10-Q 1 tm2111721d1_10q.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended March 31, 2021

☐

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

For the transition period from to

Commission File Number: 001-39188

CINCINNATI BANCORP, INC.

(Exact name of registrant as specified in its charter)


Maryland	84-2848636
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6581 Harrison Avenue, Cincinnati, Ohio	45247
(Address of principal executive offices)	(Zip Code)

(513) 574-3025

(Registrant’s telephone number, including area code)

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

Common stock, $0.01 par value per share		CNNB		The Nasdaq Stock Market, LLC
(Title of Each Class)		(Trading Symbol(s))		(Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

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

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging Growth Company	☐

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

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

The number of outstanding shares of the registrant’s common stock as of May 4, 2021 was 2,966,790.

Cincinnati Bancorp, Inc.

Form 10-Q

Index

		Page
Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements

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

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	2

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	3

	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44

Item 4.	Controls and Procedures	44

Part II. Other Information

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

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

Item 3.	Defaults upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	47

	Signature Page	48

Part I. – Financial Information

Item 1.

Financial Statements

Cincinnati Bancorp, Inc.

Condensed Consolidated Balance Sheets

March 31, 2021 (Unaudited) and December 31, 2020

	March 31, 2021			December 31, 2020
Assets
Cash and due from banks	$	2,599,904		$	2,951,787
Interest-bearing demand deposits in banks		20,133,465			23,558,019
Federal funds sold		4,300,000			5,838,000
Cash and cash equivalents		27,033,369			32,347,806
Interest-bearing time deposits		2,000,000			3,000,000
Available-for-sale debt securities		9,743,249			5,213,830
Loans held for sale		11,975,165			13,345,370
Loans, net of allowance for loan losses of $1,672,545 and $1,672,545, respectively		172,553,014			166,667,918
Premises and equipment, net		3,468,615			3,487,826
Federal Home Loan Bank stock		3,022,500			2,801,800
Interest receivable		528,597			520,775
Mortgage servicing rights		2,333,873			2,025,323
Federal Home Loan Bank lender risk account receivable		1,909,681			1,947,271
Bank-owned life insurance		4,193,023			4,172,486
Other assets		1,946,809			1,603,150

Total assets	$	240,707,895		$	237,133,555

Liabilities and Stockholders' Equity

Liabilities
Deposits
Demand	$	44,646,113		$	41,945,628
Savings		53,107,626			48,056,629
Certificates of deposit		57,649,438			62,204,786
Total deposits		155,403,177			152,207,043

Federal Home Loan Bank advances		38,412,000			38,412,000
Advances from borrowers for taxes and insurance		1,403,031			1,946,340
Interest payable		72,952			73,585
Directors deferred compensation		685,138			601,536
Deferred tax liabilities		783,707			905,975
Other liabilities		1,146,210			1,483,105

Total liabilities		197,906,215			195,629,584

Commitments and Contingent Liabilities

Stockholders' Equity
Preferred stock - authorized 1,000,000 shares, $0.01 par value, none issued		-			-
Common stock - authorized 14,000,000 shares, $0.01 par value; issued 2,975,625 at March 31, 2021 and December 31, 2020; outstanding 2,972,822 at March 31, 2021 and 2,975,625 at December 31, 2020		29,756			29,756
Additional paid-in capital		23,265,450			23,266,485
Unearned ESOP shares		(1,647,947	)		(1,673,660	)
Retained earnings - substantially restricted		21,495,916			20,173,404
Accumulated other comprehensive loss		(341,495	)		(292,014	)

Total stockholders' equity		42,801,680			41,503,971

Total liabilities and stockholders' equity	$	240,707,895		$	237,133,555

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

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Operations

Three Months Ended March 31, 2021 and 2020 (Unaudited)

	Three Months Ended March 31,
	2021		2020
Interest and Dividend Income
Loans, including fees	$	1,880,907	$	2,011,365
Securities		21,385		26,718
Dividends on Federal Home Loan Bank stock and other		14,086		85,359
Total interest and dividend income		1,916,378		2,123,442

Interest Expense
Deposits		292,277		503,104
Federal Home Loan Bank advances		207,660		248,382
Total interest expense		499,937		751,486

Net Interest Income		1,416,441		1,371,956

Provision for Loan Losses		-		65,000

Net Interest Income After Provision for Loan Losses		1,416,441		1,306,956

Noninterest Income
Gain on sales of loans		2,857,267		438,354
Mortgage servicing fees (costs)		86,143		(103,514	)
Mortgage derivative income		304,695		-
Other		297,003		192,743
Total noninterest income		3,545,108		527,583

Noninterest Expense
Salaries and employee benefits		2,195,061		1,300,774
Occupancy and equipment		196,364		151,066
Directors compensation		42,250		45,750
Data processing		214,908		121,258
Professional fees		91,802		71,729
Franchise tax		69,802		55,658
Deposit insurance premiums		14,839		-
Advertising		37,114		67,639
Software licenses		26,763		32,971
Loan costs		213,423		68,153
Other		186,391		219,005
Total noninterest expense		3,288,717		2,134,003

Income (Loss) Before Income Taxes		1,672,832		(299,464	)

Provision for Income Taxes (Benefits)		350,320		(73,415	)

Net Income (Loss)	$	1,322,512	$	(226,049	)

Earnings (loss) per common share - basic	$	0.48	$	(0.08	)
Earnings (loss) per common share - diluted	$	0.47	$	(0.08	)
Weighted-average shares outstanding - basic		2,752,815		2,761,212
Weighted-average shares outstanding - diluted		2,815,192		2,761,212

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

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31, 2021 and 2020 (Unaudited)

	Three Months Ended March 31,
	2021			2020
Net Income (loss)	$	1,322,512		$	(226,049	)

Other Comprehensive Income (loss):
Net unrealized gains (losses) on available-for-sale securities		27,522			(58,952	)
Tax (expense) benefit		(5,780	)		12,380
Changes in directors' retirement plan prior service costs		(52,197	)		(12,355	)
Tax (expense) benefit		(19,078	)		2,594
Other comprehensive loss		(49,533	)		(56,333	)

Comprehensive Income (loss)	$	1,272,979		$	(282,382	)

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

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2021 and 2020 (Unaudited)

	Common Stock			Additional Paid-in Capital			Unearned Shares			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
For the Three Months ended March 31, 2021 (unaudited)

Balance, January 1, 2021	$	29,756		$	23,266,485		$	(1,673,660	)	$	20,173,404		$	(292,014	)	$	41,503,971

ESOP shares earned		-			5,991			25,713			-			-			31,704

Stock-based compensation expense		-			28,535			-			-			-			28,535

Net income		-			-			-			1,322,512			-			1,322,512

Repurchase of common stock		-			(35,561	)		-			-			-			(35,561	)

Other comprehensive loss		-			-			-			-			(49,481	)		(49,481	)

Balance, March 31, 2021	$	29,756		$	23,265,450		$	(1,647,947	)	$	21,495,916		$	(341,495	)	$	42,801,680

For the Three Months ended March 31, 2020 (unaudited)

Balance, January 1, 2020	$	29,607		$	7,529,850		$	(449,313	)	$	17,017,683		$	(290,989	)	$	23,836,838

Proceeds from issuance of 1,652,960 shares of common stock (which included 132,237 shares to the ESOP), net of the offering costs of $1.2 million		29,756			15,577,194			(1,322,370	)		-			-			14,284,580

Contribution by CF Mutual Holding Company					50,000			-			-			-			50,000

Exchange of common stock		(29,607	)		-			-			-			-			(29,607	)

ESOP shares earned		-			4,467			20,886			-			-			25,353

Stock-based compensation expense		-			25,791			-			-			-			25,791

Net loss		-			-			-			(226,049	)		-			(226,049	)

Other comprehensive loss		-			-			-			-			(56,333	)		(56,333	)

Balance, March 31, 2020	$	29,756		$	23,187,302		$	(1,750,797	)	$	16,791,634		$	(347,322	)	$	37,910,573

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

Cincinnati Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2021 and 2020 (Unaudited)

	2021			2020
Operating Activities
Net income	$	1,322,512		$	(226,049	)
Items not requiring (providing) cash:
Depreciation and amortization		56,341			52,371
Provision for loan losses		-			65,000
Amortization of premiums and discounts on securities, net		2,994			7,454
Amortization of deferred prepayment penalty on Federal Home Loan Bank advances		-			1,158
Change in deferred income taxes		122,268			19,586
Gain on sale of loans		(2,857,267	)		(438,354	)
Proceeds from the sale of loans held for sale		93,566,611			23,373,661
Origination of loans held for sale		(89,339,139	)		(29,344,422	)
Earnings on cash surrender value of bank-owned life insurance		(20,537	)		(22,201	)
Stock-based compensation expense		28,535			25,791
ESOP shares earned		31,704			25,353
Changes in:
Interest receivable		(7,822	)		28,529
Mortgage servicing rights		(308,550	)		128,322
Federal Home Loan Bank lender risk account receivable		37,590			83,118
Other assets		(343,659	)		426,736
Interest payable		(633	)		(6,229	)
Other liabilities		(574,831	)		(68,879	)
Net cash provided by (used in) operating activities		1,716,117			(5,869,055	)

Investing Activities
Net change in interest-bearing deposits		1,000,000			(1,750,000	)
Proceeds from maturities of available-for-sale securities		529,483			423,471
Purchase of available for sale securities		(5,034,375	)		-
Purchase of Federal Home Loan Bank stock		(220,700	)		(74,100	)
Net change in loans		(5,885,096	)		(684,271	)
Purchase of premises and equipment		(37,130	)		(207,290	)
Net cash used in investing activities		(9,647,818	)		(2,292,190	)

Financing Activities
Net increase (decrease) in deposits		3,196,134			(23,970,325	)
Repurchase of common stock		(35,561	)		-
Proceeds from issuance of common stock		-			14,060,646
Repayment of Federal Home Loan Bank advances		-			(3,500,000	)
Net decrease in advances from borrowers for taxes and insurance		(543,309	)		(503,824	)
Net cash provided by (used in) financing activities		2,617,264			(13,913,503	)

Decrease in Cash and Cash Equivalents		(5,314,437	)		(22,074,748	)
Cash and Cash Equivalents, Beginning of Period		32,347,806			37,735,266
Cash and Cash Equivalents, End of Period	$	27,033,369		$	15,660,518

Supplemental Cash Flows Information
Interest paid	$	500,570		$	757,715
Income taxes paid		441,193			-

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

Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1:

Nature of Operations and Summary of Significant Account Policies

Nature of Operations

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

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

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

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

Revenue Recognition

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

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

Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

Principles of Consolidation

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

Interim Financial Statements

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

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

Use of Estimates

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

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

Cincinnati Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 2:

Securities

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

For debt securities with fair value below amortized cost, when the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, the Company recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-Sale Debt Securities:

March 31, 2021 (unaudited):
Mortgage-backed securities of government sponsored entities	$	9,672,416	$	73,605	$	(2,772	)	$	9,743,249

December 31, 2020:
Mortgage-backed securities of government sponsored entities	$	5,170,519	$	46,278	$	(2,967	)	$	5,213,830

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

SEC Form 10-Q filed by Cincinnati Bancorp, Inc.