Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
Note 1:
Nature
of Operations and Summary of Significant Accounting Policies
General
Eagle
Financial Bancorp, Inc. (the “Company”), a Maryland corporation and registered savings and loan holding company, was
formed on February 21, 2017 to become the savings and loan holding company for Eagle Savings Bank (the “Bank”). The
Bank, an Ohio chartered savings and loan association, completed its mutual-to-stock conversion on July 20, 2017. In connection
with the Bank’s conversion, the Company acquired 100% ownership of the Bank and the Company offered and sold 1,572,808 shares
of its common stock at $10.0 per share, for gross offering proceeds of $15,728. The cost of the conversion and issuance of common
stock was approximately $1,423, which was deducted from the gross offering proceeds. The Company also contributed 40,000 shares
of its common stock and $100 of cash to Eagle Savings Bank Charitable Foundation (the “Foundation”), a charitable foundation
formed in connection with the Bank’s conversion. The Bank’s employee stock ownership plan (“ESOP”) purchased
129,024 shares of the common stock sold by the Company, which was 8% of the 1,612,808 shares of common stock issued by the Company,
including the shares contributed to the Foundation. The ESOP purchased the shares using a loan from the Company. The Company contributed
$7,153 of the net proceeds from the offering to the Bank, loaned $1,290 of the net proceeds to the ESOP, contributed $100 to the
Foundation and retained approximately $5,763 of the net proceeds.
Following
the Bank’s conversion, voting rights are held and exercised exclusively by the shareholders of the holding company. Deposit
account holders continue to be insured by the FDIC. A liquidation account was established in an amount equal to the Bank’s
total equity as of the latest balance sheet date in the final offering circular used in the conversion. Each eligible account holder
or supplemental account holder are entitled to a proportionate share of this account in the event of a complete liquidation of
the Bank, and only in such event. This share will be reduced if the eligible account holder’s or supplemental account holder’s
deposit balance falls below the amounts on the date of record and will cease to exist if the account is closed. The liquidation
account will never be increased despite any increase after conversion in the related deposit balance.
The
Bank may not pay a dividend on its capital stock, if the effect thereof would cause retained earnings to be reduced below the liquidation
account amount or regulatory capital requirements. In addition, the stock holding company will be subject to certain regulations
related to the payment of dividends and the repurchase of its capital stock.
The
Conversion was accounted for as a change in corporate form with the historic basis of the Bank’s assets, liabilities and
equity unchanged as a result.
Basis of Presentation and Consolidation
The condensed consolidated financial
statements as of June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018, include Eagle
Financial Bancorp, Inc. and the Bank, its wholly owned subsidiary. Intercompany transactions and balances have been eliminated
in consolidation.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts
in thousands, except share and per share data)
The accompanying condensed balance
sheet of the Company as of December 31, 2018, which have been derived from audited financial statements, and the unaudited condensed
financial statements of the Company as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018, were prepared
in accordance with instructions for form 10Q and Article 8-03 of Regulation S-X and, therefore, do not include information or footnotes
necessary for a complete presentation of financial position, results of operations and cash flows in accounting principles generally
accepted in the United States of America. Accordingly, these condensed financial statements should be read in conjunction with
the financial statements and notes thereto of the Company for the years ended December 31, 2018 included in the Registrants Form
10-K (the “Form 10-K”). Reference is made to the accounting policies of the Company described in the Notes to Financial
Statements contained in the Form 10-K.
In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited
condensed financial statements as of June 30, 2019 and the results of operations and cash flows for the three and six months ended
June 30, 2019 and 2018. All interim amounts have not been audited and the results of operations for the three and six months ended
June 30, 2019 and 2018, herein are not necessarily indicative of the results of operations to be expected for the entire year.
Revenue Recognition
Accounting Standards Codification ("ASC")
606,
Revenue from Contracts with Customers
("ASC 606"), establishes principles for reporting information about
the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services
to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers
in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services
recognized as performance obligations are satisfied.
The majority of our revenue-generating transactions
are not subject to ASC 606, including revenue generated from financial instruments, such as our loans, as well as revenue related
to our mortgage banking activities, as these activities are subject to other GAAP discussed elsewhere within our disclosures.
Descriptions of our revenue-generating activities
that are within the scope of ASC 606, which are presented in our income statements as components of non-interest income are as
follows:
Service charges on deposit accounts - these represent
general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue,
time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized
when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction
has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance
obligations are satisfied.
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America 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.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts
in thousands, except share and per share data)
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, and fair values of financial instruments.
Recently Adopted
Accounting Pronouncements
ASU No. 2016-01 was issued in January 2016 and applies
to all entities that hold financial assets or owe financial liabilities. ASU 2016-01 is intended to improve the recognition and
measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized
in net income; requiring public entities to use the exit price notion when measuring the fair value of financial instruments for
disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and
form of financial asset on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement
for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required
to be disclosed for financial instruments measured and amortized at cost on the balance sheet; and requiring a reporting organization
to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting
from a change in the instruments specific credit risk when the organization has elected to measure the liability at fair value
in accordance with the fair value option for financial instruments. ASU 2016-01 is effective for annual periods and interim periods
within those periods, beginning after December 15, 2018. The amendments should be applied by means of a cumulative-effect adjustment
to the balance sheet as of the beginning of the fiscal year of adoption. The Company has adopted ASU 2016-01 on January 1, 2019
and it did not have a material effect on its fair value disclosures and other disclosure requirements. These amendments did have
an impact on certain items that were disclosed at fair value that did not utilize the exit price notion when measuring fair value.
For additional information on fair value of assets and liabilities, see Note 7.
In May 2014, the FASB issued ASU No. 2014-09 “
Revenue
from Contracts with Customers (Topic 606)
” (ASU 2014-09). This update to the ASC is the culmination of efforts by the
FASB and the International Accounting Standards Board (IASB) to develop a common revenue standard for U.S. GAAP and International
Financial Reporting Standards (IFRS). ASU 2014-09 supersedes Topic 605 – Revenue Recognition and most industry-specific guidance.
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or 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. The guidance in ASU 2014-09 describes a 5-step process entities can apply to achieve the core principle of revenue
recognition and requires disclosures sufficient to enable users of financial statements to understand the nature, amount, timing,
and uncertainty of revenue and cash flows arising from contracts with customers and the significant judgments used in determining
that information. Originally, the amendments in ASU 2014-09 were effective for annual reporting periods beginning after December
15, 2016, including interim periods within that reporting period and early application is not allowed. In July 2015, the FASB extended
the implementation date to annual reporting periods beginning after December 15, 2017 including interim periods within that reporting
period. Transitional guidance is included in the update. Earlier adoption is permitted only as of annual reporting periods beginning
after December 31, 2016, including interim periods within that reporting period. The Company’s revenue is comprised of net
interest income, which is explicitly excluded from the scope of ASU 2014-09, and non- interest income. The Company has adopted
ASU 2014-09 on January 1, 2019 and it did not identify any changes in the timing of revenue recognition when considering the amended
accounting guidance. The Company included additional disclosures beginning in the first quarter of 2019 as required by the guidance.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands,
except share and per share data)
|
|
Note 2:
|
Earnings Per Common Share
|
Basic earnings per common share (“EPS”)
allocated to common shareholders is calculated using the two-class method and is computed by dividing net income allocated to common
shareholders by the weighted average number of common shares outstanding during the period. Unallocated common shares held by the
Company’s Employee Stock Ownership Plan (“the ESOP”) are shown as a reduction in stockholder’s equity and
are excluded from weighted-average common shares outstanding for both basic and diluted EPS calculations until they are committed
to be released. Diluted earnings per share is adjusted for the dilutive effects of stock-based compensation and is calculated using
the two-class method or the treasury method. There were no dilutive effects at June 30, 2019 or 2018.
The following table presents a reconciliation
of the number of shares used in the calculation of basic and diluted earnings per common share:
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
81
|
|
|
$
|
84
|
|
|
$
|
162
|
|
|
$
|
212
|
|
|
Less allocation of earnings to participating
securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net income allocated to common shareholders
|
|
$
|
81
|
|
|
$
|
84
|
|
|
$
|
162
|
|
|
$
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Outstanding for basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average shares outstanding:
|
|
|
1,600,080
|
|
|
|
1,612,808
|
|
|
|
1,601,844
|
|
|
|
1,612,808
|
|
|
Less: Average Unearned ESOP shares:
|
|
|
113,433
|
|
|
|
119,885
|
|
|
|
114,240
|
|
|
|
120,691
|
|
|
Weighted average number of shares outstanding used in the calculation
of basic earnings per common share
|
|
|
1,486,647
|
|
|
|
1,492,923
|
|
|
|
1,487,604
|
|
|
|
1,492,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.11
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Weighted average number of shares outstanding used in the calculation
of dilutive earnings per common share
|
|
|
1,486,647
|
|
|
|
1,492,923
|
|
|
|
1,487,604
|
|
|
|
1,492,117
|
|
|
Diluted earnings per common share:
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.11
|
|
|
$
|
0.14
|
|
All stock options were anti-dilutive, therefore
not included in dilutive securities.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
|
|
Note 3:
|
Loans and Allowance for Loan Losses
|
The composition of the loan portfolio at June 30,
2019 and December 31, 2018 was as follows:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Residential mortgage loans
|
|
$
|
65,592
|
|
|
$
|
67,169
|
|
|
Commercial real estate and land loans
|
|
|
19,140
|
|
|
|
17,587
|
|
|
Home equity and other consumer
|
|
|
11,451
|
|
|
|
13,773
|
|
|
Residential construction loans
|
|
|
12,609
|
|
|
|
11,756
|
|
|
Residential mortgage loans, non-owner occupied
|
|
|
6,811
|
|
|
|
6,464
|
|
|
Multi-family real estate loans
|
|
|
1,148
|
|
|
|
1,185
|
|
|
Commercial loans
|
|
|
5,947
|
|
|
|
6,041
|
|
|
|
|
|
122,698
|
|
|
|
123,975
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred loan costs
|
|
|
9
|
|
|
|
14
|
|
|
Loans in process
|
|
|
(8,243
|
)
|
|
|
(9,485
|
)
|
|
Allowance for loan losses
|
|
|
(1,156
|
)
|
|
|
(1,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
$
|
113,308
|
|
|
$
|
113,317
|
|
Loans serviced for the benefit of others
at June 30, 2019 and December 31, 2018 amounted to $1,724 and $1,816, respectively.
Loans in process relates to primarily residential
mortgage loans.
Risk characteristics applicable to each
segment of the loan portfolio are described as follows.
Residential Mortgage Loans, including
Construction Loans and Land Loans
: The residential 1-4 family real estate loans and construction loans are generally secured
by owner-occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating
of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Bank’s market areas that might
impact either property values or a borrower’s personal income. Land loans are secured primarily by unimproved land for future
residential use. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number
of borrowers.
Residential Mortgage Loans, Non-Owner
Occupied
: One-to-four family, non-owner occupied loans carry greater inherent risks than one-to-four family, owner occupied
loans, since the repayment ability of the borrower is generally reliant on the success of the income generated from the property.
Commercial Real Estate and Multi-Family
Real Estate
: Commercial real estate loans typically involve larger principal amounts, and repayment of these loans is generally
dependent on the successful operations of the property securing the loan or the business conducted on the property securing the
loan. Multi-family real estate loans are generally secured by apartment complexes. These loans are viewed primarily as cash flow
loans and secondarily as loans secured by real estate. Credit risk in these loans may be impacted by the creditworthiness of a
borrower, property values and the local economies in the Bank’s market areas.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts
in thousands, except share and per share data)
Commercial
: The commercial portfolio
includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans
in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these
loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business
operations.
Home equity and Other Consumer
:
The consumer loan portfolio consists of home equity loans and term and line of credit loans such as automobile loans and loans
for other personal purposes. Repayment of the home equity loans is primarily dependent on the personal income and credit rating
of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Bank’s market areas that might
impact either property values or a borrower’s personal income. Repayment for term and line of credit loans will come from
a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic
factors (such as unemployment and general economic conditions in the Bank’s market area) and the creditworthiness of a borrower.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
The following tables present the activity
in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method for the
three and six months ended June 30, 2019 and 2018 and year ended December 31, 2018:
Six
Months Ended June 30, 2019
(Unaudited)
|
|
Residential
Mortgage
Loans
|
|
|
Commercial
Real Estate
and Land
Loans
|
|
|
Home
Equity and
Other
Consumer
|
|
|
Residential
Construction
Loans
|
|
|
Residential
Mortgage
Loans Non-
Owner
Occupied
|
|
|
Multi-
Family Real
Estate
Loans
|
|
|
Commercial
Loans
|
|
|
Total
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
$
|
409
|
|
|
$
|
260
|
|
|
$
|
313
|
|
|
$
|
128
|
|
|
$
|
42
|
|
|
$
|
14
|
|
|
$
|
21
|
|
|
$
|
1,187
|
|
|
Provision (credit)
charged to expense
|
|
|
(39
|
)
|
|
|
35
|
|
|
|
(8
|
)
|
|
|
10
|
|
|
|
3
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
Losses charged off
|
|
|
-
|
|
|
|
-
|
|
|
|
(39
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(39
|
)
|
|
Recoveries
|
|
|
7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
377
|
|
|
$
|
295
|
|
|
$
|
266
|
|
|
$
|
138
|
|
|
$
|
46
|
|
|
$
|
14
|
|
|
$
|
20
|
|
|
$
|
1,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
375
|
|
|
$
|
295
|
|
|
$
|
266
|
|
|
$
|
138
|
|
|
$
|
46
|
|
|
$
|
14
|
|
|
$
|
20
|
|
|
$
|
1,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
65,592
|
|
|
$
|
19,140
|
|
|
$
|
11,451
|
|
|
$
|
12,609
|
|
|
$
|
6,811
|
|
|
$
|
1,148
|
|
|
$
|
5,947
|
|
|
$
|
122,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
73
|
|
|
$
|
-
|
|
|
$
|
41
|
|
|
$
|
-
|
|
|
$
|
185
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
65,519
|
|
|
$
|
19,140
|
|
|
$
|
11,410
|
|
|
$
|
12,609
|
|
|
$
|
6,626
|
|
|
$
|
1,148
|
|
|
$
|
5,947
|
|
|
$
|
122,399
|
|
Three
Months Ended June 30,
2019 (Unaudited)
|
|
Residential
Mortgage
Loans
|
|
|
Commercial
Real Estate
and Land
Loans
|
|
|
Home
Equity and
Other
Consumer
|
|
|
Residential
Construction
Loans
|
|
|
Residential
Mortgage
Loans Non-
Owner
Occupied
|
|
|
Multi-
Family Real
Estate
Loans
|
|
|
Commercial
Loans
|
|
|
Total
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
424
|
|
|
$
|
246
|
|
|
$
|
295
|
|
|
$
|
112
|
|
|
$
|
41
|
|
|
$
|
14
|
|
|
$
|
20
|
|
|
$
|
1,152
|
|
|
Provision (credit)
charged to expense
|
|
|
(51
|
)
|
|
|
49
|
|
|
|
(29
|
)
|
|
|
26
|
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Losses charged off
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Recoveries
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of
period
|
|
$
|
377
|
|
|
$
|
295
|
|
|
$
|
266
|
|
|
$
|
138
|
|
|
$
|
46
|
|
|
$
|
14
|
|
|
$
|
20
|
|
|
$
|
1,156
|
|
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts
in thousands, except share and per share data)
Six
Months Ended June 30, 2018
(Unaudited)
|
|
Residential
Mortgage
Loans
|
|
|
Commercial
Real Estate
and Land
Loans
|
|
|
Home
Equity and
Other
Consumer
|
|
|
Residential
Construction
Loans
|
|
|
Residential
Mortgage
Loans Non-
Owner
Occupied
|
|
|
Multi-
Family Real
Estate
Loans
|
|
|
Commercial
Loans
|
|
|
Total
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
$
|
283
|
|
|
$
|
199
|
|
|
$
|
276
|
|
|
$
|
116
|
|
|
$
|
122
|
|
|
$
|
25
|
|
|
$
|
160
|
|
|
$
|
1,181
|
|
|
Provision (credit)
charged to expense
|
|
|
154
|
|
|
|
6
|
|
|
|
28
|
|
|
|
1
|
|
|
|
(38
|
)
|
|
|
(11
|
)
|
|
|
(140
|
)
|
|
|
-
|
|
|
Losses charged off
|
|
|
(22
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22
|
)
|
|
Recoveries
|
|
|
7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of
period
|
|
$
|
422
|
|
|
$
|
205
|
|
|
$
|
304
|
|
|
$
|
117
|
|
|
$
|
85
|
|
|
$
|
14
|
|
|
$
|
20
|
|
|
$
|
1,167
|
|
Three
Months Ended June 30, 2018
(Unaudited)
|
|
Residential
Mortgage
Loans
|
|
|
Commercial
Real Estate
and Land
Loans
|
|
|
Home
Equity and
Other
Consumer
|
|
|
Residential
Construction
Loans
|
|
|
Residential
Mortgage
Loans Non-
Owner
Occupied
|
|
|
Multi-
Family Real
Estate
Loans
|
|
|
Commercial
Loans
|
|
|
Total
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
288
|
|
|
$
|
209
|
|
|
$
|
293
|
|
|
$
|
123
|
|
|
$
|
87
|
|
|
$
|
25
|
|
|
$
|
160
|
|
|
$
|
1,185
|
|
|
Provision (credit)
charged to expense
|
|
|
152
|
|
|
|
(4
|
)
|
|
|
11
|
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
(11
|
)
|
|
|
(140
|
)
|
|
|
-
|
|
|
Losses charged off
|
|
|
(22
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22
|
)
|
|
Recoveries
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of
period
|
|
$
|
422
|
|
|
$
|
205
|
|
|
$
|
304
|
|
|
$
|
117
|
|
|
$
|
85
|
|
|
$
|
14
|
|
|
$
|
20
|
|
|
$
|
1,167
|
|
|
Year
Ended December 31, 2018
|
|
Residential
Mortgage
Loans
|
|
|
Commercial
Real Estate
and Land
Loans
|
|
|
Home
Equity and
Other
Consumer
|
|
|
Residential
Construction
Loans
|
|
|
Residential
Mortgage
Loans Non-
Owner
Occupied
|
|
|
Multi-
Family Real
Estate
Loans
|
|
|
Commercial
Loans
|
|
|
Total
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
$
|
283
|
|
|
$
|
199
|
|
|
$
|
276
|
|
|
$
|
116
|
|
|
$
|
122
|
|
|
$
|
25
|
|
|
$
|
160
|
|
|
$
|
1,181
|
|
|
Provision (credit)
charged to expense
|
|
|
146
|
|
|
|
129
|
|
|
|
44
|
|
|
|
12
|
|
|
|
(82
|
)
|
|
|
(11
|
)
|
|
|
(139
|
)
|
|
|
99
|
|
|
Losses charged off
|
|
|
(35
|
)
|
|
|
(68
|
)
|
|
|
(7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110
|
)
|
|
Recoveries
|
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
409
|
|
|
$
|
260
|
|
|
$
|
313
|
|
|
$
|
128
|
|
|
$
|
42
|
|
|
$
|
14
|
|
|
$
|
21
|
|
|
$
|
1,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
406
|
|
|
$
|
260
|
|
|
$
|
313
|
|
|
$
|
128
|
|
|
$
|
42
|
|
|
$
|
14
|
|
|
$
|
21
|
|
|
$
|
1,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
67,169
|
|
|
$
|
17,587
|
|
|
$
|
13,773
|
|
|
$
|
11,756
|
|
|
$
|
6,464
|
|
|
$
|
1,185
|
|
|
$
|
6,041
|
|
|
$
|
123,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: individually evaluated for impairment
|
|
$
|
74
|
|
|
$
|
-
|
|
|
$
|
43
|
|
|
$
|
-
|
|
|
$
|
190
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance: collectively evaluated for impairment
|
|
$
|
67,095
|
|
|
$
|
17,587
|
|
|
$
|
13,730
|
|
|
$
|
11,756
|
|
|
$
|
6,274
|
|
|
$
|
1,185
|
|
|
$
|
6,041
|
|
|
$
|
123,668
|
|
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
Internal Risk Categories
Loan grades are numbered 1 through
8. Grades 5 through 8 are considered satisfactory grades. The grade of 1, or Special Mention, represents loans of lower quality
and is considered criticized. The grades of 2, or Substandard, 3, or Doubtful, and 4, or Loss refer to assets that are classified.
The use and application of these grades by the Bank will be uniform and shall conform to the Bank’s policy.
Special Mention (grade 1)
assets have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future
date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse
classification. Ordinarily, special mention credits have characteristics which corrective management action would remedy.
Substandard (grade 2)
loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if
any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are
characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful (grade 3)
loans
classified as doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the
weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable
and improbable.
Loss (grade 4)
loans classified
as loss are considered uncollectible and of such little value that their continuance as assets is not warranted. This classification
does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing
off even though partial recovery may be affected in the future.
Satisfactory (grades 5 through
8)
represent loans for which quality is considered to be satisfactory.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
The following tables present
the credit risk profile of the Bank’s loan portfolio based on rating category and payment activity as of June 30, 2019 and
December 31, 2018:
|
June
30, 2019 (Unaudited)
|
|
Residential
Mortgage Loans
|
|
|
Commercial
Real Estate and
Land Loans
|
|
|
Home
Equity and
Other
Consumer
|
|
|
Residential
Construction
Loans
|
|
|
Residential
Mortgage Loans
Non-Owner
Occupied
|
|
|
Multi-Family
Real Estate
Loans
|
|
|
Commercial
Loans
|
|
|
Total
|
|
|
Rating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satisfactory (5-8)
|
|
$
|
65,170
|
|
|
$
|
18,947
|
|
|
$
|
11,324
|
|
|
$
|
12,609
|
|
|
$
|
6,322
|
|
|
$
|
1,148
|
|
|
$
|
5,786
|
|
|
$
|
121,306
|
|
|
Special mention (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Substandard (2)
|
|
|
422
|
|
|
|
193
|
|
|
|
127
|
|
|
|
-
|
|
|
|
489
|
|
|
|
-
|
|
|
|
161
|
|
|
|
1,392
|
|
|
Doubtful (3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Loss (4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
65,592
|
|
|
$
|
19,140
|
|
|
$
|
11,451
|
|
|
$
|
12,609
|
|
|
$
|
6,811
|
|
|
$
|
1,148
|
|
|
$
|
5,947
|
|
|
$
|
122,698
|
|
|
December
31, 2018
|
|
Residential
Mortgage Loans
|
|
|
Commercial
Real Estate and
Land Loans
|
|
|
Home
Equity and
Other
Consumer
|
|
|
Residential
Construction
Loans
|
|
|
Residential
Mortgage Loans
Non-Owner
Occupied
|
|
|
Multi-Family
Real Estate
Loans
|
|
|
Commercial
Loans
|
|
|
Total
|
|
|
Rating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satisfactory (5-8)
|
|
$
|
66,074
|
|
|
$
|
17,390
|
|
|
$
|
13,552
|
|
|
$
|
11,756
|
|
|
$
|
6,442
|
|
|
$
|
1,185
|
|
|
$
|
5,868
|
|
|
$
|
122,267
|
|
|
Special mention (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Substandard (2)
|
|
|
1,095
|
|
|
|
197
|
|
|
|
221
|
|
|
|
-
|
|
|
|
22
|
|
|
|
-
|
|
|
|
173
|
|
|
|
1,708
|
|
|
Doubtful (3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Loss (4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
67,169
|
|
|
$
|
17,587
|
|
|
$
|
13,773
|
|
|
$
|
11,756
|
|
|
$
|
6,464
|
|
|
$
|
1,185
|
|
|
$
|
6,041
|
|
|
$
|
123,975
|
|
The Company evaluates the loan risk grading system definitions
and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the three and
six months ended June 30, 2019.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
The following tables present
the Bank’s loan portfolio aging analysis of the recorded investment in loans as of June 30, 2019 and December 31, 2018:
|
June 30, 2019 (Unaudited)
|
|
30-59 Days
Past Due
|
|
|
60-89 Days
Past Due
|
|
|
90 Days
Past Due or
More
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
Receivable
|
|
|
Recorded
Investment 90
Days and
Accruing
|
|
|
Residential mortgage loans
|
|
$
|
194
|
|
|
$
|
56
|
|
|
$
|
202
|
|
|
$
|
452
|
|
|
$
|
65,140
|
|
|
$
|
65,592
|
|
|
$
|
-
|
|
|
Commercial real estate and land loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,140
|
|
|
|
19,140
|
|
|
|
-
|
|
|
Home equity and other consumer
|
|
|
11
|
|
|
|
-
|
|
|
|
70
|
|
|
|
81
|
|
|
|
11,370
|
|
|
|
11,451
|
|
|
|
-
|
|
|
Residential construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,609
|
|
|
|
12,609
|
|
|
|
-
|
|
|
Residential mortgage loans, non-owner occupied
|
|
|
-
|
|
|
|
489
|
|
|
|
-
|
|
|
|
489
|
|
|
|
6,322
|
|
|
|
6,811
|
|
|
|
-
|
|
|
Multi-family real estate loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,148
|
|
|
|
1,148
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,947
|
|
|
|
5,947
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
205
|
|
|
$
|
545
|
|
|
$
|
272
|
|
|
$
|
1,022
|
|
|
$
|
121,676
|
|
|
$
|
122,698
|
|
|
$
|
-
|
|
|
December 31, 2018
|
|
30-59 Days
Past Due
|
|
|
60-89 Days
Past Due
|
|
|
90 Days
Past Due or
More
|
|
|
Total
Past
Due
|
|
|
Current
|
|
|
Total
Loans
Receivable
|
|
|
Recorded
Investment 90
Days and
Accruing
|
|
|
Residential mortgage loans
|
|
$
|
86
|
|
|
$
|
-
|
|
|
$
|
362
|
|
|
$
|
448
|
|
|
$
|
66,721
|
|
|
$
|
67,169
|
|
|
$
|
-
|
|
|
Commercial real estate and land loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,587
|
|
|
|
17,587
|
|
|
|
-
|
|
|
Home equity and other consumer
|
|
|
37
|
|
|
|
18
|
|
|
|
71
|
|
|
|
126
|
|
|
|
13,647
|
|
|
|
13,773
|
|
|
|
-
|
|
|
Residential construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,756
|
|
|
|
11,756
|
|
|
|
-
|
|
|
Residential mortgage loans, non-owner occupied
|
|
|
493
|
|
|
|
-
|
|
|
|
-
|
|
|
|
493
|
|
|
|
5,971
|
|
|
|
6,464
|
|
|
|
-
|
|
|
Multi-family real estate loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,185
|
|
|
|
1,185
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125
|
|
|
|
5,916
|
|
|
|
6,041
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
741
|
|
|
$
|
18
|
|
|
$
|
433
|
|
|
$
|
1,192
|
|
|
$
|
122,783
|
|
|
$
|
123,975
|
|
|
$
|
-
|
|
A loan is considered impaired,
in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable
the Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
The following tables present impaired loans at June
30, 2019, June 30, 2018 and as of December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended
|
|
|
For the Six Months Ended
|
|
|
|
|
As
of June 30, 2019
|
|
|
|
|
|
June
30, 2019
|
|
|
June
30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Investment
|
|
|
Interest
|
|
|
Investment
|
|
|
Interest
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Allocated
|
|
|
in Impaired
|
|
|
Income
|
|
|
in Impaired
|
|
|
Income
|
|
|
|
|
Balance
|
|
|
Balance
|
|
|
Allowance
|
|
|
Loans
|
|
|
Recognized
|
|
|
Loans
|
|
|
Recognized
|
|
|
Loans without an allocated
allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Commercial real estate
and land loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Home equity
and other consumer
|
|
|
41
|
|
|
|
41
|
|
|
|
-
|
|
|
|
41
|
|
|
|
-
|
|
|
|
42
|
|
|
|
1
|
|
|
Residential construction
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential mortgage
loans, non-owner occupied
|
|
|
185
|
|
|
|
185
|
|
|
|
-
|
|
|
|
186
|
|
|
|
3
|
|
|
|
187
|
|
|
|
7
|
|
|
Multi-family real estate
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Loans with an allocated allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
loans
|
|
|
73
|
|
|
|
73
|
|
|
|
2
|
|
|
|
73
|
|
|
|
1
|
|
|
|
74
|
|
|
|
2
|
|
|
Commercial real estate
and land loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Home equity and other
consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential construction
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential mortgage
loans, non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Multi-family real estate
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
299
|
|
|
$
|
299
|
|
|
$
|
2
|
|
|
$
|
300
|
|
|
$
|
4
|
|
|
$
|
303
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended
|
|
|
For the Six Months Ended
|
|
|
|
|
As
of June 30, 2018
|
|
|
|
|
|
June
30, 2018
|
|
|
June
30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Investment
|
|
|
Interest
|
|
|
Investment
|
|
|
Interest
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Allocated
|
|
|
in Impaired
|
|
|
Income
|
|
|
in Impaired
|
|
|
Income
|
|
|
|
|
Balance
|
|
|
Balance
|
|
|
Allowance
|
|
|
Loans
|
|
|
Recognized
|
|
|
Loans
|
|
|
Recognized
|
|
|
Loans without an allocated allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Commercial real estate
and land loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Home equity and other
consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential construction
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential
mortgage loans, non-owner occupied
|
|
|
193
|
|
|
|
193
|
|
|
|
-
|
|
|
|
193
|
|
|
|
3
|
|
|
|
194
|
|
|
|
6
|
|
|
Multi-family real estate
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Loans with an allocated
allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
loans
|
|
|
76
|
|
|
|
76
|
|
|
|
5
|
|
|
|
119
|
|
|
|
2
|
|
|
|
130
|
|
|
|
3
|
|
|
Commercial real estate
and land loans
|
|
|
163
|
|
|
|
163
|
|
|
|
13
|
|
|
|
161
|
|
|
|
-
|
|
|
|
159
|
|
|
|
-
|
|
|
Home equity and other
consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential construction
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential mortgage
loans, non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Multi-family real estate
loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
199
|
|
|
|
5
|
|
|
|
250
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
432
|
|
|
$
|
432
|
|
|
$
|
18
|
|
|
$
|
672
|
|
|
$
|
10
|
|
|
$
|
733
|
|
|
$
|
18
|
|
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
|
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Investment
|
|
|
Interest
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Allocated
|
|
|
in Impaired
|
|
|
Income
|
|
|
|
|
Balance
|
|
|
Balance
|
|
|
Allowance
|
|
|
Loans
|
|
|
Recognized
|
|
|
Loans without an allocated allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Commercial real estate and land loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
108
|
|
|
|
-
|
|
|
Home equity and other consumer
|
|
|
43
|
|
|
|
43
|
|
|
|
-
|
|
|
|
36
|
|
|
|
1
|
|
|
Residential construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential mortgage loans, non-owner occupied
|
|
|
190
|
|
|
|
190
|
|
|
|
-
|
|
|
|
192
|
|
|
|
10
|
|
|
Multi-family real estate loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125
|
|
|
|
9
|
|
|
Loans with an allocated allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage loans
|
|
|
74
|
|
|
|
74
|
|
|
|
3
|
|
|
|
103
|
|
|
|
4
|
|
|
Commercial real estate and land loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Home equity and other consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential mortgage loans, non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Multi-family real estate loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
307
|
|
|
$
|
307
|
|
|
$
|
3
|
|
|
$
|
564
|
|
|
$
|
24
|
|
Interest income recognized is
not materially different than interest income that would have been recognized on a cash basis.
The following table presents
the Bank’s nonaccrual loans at June 30, 2019 and December 31, 2018. This table excludes performing troubled debt restructurings.
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Residential mortgage loans
|
|
$
|
202
|
|
|
$
|
362
|
|
|
Commercial real estate and land loans
|
|
|
-
|
|
|
|
-
|
|
|
Home equity and other consumer
|
|
|
70
|
|
|
|
71
|
|
|
Residential construction loans
|
|
|
-
|
|
|
|
-
|
|
|
Residential mortgage loans, non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
Multi-family real estate loans
|
|
|
-
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
272
|
|
|
$
|
433
|
|
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
Following is a summary of troubled
debt restructurings at June 30, 2019 and December 31, 2018:
|
|
|
As of June 30, 2019
|
|
|
As of December 31, 2018
|
|
|
|
|
Number of
Contracts
|
|
|
Recorded
Investment
|
|
|
Number of
Contracts
|
|
|
Recorded
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage loans
|
|
|
1
|
|
|
$
|
73
|
|
|
|
1
|
|
|
$
|
74
|
|
|
Commercial real estate and land loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Home equity and other consumer
|
|
|
2
|
|
|
|
41
|
|
|
|
2
|
|
|
|
43
|
|
|
Residential construction loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Residential mortgage loans, non-owner occupied
|
|
|
4
|
|
|
|
185
|
|
|
|
4
|
|
|
|
190
|
|
|
Multi-family real estate loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Commercial loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
7
|
|
|
$
|
299
|
|
|
|
7
|
|
|
$
|
307
|
|
As of June 30, 2019, the Bank
had total troubled debt restructurings of $299. There were five residential mortgage loans and residential non-owner occupied loans
totaling $258 with the largest loan totaling $73, and two home equity loans totaling $41. As of December 31, 2018, the
Bank had total troubled debt restructurings of $307. There were five residential mortgage loans and residential non-owner
occupied loans totaling $264 in troubled debt restructurings with the largest totaling $74. The remaining $43 in troubled
debt restructurings consisted of two home equity loans. These loans were modified due to short term concessions. Eagle Savings
Bank has no commitments to lend additional funds to these debtors owing receivables whose terms have been modified in troubled
debt restructurings. During the three months and six months ended June, 30, 2019 and 2018 there were no new troubled debt restructurings.
There were no foreclosed real
estate properties at June 30, 2019. There were two foreclosed real estate properties totaling $217 at December 31, 2018. They consisted
of one commercial real estate property totaling $127 and one residential mortgage property totaling $90.
|
|
Note 4:
|
Employee Stock Ownership Plan (“ESOP”)
|
In connection with the conversion
to an entity owned by stockholders, the Company established an Employee Stock Ownership Plan (“ESOP”) for the exclusive
benefit of eligible employees. The ESOP borrowed funds from the Company in an amount sufficient to purchase 129,024 shares (approximately
8.0% of the common stock issued in connection with the conversion). The loan is secured by the shares purchased and will be repaid
by the ESOP with funds from contributions made by the Company and dividends received by the ESOP. Contributions will be applied
to repay interest on the loan first, and then the remainder will be applied to principal. The loan is expected to be repaid over
a period of up to 20 years. Shares purchased with the loan proceeds are held in a suspense account for allocation among participants
as the loan is repaid. Contributions to the ESOP and shares released from the suspense account are allocated among participants
in proportion to their compensation, relative to total compensation of all active participants. Participants will vest in their
accrued benefits under the ESOP at the rate of 20 percent per year after two years of service. Vesting is accelerated upon retirement,
death or disability of the participant, or a change in control of the Company. Forfeitures will be reallocated to remaining participants.
Benefits may be payable upon retirement, death, disability, separation of service, or termination of the ESOP.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts
in thousands, except share and per share data)
The debt of the ESOP is eliminated
in consolidation. Contributions to the ESOP shall be sufficient to pay principal and interest currently due under the loan agreement.
As shares are committed to be released from collateral, the Company reports the compensation expense equal to the average market
price of the shares for the respective period, and the shares become outstanding for earnings per share computations. Dividends
on unallocated ESOP shares, if any, are recorded as a reduction of debt and accrued interest. ESOP compensation was $25 and $50
for the three and six months ended June 30, 2019, and $26 and $52 for the three and six months ended June 30, 2018.
A summary of the ESOP shares
as of June 30, 2019 and December 31, 2018 are as follows:
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
Shares allocated to participants
|
|
|
3,226
|
|
|
|
6,451
|
|
|
Shares released to participants
|
|
|
12,902
|
|
|
|
6,451
|
|
|
Unreleased shares
|
|
|
112,896
|
|
|
|
116,122
|
|
|
Total
|
|
|
129,024
|
|
|
|
129,024
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Unreleased Shares
|
|
$
|
1,783,757
|
|
|
$
|
1,761,571
|
|
In the event the ESOP is unable
to satisfy the obligation to repurchase the shares held by each beneficiary upon the beneficiary’s termination or retirement,
the Company is obligated to repurchase the shares. In addition, there are no outstanding shares held by former employees that are
subject to an ESOP related repurchase option.
|
|
Note 5:
|
Equity Incentive Plan
|
In
September 2018, the Company’s stockholders approved the Eagle Financial Bancorp, Inc. 2018 Equity Incentive Plan (the “2018
Plan”). The 2018 Plan authorizes the issuance or delivery to participants of up to 225,792 shares of the Company’s
common stock pursuant to the grants of restricted stock awards, incentive stock options, and non-qualified stock options. Of this
number, the maximum number of shares of Company common stock that may be issued under the 2018 Plan pursuant to the exercise of
stock options is 161,280 shares and the maximum number of shares of Company common stock that may be issued as restricted stock
awards is 64,512 shares. Stock options awarded to employees may be incentive stock options or non-qualified stock options. Shares
awarded under the 2018 Plan may be authorized but unissued shares or treasury shares. The 2018 Plan contains annual and lifetime
limits on certain types of awards to individual participants.
Awards
may vest or become exercisable only upon the achievement of performance measures or based solely on the passage of time after award.
Stock options and restricted stock awards provide for accelerated vesting if there is a change in control (as defined in the 2018
Plan).
In
September 2018, the Company granted stock options for 32,255 shares to members of the Board of Directors. Awards under the
Plan were granted with a vesting rate not exceeding twenty percent (20%) per year for five years. Options granted in September
2018 have an exercise price $15.89, as determined on the grant date and expire ten years from the grant date.
The fair value was calculated using the Black-Scholes
model for stock options granted in September 2018 using the following assumptions: expected volatility of 24.56%, a risk free interest
rate of 3.01%, and an expected term of 7.5 years. The Company utilized the simplified method to determine the expected term because
it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and per share
data)
The
weighted average grant-date fair value of options granted in September 2018 was $5.57 per share.
In
October 2018, the Company granted stock options for 69,356 shares to Executive Officers of the Company. Awards under the Plan were
granted with a vesting rate not exceeding twenty percent (20%) per year for five years. Options granted in October 2018 have an
exercise price $15.75, as determined on the grant date and expire ten years from the grant date.
The
fair value was calculated using the Black-Scholes model for stock options granted in September 2018 using the following assumptions:
expected volatility of 24.63%, a risk free interest rate of 3.14%, and an expected term of 7.5 years. The Company utilized the
simplified method to determine the expected term because it does not have sufficient historical exercise data to provide a reasonable
basis upon which to estimate the expected term.
The
weighted average grant-date fair value of options granted in October 2018 was $5.59 per share.
At
June 30, 2019, no stock options were exercisable.
In
September 2018, the Company awarded 12,900 restricted shares to members of the Board of Directors. The restricted stock awards
have a five year vesting period. During the restricted period, the holder is entitled to full voting rights and dividends, thus
are considered participating securities.
In
October 2018, the Company awarded 29,050 restricted shares to Executive Officers and other employees of the Company. The restricted
stock awards have a five year vesting period. During the restricted period, the holder is entitled to full voting rights and dividends,
thus are considered participating securities.
Total
compensation cost recognized in the income statement for share-based payment arrangements at June 30, 2019 and 2018 was $123 and
$0.
As of June 30, 2019, there was approximately $1,039
of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Plan. That
cost is expected to be recognized over a remaining weighted-average period of 4.1 years.
|
|
Note 6:
|
Regulatory Matters
|
The Bank is subject to various
regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional 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 that involve quantitative measures of the Bank’s assets,
liabilities and certain off-balance-sheet items as calculated under United States Generally Accepted Accounting Principles, regulatory
reporting requirements and regulatory capital standards. The Bank’s capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Bank’s regulators
could require adjustments to regulatory capital not reflected in these financial statements.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except
share and per share data)
Quantitative measures established
by regulatory reporting standards, to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth
in the table below) of Total capital (as defined), Tier I capital (as defined) and common equity Tier 1capital (as defined) to
risk-weighted assets (as defined) and Tier I capital (as defined) to average assets (as defined). Management believes, as of June
30, 2019 and December 31, 2018 that the Bank meets all capital adequacy requirements to which it is subject.
As of June 30, 2019 and December
31, 2018 the most recent notification from the Bank’s regulators categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based
capital, Tier I risk-based capital, common equity Tier 1 risk-based capital and Tier I leverage ratios as set forth in the table.
There are no conditions or events since that notification that management believes have changed the Bank’s category.
In addition to the minimum capital
ratios, the Bank must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of
total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonuses.
As a result of the recently enacted Economic Growth,
Regulatory Relief, and Consumer Protection Act (the “Act”), banking regulatory agencies including the Federal Reserve
Board must establish for institutions with less than $10 billion of assets a “community bank leverage ratio” of tangible
equity capital to total average consolidated assets of between 8 to 10%. Institutions with capital meeting the specified requirement
and electing to follow the alternative regulatory capital structure will be considered to comply with the applicable regulatory
capital requirements, including the risk-based requirements. The establishment of the community bank leverage ratio is subject
to notice and comment rulemaking by the federal regulators and the agencies issued a proposed rule in February 2019 that would
set the “community bank leverage ratio” at 9%.
In addition, as a result of the Act, the Federal Reserve
Board has amended its small bank holding company and savings and loan holding company policy statement to provide that holding
companies with consolidated assets of less than $3 billion that are (i) not engaged in significant nonbanking activities, (ii)
do not conduct significant off-balance sheet activities, and (3) do not have a material amount of SEC-registered debt or equity
securities, other than trust preferred securities, that contribute to an organization’s complexity, are not subject to consolidated
regulatory capital requirements.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and per share
data)
The Bank’s actual capital amounts and ratios
are presented in the following tables (minimum capital requirements exclude the capital conservation buffer):
|
|
|
Actual
|
|
|
Minimum Capital
Requirement
|
|
|
Minimum to Be Well
Capitalized Under
Prompt
Corrective Action
Provisions
|
|
|
As of June 30, 2019
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
21,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
1,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital (to risk-weighted assets)
|
|
$
|
22,392
|
|
|
|
16.8
|
%
|
|
$
|
10,674
|
|
|
|
8.0
|
%
|
|
$
|
13,342
|
|
|
|
10.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I capital (to risk-weighted assets)
|
|
|
21,236
|
|
|
|
15.9
|
%
|
|
|
8,005
|
|
|
|
6.0
|
%
|
|
|
10,674
|
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier I capital (to risk-weighted assets)
|
|
|
21,236
|
|
|
|
15.9
|
%
|
|
|
6,004
|
|
|
|
4.5
|
%
|
|
|
8,672
|
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I capital (to adjusted total assets)
|
|
|
21,236
|
|
|
|
15.5
|
%
|
|
|
5,496
|
|
|
|
4.0
|
%
|
|
|
6,870
|
|
|
|
5.0
|
%
|
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
|
|
|
Actual
|
|
|
Minimum Capital
Requirement
|
|
|
Minimum to Be Well
Capitalized Under
Prompt Corrective Action
Provisions
|
|
|
As of December 31, 2018
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
20,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
1,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital (to risk-weighted assets)
|
|
$
|
22,036
|
|
|
|
16.9
|
%
|
|
$
|
10,459
|
|
|
|
8.0
|
%
|
|
$
|
13,074
|
|
|
|
10.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I capital (to risk-weighted assets)
|
|
|
20,849
|
|
|
|
15.9
|
%
|
|
|
7,844
|
|
|
|
6.0
|
%
|
|
|
10,459
|
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier I capital (to risk-weighted assets)
|
|
|
20,849
|
|
|
|
15.9
|
%
|
|
|
5,883
|
|
|
|
4.5
|
%
|
|
|
8,498
|
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I capital (to adjusted total assets)
|
|
|
20,849
|
|
|
|
15.2
|
%
|
|
|
5,495
|
|
|
|
4.0
|
%
|
|
|
6,868
|
|
|
|
5.0
|
%
|
|
|
Note 7:
|
Disclosure About Fair Values of Assets and Liabilities
|
ASC Topic 820,
Fair Value
Measurements
, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The standard describes three levels of inputs that may be used to measure fair value:
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities
|
|
|
|
|
Level 2
|
Observable inputs other than Level 1 prices, 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
|
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
Nonrecurring Measurements
The following tables present
the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy
in which the fair value measurements fall at June 30, 2019 and December 31, 2018:
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Fair
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
June 30, 2019
|
|
Value
|
|
|
(Level 1)
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Impaired loans (collateral dependent)
|
|
$
|
71
|
|
|
$
|
-
|
|
$
|
-
|
|
|
$
|
71
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Fair
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
December 31, 2018
|
|
Value
|
|
|
(Level 1)
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Impaired loans (collateral dependent)
|
|
$
|
71
|
|
|
$
|
-
|
|
$
|
-
|
|
|
$
|
71
|
|
Fair value adjustments, consisting
of charge-offs or allocated allowances, on impaired loans and foreclosed assets held for sale during the six months ended June
30, 2019 and the year ended December 31, 2018 amounted to $2 and $3, respectively.
Following is a description of
the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying
balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified
within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
Collateral-dependent Impaired
Loans, Net of ALLL
The estimated fair value of collateral-dependent
impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired
loans are classified within Level 3 of the fair value hierarchy. The Bank considers the appraisal or evaluation as the starting
point for determining fair value and then considers other factors and events in the environment that may affect the fair value.
Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent
and subsequently as deemed necessary. Appraisals are reviewed for accuracy and consistency by the lending department. Appraisers
are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider
lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.
These discounts and estimates are developed by comparison to historical results.
Unobservable (Level 3)
Inputs
The following tables present
quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements.
|
|
|
Fair Value at
|
|
|
Valuation
|
|
|
|
|
|
|
|
|
6/30/2019
|
|
|
Technique
|
|
Unobservable Inputs
|
|
Range
|
|
|
Impaired loans (collateral dependent)
|
|
$
|
71
|
|
|
Market comparable properties
|
|
Marketability discount
|
|
|
10% - 15%
|
|
|
|
|
Fair Value at
|
|
|
Valuation
|
|
|
|
|
|
|
|
|
12/31/2018
|
|
|
Technique
|
|
Unobservable Inputs
|
|
Range
|
|
|
Impaired loans (collateral dependent)
|
|
$
|
71
|
|
|
Market comparable properties
|
|
Marketability discount
|
|
|
10% - 15%
|
|
The following methods were used
to estimate the fair value of all other financial instruments recognized in the accompanying balance sheet at amounts other than
fair value.
Cash and Cash Equivalents
and Interest-bearing Time Deposits
The carrying amount approximates
fair value.
Loans Held For Sale
The carrying amount approximates
fair value due to the insignificant time between origination and date of sale. The carrying amount is the amount funded.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
Loans
The estimated fair value of loans
as of June 30, 2019 follows the guidance in ASU 2016-01, which prescribes an “exit price” approach in estimating and
disclosing fair value of financial instruments. The fair value calculation at that date discounted estimated future cash flows
using rates that incorporated discounts for credit, liquidity and marketability factors. The fair value estimate shown as of December
31, 2018 used an “entry price” approach. The fair value calculation for that date discounted estimated future cash
flows using the market rates at which similar notes would be made to borrowers with similar credit ratings and for the same remaining
maturities. The market rates used are based on current rates the Bank would impose for similar loans and reflect a market participant
assumption about risks associated with nonperformance, illiquidity, and the structure and term of the loans along with local economic
and market conditions. Consequently, the fair value disclosures for June 30, 2019 and December 31, 2018 are not directly comparable.
FHLB Stock
Fair value is estimated at book
value due to restrictions that limit the sale or transfer of such securities.
FHLB Lender Risk Account
Receivable
The fair value of the Federal
Home Loan Bank lender risk account receivable is estimated by discounting the estimated remaining cash flows of each strata of
the receivable at current rates applicable to each strata for the same remaining maturities.
Accrued Interest Receivable
and Payable
The carrying amount approximates
fair value. The carrying amount is determined using the interest rate, balance and last payment date.
Deposits
Fair value of term deposits is
estimated by discounting the future cash flows using rates of similar deposits with similar maturities. The market rates used were
obtained from a knowledgeable independent third party and reviewed by the Bank. The rates were the average of current rates offered
by local competitors of the Bank.
The estimated fair value of checking,
NOW, savings and money market deposits is the book value since rates are regularly adjusted to market rates and amounts are payable
on demand at the reporting date.
FHLB Advances
Fair value is estimated by discounting
the future cash flows using rates of similar advances with similar maturities. These rates were obtained from current rates offered
by FHLB.
Advances from Borrowers
for Taxes and Insurance
The carrying amount approximates
fair value.
Commitments to Originate
Loans, Forward Sale Commitments, Letters of Credit and Lines of Credit
The fair value of commitments
to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and the committed rates. The fair value of commitments to sell
securities is estimated based on current market prices for securities of similar terms and credit quality. The fair values of letters
of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate
or otherwise settle the obligations with the counterparties at the reporting date. At June 30, 2019 and December 31, 2018, the
fair value of such commitments was not material.
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
The following tables present
estimated fair values of the Bank’s financial instruments at June 30, 2019 and December 31, 2018.
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
June 30, 2019
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,805
|
|
|
$
|
7,805
|
|
|
$
|
7,805
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest-bearing time deposits
|
|
|
2,490
|
|
|
|
2,490
|
|
|
|
2,490
|
|
|
|
-
|
|
|
|
-
|
|
|
Loans held for sale
|
|
|
5,711
|
|
|
|
5,711
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,711
|
|
|
Loans, net of allowance for losses
|
|
|
113,308
|
|
|
|
113,962
|
|
|
|
-
|
|
|
|
-
|
|
|
|
113,962
|
|
|
FHLB stock
|
|
|
816
|
|
|
|
816
|
|
|
|
-
|
|
|
|
816
|
|
|
|
-
|
|
|
FHLB lender risk account receivable
|
|
|
3,406
|
|
|
|
3,505
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,505
|
|
|
Interest receivable
|
|
|
358
|
|
|
|
358
|
|
|
|
-
|
|
|
|
358
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
109,275
|
|
|
|
109,319
|
|
|
|
62,380
|
|
|
|
46,939
|
|
|
|
-
|
|
|
Advances from borrowers for taxes and insurance
|
|
|
272
|
|
|
|
272
|
|
|
|
-
|
|
|
|
272
|
|
|
|
-
|
|
|
Interest payable
|
|
|
2
|
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
December 31, 2018
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,434
|
|
|
$
|
7,434
|
|
|
$
|
7,434
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest-bearing time deposits
|
|
|
3,486
|
|
|
|
3,486
|
|
|
|
3,486
|
|
|
|
-
|
|
|
|
-
|
|
|
Loans held for sale
|
|
|
1,827
|
|
|
|
1,827
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,827
|
|
|
Loans, net of allowance for losses
|
|
|
113,317
|
|
|
|
114,248
|
|
|
|
-
|
|
|
|
-
|
|
|
|
114,248
|
|
|
FHLB stock
|
|
|
754
|
|
|
|
754
|
|
|
|
-
|
|
|
|
754
|
|
|
|
-
|
|
|
FHLB lender risk account receivable
|
|
|
3,377
|
|
|
|
3,377
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,377
|
|
|
Interest receivable
|
|
|
354
|
|
|
|
354
|
|
|
|
-
|
|
|
|
354
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
106,369
|
|
|
|
105,829
|
|
|
|
59,872
|
|
|
|
45,957
|
|
|
|
-
|
|
|
FHLB advances
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Advances from borrowers for taxes and insurance
|
|
|
950
|
|
|
|
950
|
|
|
|
-
|
|
|
|
950
|
|
|
|
-
|
|
|
Interest payable
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
|
|
Note 8:
|
Commitments and Credit Risk
|
Commitments to Originate
Loans
Commitments to originate loans
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 a portion of the commitments
may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s
creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s
credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant
and equipment, commercial real estate and residential real estate.
At June 30, 2019, the Bank had
loans approved but not yet originated with interest rates ranging from 3.875% to 4.375% for $217 secured by one-to four-family
residential real estate. At December 31, 2018, the Bank had no loans approved but not yet originated. At June 30, 2019, the Bank
had undisbursed loans in process of $8,243 with interest rate ranges of 3.125% to 5.250%. At December 31, 2018 the Bank had undisbursed
loans in process of $9,485 with interest rate ranges from 3.125% to 5.730%.
Lines of Credit
Lines of credit are agreements
to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally
have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily
represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of
collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real
estate. Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.
Lines and
letters of credit at June 30, 2019 and December 31, 2018 were as follows:
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
Unused lines of credit
|
|
$
|
3,732
|
|
|
$
|
3,905
|
|
|
Unused home equity lines
|
|
|
11,522
|
|
|
|
12,145
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments
|
|
$
|
15,254
|
|
|
$
|
16,050
|
|
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
|
|
Note 9:
|
Recent Accounting Pronouncements
|
Eagle
Financial Bancorp, Inc. is an “emerging growth company. As an “emerging growth company”, we have 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.
In February 2016, the FASB issued
ASU No. 2016-02 "Leases (Topic 842)." ASU 2016-02 establishes a right of use model that requires a lessee to record a
right of use asset and a lease liability for all leases with terms longer than 12 months. Leases will be classified as either finance
or operating, with classification affecting the pattern of expense recognition in the income statement. For lessors, the guidance
modifies the classification criteria and the accounting for sales-type and direct financing leases. A lease will be treated as
a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards
are conveyed without the transfer of control, the lease is treated as a financing lease. If the lessor doesn't convey risks and
rewards or control, the lease is classified as an operating lease. Public business entities should apply the amendments in ASU
2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Nonpublic business
entities should apply the amendments for fiscal years beginning after December 15, 2019 and interim periods within fiscal years
beginning after December 15, 2020. Entities are required to use a modified retrospective approach for leases that exist or are
entered into after the beginning of the earliest comparative period in the financial statements, with certain practical expedients
available. The impact is not expected to have a material effect on the Company’s financial position or results of operations
since the Company does not have a material amount of lease agreements. The Company is continuing to evaluate the amendments and
will subsequently implement new processes to comply with the ASU. In addition, the Company will change its current accounting practice
to comply with the amendments and such changes as mentioned above.
In June 2016, the FASB issued
ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326) -Measurement of Credit Losses on Financial Instruments."
The provisions of ASU 2016-13 were issued to provide financial statement users with more decision-useful information about the
expected credit losses on financial instruments that are not accounted for at fair value through net income, including loans held
for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to
extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires that financial assets measured at amortized
cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the
amortized cost basis. The amendments in ASU 2016-13 eliminate the probable incurred loss recognition in current GAAP and reflect
an entity's current estimate of all expected credit losses. The measurement of expected credit losses is based upon historical
experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the financial assets.
For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments are effective for fiscal
years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities,
the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal
years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods
within fiscal years beginning after December 15, 2021. Early adoption is permitted for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2018. The Company continues to evaluate the impact of these amendments to the
Company’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact
of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The Allowance for Loan
Losses (ALL) estimate is material to the Company and given the change from an incurred loss model to a methodology that considers
the credit loss over the life of the loan,
Eagle Financial Bancorp, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2019 (Unaudited) and December
31, 2018
Three Months and Six Months Ended June
30, 2019 and 2018 (Unaudited)
(Amounts in thousands, except share and
per share data)
there is the potential for an
increase in the ALL at the adoption date. The Company is anticipating a significant change in processes and procedures to calculate
the ALL, including changes in assumptions and estimates to consider the expected credit losses over the life of the loan versus
the current accounting practice that utilizes the incurred loss model. In addition, the current accounting policy and procedures
for the other-than temporary impairment on available-for-sale securities will be replaced with an allowance approach. The Company
has continued developing processes during the second quarter of 2019. Management continues to focus its attention on collecting
historical loan loss data, loan level data, and evaluating data capabilities to ensure it is fully compliant with the amendments
at adoption date. For additional information on the allowance for loan losses, see Note 3.
In August 2016, the FASB issued
ASU No. 2016-15 "Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments." ASU
2016-15 provides cash flow statement classification guidance for certain transactions including how the predominance principle
should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The amendments are effective
for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.
For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within
fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company
has assessed ASU 2016-15 and does not expect a significant impact on its accounting and disclosures.
In November 2016, the FASB issued ASU No. 2016-18
"Statement of Cash Flows (Topic 230) – Restricted Cash." ASU 2016-18 provides amendments to cash flow statement
classification and presentation to explain the change during the period in the total of cash, cash equivalents, and amounts generally
described as restricted cash or restricted cash equivalents. The amendments are effective for public business entities for fiscal
years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December
15, 2019. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective
transition method to each period presented. The Company has assessed ASU 2016-18 and does not expect a significant impact on its
accounting and disclosures.