021 (Unaudited)

One- to Four-Family

One- to Four-Family

Construction &

Real Estate

Mortgage Loans Owner

Mortgage Loans

Multi-Family

Nonresidential

 Land

Secured Lines of

Commercial

Other Consumer

    

Occupied

    

Investment

    

Mortgage Loans

    

Mortgage 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

$

$

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