10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2019

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 No. 001-37912

Bancorp 34, Inc.

(Exact name of registrant as specified in its charter)

Maryland	74-2819148
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
500 East 10th Street, Alamogordo, New Mexico	88310
(Address of Principal Executive Offices)	(Zip Code)

(575) 437-9334

(Registrant’s telephone number)

                                         N/A                                         

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

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

YES  X   NO      .

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

YES  X    NO     .

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

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

Page 1 of 41

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES         NO   X  

Shares of the Registrant’s common stock, par value $0.01 per share, issued and outstanding as of April 28, 2019 were 3,356,155.

Page 2 of 41

Bancorp 34, Inc.
FORM 10-Q

Index 

		Page
	Part I. Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018	4
	Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2019 and 2018 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months ended March 31, 2019 (unaudited) and Year Ended December 31, 2018	6
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
	Part II. Other Information
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures		41

Page 3 of 41

Item 1. Financial Statements 

BANCORP 34, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED

	March 31, 2019			December 31, 2018
ASSETS
Cash and due from banks	$	4,718,880		$	6,374,457
Interest-bearing deposits with banks		6,855,000			5,400,000
Total cash and cash equivalents		11,573,880			11,774,457
Available-for-sale securities, at fair value		32,570,879			33,428,658
Loans held for sale, at fair value		14,614,579			26,884,014
Loans held for investment		289,856,142			285,691,372
Allowance for loan losses		(2,981,412	)		(2,901,091	)
Loans held for investment, net		286,874,730			282,790,281
Premises and equipment, net		9,464,710			9,615,626
Stock in financial institutions, restricted, at cost		3,937,361			3,910,361
Accrued interest receivable		963,269			875,040
Deferred income taxes, net		2,103,654			2,196,928
Bank owned life insurance		10,641,381			10,573,069
Core deposit intangible, net		161,893			172,108
Prepaid and other assets		1,088,406			1,057,365
TOTAL ASSETS	$	373,994,742		$	383,277,907
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits
Demand deposits	$	43,655,695		$	45,350,477
Savings and NOW deposits		146,259,640			142,349,920
Time deposits		77,969,777			77,538,576
Total deposits		267,885,112			265,238,973
Federal Home Loan Bank advances		50,000,000			67,000,000
Escrows		424,049			378,592
Accrued interest and other liabilities		9,131,724			4,237,608
Total liabilities		327,440,885			336,855,173
Commitments and contingencies (note 4)		-			-
Stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 authorized, 0 issued and outstanding		-			-
Common stock, $0.01 par value, 100,000,000 authorized, 3,356,155 and 3,374,565 issued and outstanding.		33,561			33,746
Additional paid-in capital		25,309,067			25,500,873
Retained earnings		22,969,985			22,928,777
Accumulated other comprehensive loss, net of tax		(132,301	)		(396,148	)
Unearned employee stock ownership plan (ESOP) shares		(1,626,455	)		(1,644,514	)
Total stockholders’ equity		46,553,857			46,422,734
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	373,994,742		$	383,277,907

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

Page 4 of 41

BANCORP 34, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

	Three Months Ended March 31,
	2019			2018
Interest income
Interest and fees on loans	$	4,332,096		$	3,876,008
Interest on securities		223,807			148,581
Interest on other interest-earning assets		121,988			68,030
Total interest income		4,677,891			4,092,619
Interest expense
Interest on deposits		861,269			493,736
Interest on borrowings		371,756			149,430
Total interest expense		1,233,025			643,166
Net interest income		3,444,866			3,449,453
Provision for loan losses		87,500			22,000
Net interest income after provision for loan losses		3,357,366			3,427,453
Noninterest income
Gain on sale of loans		2,744,581			3,353,393
Service charges and fees		95,199			84,389
Bank owned life insurance income		91,261			88,597
Other		11,157			24,606
Total noninterest income		2,942,198			3,550,985
Noninterest expense
Salaries and benefits		4,148,518			4,229,977
Occupancy		499,462			505,951
Data processing fees		786,591			723,406
FDIC and other insurance expense		85,603			50,533
Professional fees		238,138			354,604
Advertising		114,389			156,026
Other		379,646			492,171
Total noninterest expense		6,252,347			6,512,668
Income before provision for income taxes		47,217			465,770
Provision for income taxes		6,009			95,143
NET INCOME		41,208			370,627
Other comprehensive income
Unrealized (loss) gain on available-for-sale securities		353,919			(347,268	)
Tax effect of unrealized (loss) gain on available-for-sale securities		(90,072	)		88,680
Unrealized (loss) gain on available-for-sale securities, net of tax		263,847			(258,588	)
COMPREHENSIVE INCOME	$	305,055		$	112,039
Earnings per common share:
Basic	$	0.01		$	0.11
Diluted	$	0.01		$	0.11

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

Page 5 of 41

BANCORP 34, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED

												Accumulated
												Other
							Additional					Comprehensive			Unearned			Total
	Common			Common			Paid-In			Retained		Income			ESOP			Stockholders'
	Shares			Stock			Capital			Earnings		(Loss)			Shares			Equity
BALANCE, DECEMBER 31, 2017		3,490,672		$	34,907		$	26,849,822		$	26,060,598	$	(274,266	)	$	(1,700,372	)	$	50,970,689
Net income		-		$	-		$	-		$	370,627	$	-		$	-		$	370,627
Unrealized gain on available-for-sale securities, net		-			-			-			-		(258,588	)		-			(258,588	)
Restricted stock awards		429			4			(4	)		-		-			-			-
Amortization of equity awards		-			-			93,672			-		-			13,964			107,636
Share repurchase		(102,500	)		(1,025	)		(1,571,025	)		-		-			-			(1,572,050	)
BALANCE, MARCH 31, 2018		3,388,601		$	33,886		$	25,372,465		$	26,431,225	$	(532,854	)	$	(1,686,408	)	$	49,618,314
BALANCE, DECEMBER 31, 2018		3,374,565		$	33,746		$	25,500,873		$	22,928,777	$	(396,148	)	$	(1,644,514	)	$	46,422,734
Net income		-		$	-		$	-		$	41,208	$	-		$	-		$	41,208
Unrealized gain on available-for-sale securities, net		-			-			-			-		263,847			-			263,847
Amortization of equity awards		-			-			85,680			-		-			18,059			103,739
Share repurchase		(18,410	)		(185	)		(277,486	)		-		-			-			(277,671	)
BALANCE, MARCH 31, 2019		3,356,155		$	33,561		$	25,309,067		$	22,969,985	$	(132,301	)	$	(1,626,455	)	$	46,553,857

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

Page 6 of 41

BANCORP 34, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

	Three Months Ended March 31,
	2019			2018
Cash flows from operating activities
Net income	$	41,208		$	370,627
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		162,472			175,954
Stock dividend on financial institution stock		(27,000	)		(17,000	)
Amortization of premiums and discounts on securities, net		27,718			77,246
Amortization of ESOP awards		18,059			13,964
Amortization of stock-based compensation		85,680			93,672
Amortization of core deposit intangible		10,215			13,101
Gain on sale of loans		(2,744,581	)		(3,353,393	)
Proceeds from sale of loans held for sale		76,550,254			76,956,796
Funding of loans held for sale		(61,105,134	)		(72,168,547	)
Provision for loan losses		87,500			22,000
Net appreciation on bank-owned life insurance		(68,312	)		(68,548	)
Deferred income tax (benefit) expense		-			(1,834	)
Changes in operating assets and liabilities:
Accrued interest receivable		(88,229	)		19,176
Prepaid and other assets		(27,839	)		(390,966	)
Accrued interest and other liabilities		4,894,116			(49,292	)
Net cash from operating activities		17,816,127			1,692,956
Cash flows from investing activities
Proceeds from principal payments on available-for-sale securities		1,183,980			1,173,524
Purchases of available-for-sale securities		-			(3,293,817	)
Net change in loans held for investment		(4,603,053	)		(1,755,045	)
Purchases of premises and equipment		(11,556	)		(149,942	)
Net cash from investing activities		(3,430,629	)		(4,025,280	)
Cash flows from financing activities
Net change in deposits		2,646,139			6,247,815
Net change in escrows		45,457			125,696
Proceeds from Federal Home Loan Bank advances		5,000,000			30,000,000
Repayments of Federal Home Loan Bank advances		(22,000,000	)		(30,000,000	)
Common stock repurchases		(277,671	)		(1,572,050	)
Net cash from financing activities		(14,586,075	)		4,801,461
Net change in cash and cash equivalents		(200,577	)		2,469,137
Cash and cash equivalents, beginning of period		11,774,457			9,873,178
Cash and cash equivalents, end of period	$	11,573,880		$	12,342,315
Supplemental disclosures:
Interest on deposits and advances paid		1,171,513			571,575
Loans transferred to loans held for sale		431,104			1,272,081

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

Page 7 of 41

BANCORP 34, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Bancorp 34, Inc. (“Bancorp 34” or the “Company”) is a Maryland corporation and savings and loan holding company which owns 100% of the common stock of Bank 34 (the “Bank”).

The Bank provides a variety of banking services to individuals and businesses through its full-service branches in Alamogordo and Las Cruces, New Mexico, and Scottsdale and Peoria, Arizona. The Bank also operates ten mortgage loan production offices in El Paso, Texas, Scottsdale, Arizona, Gilbert, Arizona, Tubac, Arizona, Albuquerque, New Mexico, Lynnwood, Washington, Puyallup, Washington, West Linn, Oregon and Medford, Oregon.

A large portion of the Bank’s New Mexico loans are secured by real estate in Otero and Dona Ana Counties. The economy for these counties is heavily dependent on two U.S. Government military installations located in those counties. Accordingly, the ultimate collectability of the Bank’s New Mexico loans is susceptible to changes in U.S. Government military operations in southern New Mexico.

The primary deposit products are demand deposits, time deposits, NOW, savings and money market accounts. The primary lending products are real estate mortgage loans and commercial loans. The Bank is subject to competition from other financial institutions and regulated and non-regulated financial services providers, regulation by certain federal agencies and undergoes periodic examinations by regulatory authorities.

Rising and falling interest rate environments can have various impacts on the Bank’s net interest income, depending on the short-term interest rate gap that the Bank maintains. The Bank’s net interest income is also affected by prepayments of loans and early withdrawals of deposits.

Basis of Presentation – The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the accompanying consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition, cash flows and results of operations at the dates and for the periods presented. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results of operations for the full fiscal year or for any other period. This information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Basis of Consolidation – The consolidated financial statements include the accounts of Bancorp 34 and the Bank. All significant intercompany accounts and transactions have been eliminated.

Emerging Growth Company Status - Bancorp 34 is an emerging growth company under the JOBS Act and expects to lose its status as an emerging growth company at the end of 2019.  Bancorp 34 has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

Reclassifications – Certain reclassifications have been made to prior period’s financial information to conform to the current period presentation.

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.

Significant estimates include, but are not limited to, allowance for loan losses, other-than-temporary impairment of securities, useful lives used in depreciation and amortization, deferred income taxes, valuation of other real estate and core deposit intangibles.

Subsequent Events – Subsequent events have been evaluated through the date the unaudited consolidated financial statements were issued. 

Page 8 of 41

Summary of Recent Accounting Pronouncements:

Bancorp 34 is an emerging growth company and has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. The Company expects to lose its status as an emerging growth company at the end of 2019.

Revenue Recognition - In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective.  ASU 2014-09 would have been initially effective for the Company's reporting period beginning January 1, 2018. However, in August of 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date, which deferred the effective date by one year. For financial reporting purposes, the standard allows for either a full retrospective or modified retrospective adoption. The FASB has also issued additional updates to provide further clarification to specific implementation issues associated with ASU 2014-09. These updates include ASU 2016-08, Principal versus Agent Considerations, ASU 2016-10, Identifying Performance Obligations and Licensing, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, and ASU 2016-20, Technical Corrections and Improvements to Topic 606. We adopted the standard on January 1, 2019, using the modified retrospective method, which resulted in no cumulative effect and no other adjustment or significant impact to the timing of revenue recognition.

Under Topic 606, we must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) we satisfy the performance obligations. Our primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of Topic 606. We have evaluated the nature of our contracts with customers and determined that further disaggregation of revenue from contracts with customers into categories beyond what is presented in the Consolidated Statements of Income was not necessary. For revenue sources that are within the scope of Topic 606, we fully satisfy our performance obligations and recognize revenue in the period it is earned as services are rendered. Transaction prices are typically fixed, charged on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with our customers.

All of our revenue from contracts with customers in the scope of ASC 606 is recognized in Non-Interest Income. Sources of revenue from contracts with customers that are in the scope of ASC 606 include the following:

* Service Charges on Deposit accounts - We earn monthly account fees and transaction-based fees from our customers for services rendered on deposit accounts. Fees charged to deposit accounts on a monthly basis are recognized as the performance obligation is satisfied at the end of the service period.

* Transaction-based fees are based on specific services provided to our customer. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

* ATM and Point of Sale fees – We earn fees when debit cards we issued are used in transactions through card processing networks. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders’ account. The fees are recognized monthly.

Leases – In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” This standard requires entities that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018 for public companies, but the Company will have until the first quarter of 2020 to adopt due to its emerging growth company status. The guidance is required to be applied by the modified retrospective transition approach. Early adoption is permitted. We are currently assessing the impact of the adoption of this authoritative guidance on our consolidated financial statements and collecting the data necessary for that assessment and adoption.

Credit Losses - In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments in this update replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to create credit loss estimates. The new guidance is effective for public companies that are U.S. Securities and Exchange Commission filers for fiscal years beginning after December 15, 2019 including interim periods within those fiscal years. For all other public companies, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. For all other companies, including emerging growth companies, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The guidance is required to be applied by the modified retrospective approach. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently assessing the impact of the adoption of this authoritative guidance on our consolidated financial statements.

Page 9 of 41

Premium on Callable Debt - In March 2017, the FASB issued ASU No. 2017-08, “Receivables–Nonrefundable Fees and Other Costs (Subtopic 310-20)” to shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Currently, entities generally amortize the premium as a yield adjustment over the contractual life of the security. The guidance does not change the accounting for callable debt securities held at a discount. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including in an interim period. ASU 2017-08 is not expected to have a significant impact on our consolidated financial statements.

Reporting Tax Effects of Tax Cuts and Jobs Act - In February 2018, the FASB issued ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” that helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the 2017 Tax Cuts and Jobs Act. The ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The ASU requires financial statement preparers to disclose a description of the accounting policy for releasing income tax effects from AOCI, whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act, and information about the other income tax effects that are reclassified. The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We adopted ASU 2018-02 effective December 2018 and reclassified the stranded tax effects from AOCI to retained earnings. Adoption did not have a significant impact on our consolidated financial statements.

NOTE 2 – AVAILABLE-FOR-SALE SECURITIES

Available-for-sale securities have been classified in the consolidated balance sheets according to management’s intent at March 31, 2019 and December 31, 2018. The amortized cost of such securities and their approximate fair values were as follows:

	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
March 31, 2019
Available-for-sale securities
Mortgage-backed securities	$	27,719,782	$	232,930	$	(409,694	)	$	27,543,018
U.S. Government agencies		1,356,271		-		(45,848	)		1,310,423
Municipal obligations		3,672,092		45,346		-			3,717,438
Total	$	32,748,145	$	278,276	$	(455,542	)	$	32,570,879
December 31, 2018
Available-for-sale securities
Mortgage-backed securities	$	28,799,904	$	115,824	$	(605,370	)	$	28,310,358
U.S. Government agencies		1,487,917		-		(42,885	)		1,445,032
Municipal obligations		3,672,023		2,363		(1,118	)		3,673,268
Total	$	33,959,844	$	118,187	$	(649,373	)	$	33,428,658

Page 10 of 41

There were no sales of available-for-sale securities during the three months ended March 31, 2019 or 2018.

Amortized cost and fair value of securities by contractual maturity as of March 31, 2019 and December 31, 2018 are shown below. For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the actual contractual maturities of underlying collateral. Expected maturities may differ from contractual maturities because borrowers may call or prepay obligations.

The scheduled maturities of available-for-sale securities at March 31, 2019 and December 31, 2018 were as follows:

	March 31, 2019				December 31, 2018
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	400,000	$	400,000	$	403,612	$	402,924
Due after one to five years		20,295,449		19,983,683		23,040,618		22,482,300
Due after five to ten years		12,052,696		12,187,196		10,515,614		10,543,434
Totals	$	32,748,145	$	32,570,879	$	33,959,844	$	33,428,658

At March 31, 2019 and December 31, 2018, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

At March 31, 2019 and December 31, 2018, mortgage-backed securities included collateralized mortgage obligations of $13.4 million and $13.8 million, respectively, which are backed by single-family mortgage loans. The Company does not hold any securities backed by commercial real estate loans.

Page 11 of 41

Gross Unrealized Losses and Fair Value – The following tables show the gross unrealized losses and fair values of securities by length of time that individual securities in each category have been in a continuous loss position.

	March 31, 2019
	Less Than 12 Months				12 Months or More					Total
			Gross				Gross					Gross
Description of			Unrealized				Unrealized					Unrealized
Securities	Fair Value		Losses		Fair Value		Losses			Fair Value		Losses
Available-for-sale securities:
Mortgage-backed securities					$	18,439,189	$	(409,694	)	$	18,439,189	$	(409,694	)
U.S. Government agencies						1,310,423		(45,848	)		1,310,423		(45,848	)
Municipal obligations						-		-			-		-
Total temporarily impaired securities	$	-	$	-	$	19,749,612	$	(455,542	)	$	19,749,612	$	(455,542	)

	December 31, 2018
	Less Than 12 Months					12 Months or More					Total
			Gross					Gross					Gross
Description of			Unrealized					Unrealized					Unrealized
Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Available-for-sale securities:
Mortgage-backed securities	$	8,605,742	$	(200,190	)	$	10,740,671	$	(405,180	)	$	19,346,413	$	(605,370	)
U.S. Government agencies		302,219		(885	)		1,142,814		(42,000	)		1,445,033		(42,885	)
Municipal obligations		1,747,571		(430	)		402,924		(688	)		2,150,495		(1,118	)
Total temporarily impaired securities	$	10,655,532	$	(201,505	)	$	12,286,409	$	(447,868	)	$	22,941,941	$	(649,373	)

At March 31, 2019 and December 31, 2018, all of the government agencies and mortgage-backed securities held by the Company were issued by U.S. Government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2019.

Loans and securities with a carrying value of approximately $155.2 million at March 31, 2019 were pledged to secure Federal Home Loan Bank (“FHLB”) advances. In addition, securities with a carrying value of approximately $3.7 million at March 31, 2019 were pledged to secure public deposits.

Page 12 of 41

NOTE 3 – LOANS HELD FOR INVESTMENT, NET

The components of loans held for investment, net in the consolidated balance sheets were as follows:

	March 31, 2019						December 31, 2018
	Amount			Percent			Amount			Percent
Loans held for investment, net:
Commercial real estate	$	238,120,124			81.8	%	$	233,102,637			81.3	%
One- to four-family residential real estate residential real estate		29,170,381			10.0			29,855,462			10.4
Commercial and industrial		17,602,539			6.1			17,508,258			6.1
Consumer and other		6,085,629			2.1			6,374,532			2.2
Total gross loans		290,978,673			100.0	%		286,840,889			100.0	%
Unamortized loan fees		(1,122,531	)					(1,149,517	)
Loans held for investment		289,856,142						285,691,372
Allowance for loan losses		(2,981,412	)					(2,901,091	)
Loans held for investment, net	$	286,874,730					$	282,790,281

At March 31, 2019 and December 31, 2018, loans held for investment includes construction loans of $21.8 million and $20.8 million, respectively. 

Page 13 of 41

Allowance for Loan Losses and Recorded Investment in Loans – The following is a summary of the allowance for loan losses and recorded investment in loans as of March 31, 2019 and December 31, 2018:

	As of March 31, 2019
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Other		Total
Allowance for loan losses
Ending balance: individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Ending balance: collectively evaluated for impairment		2,341,297		220,139		388,425		31,551		2,981,412
Total	$	2,341,297	$	220,139	$	388,425	$	31,551	$	2,981,412
Gross loans
Ending balance: individually evaluated for impairment	$	2,988,885	$	616,750	$	-	$	-	$	3,605,635
Ending balance: collectively evaluated for impairment		235,131,239		28,553,631		17,602,539		6,085,629		287,373,038
Total	$	238,120,124	$	29,170,381	$	17,602,539	$	6,085,629	$	290,978,673

	As of December 31, 2018
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Other		Total
Allowance for loan losses
Ending balance: individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Ending balance: collectively evaluated for impairment		2,130,124		359,705		377,180		34,082		2,901,091
Total	$	2,130,124	$	359,705	$	377,180	$	34,082	$	2,901,091
Gross loans
Ending balance: individually evaluated for impairment	$	2,993,923	$	649,685	$	-	$	-	$	3,643,608
Ending balance: collectively evaluated for impairment		230,108,714		29,205,777		17,508,258		6,374,532		283,197,281
Total	$	233,102,637	$	29,855,462	$	17,508,258	$	6,374,532	$	286,840,889

Page 14 of 41

The following tables summarize activities for the allowance for loan losses for the three months ended March 31, 2019 and 2018:

	Commercial Real Estate		One- to Four- Family Residential Real Estate			Commercial and Industrial		Consumer and Other			Total
Balance December 31, 2018	$	2,130,124	$	359,705		$	377,180	$	34,082		$	2,901,091
Provision for loan losses		211,173		(130,880	)		9,738		(2,531	)		87,500
Charge-offs		-		(8,686	)		-		-			(8,686	)
Recoveries		-		-			1,507		-			1,507
Net (charge-offs) recoveries		-		(8,686	)		1,507		-			(7,179	)
Balance March 31, 2019	$	2,341,297	$	220,139		$	388,425	$	31,551		$	2,981,412
Balance December 31, 2017	$	2,055,911	$	567,290		$	462,406	$	31,583		$	3,117,190
Provision for loan losses		10,374		(46,975	)		51,901		6,700			22,000
Charge-offs		-		(23,269	)		-		-			(23,269	)
Recoveries		-		6,249			-		-			6,249
Net (charge-offs) recoveries		-		(17,020	)		-		-			(17,020	)
Balance March 31, 2018	$	2,066,285	$	503,295		$	514,307	$	38,283		$	3,122,170

Page 15 of 41

Nonperforming Assets – The following tables present an aging analysis of the recorded investment of past due loans as of March 31, 2019 and December 31, 2018. Payment activity is reviewed by management on a monthly basis to determine the performance of each loan. Per Company policy, loans past due 90 days or more no longer accrue interest.

	Past Due										Total
					90 Days						Financing
	30 - 59 Days		60 - 89 Days		or More		Total		Current		Receivables
March 31, 2019
Commercial real estate	$	39,734	$	-	$	2,744,405	$	2,784,139	$	235,335,985	$	238,120,124
One- to four-family residential real estate		408,880		47,905		323,374		780,159		28,390,222		29,170,381
Commercial and industrial		-		-		-		-		17,602,539		17,602,539
Consumer and other		-		-		-		-		6,085,629		6,085,629
Totals	$	448,614	$	47,905	$	3,067,779	$	3,564,298	$	287,414,375	$	290,978,673

	Past Due										Total
					90 Days						Financing
	30 - 59 Days		60 - 89 Days		or More		Total		Current		Receivables
December 31, 2018
Commercial real estate	$	-	$	2,744,405	$	-	$	2,744,405	$	230,358,232	$	233,102,637
One- to four-family residential real estate		782,835		234,524		393,068		1,410,427		28,445,035		29,855,462
Commercial and industrial		-		-		-		-		17,508,258		17,508,258
Consumer and other		-		-		-		-		6,374,532		6,374,532
Totals	$	782,835	$	2,978,929	$	393,068	$	4,154,832	$	282,686,057	$	286,840,889

Page 16 of 41

The following table sets forth nonaccrual loans and other real estate at March 31, 2019 and December 31, 2018:

	March 31,		December 31,
	2019		2018
Nonaccrual loans
Commercial real estate	$	2,988,885	$	2,993,923
One- to four-family residential real estate		616,750		649,685
Commercial and industrial		-		-
Consumer and other		-		-
Total nonaccrual loans		3,605,635		3,643,608
Other real estate (ORE)		-		-
Total nonperforming assets	$	3,605,635	$	3,643,608
Nonperforming assets to gross loans held for investment and ORE		1.24%		1.27%
Nonperforming assets to total assets		0.96%		0.95%

One large loan relationship,75% guaranteed by the SBA and partially secured by real estate, comprises $2.7 million, or 76%, of the $3.6 million in nonaccrual loans at March 31, 2019 and $2.3 million, or 64% of the total March 31, 2019 nonaccrual loan balance, is guaranteed by the SBA.

Page 17 of 41

Credit Quality Indicators – The following table represents the credit exposure by internally assigned grades at March 31, 2019 and December 31, 2018. This grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements in accordance with the loan terms. The Bank’s internal credit risk grading system is based on management’s experiences with similarly graded loans. Credit risk grades are reassessed each quarter based on any recent developments potentially impacting the creditworthiness of the borrower, as well as other external statistics and factors, which may affect the risk characteristics of the respective loan.

	As of March 31, 2019
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Consumer and Other		Total
Grade
Pass	$	229,465,218	$	27,616,139	$	17,249,760	$	6,085,629	$	280,416,746
Special mention		4,060,029		-		95,815		-		4,155,844
Substandard		4,594,877		1,554,242		256,964		-		6,406,083
Doubtful		-		-		-		-		-
Loss		-		-		-		-		-
Totals	$	238,120,124	$	29,170,381	$	17,602,539	$	6,085,629	$	290,978,673

	As of December 31, 2018
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Consumer and Other		Total
Grade
Pass	$	226,510,803	$	27,990,417	$	17,237,690	$	6,374,532	$	278,113,442
Special mention		1,981,667		268,892		-		-		2,250,559
Substandard		4,610,167		1,596,153		270,568		-		6,476,888
Doubtful		-		-		-		-		-
Loss		-		-		-		-		-
Totals	$	233,102,637	$	29,855,462	$	17,508,258	$	6,374,532	$	286,840,889

The Bank’s internally assigned grades are as follows:

Pass – Strong credit with no existing or known potential weaknesses deserving of management’s close attention.

Special Mention – Potential weaknesses that deserve management’s close attention. Borrower and guarantor’s capacity to meet all financial obligations is marginally adequate or deteriorating.

Substandard – Inadequately protected by the paying capacity of the Borrower and/or collateral pledged. The borrower or guarantor is unwilling or unable to meet loan terms or loan covenants for the foreseeable future.

Doubtful – All the weakness inherent in one classified as substandard with the added characteristic that those weaknesses in place make the collection or liquidation in full, on the basis of current conditions, highly questionable and improbable.

Page 18 of 41

Loss – Considered uncollectible or no longer a bankable asset. This classification does not mean that the asset has absolutely no recoverable value. In fact, a certain salvage value is inherent in these loans. Nevertheless, it is not practical or desirable to defer writing off a portion or whole of a perceived asset even though partial recovery may be collected in the future.

Impaired Loans – The following tables include the recorded investment and unpaid principal balances, net of charge-offs for impaired loans with the associated allowance amount, if applicable. Management determined the allocated allowance based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the remaining source of repayment for the loan is the operation or liquidation of the collateral. In those cases, the current fair value of the collateral, less selling costs was used to determine the allocated allowance recorded.

	As of March 31, 2019
			Principal				Average
	Recorded		Net of		Related		Recorded
	Investment		Charge-offs		Allowance		Investment
With no related allowance recorded:
Commercial real estate	$	2,988,885	$	2,988,885	$	-	$	2,999,285
One- to four-family residential real estate		616,750		616,750		-		623,917
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,605,635	$	3,605,635	$	-	$	3,623,202
With an allowance recorded:	$	-	$	-	$	-	$	-
Total:
Commercial real estate	$	2,988,885	$	2,988,885	$	-	$	2,999,285
One- to four-family residential real estate		616,750		616,750		-		623,917
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,605,635	$	3,605,635	$	-	$	3,623,202

Page 19 of 41

	As of December 31, 2018
			Principal				Average
	Recorded		Net of		Related		Recorded
	Investment		Charge-offs		Allowance		Investment
With no related allowance recorded:
Commercial real estate	$	2,993,923	$	2,993,923	$	-	$	3,007,495
One- to four-family residential real estate		649,685		649,685		-		656,436
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,643,608	$	3,643,608	$	-	$	3,663,931
With an allowance recorded:	$	-	$	-	$	-	$	-
Total:
Commercial real estate	$	2,993,923	$	2,993,923	$	-	$	3,007,495
One- to four-family residential real estate		649,685		649,685		-		656,436
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,643,608	$	3,643,608	$	-	$	3,663,931

During each of the three months ended March 31, 2019 and 2018, no interest income was recognized on nonaccrual loans.

Page 20 of 41

Certain loans within the Company’s loan and ORE portfolios are guaranteed by the Veterans Administration (VA). In the event of default by the borrower, the VA can elect to pay the guaranteed amount or take possession of the property. If the VA takes possession of the property, the Company is entitled to be reimbursed for the outstanding principal balance, accrued interest and certain other expenses. There were no commitments from the VA to take title to foreclosed VA properties at March 31, 2019 and December 31, 2018.

Troubled Debt Restructurings – Restructured loans are considered “troubled debt restructurings” if due to the borrower’s financial difficulties, the Bank has granted a concession that they would not otherwise consider. This may include a transfer of real estate or other assets from the borrower, a modification of loan terms, rates, or a combination of the two. All troubled debt restructurings placed on nonaccrual status must show no less than six months of repayment performance by the borrower in accordance with contractual terms to return to accrual status. Once a loan has been identified as a troubled debt restructuring, it will continue to be reported as such until the loan is paid in full.

In the normal course of business, the Company may modify a loan for a credit worthy borrower where the modified loan is not considered a troubled debt restructuring. In these cases, the modified terms are consistent with loan terms available to credit worthy borrowers and within normal loan pricing. The modifications to such loans are done according to existing underwriting standards which include review of historical financial statements, including current interim information if available, an analysis of the causes of the borrower’s decline in performance, and projections intended to assess repayment ability going forward.

There was one troubled debt restructuring with a current payment status and principal balances of $52,000 and $54,000, as of March 31, 2019 and December 31, 2018, respectively.

NOTE 4 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

In the normal course of business, the Bank has outstanding commitments to extend credit and standby letters of credit, which are not included in the accompanying consolidated financial statements. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making commitments as it does for instruments that are included in the consolidated balance sheets.

Financial instruments whose contract amounts represent off-balance-sheet credit risk are as follows as of March 31, 2019 and December 31, 2018:

	March 31, 2019		December 31, 2018
Commitments to originate and sell mortgage loans	$	35,428,610	$	34,268,309
Commitments to extend credit		41,375,723		25,323,822
Unused lines of credit		19,231,789		18,281,453
Standby letters of credit		-		-
Totals	$	96,036,122	$	77,873,584

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies by and may include accounts receivable, inventory, property and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third-party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit.

Page 21 of 41

NOTE 5 – REGULATORY MATTERS

Bank 34 is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total risk-based capital and Tier 1 capital to risk-weighted assets, and Tier 1 capital to adjusted total assets. Management believes, as of March 31, 2019 and December 31, 2018, the Bank meets all capital adequacy requirements to which it is subject.

Banks are also subject to certain restrictions on the amount of dividends that they may declare without prior regulatory approval.

As of March 31, 2019, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank has to maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as disclosed in the table below. There are no conditions or events that management believes have changed the Bank’s prompt corrective action category.

Page 22 of 41

The Bank’s actual and required capital amounts and ratios are as follows:

											To be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of March 31, 2019:
Total Capital (to Risk-Weighted Assets)	$	41,909		14.47	%	$	23,175		>8.00	%	$	28,968		>10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	38,861		13.42	%	$	17,381		>6.00	%	$	23,175		>8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	38,861		13.42	%	$	13,036		>4.50	%	$	18,829		>6.50	%
Tier I Capital (to Average Assets)	$	38,861		10.24	%	$	15,185		>4.00	%	$	18,982		>5.00	%
As of December 31, 2018:
Total Capital (to Risk-Weighted Assets)	$	41,685		14.50	%	$	22,999		>8.00	%	$	28,748		>10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	38,703		13.46	%	$	17,252		>6.00	%	$	23,003		>8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	38,703		13.46	%	$	12,939		>4.50	%	$	18,690		>6.50	%
Tier I Capital (to Average Assets)	$	38,703		10.29	%	$	15,045		>4.00	%	$	18,806		>5.00	%

Page 23 of 41

NOTE 6 – STOCK-BASED COMPENSATION

The Company has fully vested stock options outstanding under the 2001 Stock Option Plan and vested and unvested stock options and restricted stock awards under the 2017 Equity Incentive Plan.

A summary of stock option activity during the three months ended March 31, 2019 and 2018 is presented below:

	For the three Months Ended March 31, 2019
					Average
			Weighted-		Remaining
			Average		Contractual
	Shares		Exercise Price		Term (years)
Outstanding, December 31, 2018		164,410	$	14.69		5.8
Granted		1,000		14.63
Exercised		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2019		165,410	$	14.69		5.6
Exercisable, March 31, 2019		38,690	$	13.93		4.7

	For the three Months Ended March 31, 2018
						Average
				Weighted-		Remaining
				Average		Contractual
	Shares			Exercise Price		Term (years)
Outstanding, December 31, 2017		207,108		$	14.18		6.2
Granted		5,000			15.48
Exercised		-			-
Forfeited or expired		(1,002	)		14.90
Outstanding, March 31, 2018		211,106		$	14.28		5.9
Exercisable, March 31, 2018		28,456		$	9.65		1.3

The exercise price of outstanding stock options at March 31, 2019 range from $9.65 to $15.48 per share. The grant date fair value of stock options awarded in the three months ended March 31, 2019 was $3.77 using the Black-Scholes-Merton options pricing model with the following inputs and assumptions:

Grant date stock price	$	14.63
Dividend yield		0.00	%
Expected volatility		19.55	%
Risk-free interest rate		2.63	%
Expected life in years		6

Page 24 of 41

A summary of restricted stock activity during the three months ended March 31, 2019 and 2018 is presented below:

			Weighted		Average
			Average		Remaining
			Grant Date		Contractual
	Shares		Price		Term (years)
	For the Quarter Ended March 31, 2019
Outstanding, December 31, 2018		49,829	$	14.90		4.0
Granted		-		-
Vested		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2019		49,829	$	14.90		3.8

	For the Quarter Ended March 31, 2018
Outstanding, December 31, 2017		74,750	$	14.90	4.9
Granted		429		15.48
Vested		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2018		75,179	$	14.90	4.7

Page 25 of 41

Compensation and benefits included $75,000 and $86,000 of stock-based expense for the three months ended March 31, 2019 and 2018, respectively.

As of March 31, 2019, there was $1,130,000 of total unrecognized stock-based expense including $448,000 related to unvested stock options and $682,000 from restricted stock awards granted under the 2017 Equity Incentive Plan that is expected to be recognized over the next 3.7 years.

NOTE 7 – FAIR VALUES OF FINANCIAL INSTRUMENTS

The following table presents information about assets and liabilities measured at fair value on a recurring and non-recurring basis and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair values as of March 31, 2019 and December 31, 2018.

	Fair Value Measurements Using
	Quoted Prices		Significant
	in Active		Other			Significant
	Markets for		Observable			Unobservable
	Identical Assets		Inputs			Inputs
	Level 1		Level 2			Level 3		Fair Value
March 31, 2019
Recurring basis
Mortgage-backed securities	$	-	$	27,543,018		$	-	$	27,543,018
U.S. Government agencies		-		1,310,423			-		1,310,423
Municipal obligations		-		3,717,438			-		3,717,438
Loans held for sale		-		14,614,579			-		14,614,579
Derivative IRLC's		-		-			360,830		360,830
Derivative forward commitments		-		(94,922	)		-		(94,922	)
Nonrecurring basis
Impaired loans		-		-			3,605,635		3,605,635
Totals	$	-	$	47,090,536		$	3,966,465	$	51,057,001
December 31, 2018:
Recurring basis
Mortgage-backed securities	$	-	$	28,310,358		$	-	$	28,310,358
U.S. Government agencies		-		1,445,032			-		1,445,032
Municipal obligations		-		3,673,268			-		3,673,268
Loans held for sale		-		26,884,014			-		26,884,014
Derivative IRLC's		-		-			380,866		380,866
Derivative forward commitments		-		(153,906	)		-		(153,906	)
Nonrecurring basis
Impaired loans		-		-			3,643,608		3,643,608
Totals	$	-	$	60,158,766		$	4,024,474	$	64,183,240

The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Bank does not know whether the fair values shown represent values at which the respective financial instruments could be sold individually or in the aggregate.

Page 26 of 41

There were no transfers between levels of the fair value hierarchy during the three months ended March 31, 2019 or 2018. 

The following tables present estimated fair values of the Company’s financial instruments at March 31, 2019 and December 31, 2018.

							Quoted Prices		Significant
							in Active		Other			Significant
							Markets for		Observable			Unobservable
	Carrying						Identical Assets		Inputs			Inputs
	Amount			Fair Value			Level 1		Level 2			Level 3
	(Dollars in thousands)
At March 31, 2019:
Financial assets:
Cash and due from banks	$	4,719		$	4,719		$	4,719	$	-		$	-
Interest-bearing deposits with banks		6,855			6,855			6,855		-			-
Available-for-sale securities		32,571			32,571			-		32,571			-
Loans held for sale		14,615			14,615			-		14,615			-
Loans held for investment, net		286,875			287,346			-		-			287,346
Derivative IRLC's		361			361			-		-			361
Derivative forward commitments		(95	)		(95	)		-		(95	)		-
Stock in financial institutions		3,937			3,937			-		3,937			-
Financial liabilities:
Demand deposits, savings and NOW deposits		189,915			176,906			176,906		-			-
Time deposits		77,970			78,208			-		78,208			-
Federal Home Loan Bank advances		50,000			49,880			-		49,880			-
At December 31, 2018:
Financial assets:
Cash and due from banks	$	6,374		$	6,374		$	6,374	$	-		$	-
Interest-bearing deposits with banks		5,400			5,400			5,400		-			-
Available-for-sale securities		33,429			33,429			-		33,429			-
Loans held for sale		26,884			26,884			-		26,884			-
Loans held for investment, net		282,790			283,466			-		-			283,466
Derivative IRLC's		381			381			-		-			381
Derivative forward commitments		(154	)		(154	)		-		(154	)		-
Stock in financial institutions		3,910			3,910			-		3,910			-
Financial liabilities:
Demand deposits, savings and NOW deposits		187,700			172,049			172,049		-			-
Time deposits		77,359			77,688			-		77,688			-
Federal Home Loan Bank advances		67,000			66,653			-		66,653			-

The following methods and assumptions were used to estimate the fair value of the additional classes of financial instruments shown:

Cash and Due from Banks, Interest-Bearing Deposits with Banks and Stock in Financial Institutions– The carrying amount approximates fair value.

Deposits and FHLB Advances – Deposits include demand deposits, savings accounts, NOW accounts and money market deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits and FHLB advances is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits and advances of similar remaining maturities.

Available-for-sale Securities – Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly-liquid government bonds, mortgage products and exchange-traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include certain collateralized mortgage and debt obligations and certain municipal securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include certain residual municipal securities and other less liquid securities.

Loans Held for Sale – The fair value of loans held for sale is based on quoted market prices from FHLMC. FHLMC quotes are updated daily and represent prices at which loans are exchanged in high volumes and in a liquid market.

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Other Real Estate – Other real estate is fair valued under Level 3 based on property appraisals less estimated disposition costs, which include both observable and unobservable inputs, at the time of transfer and as appropriate thereafter.

Loans Held for Investment – Loans held for investment are generally not recorded at fair value on a recurring basis. Periodically, the Bank records nonrecurring adjustments to the carrying value of these loans based on fair value measurements for loans subject to impairment. The fair value of impaired loans is typically determined using a combination of observable inputs, such as interest rates, contract terms, appraisals of collateral supporting the loan and recent comparable sales of similar properties, and unobservable inputs such as creditworthiness, disposition costs and underlying cash flows associated with the loan. Since the estimates of fair value utilized for loans also involve unobservable inputs, valuations of impaired loans have been classified as Level 3.

The following table presents the significant unobservable inputs used in the fair value measurements for Level 3 financial assets measured on a non-recurring basis:

	Fair Value		Valuation Methodologies	Valuation Model	Unobservable Input Valuation
At March 31, 2019
Impaired loans
Commercial real estate	$	2,988,885	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
One- to four-family residential real estate		616,750	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
Total Impaired Loans	$	3,605,635
Derivative IRLC's	$	360,830	Internal pricing model	Pull-through rate			73%
At December 31, 2018
Impaired loans
Commercial real estate	$	2,993,923	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
One- to four-family residential real estate		649,685	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
Total Impaired Loans	$	3,643,608
Derivative IRLC's	$	380,866	Internal pricing model	Pull-through rate			77%

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NOTE 8 – EARNINGS PER SHARE

The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. The factors used in the earnings per share computation follow:

	Three Months Ended March 31,
	2019			2018
Basic:
Net income	$	41,208		$	370,627
Less: Earnings allocated to participating securities		(643	)		(8,495	)
Net income allocated to common shareholders	$	40,565		$	362,132
Weighted-average common shares outstanding including participating securities		3,360,612			3,444,390
Less: Average participating securities		(49,798	)		(74,907	)
Less: Average unallocated ESOP Shares		(170,316	)		(176,102	)
Average shares		3,140,499			3,193,381
Basic earnings per common share	$	0.01		$	0.11
Diluted:
Net income allocated to common shareholders	$	40,565		$	362,132
Weighted-average common shares outstanding for basic earnings per common share		3,140,499			3,193,381
Add: Dilutive effects of assumed exercises of stock options		4,712			13,745
Weighted average shares and dilutive potential common shares		3,145,210			3,207,126
Diluted earnings per common share	$	0.01		$	0.11

Our restricted stock awards are participating securities since they participate in common stock dividends.

Stock options for 4,000 shares were not considered in computing diluted earnings per common share for the three months ended March 31, 2019 because they were antidilutive. There were no stock options considered antidilutive for the three months ended March 31, 2018. 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section as of and for the three months ended March 31, 2019 and 2018, has been derived from the consolidated financial statements that appear elsewhere in this report. The information contained in this section should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto, appearing in Part 1, Item 1 of this report.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this document that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (referred to as the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (referred to as the Securities Exchange Act), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “tend,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions. Because of these and other uncertainties, Bancorp 34’s actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. You should not place undue reliance on any forward-looking statements, which speak only as of the dates on which they were made. Bancorp 34 is not undertaking an obligation to update these forward-looking statements, even though its situation may change in the future, except as required under federal securities law. Bancorp 34 qualifies all of its forward-looking statements by these cautionary statements.                          

Critical Accounting Policies

Critical accounting policies are those that involve significant judgments and assumptions by management and that have, or could have, a material impact on our income or the carrying value of our assets. Our critical accounting policies are those related to our allowance for loan losses, the evaluation of other-than-temporary impairment of securities, the valuation of and our ability to realize deferred tax assets and the measurement of fair values of financial instruments.

Allowance for Loan Losses. The allowance for loan losses is calculated with the objective of maintaining an allowance necessary to absorb probable credit losses inherent in the loan portfolio. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective, as it requires an estimate of the losses for each risk rating and for each impaired loan, an estimate of the amounts and timing of expected future cash flows, and an estimate of the value of collateral.

We have established a systematic method of periodically reviewing the credit quality of the loan portfolio in order to establish an allowance for loan losses. The allowance for loan losses is based on our current judgments about the credit quality of individual loans and segments of the loan portfolio. The allowance for loan losses is established through a provision for loan losses based on our evaluation of the probable losses inherent in the loan portfolio, and considers all known internal and external factors that affect loan collectability as of the reporting date. Our evaluation, which includes a review of loans on which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, our knowledge of inherent losses in the portfolio that are probable and reasonably estimable and other factors that warrant recognition in providing an appropriate loan loss allowance. Management believes this is a critical accounting policy because this evaluation involves a high degree of complexity and requires us to make subjective judgments that often require assumptions or estimates about various matters.

The allowance for loan losses consists primarily of specific allocations and general allocations. Specific allocations are made for loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral, including adjustments for market conditions and selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, risk weighting and payment history. We also analyze delinquency trends, general economic conditions, trends in historical loss experience and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general allowance. The principal assumption used in calculating the allowance for loan losses is the estimate of loss for each risk rating. Actual loan losses may be significantly more than the allowance we have established, which could have a material negative effect on our financial results.

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Other-Than-Temporary Impairment. Securities are evaluated on at least a quarterly basis, to determine whether a decline in their value is other-than-temporary. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether or not we intend to sell or expect that it is more likely than not that we will be required to sell the investment security prior to an anticipated recovery in fair value. Once a decline in value for a debt security is determined to be other than temporary, the other-than-temporary impairment is separated in (a) the amount of total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to credit loss is recognized in operations. The amount of other-than-temporary impairment related to other factors is recognized in other comprehensive loss.

Valuation of Deferred Tax Assets. As a result of the reduction in the Federal corporate tax rate effective in 2018 under the Tax Cuts and Jobs Act signed into law in December 2017, income tax expense for 2017 includes a $1.2 million deferred tax asset re-measurement adjustment. Effective December 31, 2016, we reversed 100% of our net deferred tax asset valuation allowances and recognized an income tax benefit based upon our assessment of net deferred tax assets that are more-likely-than-not to be realized. The net deferred tax asset had been offset by an equal valuation allowance from June 2012 through November 2016. In evaluating our ability to realize deferred tax assets, management considers all positive and negative information, including our past operating results and our forecast of future taxable income. In determining future taxable income, management utilizes a budget process that makes business assumptions and the implementation of feasible and prudent tax planning strategies, if any. These assumptions require us to make judgments about our future taxable income that are consistent with the plans and estimates we use to manage our business. Any change in estimated future taxable income or effective tax rates may result in changes to the carrying balance of our net deferred tax assets which would result in an income tax benefit or expense in the same period.

Fair Value Measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.  A three-level of fair value hierarchy prioritizes the inputs used to measure fair value:

● Level 1 – Quoted prices in active markets for identical assets or liabilities; includes certain U.S. Treasury and other U.S. Government agency debt that is highly liquid and actively traded in over-the-counter markets.

● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. 

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Average Balance Sheets

The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated. Tax-equivalent yield adjustments have not been made for tax-exempt securities, as the effect thereof was not material. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income. 

	Three Months Ended March 31,
	2019								2018
	Average								Average
	Outstanding					Yield/			Outstanding					Yield/
	Balance			Interest		Rate (1)			Balance			Interest		Rate (1)
	(Dollars in thousands)
Interest-earning assets:
Loans	$	304,449		$	4,332		5.77	%	$	273,362		$	3,876		5.75	%
Securities		33,405			224		2.72	%		26,927			149		2.24	%
Other interest earning assets		19,538			122		2.53	%		15,705			67		1.73	%
Total interest-earning assets		357,393			4,678		5.31	%		315,994			4,092		5.25	%
Noninterest-earning assets		23,617								23,679
Total assets	$	381,009							$	339,673
Interest-bearing liabilities:
Checking, money market and savings accounts	$	145,326		$	467		1.30	%	$	130,535		$	282		0.88	%
Certificates of deposit		80,060			394		2.00	%		66,843			212		1.29	%
Total deposits		225,387			861		1.55	%		197,378			494		1.02	%
Advances from FHLB of Dallas		60,289			372		2.50	%		41,222			149		1.47	%
Total interest-bearing liabilities		285,675			1,233		1.75	%		238,600			643		1.09	%
Non-interest bearing deposits		44,191								45,712
Non-interest bearing liabilities		4,162								4,461
Total liabilities		334,028								288,773
Stockholders' equity		46,981								50,900
Total liabilities and stockholders' equity	$	381,009							$	339,673
Net interest income				$	3,445							$	3,449
Net interest rate spread (2)							3.56	%							4.16	%
Net interest-earning assets (3)	$	71,717							$	77,394
Net interest margin (4)							3.91	%							4.43	%
Average interest-earning assets to average interest-bearing liabilities		125.10	%							132.44	%

(1)	Yield/Rate for the three-month periods have been annualized.
(2)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(3)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(4)	Net interest margin represents net interest income as a percentage of average total interest-earning assets.

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

Cash and cash equivalents were $11.6 million at March 31, 2019 and $11.8 million at December 31, 2018. Daily cash and cash equivalent balances vary around our target levels of $5.0 to $10.0 million primarily due to the timing of commercial loan fundings and payoffs and changes in deposit balances, mortgage loans held for sale and FHLB advances.

Available-for-sale securities decreased $858,000, or 2.6%, during the three months ended March 31, 2019 to $32.6 million due to monthly payments on mortgage backed securities. There were no purchases or sales of available-for-sale securities in the three months ended March 31, 2019.

Loans held for sale at March 31, 2019 totaled $14.6 million, consisting entirely of residential mortgage loans. We currently sell a significant majority of our residential mortgage loans in the secondary market. At December 31, 2018, loans held for sale totaled $26.9 million. The balances at any date vary based upon the timing and volume of current loan originations and sales.

Loans held for investment increased $4.2 million, or 1.5%, to $289.9 million at March 31, 2019 from $285.7 million at December 31, 2018, due to organic growth. In the three months ended March 31, 2019, commercial real estate loans increased $5.0 million to $238.1 million and represented 81.8% of the gross loan portfolio at March 31, 2019, compared to 81.3% at December 31, 2018.

Total deposits increased $2.7 million, or 1.0%, to $267.9 million at March 31, 2019 from $265.2 million at December 31, 2018. The increase included a $3.9 million, or 2.7%, increase in savings and NOW deposits and a $431,000, or 0.6% increase in time deposits, partially offset by a $1.7 million, or 3.7%, decrease in demand deposits.

Federal Home Loan Bank advances were down $17.0 million, or 25.4%, to $50.0 million at March 31, 2019 compared to $67.0 million at December 31, 2018. The decrease was primarily due to a $12.3 million decrease in loans held for sale and the $2.7 million increase in deposits. We utilize short-term borrowings to fund loans held for sale, and long-term borrowings and some short-term borrowings to fund net growth in loans held for investment.

Accrued interest and other liabilities increased $4.9 million, or 116.7%, to $9.1 million at March 31, 2019 compared to $4.2 million at December 31, 2018. The increase was due to a $5.0 million brokered CD that matured in late March 2019, but the money wasn't remitted until April 1 so it was in other liabilities over quarter end.

Total stockholders’ equity increased $0.2 million to $46.6 million at March 31, 2019 from $46.4 million at December 31, 2018. The largest changes in stockholders’ equity included a $264,000 increase due to securities fair value appreciation and a $278,000 reduction due to common stock repurchases.

Comparison of Operating Results for the Three Months Ended March 31, 2019 and 2018

General. We had net income of $41,000 for the three months ended March 31, 2019, which was $330,000 less than net income of $371,000 for the three months ended March 31, 2018. The decrease was primarily caused by a $609,000, or 18.2%, decrease in gain on sale of loans and a $66,000 larger provision for loan losses, partially offset by a $260,000, or 4.0%, decrease in noninterest expense and an $89,000 decrease in income tax expense.

Interest Income. Interest income increased $585,000, or 14.3%, to $4.7 million for the three months ended March 31, 2019 from $4.1 million for the three months ended March 31, 2018. The increase was due to a $41.4 million, or 13.1%, increase in average interest-earning assets and a six basis point increase in average yields, partially offset by a change in asset mix as loans, our highest yielding assets, decreased to 85.2% of average interest-earning assets from 86.5% of average interest-earning assets. The six basis point increase in yield on average interest earning assets included yield increases on loans, securities and other interest earning assets of two basis points, 48 basis points and 80 basis points, respectively. Interest income on loans increased due primarily to a $31.1 million, or 11.4%, increase in average loan balances due to organic growth and a two basis point increase in yield. Interest on securities increased $75,000, or 50.3%, for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 due primarily to a $6.5 million, or 24.1%, increase in average loan balances due to fourth quarter 2018 purchases and a 48 basis point increase in yield due to favorable market rate increases.

Interest Expense. Interest expense increased $590,000, or 91.7%, to $1.2 million for the three months ended March 31, 2019 from $643,000 for the three months ended March 31, 2018. The increase was the result of increases of $368,000, or 74.4%, in interest expense on deposits and $222,000, or 148.8%, in interest expense on borrowings. The average balance of borrowings increased $19.1 million, or 46.3%, from the quarter ended March 31, 2018 to the quarter ended March 31, 2019 and the average rate paid increased 103 basis points to 2.50% for the three months ended March 31, 2019 from 1.47% for the three months ended March 31, 2018.

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Interest paid on checking, money market and savings accounts increased $185,000, or 65.6%, to $467,000 for the three months ended March 31, 2019 from $282,000 for the three months ended March 31, 2018. The average rate we paid on such deposit accounts increased 42 basis points to 1.30% for the three months ended March 31, 2019 from 0.88% for the three months ended March 31, 2018 due to the increase in market interest rates, and the average balance increased $14.8 million, or 11.3%, to $145.3 million for the three months ended March 31, 2019 from $130.5 million for the three months ended March 31, 2018.  

Interest on certificates of deposits increased $182,000, or 85.8%, to $394,000 for the three months ended March 31, 2019 from $212,000 for the three months ended March 31, 2018. The average rate paid on certificates of deposit increased 71 basis points, or 55.0%, to 2.00% for the three months ended March 31, 2019 compared to 1.29% for the three months ended March 31, 2018 due to the increase in market interest rates. The average balance of certificates of deposit increased $13.3 million, or 19.8%, to $80.1 million for the three months ended March 31, 2019 from $66.8 million for the three months ended March 31, 2018.  

The average rates we pay on deposits is considerably higher in the Arizona market.

Net Interest Income. Net interest income decreased $4,000 and was $3.4 million for each of the three months ended March 31, 2019 and 2018, primarily due to a 13.1% increase in average interest earning assets mostly offset by a 60 basis point decrease in net interest rate spread to 3.56% for the three months ended March 31, 2019 from 4.16% for the three months ended March 31, 2018. Average interest bearing liability rates increased 66 basis points compared to a six basis point increase in the average interest earning assets yield. Our average net interest-earning assets decreased by $5.7 million, or 7.3%, to $71.8 million for the three months ended March 31, 2019 from $77.4 million for the three months ended March 31, 2018 due primarily to higher growth in interest-bearing liabilities than interest-earning assets. Loan yield was 5.77% of average loans for the three months ended March 31, 2019, compared to 5.75% for the comparable quarter in 2018. Our cost of borrowings increased 103 basis points to 2.50% for the quarter ended March 31, 2019 from 1.47% for the quarter ended March 31, 2018 due to the increase in short-term market interest rates. The target Federal Funds rate has increased 175 basis points from 0.75% at December 31, 2016 to 2.50% at March 31, 2019 with three 25 basis point increases in 2017 and four in 2018.

Provision for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. If the allowance for loan losses is larger than necessary, we post a negative provision as a benefit to earnings. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including but not limited to, charge-off history over a relevant period, changes in management or underwriting policies, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower and results of internal and external loan reviews.

See “Asset Quality - Allowance for Loan Losses” for additional information.

After an evaluation of these factors, we recorded a provision for loan losses of $88,000 for the three months ended March 31, 2019, compared to $22,000 for the three months ended March 31, 2018. In the three months ended March 31, 2019, the allowance for loan losses increased $80,000 or 2.8%, including an $88,000 increase from provisions, partially offset by $7,000 in net charge-offs.

To the best of our knowledge, at March 31, 2019 we have recorded all loan losses that are both probable and reasonable to estimate.  However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, will periodically review our allowance for loan losses and may require us to recognize adjustments to the allowance based on its judgments about the recoverability of our loan balances based upon information available to it at the time of its examination.

 Noninterest Income. Noninterest income decreased $609,000, or 17.1%, to $2.9 million for the three months ended March 31, 2019 from $3.6 million for the three months ended March 31, 2018 due primarily to an 18.2% decrease in loan sales gains.

The gain on sale of loans decreased $609,000, or 18.2%, to $2.7 million for the three months ended March 31, 2019 from $3.4 million for the three months ended March 31, 2018 due primarily to the effects of pipeline fair value adjustment on sales gain. During the three months ended March 31, 2019, we sold $73.8 million of mortgage loans for a gain of $2.7 million, compared to $72.8 million of mortgage loan sales during the three months ended March 31, 2018 for a gain of $3.2 million. We sold $431,000 of SBA loans during the three months ended March 31, 2019 and recognized $27,000 of sales gains directly into income compared to $1.3 million of SBA loan sales in the quarter ended March 31, 2018 with gains of $108,000. We realized a 4.0% average premium (gain on sale/sold loans) on the sales of mortgage loans for the three months ended March 31, 2019 and 3.7% for the three months ended March 31, 2018. Premiums vary from period to period based upon the mix of government Federal Housing Administration (FHA) and VA loans to conventional loans, geographic markets and market interest rates, specifically 10-year Treasury rates.

Noninterest Expense. Noninterest expense decreased $260,000, or 4.0%, to $6.3 million for the three months ended March 31, 2019 from $6.5 million for the three months ended March 31, 2018, despite a 12.2% increase in average assets. The decrease was primarily related to reductions in professional fees, salaries and benefits and other expense, including loan related and travel and entertainment expense, partially offset by an increase in data processing fees.

Provision for Income Tax. Provision for income tax expense was $6,000 for the three months ended March 31, 2019, representing an effective tax rate of 12.7% on pre-tax income. There are numerous differences between pre-tax income and actual taxable income that have an effect on the effective income tax rate for any given period. We recognized an income tax expense of $95,000.for the three months ended March 31, 2018 representing 20.4% of the $466,000 income before income taxes.

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Asset Quality

We review loans on a regular basis, and place loans on nonaccrual status when either principal or interest is 90 days or more past due, or earlier if we do not expect to receive full payment of interest or principal. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income. Once a loan is placed on nonaccrual status, the borrower must generally demonstrate at least six months of payment performance before the loan is eligible to return to accrual status.

Non-Performing Loans and Non-Performing Assets The following table sets forth information regarding our nonperforming assets.

	At March 31,			At December 31,
	2019			2018
	(Dollars in thousands)
Nonaccrual loans
Real estate loans:
One- to four-family residential real estate	$	617		$	650
Commercial real estate		2,989			2,994
Commercial and industrial loans		-			-
Consumer and other loans		-			-
Total nonaccrual loans		3,606			3,644
Accruing loans past due 90 days or more		-			-
Total nonaccrual loans and accruing loans past due 90 days or more		3,606			3,644
Other real estate (ORE)
One- to four-family residential real estate		-			-
Commercial real estate		-			-
Total other real estate		-			-
Total nonperforming assets	$	3,606		$	3,644
Ratios:
Nonperforming loans to gross loans held for investment		1.24	%		1.27	%
Nonperforming assets to total assets		0.96	%		0.95	%
Nonperforming assets to gross loans held for investment and ORE		1.24	%		1.27	%

One loan relationship secured by real estate comprises $2.7 million, or 76%, of the $3.6 million in nonaccrual loans at March 31, 2019, and $2.3 million, or 64%, of the total March 31, 2019 nonaccrual loan balance, is guaranteed by the SBA. This is a loan to an operating commercial entity that has filed for Chapter 11 bankruptcy protection. The loan is 75% SBA guaranteed and the outstanding balance is collateralized by the real estate and all business assets.

Due to the decrease in nonaccrual loans, the nonperforming asset ratios decreased from December 31, 2018 to March 31, 2019.

Interest income that would have been recorded for the three months ended March 31, 2019, had nonaccruing loans been current according to their original terms amounted to $80,000. We recognized $0 in interest income on nonaccrual loans and $0 related to a troubled debt restructurings for the three months ended March 31, 2019.

As of March 31, 2019 and December 31, 2018 we had $52,000 and $54,000 in current troubled debt restructurings, respectively.

Allowance for Loan Losses. The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, and economic conditions. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Because of uncertainties associated with regional economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that management’s estimate of credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term. The allowance is increased by a provision for loan losses, which is charged to expense and reduced by full and partial charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses. Management’s periodic evaluation of the adequacy of the allowance is based on the current level of net loan losses, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, and current economic conditions.

Page 35 of 41

The following table sets forth activity in our allowance for loan losses for the periods indicated.

	Three Months Ended March 31,
	2019			2018
	(Dollars in thousands)
Balance at beginning of period	$	2,901		$	3,117
Provision for (credit to) loan losses		87			22
Charge-offs:
One- to four-family residential real estate loans		(9	)		(23	)
Commercial real estate loans		-			-
Commercial and industrial loans		-			-
Consumer and other loans		-			-
Total charge-offs		(9	)		(23	)
Recoveries:
One- to four-family residential real estate loans		-			6
Commercial real estate loans		-			-
Commercial and industrial loans		2			-
Consumer and other loans		-			-
Total recoveries		2			6
Net charge-offs recoveries		(7	)		(17	)
Balance at end of period	$	2,981		$	3,122
Allowance for loan losses to nonperforming loans		82.68	%		54.83	%
Allowance for loan losses to total loans		1.03	%		1.19	%
Allowance for loan losses to total loans less acquired loans		1.04	%		1.28	%
Net (charge-offs) recoveries to average loans outstanding during the period		(0.00	)%		-0.01	%

The ratio of our allowance for loan losses to nonperforming loans increased due to a 36.7% decrease in nonperforming loans partially offset by a 4.5% decrease in the allowance for loan losses. The allowance for loan losses to total loans ratios decreased because total gross loans increased 10.9% and the allowance for loan losses decreased 4.5%.   

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, FHLB borrowings, loan repayments and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly adjust our investments in liquid assets based upon our assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits with other banks and short- and intermediate-term securities.

Page 36 of 41

We believe that we have enough sources of liquidity to satisfy our short-term liquidity needs as of March 31, 2019.

Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At March 31, 2019, cash and cash equivalents totaled $11.6 million. Available-for-sale securities, which provide additional sources of liquidity, totaled $32.6 million at March 31, 2019. In addition, at March 31, 2019, we had $50.0 million of advances outstanding from the Federal Home Loan Bank of Dallas and the ability to borrow an additional $102.3 million from the FHLB, $9.8 million from the Independent Bankers Bank (TIB), and $6.0 million from the Pacific Coast Bankers Bank (PCBB).

At March 31, 2019, we had $41.4 million in loan commitments outstanding, and $35.4 million in commitments to originate and sell mortgage loans. In addition, we had $19.2 million in unused lines of credit and $0 in commitments issued under standby letters of credit. Time deposits due within one year as of March 31, 2019 totaled $35.9 million, or 13.40% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other time deposits and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before March 31, 2020. We believe, however, based on past experience that a significant portion of our time deposits will remain with us, either as time deposits or as other deposit products. We have the ability to attract and retain deposits by adjusting the interest rates offered.

We have no material commitments or demands that are likely to affect our liquidity other than set forth above. In the event loan demand were to increase at a pace greater than expected, or any unforeseen demand or commitment were to occur, we would access our borrowing capacity with the Federal Home Loan Bank of Dallas or the other financial institutions, or increase our deposits by offering higher interest rates.

Our primary investing activities are the origination of loans and the purchase of securities. During the three months ended March 31, 2019, we originated $21.6 million of loans held for investment and $61.1 million of mortgage loans held for sale, compared to $28.5 million of loans held for investment and $72.3 million of mortgage loans held for sale during the three months ended March 31, 2018. In the three months ended March 31, 2019 and 2018 we purchased $0 and $3.3 million in securities, respectively. We have not purchased any whole loans in the past two years.

Financing activities consist primarily of activity in deposit accounts and Federal Home Loan Bank advances. We experienced net increases of $2.7 million and $6.2 million in total deposits for the three months ended March 31, 2019 and 2018, respectively. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits so that we are competitive in our market area.

We had $50.0 million in Federal Home Loan Bank advances at March 31, 2019 and $67.0 million at December 31, 2018.

Bancorp 34, Inc. is a separate legal entity from the Bank and must provide for its own liquidity to pay any dividends to stockholders, to repurchase its common stock, and for other corporate purposes. Bancorp 34, Inc.’s primary source of liquidity is dividend payments it may receive from the Bank. At March 31, 2019, Bancorp 34, Inc. (on an unconsolidated basis) had liquid assets of $4.6 million.

The Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2019 and December 31, 2018, Bank 34 exceeded all regulatory capital requirements. Bank 34 is considered “well-capitalized” under regulatory guidelines.

Page 37 of 41

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of March 31, 2019. Based on that evaluation, the Company’s management, including the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended March 31, 2019, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1. Legal Proceedings 

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

Item 1A. Risk Factors

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

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

(a) Not applicable.

(b) Not applicable.

(c) On October 24, 2017, the Company adopted its first repurchase program under which it was authorized to repurchase up to 171,910 shares of its common stock, or approximately 5.0% of the Company’s outstanding shares. Under that program 28,000 shares were repurchased in December 2017, 125,500 were repurchased in 2018 and the program was completed with 18,410 shares repurchased in the first quarter of 2019. No shares remain available for repurchase under that program.  

Item 3. Defaults Upon Senior Securities 

None.

Item 4. Mine Safety Disclosures

Not applicable.

Page 38 of 41

Item 5. Other Information

The Company’s repurchases of common stock for the three months ended March 31, 2019 were as follows:
					Total Number of		Maximum Number
	Total				Shares Purchased as		of Shares that May
	Number of		Average Price		Part of Publicly		Be Purchased Yet
	Shares		Paid		Announced Plans or		Under the Plans
Period	Purchased		per Share		Programs		or Programs (1)
January 1, 2019 through January 31, 2019		---		---		---		18,410
February 1, 2019 through February 28, 2019		10,000		$14.85		10,000		8,410
March 1, 2019 through March 31, 2019		8,410		$15.25		8,410		0
		18,410				18,410

(1) On October 24, 2017, the Company adopted a repurchase program under which it would repurchase up to 171,910 shares of its common stock, or approximately 5.0% of the Company’s outstanding shares. The repurchase program was completed in February 2019.

Page 39 of 41

Item 6. Exhibits

3.1	Articles of Incorporation of Bancorp 34, Inc. (1)
3.2	Bylaws of Bancorp 34, Inc. (1)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial statements from the Bancorp 34, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Comprehensive Income; (iii) Consolidated Statements of Stockholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.
(1)	Incorporated by reference to the Registration Statement on Form S-1 of Bancorp 34, Inc. (File No. 333-21182), originally filed with the Securities and Exchange Commission on September 3, 2016.

Page 40 of 41

SIGNATURES

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

	BANCORP 34, INC.
Date:     April 26,2019	/s/ Jill Gutierrez
	Jill Gutierrez
	President and Chief Executive Officer
Date:     April 26, 2019	/s/ Jan R. Thiry
	Jan R. Thiry
	Executive Vice President and Chief Financial Officer

Page 41 of 41

EX-31.1

 Exhibit 31.1

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

I, Jill Gutierrez, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Bancorp 34, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within the entity, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 26, 2019	/s/ Jill Gutierrez
		Jill Gutierrez
		President and Chief Executive Officer

EX-31.2

 Exhibit 31.2

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

I, Jan R. Thiry, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Bancorp 34, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within the entity, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 26, 2019	/s/ Jan R. Thiry
		Jan R. Thiry
		Executive Vice President and Chief Financial Officer

EX-32.1

 Exhibit 32.1

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

Jill Gutierrez, President and Chief Executive Officer of Bancorp 34, Inc. (the “Company”), and Jan R. Thiry, Executive Vice President and Chief Financial Officer of the Company, each certify in his or her capacity as an officer of the Company that they have reviewed the quarterly report on Form 10-Q for the quarter ended March 31, 2019 (the “Report”) and that to the best of their knowledge:

1. the Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	April 26, 2019	/s/ Jill Gutierrez
		Jill Gutierrez
		President and Chief Executive Officer
Date:	April 26, 2019	/s/ Jan R. Thiry
		Jan R. Thiry
		Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2019	Apr. 28, 2019
Document Information [Line Items]
Entity Registrant Name	Bancorp 34, Inc.
Entity Central Index Key	0001668340
Trading Symbol	bctf
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		3,356,155
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks	$ 4,718,880	$ 6,374,457
Interest-bearing deposits with banks	6,855,000	5,400,000
Total cash and cash equivalents	11,573,880	11,774,457
Available-for-sale securities, at fair value	32,570,879	33,428,658
Loans held for sale, at fair value	14,614,579	26,884,014
Loans held for investment	289,856,142	285,691,372
Allowance for loan losses	(2,981,412)	(2,901,091)
Loans held for investment, net	286,874,730	282,790,281
Premises and equipment, net	9,464,710	9,615,626
Stock in financial institutions, restricted, at cost	3,937,361	3,910,361
Accrued interest receivable	963,269	875,040
Deferred income taxes, net	2,103,654	2,196,928
Bank owned life insurance	10,641,381	10,573,069
Core deposit intangible, net	161,893	172,108
Prepaid and other assets	1,088,406	1,057,365
TOTAL ASSETS	373,994,742	383,277,907
Liabilities
Demand deposits	43,655,695	45,350,477
Savings and NOW deposits	146,259,640	142,349,920
Time deposits	77,969,777	77,538,576
Total deposits	267,885,112	265,238,973
Federal Home Loan Bank advances	50,000,000	67,000,000
Escrows	424,049	378,592
Accrued interest and other liabilities	9,131,724	4,237,608
Total liabilities	327,440,885	336,855,173
Commitments and contingencies (note 4)
Stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 authorized, 0 issued and outstanding
Common stock, $0.01 par value, 100,000,000 authorized, 3,356,155 and 3,374,565 issued and outstanding.	33,561	33,746
Additional paid-in capital	25,309,067	25,500,873
Retained earnings	22,969,985	22,928,777
Accumulated other comprehensive loss, net of tax	(132,301)	(396,148)
Unearned employee stock ownership plan (ESOP) shares	(1,626,455)	(1,644,514)
Total stockholders’ equity	46,553,857	46,422,734
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 373,994,742	$ 383,277,907

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	50,000,000	50,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	3,356,155	3,374,565
Common stock, shares outstanding (in shares)	3,356,155	3,374,565

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Interest income
Interest and fees on loans	$ 4,332,096	$ 3,876,008
Interest on securities	223,807	148,581
Interest on other interest-earning assets	121,988	68,030
Total interest income	4,677,891	4,092,619
Interest expense
Interest on deposits	861,269	493,736
Interest on borrowings	371,756	149,430
Total interest expense	1,233,025	643,166
Net interest income	3,444,866	3,449,453
Provision for loan losses	87,500	22,000
Net interest income after provision for loan losses	3,357,366	3,427,453
Noninterest income
Gain on sale of loans	2,744,581	3,353,393
Service charges and fees	95,199	84,389
Bank owned life insurance income	91,261	88,597
Other	11,157	24,606
Total noninterest income	2,942,198	3,550,985
Noninterest expense
Salaries and benefits	4,148,518	4,229,977
Occupancy	499,462	505,951
Data processing fees	786,591	723,406
FDIC and other insurance expense	85,603	50,533
Professional fees	238,138	354,604
Advertising	114,389	156,026
Other	379,646	492,171
Total noninterest expense	6,252,347	6,512,668
Income before provision for income taxes	47,217	465,770
Provision for income taxes	6,009	95,143
NET INCOME	41,208	370,627
Other comprehensive income
Unrealized (loss) gain on available-for-sale securities	353,919	(347,268)
Tax effect of unrealized (loss) gain on available-for-sale securities	(90,072)	88,680
Unrealized (loss) gain on available-for-sale securities, net of tax	263,847	(258,588)
COMPREHENSIVE INCOME	$ 305,055	$ 112,039
Earnings per common share:
Basic (in dollars per share)	$ 0.01	$ 0.11
Diluted (in dollars per share)	$ 0.01	$ 0.11

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)		Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Unearned ESOP Shares [Member]	Total
Balance (in shares) at Dec. 31, 2017		3,490,672
Balance at Dec. 31, 2017		$ 34,907	$ 26,849,822	$ 26,060,598	$ (274,266)	$ (1,700,372)	$ 50,970,689
Net income				370,627			370,627
Unrealized gain on available-for-sale securities, net					(258,588)		(258,588)
Restricted stock awards (in shares)		429
Restricted stock awards		$ 4	(4)
Amortization of equity awards			93,672			13,964	107,636
Share repurchase (in shares)		(102,500)
Share repurchase		$ (1,025)	(1,571,025)				(1,572,050)
Balance (in shares) at Mar. 31, 2018		3,388,601
Balance at Mar. 31, 2018	[1]	$ 33,886	25,372,465	26,431,225	(532,854)	(1,686,408)	49,618,314
Balance (in shares) at Dec. 31, 2018		3,374,565
Balance at Dec. 31, 2018		$ 33,746	25,500,873	22,928,777	(396,148)	(1,644,514)	46,422,734
Net income				41,208			41,208
Unrealized gain on available-for-sale securities, net					263,847		263,847
Amortization of equity awards			85,680			18,059	103,739
Share repurchase (in shares)		(18,410)
Share repurchase		$ (185)	(277,486)				(277,671)
Balance (in shares) at Mar. 31, 2019		3,356,155
Balance at Mar. 31, 2019		$ 33,561	$ 25,309,067	$ 22,969,985	$ (132,301)	$ (1,626,455)	$ 46,553,857

[1] The stranded tax element of accumulated other comprehensive income (loss) created by the 2017 Tax Cuts and Jobs Act was reclassified to retained earnings.

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities
Net income	$ 41,208	$ 370,627
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	162,472	175,954
Stock dividend on financial institution stock	(27,000)	(17,000)
Amortization of premiums and discounts on securities, net	27,718	77,246
Amortization of ESOP awards	18,059	13,964
Amortization of stock-based compensation	85,680	93,672
Amortization of core deposit intangible	10,215	13,101
Gain on sale of loans	(2,744,581)	(3,353,393)
Proceeds from sale of loans held for sale	76,550,254	76,956,796
Funding of loans held for sale	(61,105,134)	(72,168,547)
Provision for loan losses	87,500	22,000
Net appreciation on bank-owned life insurance	(68,312)	(68,548)
Deferred income tax (benefit) expense		(1,834)
Changes in operating assets and liabilities:
Accrued interest receivable	(88,229)	19,176
Prepaid and other assets	(27,839)	(390,966)
Accrued interest and other liabilities	4,894,116	(49,292)
Net cash from operating activities	17,816,127	1,692,956
Cash flows from investing activities
Proceeds from principal payments on available-for-sale securities	1,183,980	1,173,524
Purchases of available-for-sale securities		(3,293,817)
Net change in loans held for investment	(4,603,053)	(1,755,045)
Purchases of premises and equipment	(11,556)	(149,942)
Net cash from investing activities	(3,430,629)	(4,025,280)
Cash flows from financing activities
Net change in deposits	2,646,139	6,247,815
Net change in escrows	45,457	125,696
Proceeds from Federal Home Loan Bank advances	5,000,000	30,000,000
Repayments of Federal Home Loan Bank advances	(22,000,000)	(30,000,000)
Common stock repurchases	(277,671)	(1,572,050)
Net cash from financing activities	(14,586,075)	4,801,461
Net change in cash and cash equivalents	(200,577)	2,469,137
Cash and cash equivalents, beginning of period	11,774,457	9,873,178
Cash and cash equivalents, end of period	11,573,880	12,342,315
Supplemental disclosures:
Interest on deposits and advances paid	1,171,513	571,575
Loans transferred to loans held for sale	$ 431,104	$ 1,272,081

XML

Note 1 - Nature of Operations and Summary of Significant Accounting and Reporting Policies

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

NOTE

1

– NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Bancorp

34,

Inc. (“Bancorp

34”

or the “Company”) is a Maryland corporation and savings and loan holding company which owns

100%

of the common stock of Bank

34

(the “Bank”).

The Bank provides a variety of banking services to individuals and businesses through its full-service branches in Alamogordo and Las Cruces, New Mexico, and Scottsdale and Peoria, Arizona. The Bank also operates

ten

mortgage loan production offices in El Paso, Texas, Scottsdale, Arizona, Gilbert, Arizona, Tubac, Arizona, Albuquerque, New Mexico, Lynnwood, Washington, Puyallup, Washington, West Linn, Oregon and Medford, Oregon.

A large portion of the Bank’s New Mexico loans are secured by real estate in Otero and Dona Ana Counties. The economy for these counties is heavily dependent on

two

U.S. Government military installations located in those counties. Accordingly, the ultimate collectability of the Bank’s New Mexico loans is susceptible to changes in U.S. Government military operations in southern New Mexico.

The primary deposit products are demand deposits, time deposits, NOW, savings and money market accounts. The primary lending products are real estate mortgage loans and commercial loans. The Bank is subject to competition from other financial institutions and regulated and non-regulated financial services providers, regulation by certain federal agencies and undergoes periodic examinations by regulatory authorities.

Rising and falling interest rate environments can have various impacts on the Bank’s net interest income, depending on the short-term interest rate gap that the Bank maintains. The Bank’s net interest income is also affected by prepayments of loans and early withdrawals of deposits.

Basis of Presentation –

The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the accompanying consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition, cash flows and results of operations at the dates and for the periods presented. The results of operations for the

three

months ended

March 31, 2019

are

not

necessarily indicative of the results of operations for the full fiscal year or for any other period. This information should be read in conjunction with the Company’s Annual Report on Form

10

-K for the year ended

December 31, 2018.

Basis of Consolidation

– The consolidated financial statements include the accounts of Bancorp

34

and the Bank. All significant intercompany accounts and transactions have been eliminated.

Emerging Growth Company Status

- Bancorp

34

is an emerging growth company under the JOBS Act and expects to lose its status as an emerging growth company at the end of

2019.

  Bancorp

34

has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

Reclassifications

– Certain reclassifications have been made to prior period’s financial information to conform to the current period presentation.

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.

Significant estimates include, but are

not

limited to, allowance for loan losses, other-than-temporary impairment of securities, useful lives used in depreciation and amortization, deferred income taxes, valuation of other real estate and core deposit intangibles.

Subsequent Events

– Subsequent events have been evaluated through the date the unaudited consolidated financial statements were issued. 

Summary of Recent Accounting Pronouncements

:

Bancorp

34

is an emerging growth company and has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements

may

not

be comparable to the financial statements of public companies that comply with such new or revised accounting standards. The Company expects to lose its status as an emerging growth company at the end of

2019.

Revenue Recognition

- In

May 2014,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

. ASU

2014

-

09

requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective.  ASU

2014

-

09

would have been initially effective for the Company's reporting period beginning

January 1, 2018.

However, in

August

of

2015,

the FASB issued ASU

2015

-

14,

Revenue from Contracts with Customers - Deferral of the Effective Date

, which deferred the effective date by

one

year. For financial reporting purposes, the standard allows for either a full retrospective or modified retrospective adoption. The FASB has also issued additional updates to provide further clarification to specific implementation issues associated with ASU

2014

-

09.

These updates include ASU

2016

-

08,

Principal versus Agent Considerations

, ASU

2016

-

10,

Identifying Performance Obligations and Licensing

, ASU

2016

-

12,

Narrow-Scope Improvements and Practical Expedients

, and ASU

2016

-

20,

Technical Corrections and Improvements to Topic

606

. We adopted the standard on

January 1, 2019,

using the modified retrospective method, which resulted in

no

cumulative effect and

no

other adjustment or significant impact to the timing of revenue recognition.

Under Topic

606,

we must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) we satisfy the performance obligations. Our primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are

not

within the scope of Topic

606.

We have evaluated the nature of our contracts with customers and determined that further disaggregation of revenue from contracts with customers into categories beyond what is presented in the Consolidated Statements of Income was

not

necessary. For revenue sources that are within the scope of Topic

606,

we fully satisfy our performance obligations and recognize revenue in the period it is earned as services are rendered. Transaction prices are typically fixed, charged on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic

606

that significantly affects the determination of the amount and timing of revenue from contracts with our customers.

All of our revenue from contracts with customers in the scope of ASC

606

is recognized in Non-Interest Income. Sources of revenue from contracts with customers that are in the scope of ASC

606

include the following:

* Service Charges on Deposit accounts - We earn monthly account fees and transaction-based fees from our customers for services rendered on deposit accounts. Fees charged to deposit accounts on a monthly basis are recognized as the performance obligation is satisfied at the end of the service period.

* Transaction-based fees are based on specific services provided to our customer. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

* ATM and Point of Sale fees – We earn fees when debit cards we issued are used in transactions through card processing networks. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders’ account. The fees are recognized monthly.

Leases –

In

February 2016,

the FASB issued ASU 

2016

-

02

“Leases (Topic

842

).”

This standard requires entities that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The standard is effective for fiscal years and interim periods within those fiscal years beginning after

December 15, 2018

for public companies, but the Company will have until the

first

quarter of

2020

to adopt due to its emerging growth company status. The guidance is required to be applied by the modified retrospective transition approach. Early adoption is permitted. We are currently assessing the impact of the adoption of this authoritative guidance on our consolidated financial statements and collecting the data necessary for that assessment and adoption.

Credit Losses -

In

June 2016,

the FASB issued ASU

2016

-

13,

“Financial Instruments—Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments.”

The amendments in this update replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to create credit loss estimates. The new guidance is effective for public companies that are U.S. Securities and Exchange Commission filers for fiscal years beginning after

December 15, 2019

including interim periods within those fiscal years. For all other public companies, the amendments are effective for fiscal years beginning after

December 15, 2020,

including interim periods within those fiscal years. For all other companies, including emerging growth companies, the amendments are effective for fiscal years beginning after

December 15, 2020,

and interim periods within fiscal years beginning after

December 15, 2021.

The guidance is required to be applied by the modified retrospective approach. Early adoption is permitted as of the fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. We are currently assessing the impact of the adoption of this authoritative guidance on our consolidated financial statements.

Premium on Callable Debt -

In

March 2017,

the FASB issued ASU

No.

2017

-

08,

“Receivables–Nonrefundable Fees and Other Costs (Subtopic

310

-

20

)”

to shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Currently, entities generally amortize the premium as a yield adjustment over the contractual life of the security. The guidance does

not

change the accounting for callable debt securities held at a discount. For public business entities, the guidance is effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted, including in an interim period. ASU

2017

-

08

is

not

expected to have a significant impact on our consolidated financial statements.

Reporting Tax Effects of Tax Cuts and Jobs Act -

In

February 2018,

the FASB issued ASU

No.

2018

-

02,

“Income Statement-Reporting Comprehensive Income (Topic

220

): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”

that helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the

2017

Tax Cuts and Jobs Act. The ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The ASU requires financial statement preparers to disclose a description of the accounting policy for releasing income tax effects from AOCI, whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act, and information about the other income tax effects that are reclassified. The amendments are effective for all organizations for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We adopted ASU

2018

-

02

effective

December 2018

and reclassified the stranded tax effects from AOCI to retained earnings. Adoption did

not

have a significant impact on our consolidated financial statements.

XML

Note 2 - Available-for-sale Securities

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE

2

– AVAILABLE-FOR-SALE SECURITIES

Available-for-sale securities have been classified in the consolidated balance sheets according to management’s intent at

March 31, 2019

and

December 31, 2018.

The amortized cost of such securities and their approximate fair values were as follows:

	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
March 31, 2019
Available-for-sale securities
Mortgage-backed securities	$	27,719,782	$	232,930	$	(409,694	)	$	27,543,018
U.S. Government agencies		1,356,271		-		(45,848	)		1,310,423
Municipal obligations		3,672,092		45,346		-			3,717,438
Total	$	32,748,145	$	278,276	$	(455,542	)	$	32,570,879
December 31, 2018
Available-for-sale securities
Mortgage-backed securities	$	28,799,904	$	115,824	$	(605,370	)	$	28,310,358
U.S. Government agencies		1,487,917		-		(42,885	)		1,445,032
Municipal obligations		3,672,023		2,363		(1,118	)		3,673,268
Total	$	33,959,844	$	118,187	$	(649,373	)	$	33,428,658

There were

no

sales of available-for-sale securities during the

three

months ended

March 31, 2019

or

2018.

Amortized cost and fair value of securities by contractual maturity as of

March 31, 2019

and

December 31, 2018

are shown below. For purposes of the maturity table, mortgage-backed securities, which are

not

due at a single maturity date, have been allocated over maturity groupings based on the actual contractual maturities of underlying collateral. Expected maturities

may

differ from contractual maturities because borrowers

may

call or prepay obligations.

The scheduled maturities of available-for-sale securities at

March 31, 2019

and

December 31, 2018

were as follows:

	March 31, 2019				December 31, 2018
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	400,000	$	400,000	$	403,612	$	402,924
Due after one to five years		20,295,449		19,983,683		23,040,618		22,482,300
Due after five to ten years		12,052,696		12,187,196		10,515,614		10,543,434
Totals	$	32,748,145	$	32,570,879	$	33,959,844	$	33,428,658

At

March 31, 2019

and

December 31, 2018,

there were

no

holdings of securities of any

one

issuer, other than the U.S. Government and its agencies, in an amount greater than

10%

of stockholders’ equity.

At

March 31, 2019

and

December 31, 2018,

mortgage-backed securities included collateralized mortgage obligations of

$13.4

million and

$13.8

million, respectively, which are backed by single-family mortgage loans. The Company does

not

hold any securities backed by commercial real estate loans.

Gross Unrealized Losses and Fair Value

– The following tables show the gross unrealized losses and fair values of securities by length of time that individual securities in each category have been in a continuous loss position.

	March 31, 2019
	Less Than 12 Months				12 Months or More					Total
			Gross				Gross					Gross
Description of			Unrealized				Unrealized					Unrealized
Securities	Fair Value		Losses		Fair Value		Losses			Fair Value		Losses
Available-for-sale securities:
Mortgage-backed securities					$	18,439,189	$	(409,694	)	$	18,439,189	$	(409,694	)
U.S. Government agencies						1,310,423		(45,848	)		1,310,423		(45,848	)
Municipal obligations						-		-			-		-
Total temporarily impaired securities	$	-	$	-	$	19,749,612	$	(455,542	)	$	19,749,612	$	(455,542	)

	December 31, 2018
	Less Than 12 Months					12 Months or More					Total
			Gross					Gross					Gross
Description of			Unrealized					Unrealized					Unrealized
Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Available-for-sale securities:
Mortgage-backed securities	$	8,605,742	$	(200,190	)	$	10,740,671	$	(405,180	)	$	19,346,413	$	(605,370	)
U.S. Government agencies		302,219		(885	)		1,142,814		(42,000	)		1,445,033		(42,885	)
Municipal obligations		1,747,571		(430	)		402,924		(688	)		2,150,495		(1,118	)
Total temporarily impaired securities	$	10,655,532	$	(201,505	)	$	12,286,409	$	(447,868	)	$	22,941,941	$	(649,373	)

At

March 31, 2019

and

December 31, 2018,

all of the government agencies and mortgage-backed securities held by the Company were issued by U.S. Government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and

not

credit quality, and because the Company does

not

have the intent to sell these securities and it is likely that it will

not

be required to sell the securities before their anticipated recovery, the Company does

not

consider these securities to be other-than-temporarily impaired at

March 31, 2019.

Loans and securities with a carrying value of approximately

$155.2

million at

March 31, 2019

were pledged to secure Federal Home Loan Bank (“FHLB”) advances. In addition, securities with a carrying value of approximately

$3.7

million at

March 31, 2019

were pledged to secure public deposits.

XML

Note 3 - Loans Held for Investment, Net

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE

3

– LOANS HELD FOR INVESTMENT, NET

The components of loans held for investment, net in the consolidated balance sheets were as follows:

	March 31, 2019						December 31, 2018
	Amount			Percent			Amount			Percent
Loans held for investment, net:
Commercial real estate	$	238,120,124			81.8	%	$	233,102,637			81.3	%
One- to four-family residential real estate residential real estate		29,170,381			10.0			29,855,462			10.4
Commercial and industrial		17,602,539			6.1			17,508,258			6.1
Consumer and other		6,085,629			2.1			6,374,532			2.2
Total gross loans		290,978,673			100.0	%		286,840,889			100.0	%
Unamortized loan fees		(1,122,531	)					(1,149,517	)
Loans held for investment		289,856,142						285,691,372
Allowance for loan losses		(2,981,412	)					(2,901,091	)
Loans held for investment, net	$	286,874,730					$	282,790,281

At

March 31, 2019

and

December 31, 2018,

loans held for investment includes construction loans of

$21.8

million and

$20.8

million, respectively. 

Allowance for Loan Losses and Recorded Investment in Loans –

The following is a summary of the allowance for loan losses and recorded investment in loans as of

March 31, 2019

and

December 31, 2018:

	As of March 31, 2019
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Other		Total
Allowance for loan losses
Ending balance: individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Ending balance: collectively evaluated for impairment		2,341,297		220,139		388,425		31,551		2,981,412
Total	$	2,341,297	$	220,139	$	388,425	$	31,551	$	2,981,412
Gross loans
Ending balance: individually evaluated for impairment	$	2,988,885	$	616,750	$	-	$	-	$	3,605,635
Ending balance: collectively evaluated for impairment		235,131,239		28,553,631		17,602,539		6,085,629		287,373,038
Total	$	238,120,124	$	29,170,381	$	17,602,539	$	6,085,629	$	290,978,673

	As of December 31, 2018
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Other		Total
Allowance for loan losses
Ending balance: individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Ending balance: collectively evaluated for impairment		2,130,124		359,705		377,180		34,082		2,901,091
Total	$	2,130,124	$	359,705	$	377,180	$	34,082	$	2,901,091
Gross loans
Ending balance: individually evaluated for impairment	$	2,993,923	$	649,685	$	-	$	-	$	3,643,608
Ending balance: collectively evaluated for impairment		230,108,714		29,205,777		17,508,258		6,374,532		283,197,281
Total	$	233,102,637	$	29,855,462	$	17,508,258	$	6,374,532	$	286,840,889

The following tables summarize activities for the allowance for loan losses for the

three

months ended

March 31, 2019

and

2018:

	Commercial Real Estate		One- to Four- Family Residential Real Estate			Commercial and Industrial		Consumer and Other			Total
Balance December 31, 2018	$	2,130,124	$	359,705		$	377,180	$	34,082		$	2,901,091
Provision for loan losses		211,173		(130,880	)		9,738		(2,531	)		87,500
Charge-offs		-		(8,686	)		-		-			(8,686	)
Recoveries		-		-			1,507		-			1,507
Net (charge-offs) recoveries		-		(8,686	)		1,507		-			(7,179	)
Balance March 31, 2019	$	2,341,297	$	220,139		$	388,425	$	31,551		$	2,981,412
Balance December 31, 2017	$	2,055,911	$	567,290		$	462,406	$	31,583		$	3,117,190
Provision for loan losses		10,374		(46,975	)		51,901		6,700			22,000
Charge-offs		-		(23,269	)		-		-			(23,269	)
Recoveries		-		6,249			-		-			6,249
Net (charge-offs) recoveries		-		(17,020	)		-		-			(17,020	)
Balance March 31, 2018	$	2,066,285	$	503,295		$	514,307	$	38,283		$	3,122,170

Nonperforming Assets –

The following tables present an aging analysis of the recorded investment of past due loans as of

March 31, 2019

and

December 31, 2018.

Payment activity is reviewed by management on a monthly basis to determine the performance of each loan. Per Company policy, loans past due

90

days or more

no

longer accrue interest.

	Past Due										Total
					90 Days						Financing
	30 - 59 Days		60 - 89 Days		or More		Total		Current		Receivables
March 31, 2019
Commercial real estate	$	39,734	$	-	$	2,744,405	$	2,784,139	$	235,335,985	$	238,120,124
One- to four-family residential real estate		408,880		47,905		323,374		780,159		28,390,222		29,170,381
Commercial and industrial		-		-		-		-		17,602,539		17,602,539
Consumer and other		-		-		-		-		6,085,629		6,085,629
Totals	$	448,614	$	47,905	$	3,067,779	$	3,564,298	$	287,414,375	$	290,978,673

	Past Due										Total
					90 Days						Financing
	30 - 59 Days		60 - 89 Days		or More		Total		Current		Receivables
December 31, 2018
Commercial real estate	$	-	$	2,744,405	$	-	$	2,744,405	$	230,358,232	$	233,102,637
One- to four-family residential real estate		782,835		234,524		393,068		1,410,427		28,445,035		29,855,462
Commercial and industrial		-		-		-		-		17,508,258		17,508,258
Consumer and other		-		-		-		-		6,374,532		6,374,532
Totals	$	782,835	$	2,978,929	$	393,068	$	4,154,832	$	282,686,057	$	286,840,889

The following table sets forth nonaccrual loans and other real estate at

March 31, 2019

and

December 31, 2018:

	March 31,		December 31,
	2019		2018
Nonaccrual loans
Commercial real estate	$	2,988,885	$	2,993,923
One- to four-family residential real estate		616,750		649,685
Commercial and industrial		-		-
Consumer and other		-		-
Total nonaccrual loans		3,605,635		3,643,608
Other real estate (ORE)		-		-
Total nonperforming assets	$	3,605,635	$	3,643,608
Nonperforming assets to gross loans held for investment and ORE		1.24%		1.27%
Nonperforming assets to total assets		0.96%		0.95%

One large loan

relationship,75%

guaranteed by the SBA and partially secured by real estate, comprises

$2.7

million, or

76%,

of the

$3.6

million in nonaccrual loans at

March 31, 2019

and

$2.3

million, or

64%

of the total

March 31, 2019

nonaccrual loan balance, is guaranteed by the SBA.

Credit Quality Indicators –

The following table represents the credit exposure by internally assigned grades at

March 31, 2019

and

December 31, 2018.

This grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements in accordance with the loan terms. The Bank’s internal credit risk grading system is based on management’s experiences with similarly graded loans. Credit risk grades are reassessed each quarter based on any recent developments potentially impacting the creditworthiness of the borrower, as well as other external statistics and factors, which

may

affect the risk characteristics of the respective loan.

	As of March 31, 2019
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Consumer and Other		Total
Grade
Pass	$	229,465,218	$	27,616,139	$	17,249,760	$	6,085,629	$	280,416,746
Special mention		4,060,029		-		95,815		-		4,155,844
Substandard		4,594,877		1,554,242		256,964		-		6,406,083
Doubtful		-		-		-		-		-
Loss		-		-		-		-		-
Totals	$	238,120,124	$	29,170,381	$	17,602,539	$	6,085,629	$	290,978,673

	As of December 31, 2018
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Consumer and Other		Total
Grade
Pass	$	226,510,803	$	27,990,417	$	17,237,690	$	6,374,532	$	278,113,442
Special mention		1,981,667		268,892		-		-		2,250,559
Substandard		4,610,167		1,596,153		270,568		-		6,476,888
Doubtful		-		-		-		-		-
Loss		-		-		-		-		-
Totals	$	233,102,637	$	29,855,462	$	17,508,258	$	6,374,532	$	286,840,889

The Bank’s internally assigned grades are as follows:

Pass

– Strong credit with

no

existing or known potential weaknesses deserving of management’s close attention.

Special Mention

– Potential weaknesses that deserve management’s close attention. Borrower and guarantor’s capacity to meet all financial obligations is marginally adequate or deteriorating.

Substandard

– Inadequately protected by the paying capacity of the Borrower and/or collateral pledged. The borrower or guarantor is unwilling or unable to meet loan terms or loan covenants for the foreseeable future.

Doubtful

– All the weakness inherent in

one

classified as substandard with the added characteristic that those weaknesses in place make the collection or liquidation in full, on the basis of current conditions, highly questionable and improbable.

Loss

– Considered uncollectible or

no

longer a bankable asset. This classification does

not

mean that the asset has absolutely

no

recoverable value. In fact, a certain salvage value is inherent in these loans. Nevertheless, it is

not

practical or desirable to defer writing off a portion or whole of a perceived asset even though partial recovery

may

be collected in the future.

Impaired Loans –

The following tables include the recorded investment and unpaid principal balances, net of charge-offs for impaired loans with the associated allowance amount, if applicable. Management determined the allocated allowance based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the remaining source of repayment for the loan is the operation or liquidation of the collateral. In those cases, the current fair value of the collateral, less selling costs was used to determine the allocated allowance recorded.

	As of March 31, 2019
			Principal				Average
	Recorded		Net of		Related		Recorded
	Investment		Charge-offs		Allowance		Investment
With no related allowance recorded:
Commercial real estate	$	2,988,885	$	2,988,885	$	-	$	2,999,285
One- to four-family residential real estate		616,750		616,750		-		623,917
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,605,635	$	3,605,635	$	-	$	3,623,202
With an allowance recorded:	$	-	$	-	$	-	$	-
Total:
Commercial real estate	$	2,988,885	$	2,988,885	$	-	$	2,999,285
One- to four-family residential real estate		616,750		616,750		-		623,917
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,605,635	$	3,605,635	$	-	$	3,623,202

	As of December 31, 2018
			Principal				Average
	Recorded		Net of		Related		Recorded
	Investment		Charge-offs		Allowance		Investment
With no related allowance recorded:
Commercial real estate	$	2,993,923	$	2,993,923	$	-	$	3,007,495
One- to four-family residential real estate		649,685		649,685		-		656,436
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,643,608	$	3,643,608	$	-	$	3,663,931
With an allowance recorded:	$	-	$	-	$	-	$	-
Total:
Commercial real estate	$	2,993,923	$	2,993,923	$	-	$	3,007,495
One- to four-family residential real estate		649,685		649,685		-		656,436
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,643,608	$	3,643,608	$	-	$	3,663,931

During each of the

three

months ended

March 31, 2019

and

2018,

no

interest income was recognized on nonaccrual loans.

Certain loans within the Company’s loan and ORE portfolios are guaranteed by the Veterans Administration (VA). In the event of default by the borrower, the VA can elect to pay the guaranteed amount or take possession of the property. If the VA takes possession of the property, the Company is entitled to be reimbursed for the outstanding principal balance, accrued interest and certain other expenses. There were

no

commitments from the VA to take title to foreclosed VA properties at

March 31, 2019

and

December 31, 2018.

Troubled Debt Restructurings

– Restructured loans are considered “troubled debt restructurings” if due to the borrower’s financial difficulties, the Bank has granted a concession that they would

not

otherwise consider. This

may

include a transfer of real estate or other assets from the borrower, a modification of loan terms, rates, or a combination of the two. All troubled debt restructurings placed on nonaccrual status must show

no

less than

six

months of repayment performance by the borrower in accordance with contractual terms to return to accrual status. Once a loan has been identified as a troubled debt restructuring, it will continue to be reported as such until the loan is paid in full.

In the normal course of business, the Company

may

modify a loan for a credit worthy borrower where the modified loan is

not

considered a troubled debt restructuring. In these cases, the modified terms are consistent with loan terms available to credit worthy borrowers and within normal loan pricing. The modifications to such loans are done according to existing underwriting standards which include review of historical financial statements, including current interim information if available, an analysis of the causes of the borrower’s decline in performance, and projections intended to assess repayment ability going forward.

There was

one

troubled debt restructuring with a current payment status and principal balances of

$52,000

and

$54,000,

as of

March 31, 2019

and

December 31, 2018,

respectively.

XML

Note 4 - Financial Instruments With Off-balance-sheet Risk

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Financial Instruments Disclosure [Text Block]

NOTE

4

– FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

In the normal course of business, the Bank has outstanding commitments to extend credit and standby letters of credit, which are

not

included in the accompanying consolidated financial statements. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making commitments as it does for instruments that are included in the consolidated balance sheets.

Financial instruments whose contract amounts represent off-balance-sheet credit risk are as follows as of

March 31, 2019

and

December 31, 2018:

	March 31, 2019		December 31, 2018
Commitments to originate and sell mortgage loans	$	35,428,610	$	34,268,309
Commitments to extend credit		41,375,723		25,323,822
Unused lines of credit		19,231,789		18,281,453
Standby letters of credit		-		-
Totals	$	96,036,122	$	77,873,584

Commitments to extend credit are agreements to lend to a customer as long as there is

no

violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and

may

require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do

not

necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies by and

may

include accounts receivable, inventory, property and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a

third

-party. Standby letters of credit generally have fixed expiration dates or other termination clauses and

may

require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit.

XML

Note 5 - Regulatory Matters

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE

5

– REGULATORY MATTERS

Bank

34

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

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total risk-based capital and Tier

1

capital to risk-weighted assets, and Tier

1

capital to adjusted total assets. Management believes, as of

March 31, 2019

and

December 31, 2018,

the Bank meets all capital adequacy requirements to which it is subject.

Banks are also subject to certain restrictions on the amount of dividends that they

may

declare without prior regulatory approval.

As of

March 31, 2019,

the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank has to maintain minimum total risk-based, Tier

1

risk-based, and Tier

1

leverage ratios as disclosed in the table below. There are

no

conditions or events that management believes have changed the Bank’s prompt corrective action category.

The Bank’s actual and required capital amounts and ratios are as follows:

											To be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of March 31, 2019:
Total Capital (to Risk-Weighted Assets)	$	41,909		14.47	%	$	23,175		> 8.00	%	$	28,968		> 10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	38,861		13.42	%	$	17,381		> 6.00	%	$	23,175		> 8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	38,861		13.42	%	$	13,036		> 4.50	%	$	18,829		> 6.50	%
Tier I Capital (to Average Assets)	$	38,861		10.24	%	$	15,185		> 4.00	%	$	18,982		> 5.00	%
As of December 31, 2018:
Total Capital (to Risk-Weighted Assets)	$	41,685		14.50	%	$	22,999		> 8.00	%	$	28,748		> 10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	38,703		13.46	%	$	17,252		> 6.00	%	$	23,003		> 8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	38,703		13.46	%	$	12,939		> 4.50	%	$	18,690		> 6.50	%
Tier I Capital (to Average Assets)	$	38,703		10.29	%	$	15,045		> 4.00	%	$	18,806		> 5.00	%

XML

Note 6 - Stock-based Compensation

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

NOTE

6

– STOCK-BASED COMPENSATION

The Company has fully vested stock options outstanding under the

2001

Stock Option Plan and vested and unvested stock options and restricted stock awards under the

2017

Equity Incentive Plan.

A summary of stock option activity during the

three

months ended

March 31, 2019

and

2018

is presented below:

	For the three Months Ended March 31, 2019
					Average
			Weighted-		Remaining
			Average		Contractual
	Shares		Exercise Price		Term (years)
Outstanding, December 31, 2018		164,410	$	14.69		5.8
Granted		1,000		14.63
Exercised		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2019		165,410	$	14.69		5.6
Exercisable, March 31, 2019		38,690	$	13.93		4.7

	For the three Months Ended March 31, 2018
						Average
				Weighted-		Remaining
				Average		Contractual
	Shares			Exercise Price		Term (years)
Outstanding, December 31, 2017		207,108		$	14.18		6.2
Granted		5,000			15.48
Exercised		-			-
Forfeited or expired		(1,002	)		14.90
Outstanding, March 31, 2018		211,106		$	14.28		5.9
Exercisable, March 31, 2018		28,456		$	9.65		1.3

The exercise price of outstanding stock options at

March 31, 2019

range from

$9.65

to

$15.48

per share. The grant date fair value of stock options awarded in the

three

months ended

March 31, 2019

was

$3.77

using the Black-Scholes-Merton options pricing model with the following inputs and assumptions:

Grant date stock price	$	14.63
Dividend yield		0.00	%
Expected volatility		19.55	%
Risk-free interest rate		2.63	%
Expected life in years		6

A summary of restricted stock activity during the

three

months ended

March 31, 2019

and

2018

is presented below:

			Weighted		Average
			Average		Remaining
			Grant Date		Contractual
	Shares		Price		Term (years)
	For the Quarter Ended March 31, 2019
Outstanding, December 31, 2018		49,829	$	14.90		4.0
Granted		-		-
Vested		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2019		49,829	$	14.90		3.8

	For the Quarter Ended March 31, 2018
Outstanding, December 31, 2017		74,750	$	14.90	4.9
Granted		429		15.48
Vested		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2018		75,179	$	14.90	4.7

Compensation and benefits included

$75,000

and

$86,000

of stock-based expense for the

three

months ended

March 31, 2019

and

2018,

respectively.

As of

March 31, 2019,

there was

$1,130,000

of total unrecognized stock-based expense including

$448,000

related to unvested stock options and

$682,000

from restricted stock awards granted under the

2017

Equity Incentive Plan that is expected to be recognized over the next

3.7

years.

XML

Note 7 - Fair Values of Financial Instruments

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE

7

– FAIR VALUES OF FINANCIAL INSTRUMENTS

The following table presents information about assets and liabilities measured at fair value on a recurring and non-recurring basis and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair values as of

March 31, 2019

and

December 31, 2018.

	Fair Value Measurements Using
	Quoted Prices		Significant
	in Active		Other			Significant
	Markets for		Observable			Unobservable
	Identical Assets		Inputs			Inputs
	Level 1		Level 2			Level 3		Fair Value
March 31, 2019
Recurring basis
Mortgage-backed securities	$	-	$	27,543,018		$	-	$	27,543,018
U.S. Government agencies		-		1,310,423			-		1,310,423
Municipal obligations		-		3,717,438			-		3,717,438
Loans held for sale		-		14,614,579			-		14,614,579
Derivative IRLC's		-		-			360,830		360,830
Derivative forward commitments		-		(94,922	)		-		(94,922	)
Nonrecurring basis
Impaired loans		-		-			3,605,635		3,605,635
Totals	$	-	$	47,090,536		$	3,966,465	$	51,057,001
December 31, 2018:
Recurring basis
Mortgage-backed securities	$	-	$	28,310,358		$	-	$	28,310,358
U.S. Government agencies		-		1,445,032			-		1,445,032
Municipal obligations		-		3,673,268			-		3,673,268
Loans held for sale		-		26,884,014			-		26,884,014
Derivative IRLC's		-		-			380,866		380,866
Derivative forward commitments		-		(153,906	)		-		(153,906	)
Nonrecurring basis
Impaired loans		-		-			3,643,608		3,643,608
Totals	$	-	$	60,158,766		$	4,024,474	$	64,183,240

The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because

no

market exists for certain of these financial instruments and because management does

not

intend to sell these financial instruments, the Bank does

not

know whether the fair values shown represent values at which the respective financial instruments could be sold individually or in the aggregate.

There were

no

transfers between levels of the fair value hierarchy during the

three

months ended

March 31, 2019

or

2018.

 

The following tables present estimated fair values of the Company’s financial instruments at

March 31, 2019

and

December 31, 2018.

							Quoted Prices		Significant
							in Active		Other			Significant
							Markets for		Observable			Unobservable
	Carrying						Identical Assets		Inputs			Inputs
	Amount			Fair Value			Level 1		Level 2			Level 3
	(Dollars in thousands)
At March 31, 2019:
Financial assets:
Cash and due from banks	$	4,719		$	4,719		$	4,719	$	-		$	-
Interest-bearing deposits with banks		6,855			6,855			6,855		-			-
Available-for-sale securities		32,571			32,571			-		32,571			-
Loans held for sale		14,615			14,615			-		14,615			-
Loans held for investment, net		286,875			287,346			-		-			287,346
Derivative IRLC's		361			361			-		-			361
Derivative forward commitments		(95	)		(95	)		-		(95	)		-
Stock in financial institutions		3,937			3,937			-		3,937			-
Financial liabilities:
Demand deposits, savings and NOW deposits		189,915			176,906			176,906		-			-
Time deposits		77,970			78,208			-		78,208			-
Federal Home Loan Bank advances		50,000			49,880			-		49,880			-
At December 31, 2018:
Financial assets:
Cash and due from banks	$	6,374		$	6,374		$	6,374	$	-		$	-
Interest-bearing deposits with banks		5,400			5,400			5,400		-			-
Available-for-sale securities		33,429			33,429			-		33,429			-
Loans held for sale		26,884			26,884			-		26,884			-
Loans held for investment, net		282,790			283,466			-		-			283,466
Derivative IRLC's		381			381			-		-			381
Derivative forward commitments		(154	)		(154	)		-		(154	)		-
Stock in financial institutions		3,910			3,910			-		3,910			-
Financial liabilities:
Demand deposits, savings and NOW deposits		187,700			172,049			172,049		-			-
Time deposits		77,359			77,688			-		77,688			-
Federal Home Loan Bank advances		67,000			66,653			-		66,653			-

The following methods and assumptions were used to estimate the fair value of the additional classes of financial instruments shown:

Cash and Due from Banks, Interest-Bearing Deposits with Banks and Stock in Financial Institutions

– The carrying amount approximates fair value.

Deposits and FHLB Advances

– Deposits include demand deposits, savings accounts, NOW accounts and money market deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits and FHLB advances is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits and advances of similar remaining maturities.

Available-for-sale Securities –

Where quoted market prices are available in an active market, securities are classified within Level

1

of the valuation hierarchy. Level

1

securities include highly-liquid government bonds, mortgage products and exchange-traded equities. If quoted market prices are

not

available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level

2

securities include certain collateralized mortgage and debt obligations and certain municipal securities. In certain cases where Level

1

or Level

2

inputs are

not

available, securities are classified within Level

3

of the hierarchy and include certain residual municipal securities and other less liquid securities.

Loans Held for Sale –

The fair value of loans held for sale is based on quoted market prices from FHLMC. FHLMC quotes are updated daily and represent prices at which loans are exchanged in high volumes and in a liquid market.

Other Real Estate –

Other real estate is fair valued under Level

3

based on property appraisals less estimated disposition costs, which include both observable and unobservable inputs, at the time of transfer and as appropriate thereafter.

Loans Held for Investment –

Loans held for investment are generally

not

recorded at fair value on a recurring basis. Periodically, the Bank records nonrecurring adjustments to the carrying value of these loans based on fair value measurements for loans subject to impairment. The fair value of impaired loans is typically determined using a combination of observable inputs, such as interest rates, contract terms, appraisals of collateral supporting the loan and recent comparable sales of similar properties, and unobservable inputs such as creditworthiness, disposition costs and underlying cash flows associated with the loan. Since the estimates of fair value utilized for loans also involve unobservable inputs, valuations of impaired loans have been classified as Level

3.

The following table presents the significant unobservable inputs used in the fair value measurements for Level

3

financial assets measured on a non-recurring basis:

	Fair Value		Valuation Methodologies	Valuation Model	Unobservable Input Valuation
At March 31, 2019
Impaired loans
Commercial real estate	$	2,988,885	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
One- to four-family residential real estate		616,750	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
Total Impaired Loans	$	3,605,635
Derivative IRLC's	$	360,830	Internal pricing model	Pull-through rate			73%
At December 31, 2018
Impaired loans
Commercial real estate	$	2,993,923	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
One- to four-family residential real estate		649,685	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
Total Impaired Loans	$	3,643,608
Derivative IRLC's	$	380,866	Internal pricing model	Pull-through rate			77%

XML

Note 8 - Earnings Per Share

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE

8

– EARNINGS PER SHARE

The

two

-class method is used in the calculation of basic and diluted earnings per share. Under the

two

-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. The factors used in the earnings per share computation follow:

	Three Months Ended March 31,
	2019			2018
Basic:
Net income	$	41,208		$	370,627
Less: Earnings allocated to participating securities		(643	)		(8,495	)
Net income allocated to common shareholders	$	40,565		$	362,132
Weighted-average common shares outstanding including participating securities		3,360,612			3,444,390
Less: Average participating securities		(49,798	)		(74,907	)
Less: Average unallocated ESOP Shares		(170,316	)		(176,102	)
Average shares		3,140,499			3,193,381
Basic earnings per common share	$	0.01		$	0.11
Diluted:
Net income allocated to common shareholders	$	40,565		$	362,132
Weighted-average common shares outstanding for basic earnings per common share		3,140,499			3,193,381
Add: Dilutive effects of assumed exercises of stock options		4,712			13,745
Weighted average shares and dilutive potential common shares		3,145,210			3,207,126
Diluted earnings per common share	$	0.01		$	0.11

Our restricted stock awards are participating securities since they participate in common stock dividends.

Stock options for

4,000

shares were

not

considered in computing diluted earnings per common share for the

three

months ended

March 31, 2019

because they were antidilutive. There were

no

stock options considered antidilutive for the

three

months ended

March 31, 2018. 

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation –

The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the accompanying consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition, cash flows and results of operations at the dates and for the periods presented. The results of operations for the

three

months ended

March 31, 2019

are

not

necessarily indicative of the results of operations for the full fiscal year or for any other period. This information should be read in conjunction with the Company’s Annual Report on Form

10

-K for the year ended

December 31, 2018.

Consolidation, Policy [Policy Text Block]

Basis of Consolidation

– The consolidated financial statements include the accounts of Bancorp

34

and the Bank. All significant intercompany accounts and transactions have been eliminated.

Emerging Growth Company, Policy [Policy Text Block]

Emerging Growth Company Status

- Bancorp

34

is an emerging growth company under the JOBS Act and expects to lose its status as an emerging growth company at the end of

2019.

  Bancorp

34

has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

Reclassification, Policy [Policy Text Block]

Reclassifications

– Certain reclassifications have been made to prior period’s financial information to conform to the current period presentation.

Use of Estimates, Policy [Policy Text Block]

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.

Significant estimates include, but are

not

limited to, allowance for loan losses, other-than-temporary impairment of securities, useful lives used in depreciation and amortization, deferred income taxes, valuation of other real estate and core deposit intangibles.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

– Subsequent events have been evaluated through the date the unaudited consolidated financial statements were issued. 

New Accounting Pronouncements, Policy [Policy Text Block]

Summary of Recent Accounting Pronouncements

:

Bancorp

34

is an emerging growth company and has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements

may

not

be comparable to the financial statements of public companies that comply with such new or revised accounting standards. The Company expects to lose its status as an emerging growth company at the end of

2019.

Revenue Recognition

- In

May 2014,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

. ASU

2014

-

09

requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective.  ASU

2014

-

09

would have been initially effective for the Company's reporting period beginning

January 1, 2018.

However, in

August

of

2015,

the FASB issued ASU

2015

-

14,

Revenue from Contracts with Customers - Deferral of the Effective Date

, which deferred the effective date by

one

year. For financial reporting purposes, the standard allows for either a full retrospective or modified retrospective adoption. The FASB has also issued additional updates to provide further clarification to specific implementation issues associated with ASU

2014

-

09.

These updates include ASU

2016

-

08,

Principal versus Agent Considerations

, ASU

2016

-

10,

Identifying Performance Obligations and Licensing

, ASU

2016

-

12,

Narrow-Scope Improvements and Practical Expedients

, and ASU

2016

-

20,

Technical Corrections and Improvements to Topic

606

. We adopted the standard on

January 1, 2019,

using the modified retrospective method, which resulted in

no

cumulative effect and

no

other adjustment or significant impact to the timing of revenue recognition.

Under Topic

606,

we must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) we satisfy the performance obligations. Our primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are

not

within the scope of Topic

606.

We have evaluated the nature of our contracts with customers and determined that further disaggregation of revenue from contracts with customers into categories beyond what is presented in the Consolidated Statements of Income was

not

necessary. For revenue sources that are within the scope of Topic

606,

we fully satisfy our performance obligations and recognize revenue in the period it is earned as services are rendered. Transaction prices are typically fixed, charged on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic

606

that significantly affects the determination of the amount and timing of revenue from contracts with our customers.

All of our revenue from contracts with customers in the scope of ASC

606

is recognized in Non-Interest Income. Sources of revenue from contracts with customers that are in the scope of ASC

606

include the following:

* Service Charges on Deposit accounts - We earn monthly account fees and transaction-based fees from our customers for services rendered on deposit accounts. Fees charged to deposit accounts on a monthly basis are recognized as the performance obligation is satisfied at the end of the service period.

* Transaction-based fees are based on specific services provided to our customer. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

* ATM and Point of Sale fees – We earn fees when debit cards we issued are used in transactions through card processing networks. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders’ account. The fees are recognized monthly.

Leases –

In

February 2016,

the FASB issued ASU 

2016

-

02

“Leases (Topic

842

).”

This standard requires entities that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The standard is effective for fiscal years and interim periods within those fiscal years beginning after

December 15, 2018

for public companies, but the Company will have until the

first

quarter of

2020

to adopt due to its emerging growth company status. The guidance is required to be applied by the modified retrospective transition approach. Early adoption is permitted. We are currently assessing the impact of the adoption of this authoritative guidance on our consolidated financial statements and collecting the data necessary for that assessment and adoption.

Credit Losses -

In

June 2016,

the FASB issued ASU

2016

-

13,

“Financial Instruments—Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments.”

The amendments in this update replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to create credit loss estimates. The new guidance is effective for public companies that are U.S. Securities and Exchange Commission filers for fiscal years beginning after

December 15, 2019

including interim periods within those fiscal years. For all other public companies, the amendments are effective for fiscal years beginning after

December 15, 2020,

including interim periods within those fiscal years. For all other companies, including emerging growth companies, the amendments are effective for fiscal years beginning after

December 15, 2020,

and interim periods within fiscal years beginning after

December 15, 2021.

The guidance is required to be applied by the modified retrospective approach. Early adoption is permitted as of the fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. We are currently assessing the impact of the adoption of this authoritative guidance on our consolidated financial statements.

Premium on Callable Debt -

In

March 2017,

the FASB issued ASU

No.

2017

-

08,

“Receivables–Nonrefundable Fees and Other Costs (Subtopic

310

-

20

)”

to shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Currently, entities generally amortize the premium as a yield adjustment over the contractual life of the security. The guidance does

not

change the accounting for callable debt securities held at a discount. For public business entities, the guidance is effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted, including in an interim period. ASU

2017

-

08

is

not

expected to have a significant impact on our consolidated financial statements.

Reporting Tax Effects of Tax Cuts and Jobs Act -

In

February 2018,

the FASB issued ASU

No.

2018

-

02,

“Income Statement-Reporting Comprehensive Income (Topic

220

): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”

that helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the

2017

Tax Cuts and Jobs Act. The ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The ASU requires financial statement preparers to disclose a description of the accounting policy for releasing income tax effects from AOCI, whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act, and information about the other income tax effects that are reclassified. The amendments are effective for all organizations for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We adopted ASU

2018

-

02

effective

December 2018

and reclassified the stranded tax effects from AOCI to retained earnings. Adoption did

not

have a significant impact on our consolidated financial statements.

XML

Note 2 - Available-for-sale Securities (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Available-for-sale Securities [Table Text Block]

	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
March 31, 2019
Available-for-sale securities
Mortgage-backed securities	$	27,719,782	$	232,930	$	(409,694	)	$	27,543,018
U.S. Government agencies		1,356,271		-		(45,848	)		1,310,423
Municipal obligations		3,672,092		45,346		-			3,717,438
Total	$	32,748,145	$	278,276	$	(455,542	)	$	32,570,879
December 31, 2018
Available-for-sale securities
Mortgage-backed securities	$	28,799,904	$	115,824	$	(605,370	)	$	28,310,358
U.S. Government agencies		1,487,917		-		(42,885	)		1,445,032
Municipal obligations		3,672,023		2,363		(1,118	)		3,673,268
Total	$	33,959,844	$	118,187	$	(649,373	)	$	33,428,658

Available-for-sale Securities Debt Maturities [Table Text Block]

	March 31, 2019				December 31, 2018
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	400,000	$	400,000	$	403,612	$	402,924
Due after one to five years		20,295,449		19,983,683		23,040,618		22,482,300
Due after five to ten years		12,052,696		12,187,196		10,515,614		10,543,434
Totals	$	32,748,145	$	32,570,879	$	33,959,844	$	33,428,658

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Table Text Block]

	March 31, 2019
	Less Than 12 Months				12 Months or More					Total
			Gross				Gross					Gross
Description of			Unrealized				Unrealized					Unrealized
Securities	Fair Value		Losses		Fair Value		Losses			Fair Value		Losses
Available-for-sale securities:
Mortgage-backed securities					$	18,439,189	$	(409,694	)	$	18,439,189	$	(409,694	)
U.S. Government agencies						1,310,423		(45,848	)		1,310,423		(45,848	)
Municipal obligations						-		-			-		-
Total temporarily impaired securities	$	-	$	-	$	19,749,612	$	(455,542	)	$	19,749,612	$	(455,542	)

	December 31, 2018
	Less Than 12 Months					12 Months or More					Total
			Gross					Gross					Gross
Description of			Unrealized					Unrealized					Unrealized
Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Available-for-sale securities:
Mortgage-backed securities	$	8,605,742	$	(200,190	)	$	10,740,671	$	(405,180	)	$	19,346,413	$	(605,370	)
U.S. Government agencies		302,219		(885	)		1,142,814		(42,000	)		1,445,033		(42,885	)
Municipal obligations		1,747,571		(430	)		402,924		(688	)		2,150,495		(1,118	)
Total temporarily impaired securities	$	10,655,532	$	(201,505	)	$	12,286,409	$	(447,868	)	$	22,941,941	$	(649,373	)

XML

Note 3 - Loans Held for Investment, Net (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Loans Held for Investment, Net [Table Text Block]

	March 31, 2019						December 31, 2018
	Amount			Percent			Amount			Percent
Loans held for investment, net:
Commercial real estate	$	238,120,124			81.8	%	$	233,102,637			81.3	%
One- to four-family residential real estate residential real estate		29,170,381			10.0			29,855,462			10.4
Commercial and industrial		17,602,539			6.1			17,508,258			6.1
Consumer and other		6,085,629			2.1			6,374,532			2.2
Total gross loans		290,978,673			100.0	%		286,840,889			100.0	%
Unamortized loan fees		(1,122,531	)					(1,149,517	)
Loans held for investment		289,856,142						285,691,372
Allowance for loan losses		(2,981,412	)					(2,901,091	)
Loans held for investment, net	$	286,874,730					$	282,790,281

Financing Receivable, Allowance for Credit Loss [Table Text Block]

	As of March 31, 2019
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Other		Total
Allowance for loan losses
Ending balance: individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Ending balance: collectively evaluated for impairment		2,341,297		220,139		388,425		31,551		2,981,412
Total	$	2,341,297	$	220,139	$	388,425	$	31,551	$	2,981,412
Gross loans
Ending balance: individually evaluated for impairment	$	2,988,885	$	616,750	$	-	$	-	$	3,605,635
Ending balance: collectively evaluated for impairment		235,131,239		28,553,631		17,602,539		6,085,629		287,373,038
Total	$	238,120,124	$	29,170,381	$	17,602,539	$	6,085,629	$	290,978,673

	As of December 31, 2018
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Other		Total
Allowance for loan losses
Ending balance: individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Ending balance: collectively evaluated for impairment		2,130,124		359,705		377,180		34,082		2,901,091
Total	$	2,130,124	$	359,705	$	377,180	$	34,082	$	2,901,091
Gross loans
Ending balance: individually evaluated for impairment	$	2,993,923	$	649,685	$	-	$	-	$	3,643,608
Ending balance: collectively evaluated for impairment		230,108,714		29,205,777		17,508,258		6,374,532		283,197,281
Total	$	233,102,637	$	29,855,462	$	17,508,258	$	6,374,532	$	286,840,889

	Commercial Real Estate		One- to Four- Family Residential Real Estate			Commercial and Industrial		Consumer and Other			Total
Balance December 31, 2018	$	2,130,124	$	359,705		$	377,180	$	34,082		$	2,901,091
Provision for loan losses		211,173		(130,880	)		9,738		(2,531	)		87,500
Charge-offs		-		(8,686	)		-		-			(8,686	)
Recoveries		-		-			1,507		-			1,507
Net (charge-offs) recoveries		-		(8,686	)		1,507		-			(7,179	)
Balance March 31, 2019	$	2,341,297	$	220,139		$	388,425	$	31,551		$	2,981,412
Balance December 31, 2017	$	2,055,911	$	567,290		$	462,406	$	31,583		$	3,117,190
Provision for loan losses		10,374		(46,975	)		51,901		6,700			22,000
Charge-offs		-		(23,269	)		-		-			(23,269	)
Recoveries		-		6,249			-		-			6,249
Net (charge-offs) recoveries		-		(17,020	)		-		-			(17,020	)
Balance March 31, 2018	$	2,066,285	$	503,295		$	514,307	$	38,283		$	3,122,170

Financing Receivable, Past Due [Table Text Block]

	Past Due										Total
					90 Days						Financing
	30 - 59 Days		60 - 89 Days		or More		Total		Current		Receivables
March 31, 2019
Commercial real estate	$	39,734	$	-	$	2,744,405	$	2,784,139	$	235,335,985	$	238,120,124
One- to four-family residential real estate		408,880		47,905		323,374		780,159		28,390,222		29,170,381
Commercial and industrial		-		-		-		-		17,602,539		17,602,539
Consumer and other		-		-		-		-		6,085,629		6,085,629
Totals	$	448,614	$	47,905	$	3,067,779	$	3,564,298	$	287,414,375	$	290,978,673

	Past Due										Total
					90 Days						Financing
	30 - 59 Days		60 - 89 Days		or More		Total		Current		Receivables
December 31, 2018
Commercial real estate	$	-	$	2,744,405	$	-	$	2,744,405	$	230,358,232	$	233,102,637
One- to four-family residential real estate		782,835		234,524		393,068		1,410,427		28,445,035		29,855,462
Commercial and industrial		-		-		-		-		17,508,258		17,508,258
Consumer and other		-		-		-		-		6,374,532		6,374,532
Totals	$	782,835	$	2,978,929	$	393,068	$	4,154,832	$	282,686,057	$	286,840,889

Financing Receivable, Nonaccrual [Table Text Block]

	March 31,		December 31,
	2019		2018
Nonaccrual loans
Commercial real estate	$	2,988,885	$	2,993,923
One- to four-family residential real estate		616,750		649,685
Commercial and industrial		-		-
Consumer and other		-		-
Total nonaccrual loans		3,605,635		3,643,608
Other real estate (ORE)		-		-
Total nonperforming assets	$	3,605,635	$	3,643,608
Nonperforming assets to gross loans held for investment and ORE		1.24%		1.27%
Nonperforming assets to total assets		0.96%		0.95%

Financing Receivable Credit Quality Indicators [Table Text Block]

	As of March 31, 2019
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Consumer and Other		Total
Grade
Pass	$	229,465,218	$	27,616,139	$	17,249,760	$	6,085,629	$	280,416,746
Special mention		4,060,029		-		95,815		-		4,155,844
Substandard		4,594,877		1,554,242		256,964		-		6,406,083
Doubtful		-		-		-		-		-
Loss		-		-		-		-		-
Totals	$	238,120,124	$	29,170,381	$	17,602,539	$	6,085,629	$	290,978,673

	As of December 31, 2018
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Consumer and Other		Total
Grade
Pass	$	226,510,803	$	27,990,417	$	17,237,690	$	6,374,532	$	278,113,442
Special mention		1,981,667		268,892		-		-		2,250,559
Substandard		4,610,167		1,596,153		270,568		-		6,476,888
Doubtful		-		-		-		-		-
Loss		-		-		-		-		-
Totals	$	233,102,637	$	29,855,462	$	17,508,258	$	6,374,532	$	286,840,889

Impaired Financing Receivables [Table Text Block]

	As of March 31, 2019
			Principal				Average
	Recorded		Net of		Related		Recorded
	Investment		Charge-offs		Allowance		Investment
With no related allowance recorded:
Commercial real estate	$	2,988,885	$	2,988,885	$	-	$	2,999,285
One- to four-family residential real estate		616,750		616,750		-		623,917
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,605,635	$	3,605,635	$	-	$	3,623,202
With an allowance recorded:	$	-	$	-	$	-	$	-
Total:
Commercial real estate	$	2,988,885	$	2,988,885	$	-	$	2,999,285
One- to four-family residential real estate		616,750		616,750		-		623,917
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,605,635	$	3,605,635	$	-	$	3,623,202

	As of December 31, 2018
			Principal				Average
	Recorded		Net of		Related		Recorded
	Investment		Charge-offs		Allowance		Investment
With no related allowance recorded:
Commercial real estate	$	2,993,923	$	2,993,923	$	-	$	3,007,495
One- to four-family residential real estate		649,685		649,685		-		656,436
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,643,608	$	3,643,608	$	-	$	3,663,931
With an allowance recorded:	$	-	$	-	$	-	$	-
Total:
Commercial real estate	$	2,993,923	$	2,993,923	$	-	$	3,007,495
One- to four-family residential real estate		649,685		649,685		-		656,436
Commercial and industrial		-		-		-		-
Consumer and other		-		-		-		-
	$	3,643,608	$	3,643,608	$	-	$	3,663,931

XML

Note 4 - Financial Instruments With Off-balance-sheet Risk (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block]

	March 31, 2019		December 31, 2018
Commitments to originate and sell mortgage loans	$	35,428,610	$	34,268,309
Commitments to extend credit		41,375,723		25,323,822
Unused lines of credit		19,231,789		18,281,453
Standby letters of credit		-		-
Totals	$	96,036,122	$	77,873,584

XML

Note 5 - Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

											To be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of March 31, 2019:
Total Capital (to Risk-Weighted Assets)	$	41,909		14.47	%	$	23,175		> 8.00	%	$	28,968		> 10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	38,861		13.42	%	$	17,381		> 6.00	%	$	23,175		> 8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	38,861		13.42	%	$	13,036		> 4.50	%	$	18,829		> 6.50	%
Tier I Capital (to Average Assets)	$	38,861		10.24	%	$	15,185		> 4.00	%	$	18,982		> 5.00	%
As of December 31, 2018:
Total Capital (to Risk-Weighted Assets)	$	41,685		14.50	%	$	22,999		> 8.00	%	$	28,748		> 10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	38,703		13.46	%	$	17,252		> 6.00	%	$	23,003		> 8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	38,703		13.46	%	$	12,939		> 4.50	%	$	18,690		> 6.50	%
Tier I Capital (to Average Assets)	$	38,703		10.29	%	$	15,045		> 4.00	%	$	18,806		> 5.00	%

XML

Note 6 - Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

	For the three Months Ended March 31, 2019
					Average
			Weighted-		Remaining
			Average		Contractual
	Shares		Exercise Price		Term (years)
Outstanding, December 31, 2018		164,410	$	14.69		5.8
Granted		1,000		14.63
Exercised		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2019		165,410	$	14.69		5.6
Exercisable, March 31, 2019		38,690	$	13.93		4.7

	For the three Months Ended March 31, 2018
						Average
				Weighted-		Remaining
				Average		Contractual
	Shares			Exercise Price		Term (years)
Outstanding, December 31, 2017		207,108		$	14.18		6.2
Granted		5,000			15.48
Exercised		-			-
Forfeited or expired		(1,002	)		14.90
Outstanding, March 31, 2018		211,106		$	14.28		5.9
Exercisable, March 31, 2018		28,456		$	9.65		1.3

Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions [Table Text Block]

Grant date stock price	$	14.63
Dividend yield		0.00	%
Expected volatility		19.55	%
Risk-free interest rate		2.63	%
Expected life in years		6

Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

			Weighted		Average
			Average		Remaining
			Grant Date		Contractual
	Shares		Price		Term (years)
	For the Quarter Ended March 31, 2019
Outstanding, December 31, 2018		49,829	$	14.90		4.0
Granted		-		-
Vested		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2019		49,829	$	14.90		3.8

	For the Quarter Ended March 31, 2018
Outstanding, December 31, 2017		74,750	$	14.90	4.9
Granted		429		15.48
Vested		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2018		75,179	$	14.90	4.7

XML

Note 7 - Fair Values of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Table Text Block]

	Fair Value Measurements Using
	Quoted Prices		Significant
	in Active		Other			Significant
	Markets for		Observable			Unobservable
	Identical Assets		Inputs			Inputs
	Level 1		Level 2			Level 3		Fair Value
March 31, 2019
Recurring basis
Mortgage-backed securities	$	-	$	27,543,018		$	-	$	27,543,018
U.S. Government agencies		-		1,310,423			-		1,310,423
Municipal obligations		-		3,717,438			-		3,717,438
Loans held for sale		-		14,614,579			-		14,614,579
Derivative IRLC's		-		-			360,830		360,830
Derivative forward commitments		-		(94,922	)		-		(94,922	)
Nonrecurring basis
Impaired loans		-		-			3,605,635		3,605,635
Totals	$	-	$	47,090,536		$	3,966,465	$	51,057,001
December 31, 2018:
Recurring basis
Mortgage-backed securities	$	-	$	28,310,358		$	-	$	28,310,358
U.S. Government agencies		-		1,445,032			-		1,445,032
Municipal obligations		-		3,673,268			-		3,673,268
Loans held for sale		-		26,884,014			-		26,884,014
Derivative IRLC's		-		-			380,866		380,866
Derivative forward commitments		-		(153,906	)		-		(153,906	)
Nonrecurring basis
Impaired loans		-		-			3,643,608		3,643,608
Totals	$	-	$	60,158,766		$	4,024,474	$	64,183,240

Fair Value, by Balance Sheet Grouping [Table Text Block]

							Quoted Prices		Significant
							in Active		Other			Significant
							Markets for		Observable			Unobservable
	Carrying						Identical Assets		Inputs			Inputs
	Amount			Fair Value			Level 1		Level 2			Level 3
	(Dollars in thousands)
At March 31, 2019:
Financial assets:
Cash and due from banks	$	4,719		$	4,719		$	4,719	$	-		$	-
Interest-bearing deposits with banks		6,855			6,855			6,855		-			-
Available-for-sale securities		32,571			32,571			-		32,571			-
Loans held for sale		14,615			14,615			-		14,615			-
Loans held for investment, net		286,875			287,346			-		-			287,346
Derivative IRLC's		361			361			-		-			361
Derivative forward commitments		(95	)		(95	)		-		(95	)		-
Stock in financial institutions		3,937			3,937			-		3,937			-
Financial liabilities:
Demand deposits, savings and NOW deposits		189,915			176,906			176,906		-			-
Time deposits		77,970			78,208			-		78,208			-
Federal Home Loan Bank advances		50,000			49,880			-		49,880			-
At December 31, 2018:
Financial assets:
Cash and due from banks	$	6,374		$	6,374		$	6,374	$	-		$	-
Interest-bearing deposits with banks		5,400			5,400			5,400		-			-
Available-for-sale securities		33,429			33,429			-		33,429			-
Loans held for sale		26,884			26,884			-		26,884			-
Loans held for investment, net		282,790			283,466			-		-			283,466
Derivative IRLC's		381			381			-		-			381
Derivative forward commitments		(154	)		(154	)		-		(154	)		-
Stock in financial institutions		3,910			3,910			-		3,910			-
Financial liabilities:
Demand deposits, savings and NOW deposits		187,700			172,049			172,049		-			-
Time deposits		77,359			77,688			-		77,688			-
Federal Home Loan Bank advances		67,000			66,653			-		66,653			-

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

	Fair Value		Valuation Methodologies	Valuation Model	Unobservable Input Valuation
At March 31, 2019
Impaired loans
Commercial real estate	$	2,988,885	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
One- to four-family residential real estate		616,750	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
Total Impaired Loans	$	3,605,635
Derivative IRLC's	$	360,830	Internal pricing model	Pull-through rate			73%
At December 31, 2018
Impaired loans
Commercial real estate	$	2,993,923	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
One- to four-family residential real estate		649,685	Appraisal	Appraisal discount and estimated selling costs		17	-	18%
Total Impaired Loans	$	3,643,608
Derivative IRLC's	$	380,866	Internal pricing model	Pull-through rate			77%

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Note 8 - Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months Ended March 31,
	2019			2018
Basic:
Net income	$	41,208		$	370,627
Less: Earnings allocated to participating securities		(643	)		(8,495	)
Net income allocated to common shareholders	$	40,565		$	362,132
Weighted-average common shares outstanding including participating securities		3,360,612			3,444,390
Less: Average participating securities		(49,798	)		(74,907	)
Less: Average unallocated ESOP Shares		(170,316	)		(176,102	)
Average shares		3,140,499			3,193,381
Basic earnings per common share	$	0.01		$	0.11
Diluted:
Net income allocated to common shareholders	$	40,565		$	362,132
Weighted-average common shares outstanding for basic earnings per common share		3,140,499			3,193,381
Add: Dilutive effects of assumed exercises of stock options		4,712			13,745
Weighted average shares and dilutive potential common shares		3,145,210			3,207,126
Diluted earnings per common share	$	0.01		$	0.11

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Note 1 - Nature of Operations and Summary of Significant Accounting and Reporting Policies (Details Textual)	Mar. 31, 2019
Equity Method Investment, Ownership Percentage	100.00%

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Note 2 - Available-for-sale Securities (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Proceeds from Sale of Available-for-sale Securities, Total	$ 0	$ 0
Available-for-sale Securities, Greater than 10% of Stockholders' Equity	0		$ 0
Available-for-sale Securities, Total	32,570,879		33,428,658
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities, Total	0
Loans and Securities Pledged to Secure FHLB Advances	155,200,000
Loans and Securities Pledged to Secure Public Deposits	3,700,000
Collateralized Mortgage Backed Securities [Member]
Available-for-sale Securities, Total	13,400,000		13,800,000
Commercial Mortgage Backed Securities [Member]
Available-for-sale Securities, Total	$ 0		$ 0

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Note 2 - Available-for-sale Securities - Carrying Amount of Securities and Fair Value (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Total, amortized cost	$ 32,748,145	$ 33,959,844
Available-for-sale securities, gross unrealized gains	278,276	118,187
Available-for-sale securities, gross unrealized losses	(455,542)	(649,373)
Available-for-sale securities, fair value	32,570,879	33,428,658
Asset-backed Securities [Member]
Total, amortized cost	27,719,782	28,799,904
Available-for-sale securities, gross unrealized gains	232,930	115,824
Available-for-sale securities, gross unrealized losses	(409,694)	(605,370)
Available-for-sale securities, fair value	27,543,018	28,310,358
US Government Agencies Debt Securities [Member]
Total, amortized cost	1,356,271	1,487,917
Available-for-sale securities, gross unrealized gains
Available-for-sale securities, gross unrealized losses	(45,848)	(42,885)
Available-for-sale securities, fair value	1,310,423	1,445,032
US States and Political Subdivisions Debt Securities [Member]
Total, amortized cost	3,672,092	3,672,023
Available-for-sale securities, gross unrealized gains	45,346	2,363
Available-for-sale securities, gross unrealized losses		(1,118)
Available-for-sale securities, fair value	$ 3,717,438	$ 3,673,268

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Note 2 - Available-for-sale Securities - Scheduled Maturities (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Due in one year or less, amortized cost	$ 400,000	$ 403,612
Due in one year or less, fair value	400,000	402,924
Due after one to five years, amortized cost	20,295,449	23,040,618
Due after one to five years, fair value	19,983,683	22,482,300
Due after five to ten years, amortized cost	12,052,696	10,515,614
Due after five to ten years, fair value	12,187,196	10,543,434
Total, amortized cost	32,748,145	33,959,844
Total, fair value	$ 32,570,879	$ 33,428,658

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Note 2 - Available-for-sale Securities - Securities in a Continuous Loss Position (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Available-for-sale securities, less than 12 months, fair value		$ 10,655,532
Available-for-sale securities, less than 12 months, gross unrealized losses		(201,505)
Available-for-sale securities, 12 months or more, fair value	19,749,612	12,286,409
Available-for-sale securities, 12 months or more, gross unrealized losses	(455,542)	(447,868)
Available-for-sale securities, fair value	19,749,612	22,941,941
Available-for-sale securities, gross unrealized losses	(455,542)	(649,373)
Asset-backed Securities [Member]
Available-for-sale securities, less than 12 months, fair value		8,605,742
Available-for-sale securities, less than 12 months, gross unrealized losses		(200,190)
Available-for-sale securities, 12 months or more, fair value	18,439,189	10,740,671
Available-for-sale securities, 12 months or more, gross unrealized losses	(409,694)	(405,180)
Available-for-sale securities, fair value	18,439,189	19,346,413
Available-for-sale securities, gross unrealized losses	(409,694)	(605,370)
US Government Agencies Debt Securities [Member]
Available-for-sale securities, less than 12 months, fair value		302,219
Available-for-sale securities, less than 12 months, gross unrealized losses		(885)
Available-for-sale securities, 12 months or more, fair value	1,310,423	1,142,814
Available-for-sale securities, 12 months or more, gross unrealized losses	(45,848)	(42,000)
Available-for-sale securities, fair value	1,310,423	1,445,033
Available-for-sale securities, gross unrealized losses	(45,848)	(42,885)
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities, less than 12 months, fair value		1,747,571
Available-for-sale securities, less than 12 months, gross unrealized losses		(430)
Available-for-sale securities, 12 months or more, fair value		402,924
Available-for-sale securities, 12 months or more, gross unrealized losses		(688)
Available-for-sale securities, fair value		2,150,495
Available-for-sale securities, gross unrealized losses		$ (1,118)

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Note 3 - Loans Held for Investment, Net (Details Textual)	3 Months Ended
	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2018 USD ($)
Financing Receivable, Nonaccrual	$ 3,605,635		$ 3,643,608
Nonaccrual Loan Secure Percentage	76.00%
Impaired Financing Receivable, Interest Income, Nonaccrual	$ 0	$ 0
Financing Receivable, Troubled Debt Restructuring	$ 52,000		54,000
Veterans Administration Loan [Member]
Number of Receivable Commitments Outstanding	0	0
Real Estate [Member]
Financing Receivable, Nonaccrual	$ 2,700,000
Small Business Administration [Member]
Financing Receivable, Nonaccrual	$ 2,300,000
Nonaccrual Loan Secure Percentage	64.00%
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Nonaccrual	$ 2,988,885		2,993,923
Commercial Real Estate Portfolio Segment [Member] | Construction Loans [Member]
Financing Receivable, before Allowance for Credit Loss, Total	$ 21,800,000		$ 20,800,000

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Note 3 - Loans Held for Investment, Net - Components of Loans Held for Investment, Net (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Total, gross loans	$ 290,978,673	$ 286,840,889
Percentage of gross loans	100.00%	100.00%
Unamortized loan fees	$ (1,122,531)	$ (1,149,517)
Loans held for investment	289,856,142	285,691,372
Allowance for loan losses	(2,981,412)	(2,901,091)	$ (3,122,170)	$ (3,117,190)
Loans held for investment, net	286,874,730	282,790,281
Commercial Real Estate Portfolio Segment [Member]
Total, gross loans	$ 238,120,124	$ 233,102,637
Percentage of gross loans	81.80%	81.30%
Allowance for loan losses	$ (2,341,297)	$ (2,130,124)	(2,066,285)	(2,055,911)
One-to-four Family Residential Real Estate Portfolio Segment [Member]
Total, gross loans	$ 29,170,381	$ 29,855,462
Percentage of gross loans	10.00%	10.40%
Allowance for loan losses	$ (220,139)	$ (359,705)	(503,295)	(567,290)
Commercial and Industrial Portfolio Segment [Member]
Total, gross loans	$ 17,602,539	$ 17,508,258
Percentage of gross loans	6.10%	6.10%
Allowance for loan losses	$ (388,425)	$ (377,180)	(514,307)	(462,406)
Consumer and Other Portfolio Segment [Member]
Total, gross loans	$ 6,085,629	$ 6,374,532
Percentage of gross loans	2.10%	2.20%
Allowance for loan losses	$ (31,551)	$ (34,082)	$ (38,283)	$ (31,583)

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Note 3 - Loans Held for Investment, Net - Allowance for Loan Losses and Recorded Investment in Loans (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Dec. 31, 2018
Ending balance: individually evaluated for impairment				$ 0
Ending balance: collectively evaluated for impairment			2,981,412	2,901,091
Total, allowance for loan losses	$ 2,981,412	$ 3,117,190	2,981,412	2,901,091
Ending balance: individually evaluated for impairment, gross loans			3,605,635	3,643,608
Ending balance: collectively evaluated for impairment, gross loans			287,373,038	283,197,281
Total, gross loans			290,978,673	286,840,889
Balance	2,901,091	3,117,190
Provision for loan losses	87,500	22,000
Charge-offs	(8,686)	(23,269)
Recoveries	1,507	6,249
Net recoveries (charge-offs)	(7,179)	(17,020)
Balance	2,981,412	3,122,170
Commercial Real Estate Portfolio Segment [Member]
Ending balance: individually evaluated for impairment				0
Ending balance: collectively evaluated for impairment			2,341,297	2,130,124
Total, allowance for loan losses	2,341,297	2,055,911	2,341,297	2,130,124
Ending balance: individually evaluated for impairment, gross loans			2,988,885	2,993,923
Ending balance: collectively evaluated for impairment, gross loans			235,131,239	230,108,714
Total, gross loans			238,120,124	233,102,637
Balance	2,130,124	2,055,911
Provision for loan losses	211,173	10,374
Charge-offs
Recoveries
Net recoveries (charge-offs)
Balance	2,341,297	2,066,285
One-to-four Family Residential Real Estate Portfolio Segment [Member]
Ending balance: individually evaluated for impairment			0	0
Ending balance: collectively evaluated for impairment			220,139	359,705
Total, allowance for loan losses	220,139	567,290	220,139	359,705
Ending balance: individually evaluated for impairment, gross loans			616,750	649,685
Ending balance: collectively evaluated for impairment, gross loans			28,553,631	29,205,777
Total, gross loans			29,170,381	29,855,462
Balance	359,705	567,290
Provision for loan losses	(130,880)	(46,975)
Charge-offs	(8,686)	(23,269)
Recoveries		6,249
Net recoveries (charge-offs)	(8,686)	(17,020)
Balance	220,139	503,295
Commercial and Industrial Portfolio Segment [Member]
Ending balance: individually evaluated for impairment			0	0
Ending balance: collectively evaluated for impairment			388,425	377,180
Total, allowance for loan losses	388,425	462,406	388,425	377,180
Ending balance: individually evaluated for impairment, gross loans
Ending balance: collectively evaluated for impairment, gross loans			17,602,539	17,508,258
Total, gross loans			17,602,539	17,508,258
Balance	377,180	462,406
Provision for loan losses	9,738	51,901
Charge-offs
Recoveries	1,507
Net recoveries (charge-offs)	1,507
Balance	388,425	514,307
Consumer and Other Portfolio Segment [Member]
Ending balance: individually evaluated for impairment			0	0
Ending balance: collectively evaluated for impairment			31,551	34,082
Total, allowance for loan losses	31,551	31,583	31,551	34,082
Ending balance: individually evaluated for impairment, gross loans			0
Ending balance: collectively evaluated for impairment, gross loans			6,085,629	6,374,532
Total, gross loans			$ 6,085,629	$ 6,374,532
Balance	34,082	31,583
Provision for loan losses	(2,531)	6,700
Net recoveries (charge-offs)
Balance	$ 31,551	$ 38,283

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Note 3 - Loans Held for Investment, Net - Nonperforming Receivables Past Due (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Past due loans	$ 3,564,298	$ 4,154,832
Current loans	287,414,375	282,686,057
Total, gross loans	290,978,673	286,840,889
Financial Asset, 30 to 59 Days Past Due [Member]
Past due loans	448,614	782,835
Financial Asset, 60 to 89 Days Past Due [Member]
Past due loans	47,905	2,978,929
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due loans	3,067,779	393,068
Commercial Real Estate Portfolio Segment [Member]
Past due loans	2,784,139	2,744,405
Current loans	235,335,985	230,358,232
Total, gross loans	238,120,124	233,102,637
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due loans	39,734
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due loans		2,744,405
Commercial Real Estate Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due loans	2,744,405
One-to-four Family Residential Real Estate Portfolio Segment [Member]
Past due loans	780,159	1,410,427
Current loans	28,390,222	28,445,035
Total, gross loans	29,170,381	29,855,462
One-to-four Family Residential Real Estate Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due loans	408,880	782,835
One-to-four Family Residential Real Estate Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due loans	47,905	234,524
One-to-four Family Residential Real Estate Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due loans	323,374	393,068
Commercial and Industrial Portfolio Segment [Member]
Past due loans
Current loans	17,602,539	17,508,258
Total, gross loans	17,602,539	17,508,258
Commercial and Industrial Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due loans	0	0
Commercial and Industrial Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due loans	0	0
Commercial and Industrial Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due loans
Consumer and Other Portfolio Segment [Member]
Past due loans	0	0
Current loans	6,085,629	6,374,532
Total, gross loans	6,085,629	6,374,532
Consumer and Other Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due loans	0	0
Consumer and Other Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due loans	0	0
Consumer and Other Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due loans	$ 0	$ 0

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Note 3 - Loans Held for Investment, Net - Nonaccrual Loans (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Total nonaccrual loans	$ 3,605,635	$ 3,643,608
Other real estate (ORE)	0	0
Total nonperforming assets	$ 3,605,635	$ 3,643,608
Nonperforming assets to gross loans held for investment and ORE	1.24%	1.27%
Nonperforming assets to total assets	0.96%	0.95%
Commercial Real Estate Portfolio Segment [Member]
Total nonaccrual loans	$ 2,988,885	$ 2,993,923
One-to-four Family Residential Real Estate Portfolio Segment [Member]
Total nonaccrual loans	616,750	649,685
Commercial and Industrial Portfolio Segment [Member]
Total nonaccrual loans
Consumer and Other Portfolio Segment [Member]
Total nonaccrual loans	$ 0	$ 0

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Note 3 - Loans Held for Investment, Net - Credit Quality Indicators (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Total, gross loans	$ 290,978,673	$ 286,840,889
Pass [Member]
Total, gross loans	280,416,746	278,113,442
Special Mention [Member]
Total, gross loans	4,155,844	2,250,559
Substandard [Member]
Total, gross loans	6,406,083	6,476,888
Doubtful [Member]
Total, gross loans
Loss [Member]
Total, gross loans	0	0
Commercial Real Estate Portfolio Segment [Member]
Total, gross loans	238,120,124	233,102,637
Commercial Real Estate Portfolio Segment [Member] | Pass [Member]
Total, gross loans	229,465,218	226,510,803
Commercial Real Estate Portfolio Segment [Member] | Special Mention [Member]
Total, gross loans	4,060,029	1,981,667
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member]
Total, gross loans	4,594,877	4,610,167
Commercial Real Estate Portfolio Segment [Member] | Doubtful [Member]
Total, gross loans
Commercial Real Estate Portfolio Segment [Member] | Loss [Member]
Total, gross loans	0	0
One-to-four Family Residential Real Estate Portfolio Segment [Member]
Total, gross loans	29,170,381	29,855,462
One-to-four Family Residential Real Estate Portfolio Segment [Member] | Pass [Member]
Total, gross loans	27,616,139	27,990,417
One-to-four Family Residential Real Estate Portfolio Segment [Member] | Special Mention [Member]
Total, gross loans		268,892
One-to-four Family Residential Real Estate Portfolio Segment [Member] | Substandard [Member]
Total, gross loans	1,554,242	1,596,153
One-to-four Family Residential Real Estate Portfolio Segment [Member] | Doubtful [Member]
Total, gross loans	0	0
One-to-four Family Residential Real Estate Portfolio Segment [Member] | Loss [Member]
Total, gross loans	0	0
Commercial and Industrial Portfolio Segment [Member]
Total, gross loans	17,602,539	17,508,258
Commercial and Industrial Portfolio Segment [Member] | Pass [Member]
Total, gross loans	17,249,760	17,237,690
Commercial and Industrial Portfolio Segment [Member] | Special Mention [Member]
Total, gross loans	95,815
Commercial and Industrial Portfolio Segment [Member] | Substandard [Member]
Total, gross loans	256,964	270,568
Commercial and Industrial Portfolio Segment [Member] | Doubtful [Member]
Total, gross loans	0
Commercial and Industrial Portfolio Segment [Member] | Loss [Member]
Total, gross loans	0	0
Consumer and Other Portfolio Segment [Member]
Total, gross loans	6,085,629	6,374,532
Consumer and Other Portfolio Segment [Member] | Pass [Member]
Total, gross loans	6,085,629	6,374,532
Consumer and Other Portfolio Segment [Member] | Special Mention [Member]
Total, gross loans	0	0
Consumer and Other Portfolio Segment [Member] | Substandard [Member]
Total, gross loans
Consumer and Other Portfolio Segment [Member] | Doubtful [Member]
Total, gross loans	0	0
Consumer and Other Portfolio Segment [Member] | Loss [Member]
Total, gross loans	$ 0	$ 0

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Note 3 - Loans Held for Investment, Net - Impaired Loans (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Impaired loans, with no related allowance recorded, recorded investment	$ 3,605,635	$ 3,643,608
Impaired loans, with no related allowance recorded, principal net of charge-offs,	3,605,635	3,643,608
Impaired loans, with no related allowance recorded, average recorded investment	3,623,202	3,663,931
Impaired loans, with an allowance recorded, recorded investment	0	0
Impaired loans, with an allowance recorded, principal net of charge-offs	0	0
Impaired loans, related allowance	0	0
Impaired loans, with an allowance recorded, average recorded investment	0	0
Impaired loans, fair value disclosure	3,605,635	3,643,608
Impaired loans, principal net of charge-offs	3,605,635	3,643,608
Impaired loans, average recorded investment	3,623,202	3,663,931
Commercial Real Estate Portfolio Segment [Member]
Impaired loans, with no related allowance recorded, recorded investment	2,988,885	2,993,923
Impaired loans, with no related allowance recorded, principal net of charge-offs,	2,988,885	2,993,923
Impaired loans, with no related allowance recorded, average recorded investment	2,999,285	3,007,495
Impaired loans, related allowance	0	0
Impaired loans, fair value disclosure	2,988,885	2,993,923
Impaired loans, principal net of charge-offs	2,988,885	2,993,923
Impaired loans, average recorded investment	2,999,285	3,007,495
One-to-four Family Residential Real Estate Portfolio Segment [Member]
Impaired loans, with no related allowance recorded, recorded investment	616,750	649,685
Impaired loans, with no related allowance recorded, principal net of charge-offs,	616,750	649,685
Impaired loans, with no related allowance recorded, average recorded investment	623,917	656,436
Impaired loans, related allowance	0	0
Impaired loans, fair value disclosure	616,750	649,685
Impaired loans, principal net of charge-offs	616,750	649,685
Impaired loans, average recorded investment	623,917	656,436
Commercial and Industrial Portfolio Segment [Member]
Impaired loans, with no related allowance recorded, recorded investment
Impaired loans, with no related allowance recorded, principal net of charge-offs,
Impaired loans, with no related allowance recorded, average recorded investment
Impaired loans, related allowance	0	0
Impaired loans, fair value disclosure
Impaired loans, principal net of charge-offs
Impaired loans, average recorded investment
Consumer and Other Portfolio Segment [Member]
Impaired loans, with no related allowance recorded, recorded investment	0	0
Impaired loans, with no related allowance recorded, principal net of charge-offs,	0	0
Impaired loans, with no related allowance recorded, average recorded investment	0	0
Impaired loans, related allowance	0	0
Impaired loans, fair value disclosure	0	0
Impaired loans, principal net of charge-offs	0	0
Impaired loans, average recorded investment	$ 0	$ 0

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Note 4 - Financial Instruments With Off-balance-sheet Risk - Contract Amounts (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Financial instruments with off-balance-sheet risk	$ 96,036,122	$ 77,873,584
Commitments to Originate and Sell Mortgage Loans [Member]
Financial instruments with off-balance-sheet risk	35,428,610	34,268,309
Commitments to Extend Credit [Member]
Financial instruments with off-balance-sheet risk	41,375,723	25,323,822
Unused lines of Credit [Member]
Financial instruments with off-balance-sheet risk	19,231,789	18,281,453
Standby Letters of Credit 1 [Member]
Financial instruments with off-balance-sheet risk

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Note 5 - Regulatory Matters - Actual and Required Capital (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Tier I Capital (to Risk-Weighted Assets), Actual Amount	$ 41,909	$ 38,703
Tier I Capital (to Risk-Weighted Assets), Actual Ratio	14.47%	13.46%
Tier I Capital (to Risk-Weighted Assets), for Capital Adequacy Purposes, Actual Amount	$ 23,175	$ 12,939
Tier I Capital (to Risk-Weighted Assets), for Capital Adequacy Purposes, Actual Ratio	8.00%	4.50%
Tier I Capital (to Risk-Weighted Assets), to be Well Capitalized, Actual Amount	$ 28,968	$ 18,690
Tier I Capital (to Risk-Weighted Assets), to be Well Capitalized, Actual Ratio	10.00%	6.50%
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Actual Amount	$ 38,861	$ 38,703
Common Equity Tier 1 Capital (to Risk-Weighted Assets), Actual Ratio	13.42%	13.46%
Tier I Capital (to Average Assets), for Capital Adequacy Purposes, Actual Amount (USD)	$ 17,381	$ 17,252
Common Equity Tier 1 Capital (to Risk-Weighted Assets), for Capital Adequacy, Actual Ratio	6.00%	6.00%
Common Equity Tier 1 Capital (to Risk-Weighted Assets), to be Well Capitalized, Actual Amount	$ 23,175	$ 23,003
Common Equity Tier 1 Capital (to Risk-Weighted Assets), to be Well Capitalized, Actual Ratio	8.00%	8.00%
Tier I Capital (to Average Assets), Actual Amount	$ 38,861	$ 38,703
Tier I Capital (to Average Assets), Actual Ratio	13.42%	10.29%
Tier I Capital (to Average Assets), for Capital Adequacy Purposes, Actual Amount	$ 13,036	$ 15,045
Tier I Capital (to Average Assets), for Capital Adequacy Purposes, Actual Ratio	4.50%	4.00%
Tier I Capital (to Average Assets), to be Well Capitalized, Actual Amount	$ 18,829	$ 18,806
Tier I Capital (to Average Assets), to be Well Capitalized, Actual Ratio	6.50%	5.00%
Total Capital (to Risk-Weighted Assets), Actual Amount	$ 38,861	$ 41,685
Total Capital (to Risk-Weighted Assets), Actual Ratio	10.24%	14.50%
Total Capital (to Risk-Weighted Assets), for Capital Adequacy Purpose, Actual Amount	$ 15,185	$ 22,999
Total Capital (to Risk-Weighted Assets), for Capital Adequacy Purposes, Actual Ratio	4.00%	8.00%
Total Capital (to Risk-Weighted Assets), to be Well Capitalized, Actual Amount	$ 18,982	$ 28,748
Total Capital (to Risk-Weighted Assets), to be Well Capitalized, Actual Ratio	5.00%	10.00%

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Note 6 - Stock-based Compensation (Details Textual)	3 Months Ended
	Mar. 31, 2019 USD ($) $ / shares	Mar. 31, 2018 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares	$ 3.77
Incentive Plan [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 1,130,000
Incentive Plan [Member] | Share-based Payment Arrangement, Option [Member]
Share-based Payment Arrangement, Expense	$ 448,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition	3 years 255 days
Incentive Plan [Member] | Restricted Stock [Member]
Share-based Payment Arrangement, Expense	$ 682,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition	3 years 255 days
Stock-based Compensation Expense [Member]
Share-based Payment Arrangement, Expense	$ 75,000	$ 86,000
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Exercise Price	9.65
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Exercise Price	15.48

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Note 6 - Stock-based Compensation - Stock Option Activities (Details) - $ / shares	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018	Dec. 31, 2017
Outstanding (in shares)	164,410	207,108	207,108
Outstanding, weighted average exercise price (in dollars per share)	$ 14.69	$ 14.18	$ 14.18
Outstanding, average remaining contractual term (Year)	5 years 219 days	5 years 328 days	5 years 292 days	6 years 73 days
Granted (in shares)	1,000	5,000
Granted, weighted average exercise price (in dollars per share)	$ 14.63	$ 15.48
Exercised (in shares)
Exercised, weighted average exercise price (in dollars per share)
Forfeited or expired (in shares)		(1,002)
Forfeited or expired, weighted average exercise price (in dollars per share)		$ 14.90
Outstanding (in shares)	165,410	211,106	164,410	207,108
Outstanding, weighted average exercise price (in dollars per share)	$ 14.69	$ 14.28	$ 14.69	$ 14.18
Exercisable (in shares)	38,690	28,456
Exercisable, weighted average exercise price (in dollars per share)	$ 13.93	$ 9.65
Exercisable, average remaining contractual term (Year)	4 years 255 days	1 year 109 days

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Note 6 - Stock-based Compensation - Inputs and Assumptions (Details)	3 Months Ended
	Mar. 31, 2019 $ / shares
Grant date stock price (in dollars per share)	$ 14.63
Dividend yield	0.00%
Expected volatility	19.55%
Risk-free interest rate	2.63%
Expected life in years (Year)	6 years

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Note 6 - Stock-based Compensation - Restricted Stock Activity (Details) - Restricted Stock [Member] - $ / shares	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018	Dec. 31, 2017
Outstanding, share (in shares)	49,829	74,750	74,750
Outstanding, Weighted average grant date (in dollars per share)	$ 14.90	$ 14.90
Outstanding, Average remaining contractual (Year)	3 years 292 days	4 years 255 days	4 years	4 years 328 days
Granted, share (in shares)		429
Granted, Weighted average grant date (in dollars per share)		$ 15.48
Vested, share (in shares)
Vested, Weighted average grant date (in dollars per share)
Forfeited or expired, share (in shares)
Forfeited or expired, Weighted average grant date (in dollars per share)
Outstanding, share (in shares)	49,829	75,179	49,829	74,750

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Note 7 - Fair Values of Financial Instruments - Assets at Fair Value (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Available-for-sale Securities, fair value disclosure	$ 32,570,879	$ 33,428,658
Assets, fair value disclosure	51,057,001	64,183,240
Fair Value, Inputs, Level 1 [Member]
Assets, fair value disclosure	0	0
Fair Value, Inputs, Level 2 [Member]
Assets, fair value disclosure	47,090,536	60,158,766
Fair Value, Inputs, Level 3 [Member]
Assets, fair value disclosure	3,966,465	4,024,474
Fair Value, Recurring [Member]
Loans held for sale, fair value disclosure	14,614,579
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Loans held for sale, fair value disclosure	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Loans held for sale, fair value disclosure	14,614,579
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Loans held for sale, fair value disclosure	0
Fair Value, Nonrecurring [Member]
Loans held for sale, fair value disclosure		26,884,014
Impaired loans, fair value disclosure	3,605,635	3,643,608
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Loans held for sale, fair value disclosure		0
Impaired loans, fair value disclosure		0
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Loans held for sale, fair value disclosure		26,884,014
Impaired loans, fair value disclosure		0
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Loans held for sale, fair value disclosure		0
Impaired loans, fair value disclosure	3,605,635	3,643,608
Asset-backed Securities [Member]
Available-for-sale Securities, fair value disclosure	27,543,018	28,310,358
Asset-backed Securities [Member] | Fair Value, Recurring [Member]
Available-for-sale Securities, fair value disclosure	27,543,018	28,310,358
Asset-backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Available-for-sale Securities, fair value disclosure	0	0
Asset-backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale Securities, fair value disclosure	27,543,018	28,310,358
Asset-backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Available-for-sale Securities, fair value disclosure	0	0
US Government Agencies Debt Securities [Member]
Available-for-sale Securities, fair value disclosure	1,310,423	1,445,032
US Government Agencies Debt Securities [Member] | Fair Value, Recurring [Member]
Available-for-sale Securities, fair value disclosure	1,310,423	1,445,032
US Government Agencies Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Available-for-sale Securities, fair value disclosure	0	0
US Government Agencies Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale Securities, fair value disclosure	1,310,423	1,445,032
US Government Agencies Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Available-for-sale Securities, fair value disclosure	0	0
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale Securities, fair value disclosure	3,717,438	3,673,268
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member]
Available-for-sale Securities, fair value disclosure	3,717,438	3,673,268
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Available-for-sale Securities, fair value disclosure	0	0
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale Securities, fair value disclosure	3,717,438	3,673,268
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Available-for-sale Securities, fair value disclosure	0	0
Interest Rate Lock Commitments [Member] | Fair Value, Recurring [Member] | Not Designated as Hedging Instrument [Member]
Derivative IRLC's, fair value disclosure	360,830	380,866
Interest Rate Lock Commitments [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Not Designated as Hedging Instrument [Member]
Derivative IRLC's, fair value disclosure	0	0
Interest Rate Lock Commitments [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Not Designated as Hedging Instrument [Member]
Derivative IRLC's, fair value disclosure		0
Interest Rate Lock Commitments [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Not Designated as Hedging Instrument [Member]
Derivative IRLC's, fair value disclosure	360,830	380,866
Forward Contracts [Member] | Fair Value, Recurring [Member] | Not Designated as Hedging Instrument [Member]
Derivative forward commitments, fair value disclosure	(94,922)	(153,906)
Forward Contracts [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Not Designated as Hedging Instrument [Member]
Derivative forward commitments, fair value disclosure	0	0
Forward Contracts [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Not Designated as Hedging Instrument [Member]
Derivative forward commitments, fair value disclosure	(94,922)	(153,906)
Forward Contracts [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Not Designated as Hedging Instrument [Member]
Derivative forward commitments, fair value disclosure	$ 0	$ 0

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Note 7 - Fair Values of Financial Instruments - Fair Value by Balance Sheet Grouping (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Available-for-sale securities, at fair value	$ 32,570,879	$ 33,428,658
Reported Value Measurement [Member]
Cash and due from banks	4,719,000	6,374,000
Interest-bearing deposits with banks	6,855,000	5,400,000
Available-for-sale securities, at fair value	32,571,000	33,429,000
Loans held for sale	14,615,000	26,884,000
Loans held for investment, net	286,875,000	282,790,000
Derivative IRLC's, fair value disclosure	361,000
Derivative forward commitments	(95,000)	(154,000)
Stock in financial institutions	3,937,000	3,910,000
Demand deposits, savings and NOW deposits	189,915,000	187,700,000
Time deposits	77,970,000	77,359,000
Federal Home Loan Bank advances	50,000,000	67,000,000
Estimate of Fair Value Measurement [Member]
Cash and due from banks	4,719,000	6,374,000
Interest-bearing deposits with banks	6,855,000	5,400,000
Available-for-sale securities, at fair value	32,571,000	33,429,000
Loans held for sale	14,615,000	26,884,000
Loans held for investment, net	287,346,000	283,466,000
Derivative IRLC's, fair value disclosure	361,000	381,000
Derivative forward commitments	(95,000)	(154,000)
Stock in financial institutions	3,937,000	3,910,000
Demand deposits, savings and NOW deposits	176,906,000	172,049,000
Time deposits	78,208,000	77,688,000
Federal Home Loan Bank advances	49,880,000	66,653,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and due from banks	4,719,000	6,374,000
Interest-bearing deposits with banks	6,855,000	5,400,000
Available-for-sale securities, at fair value	0	0
Loans held for sale	0	0
Loans held for investment, net	0	0
Derivative IRLC's, fair value disclosure	0
Derivative forward commitments	0
Stock in financial institutions	0	0
Demand deposits, savings and NOW deposits	176,906,000	172,049,000
Time deposits	0	0
Federal Home Loan Bank advances	0	0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and due from banks	0	0
Interest-bearing deposits with banks	0	0
Available-for-sale securities, at fair value	32,571,000	33,429,000
Loans held for sale	14,615,000	26,884,000
Loans held for investment, net	0	0
Derivative IRLC's, fair value disclosure	0
Derivative forward commitments	(95,000)	(154,000)
Stock in financial institutions	3,937,000	3,910,000
Demand deposits, savings and NOW deposits	0	0
Time deposits	78,208,000	77,688,000
Federal Home Loan Bank advances	49,880,000	66,653,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and due from banks	0	0
Interest-bearing deposits with banks	0	0
Available-for-sale securities, at fair value	0	0
Loans held for sale	0	0
Loans held for investment, net	287,346,000	283,466,000
Derivative IRLC's, fair value disclosure	361,000	381,000
Derivative forward commitments	0
Stock in financial institutions	0	0
Demand deposits, savings and NOW deposits	0	0
Time deposits	0	0
Federal Home Loan Bank advances	$ 0	$ 0

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Note 7 - Fair Values of Financial Instruments - Significant Unobservable Inputs (Details)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Impaired loans, fair value disclosure	$ 3,605,635	$ 3,643,608
Commercial Real Estate Portfolio Segment [Member]
Impaired loans, fair value disclosure	2,988,885	2,993,923
One-to-four Family Residential Real Estate Portfolio Segment [Member]
Impaired loans, fair value disclosure	616,750	649,685
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Impaired loans, fair value disclosure	3,605,635	3,643,608
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | Valuation, Market Approach [Member] | Commercial Real Estate Portfolio Segment [Member]
Impaired loans, fair value disclosure	$ 2,988,885	$ 2,993,923
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | Valuation, Market Approach [Member] | Commercial Real Estate Portfolio Segment [Member] | Minimum [Member] | Measurement Input, Discount Rate [Member]
Impaired loans, Unobservable input valuation	0.17	0.17
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | Valuation, Market Approach [Member] | Commercial Real Estate Portfolio Segment [Member] | Maximum [Member] | Measurement Input, Discount Rate [Member]
Impaired loans, Unobservable input valuation	0.18	0.18
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | Valuation, Market Approach [Member] | One-to-four Family Residential Real Estate Portfolio Segment [Member]
Impaired loans, fair value disclosure	$ 616,750	$ 649,685
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | Valuation, Market Approach [Member] | One-to-four Family Residential Real Estate Portfolio Segment [Member] | Minimum [Member] | Measurement Input, Discount Rate [Member]
Impaired loans, Unobservable input valuation	0.17	0.17
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | Valuation, Market Approach [Member] | One-to-four Family Residential Real Estate Portfolio Segment [Member] | Maximum [Member] | Measurement Input, Discount Rate [Member]
Impaired loans, Unobservable input valuation	0.18	0.18
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | Internal Estimate [member]
Derivative IRLC's, fair value disclosure	$ 360,830	$ 380,866
Derivative IRLC's, Unobservable input valuation		0.77
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | Internal Estimate [member] | Measurement Input, Pull-through Rate [Member]
Derivative IRLC's, Unobservable input valuation	0.73
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | Internal Estimate [member] | Maximum [Member] | Measurement Input, Pull-through Rate [Member]
Derivative IRLC's, Unobservable input valuation

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Note 8 - Earnings Per Share (Details Textual) - shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Share-based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,000	0

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Note 8 - Earnings Per Share - Calculation of Diluted Weighted-average Shares Outstanding (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Basic:
Net income	$ 41,208	$ 370,627
Less: Earnings allocated to participating securities	(643)	(8,495)
Net income allocated to common shareholders	$ 40,565	$ 362,132
Weighted-average common shares outstanding including participating securities (in shares)	3,360,612	3,444,390
Less: Average participating securities (in shares)	(49,798)	(74,907)
Less: Average unallocated ESOP Shares (in shares)	(170,316)	(176,102)
Average shares (in shares)	3,140,499	3,193,381
Basic (in dollars per share)	$ 0.01	$ 0.11
Diluted:
Net income allocated to common shareholders	$ 40,565	$ 362,132
Average shares (in shares)	3,140,499	3,193,381
Add: Dilutive effects of assumed exercises of stock options (in shares)	4,712	13,745
Weighted average shares and dilutive potential common shares (in shares)	3,145,210	3,207,126
Diluted (in dollars per share)	$ 0.01	$ 0.11