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, 2020.~~June 30, 2021.

OR

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

	For the transition period from to .

Commission file number: ~~001‑39182~~001-39182

FFBW, INC.

(Exact name of registrant as specified in its charter)

Maryland		37-1962248
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1360 South Moorland Road		53005
Brookfield, Wisconsin
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: ~~(262) 542‑4448~~(262) 542-4448

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common ~~stock,~~Stock, par value $0.01 per share	FFBW	The NASDAQ Stock Market, LLC
~~(Title of each class to be registered)~~	~~(Name of each exchange on which~~ ~~each class is to be registered)~~

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

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 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule ~~12b‑2~~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 in Rule ~~12b‑2~~12b-2 of the Act). YES ☐ NO ☒

As of ~~May 8, 2020,~~August 4, 2021, there were ~~7,704,875~~6,986,843 issued and outstanding shares of the Registrant’s Common Stock.

Table of Contents

FFBW, Inc.

Form ~~10‑Q~~10-Q

~~Index~~

Index


		Page
Part I. Financial Information		3

Item 1.	Financial Statements	3


	Balance Sheets as of ~~March 31, 2020~~June 30, 2021 (unaudited) and December 31, ~~2019~~2020	3


	Statements of Income for the Three and Six Months Ended ~~March 31,~~June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	4


	Statements of Comprehensive Income ~~(Loss)~~ for the Three and Six Months Ended ~~March 31,~~June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	5


	Statements of Changes in Equity for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	6


	Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	7


	Notes to Financial Statements (unaudited)	8

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

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38 41

Item 4.	Controls and Procedures	38 41

Part II. Other Information		39 42

Item 1.	Legal Proceedings	39 42

Item 1A.	Risk Factors	39 42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39 42

Item 3.	Defaults upon Senior Securities	39 43

Item 4.	Mine Safety Disclosures	39 43

Item 5.	Other Information	39 43

Item 6.	Exhibits	40
		44

	Signature Page	41 45

Table of Contents

Part I. – Financial Information

Item 1. Financial Statements

FFBW, Inc.

Balance Sheets

~~March 31, 2020~~June 30, 2021 (Unaudited) and December 31, ~~2019~~2020

(In thousands, except share data)

March 31,

December 31,

2020

2019
Assets

Cash and due from banks

$
11,018

$
4,101
Fed funds sold

3,839

35,276
Cash and cash equivalents

14,857

39,377
Available for sale securities, stated at fair value

55,063

48,179
Loans held for sale

543

200
Loans, net of allowance for loan and lease losses of $2,307 and $2,264, respectively

192,916

189,291
Premises and equipment, net

4,744

4,807
Foreclosed assets

347

84
Other equity investments

780

780
Accrued interest receivable

816

725
Cash value of life insurance

7,117

7,068
Other assets

797

1,707
TOTAL ASSETS

$
277,980

$
292,218

Liabilities and Equity





Deposits

$
163,394

$
217,252
Advance payments by borrowers for taxes and insurance

380

46
FHLB advances

11,500

11,500
Accrued interest payable

259

51
Other liabilities

1,439

1,499
Total liabilities

$
176,972

$
230,348
Preferred stock ($0.01 par value, 1,000,000 authorized, no shares issued or outstanding as of  December 31, 2019 and 2018, respectively)

$
—

$
—
Common stock ($0.01 par value, 19,000,000 shares authorized, 7,704,875 and 7,867,008 shares issued, 7,704,875 and 7,702,478 shares outstanding as of March 31, 2020 and December 31, 2019, respectively)

77

67
Additional paid in capital

68,943

28,672
Unallocated common stock of Employee Stock Ownership Plan ("ESOP") (604,100 and 270,192 shares at March 31, 2020 and December 31, 2019, respectively)

(6,041)

(2,303)
Retained earnings

36,958

36,551
Accumulated other comprehensive income (loss), net of income taxes

1,071

344
Less treasury stock, 0 and 164,530 shares at cost, at March 31, 2020 and December 31, 2019, respectively

—

(1,461)
Total equity

$
101,008

$
61,870
TOTAL LIABILITIES AND EQUITY

$
277,980

$
292,218

~~(1)~~

Share and per share amounts related to periods prior to the date of the completion of the Conversion (January 16, 2020) have been restated to give retroactive recognition to the exchange ratio applied to the Conversion (1.1730 to one).


	June 30,		December 31,
	2021		2020
Assets
Cash and due from banks	$	62,033	$	41,454
Fed funds sold		22,387		25
Cash and cash equivalents		84,420		41,479
Available for sale securities, stated at fair value		51,453		64,243
Loans held for sale		473		1,708
Loans, net of allowance for loan and lease losses of $2,424 and $2,811, respectively		197,524		214,723
Premises and equipment, net		5,514		5,594
Foreclosed assets		0		125
Other equity investments		1,279		1,279
Accrued interest receivable		787		995
Cash value of life insurance		9,891		7,272
Other assets		1,262		1,554
TOTAL ASSETS	$	352,603	$	338,972


Liabilities and Equity

Deposits	$	245,179	$	226,498
Advance payments by borrowers for taxes and insurance		742		127
FHLB advances		8,500		7,500
Accrued interest payable		173		17
Other liabilities		1,240		1,565
Total liabilities	$	255,834	$	235,707
Preferred stock ($0.01 par value, 50,000,000 authorized, 0 shares issued or outstanding as of June 30, 2021 and December 31, 2020, respectively)	$	0	$	0
Common stock ($0.01 par value, 100,000,000 authorized, 7,034,033 and 7,695,214 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)		70		77
Additional paid in capital		61,690		69,090
Unallocated common stock of Employee Stock Ownership Plan ("ESOP") (565,799 and 581,093 shares at June 30, 2021 and December 31, 2020, respectively)		(5,659)		(5,811)
Retained earnings		39,504		38,382
Accumulated other comprehensive income (loss), net of income taxes		1,164		1,527
Total equity	$	96,769	$	103,265
TOTAL LIABILITIES AND EQUITY	$	352,603	$	338,972

~~See accompanying notes to financial statements.~~

~~Table of Contents~~

~~FFBW, Inc.~~

~~Statements of Income~~

~~Three Months Ended March 31, 2020 and 2019 (Unaudited)~~

~~(In thousands, except per share data)~~

Three months ended


March 31,

2020

2019

Interest and dividend income:





Loans, including fees

$
2,435

$
2,448

Securities



Taxable

284

275

Tax-exempt

4

2

Other

84

25

Total interest and dividend income

2,807

2,750

Interest Expense:





Interest-bearing deposits

483

599

Borrowed funds

61

88

Total interest expense

544

687

Net interest income

2,263

2,063

Provision for loan losses

40

70

Net interest income after provision for loan losses

2,223

1,993

Noninterest income:





Service charges and other fees

55

35

Net gain on sale of loans

35

41

Net loss on sale of securities

—

(8)

Increase in cash surrender value of insurance

49

47

Other noninterest income

24

25

Total noninterest income

163

140

Noninterest expense:





Salaries and employee benefits

1,132

1,097

Occupancy and equipment

244

242

Data processing

206

175

Technology

60

78

Foreclosed assets, net

(16)

1

Professional fees

108

112

Other noninterest expense

110

103

Total noninterest expense

1,844

1,808

Income before income taxes

542

325

Provision for income taxes

135

76

Net income

$
407

$
249

Earnings per share

Basic

$
0.06

$
0.03

Diluted

$
0.06

$
0.03

See accompanying notes to financial statements.

Table of Contents

FFBW, Inc.

Statements of Income

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

(In thousands, except per share data)


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Interest and dividend income:
Loans, including fees	$	2,598	$	2,505	$	5,470	$	4,940
Securities
Taxable		174		273		413		557
Tax-exempt		48		38		94		42
Other		23		2		32		86

Total interest and dividend income		2,843		2,818		6,009		5,625

Interest expense:
Interest-bearing deposits		248		395		497		878
Borrowed funds		17		48		34		109

Total interest expense		265		443		531		987

Net interest income		2,578		2,375		5,478		4,638
Provision for loan losses		0		215		0		255

Net interest income after provision for loan losses		2,578		2,160		5,478		4,383

Noninterest income:
Service charges and other fees		111		48		227		103
Net gain on sale of loans		59		112		220		147
Net gain on sale of securities		0		15		0		15
Increase in cash surrender value of insurance		65		50		118		99
Other noninterest income		25		75		50		99

Total noninterest income		260		300		615		463

Noninterest expense:
Salaries and employee benefits		1,386		1,023		2,748		2,155
Occupancy and equipment		234		215		526		459
Data processing		258		179		595		385
Technology		63		70		119		130
Foreclosed assets		0		19		1		3
Professional fees		109		243		215		351
Other noninterest expense		232		260		481		370

Total noninterest expense		2,282		2,009		4,685		3,853

Income before income taxes		556		451		1,408		993
Provision for income taxes		104		86		286		221

Net income	$	452	$	365	$	1,122	$	772

Earnings per share
Basic	$	0.07	$	0.05	$	0.17	$	0.11
Diluted	$	0.07	$	0.05	$	0.17	$	0.11

See accompanying notes to financial statements.

Table of Contents

FFBW, Inc.

~~Statement~~Statements of Comprehensive Income (Loss)

Three and Six Months Ended ~~March 31,~~June 30, 2021 and 2020, ~~and 2019,~~ (Unaudited)

(In thousands)

Three months ended

March 31,


2020

2019

Net income

$
407

$
249

Other comprehensive income (loss):





Unrealized holding gains (losses) arising during the period

997

592

Reclassification adjustment for losses realized in net income

—

8

Other comprehensive income (loss) before tax effect

997

600
��
Tax effect of other comprehensive income (loss) items

(270)

(163)

Other comprehensive income (loss), net of tax

727

437

Comprehensive income

$
1,134

$
686


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income	$	452	$	365	$	1,122	$	772
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period		57		618		(516)		1,615
Reclassification adjustment for (gains) losses realized in net income		0		(15)		0		(15)
Other comprehensive income (loss) before tax effect		57		603		(516)		1,600
Tax effect of other comprehensive income (loss) items		(16)		(162)		153		(432)
Other comprehensive income (loss), net of tax		41		441		(363)		1,168
Comprehensive income	$	493	$	806	$	759	$	1,940

See accompanying notes to financial statements.

Table of Contents

FFBW, Inc.

~~Statement~~Statements of Changes in Equity

For the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2021 and 2020, ~~and 2019,~~ (Unaudited)

(In thousands, except share data)

Unallocated



Accumulated



Number

Additional

Common

Other

of

Common

Paid-In

Stock of

Retained

Comprehensive

Treasury

Shares

Stock

Capital

ESOP

Earnings

Income (Loss)

Stock

Total

Balance at December 31, 2018

6,696,742

$
67

$
28,326

$
(2,433)

$
34,995

$
(593)

$
—

$
60,362

Net income

—

—

—

—

249

—

—

249

ESOP shares committed to be released (3,801 shares)

—

—

3

32

—

—

—

35

Stock based compensation expense

—

—

77

—

—

—

—

77

Other comprehensive loss

—

—

—

—

—

437

—

437

Repurchase of common stock

(29,436)

—

—

—

—

—

(319)

(319)

Balance at March 31, 2019

6,667,306

$
67

$
28,406

$
(2,401)

$
35,244

$
(156)

$
(319)

$
60,841

Balance at December 31, 2019

7,702,478

$
67

$
28,672

$
(2,303)

$
36,551

$
344

$
(1,461)

$
61,870

Corporate Reorganization:

Conversion of FFBW, Inc. (net of costs of $1.2 million)

2,397

10

41,561

41,571

Purchase of 341,485 shares of ESOP

(3,814)

(3,814)

Treasury stock retired

(1,461)

1,461

—

Contribution of FFBW, MHC

99

99

Net income

407

407

ESOP shares committed to be released (7,647 shares)

(15)

76

61

Stock based compensation expense

87

87

Other comprehensive income

727

727

Balance at March 31, 2020

7,704,875

$
77

$
68,943

$
(6,041)

$
36,958

$
1,071

$
—

$
101,008


						Unallocated				Accumulated
	Number			Additional		Common				Other
	of	Common		Paid-In		Stock of		Retained		Comprehensive		Treasury
	Shares	Stock		Capital		ESOP		Earnings		Income (Loss)		Stock		Total
Balance at December 31, 2019	7,702,478	$	67	$	28,672	$	(2,303)	$	36,551	$	344	$	(1,461)	$	61,870
Corporate Reorganization:
Conversion of FFBW, Inc. (net of costs of $1.2 million)	2,397		10		41,561		—		—		—		—		41,571
Purchase of 341,485 shares of ESOP	—		—		—		(3,814)		—		—		—		(3,814)
Treasury stock retired	—		—		(1,461)		—		—		—		1,461		—
Contribution of FFBW, MHC	—		—		99		—		—		—		—		99
2020 Activity:
Net income	—		—		—		—		772		—		—		772
ESOP shares committed to be released ( 7,647 shares)	—		—		(24)		152		—		—		—		128
Stock based compensation expense	—		—		178		—		—		—		—		178
Other comprehensive income	—		—		—		—		—		1,168		—		1,168
Balance at June 30, 2020	7,704,875	$	77	$	69,025	$	(5,965)	$	37,323	$	1,512	$	—	$	101,972

Balance at December 31, 2020	7,695,214	$	77	$	69,090	$	(5,811)	$	38,382	$	1,527	$	—	$	103,265
Net income	—		—		—		—		1,122		—		—		1,122
ESOP shares committed to be released (15,294 shares)	—		—		15		152		—		—		—		167
Stock based compensation expense	10,712		—		182		—		—		—		—		182
Repurchase of common stock	(671,893)		(7)		(7,597)		—		—		—		—		(7,604)
Other comprehensive loss	—		—		—		—		—		(363)		—		(363)
Balance at June 30, 2021	7,034,033	$	70	$	61,690	$	(5,659)	$	39,504	$	1,164	$	—	$	96,769

See accompanying notes to financial statements.

Table of Contents

FFBW, Inc.

Statements of Cash Flows

For the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2021 and 2020 ~~and 2019~~ (Unaudited)

(In thousands)

Three months ended

March 31,

2020

2019
Increase (decrease) in cash and cash equivalents:




Cash flows from operating activities:




Net income

$
407

$
249
Adjustments to reconcile net income to net cash provided by operating activities:




Provision for loan losses

40

70
Depreciation

79

84
Net accretion of loan portfolio discount and deposit premium

—

(34)
Net amortization on securities available for sale

81

103
(Gain) loss on sales and impairments of foreclosed assets

(11)

—
Loss on sale of available for sale securities

—

8
Increase in cash surrender value of life insurance

(49)

(47)
ESOP compensation

61

35
Stock based compensation

87

77
Changes in operating assets and liabilities:



Accrued interest receivable

(91)

(88)
Loans held for sale

(343)

679
Other assets

641

99
Accrued interest payable

208

294
Other liabilities

(60)

(24)
Net cash provided by operating activities

$
1,050

$
1,505
Cash flows from investing activities:




Proceeds from sales of available for sale securities

$
—

$
2,133
Maturities, calls, paydowns on available for sale securities

2,655

1,147
Purchases of available for sale securities

(8,624)

(3,209)
Net (increase) decrease in loans

(4,012)

572
Purchases of premises and equipment

(16)

(2)
Proceeds from redemption of FHLB stock

—

130
Proceeds from sale of foreclosed assets

95

—
Cash received in MHC merger

99

—
Net cash provided by (used in) investing activities

$
(9,803)

$
771
Cash flows from financing activities:




Net decrease in deposits

$
(53,858)

$
(2,267)
Net increase in advance payments by borrowers for taxes and insurance

334

375
Repayments of FHLB advances

—

(2,000)
Proceeds from FHLB advances

—

—
Repurchase of common stock

—

(319)
Purchase of shares of ESOP

(3,814)

—
Net proceeds from issuance of common stock

41,571

—
Net cash used in financing activities

$
(15,767)

$
(4,211)
Net increase (decrease) in cash and cash equivalents

$
(24,520)

$
(1,935)
Cash and cash equivalents at beginning

39,377

4,488
Cash and cash equivalents at end

$
14,857

$
2,553

Supplemental Cash Flow Disclosures:




Cash paid for interest

$
336

$
364
Loans transferred to foreclosed assets

347

—


`	Six months ended
	June 30,
	2021		2020
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income	$	1,122	$	772
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		0		255
Depreciation		147		156
Net amortization of loan portfolio discount and deposit premium		223		(32)
Net amortization on securities available for sale		290		194
(Gain) loss on sales and impairments of foreclosed assets		2		(11)
(Gain) loss on sale of available for sale securities		0		(15)
Increase in cash surrender value of life insurance		(118)		(99)
ESOP compensation		167		128
Stock based compensation		182		178
Changes in operating assets and liabilities:
Accrued interest receivable		208		(174)
Loans held for sale		1,235		(1,267)
Other assets		391		590
Accrued interest payable		156		314
Other liabilities		(325)		138
Net cash provided by operating activities	$	3,680	$	1,127
Cash flows from investing activities:
Proceeds from sales of available for sale securities	$	3	$	1,017
Maturities, calls, paydowns on available for sale securities		12,381		6,480
Purchases of available for sale securities		(400)		(16,974)
Net (increase) decrease in loans		17,029		(9,945)
Purchases of premises and equipment		(67)		(37)
Purchase of life insurance		(2,500)		0
Proceeds from sale of foreclosed assets		122		95
Cash received in MHC merger		0		99
Net cash provided by (used in) investing activities	$	26,568	$	(19,265)
Cash flows from financing activities:
Net (increase) decrease in deposits and advance payments	$	19,297	$	(41,390)
Repayments of FHLB advances		(4,000)		(2,000)
Proceeds from FHLB advances		5,000		4,000
Repurchase of common stock		(7,604)		0
Purchase of shares of ESOP		0		(3,814)
Net proceeds from issuance of common stock		0		41,571
Net cash (used in) provided by financing activities	$	12,693	$	(1,633)
Net change in cash and cash equivalents	$	42,941	$	(19,771)
Cash and cash equivalents at beginning		41,479		39,377
Cash and cash equivalents at end	$	84,420	$	19,606

Supplemental Cash Flow Disclosures:
Cash paid for interest	$	375	$	673
Cash paid for income taxes		815		0
Loans transferred to foreclosed assets		0		347

See accompanying notes to financial statements

Table of Contents

FFBW, Inc.

Form 10-Q

Notes to Financial Statements (Unaudited – In thousands, except share data)

NOTE 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of FFBW, Inc. and its wholly-owned subsidiary, First Federal Bank of Wisconsin, (collectively the “Company”) were prepared in accordance with instructions for Form ~~10‑Q~~10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America.

In the opinion of management, all adjustments necessary for a fair presentation of the financial statements have been included. The results of operations for the ~~three~~six month ~~periods~~period ended ~~March 31, 2020~~June 30, 2021 are not necessarily indicative of the results which may be expected for the entire year. These statements should be read in conjunction with the Financial Statements and notes thereto for the year ended December 31, ~~2019~~2020 filed with the U.S. Securities and Exchange Commission (“SEC”) as part of FFBW, Inc.’s Annual Report on Form ~~10‑K~~10-K for the year ended December 31, ~~2019.~~2020.

In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in shareholders’ equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

NOTE 2 - Summary of Significant Accounting Policies

Organization

From October 2017 until January 2020, as discussed below, we operated in a two-tier mutual holding company structure. The predecessor FFBW, Inc. ~~(the~~ “~~Company~~”(“Old FFBW”) was a federal corporation that was the publicly traded stock holding company of First Federal Bank of Wisconsin (the “~~Bank~~”“Bank”). At December 31, 2019, ~~the Company~~Old FFBW had 7,702,478 shares of common stock outstanding, of which 3,436,424 shares, or 44.6%, were owned by the public, including 29,325 shares owned by FFBW Community Foundation, and the remaining 4,266,054 shares were held by FFBW, MHC (the “~~MHC~~”“MHC”), a federally chartered mutual holding company and former parent company of ~~the Company.~~Old FFW.

~~At December 31, 2019, the significant assets of the Company consisted of the capital stock of the Bank.~~ The liabilities of the Company were insignificant. The Company was subject to the financial reporting requirements of the Securities Exchange Act of 1934, as amended. The Company was subject to regulation and examination by the Board of Governors of the Federal Reserve System (“~~the Federal Reserve Board~~”).

~~First Federal~~ Bank ~~of Wisconsin~~ is a community bank headquartered in Waukesha, Wisconsin that provides financial services to individuals and businesses from our offices in Waukesha, Brookfield, and the ~~Bay View neighborhood~~South Side of Milwaukee.

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FFBW, Inc. ~~(“New FFBW”~~(the “Company”), is a Maryland corporation that was organized in September 2019 ~~is a~~to be the successor to Old FFBW and be the savings and loan holding company ~~headquartered in Waukesha, Wisconsin. New FFBW was formed to be~~for the ~~successor to the Company~~Bank upon completion of the second step mutual-to-stock conversion (the “Conversion”) of the MHC. Prior to completion of the Conversion, approximately 55.4% of the shares of common stock of the Company were owned by the MHC. ~~In conjunction with the Conversion, the MHC and the Company merged into New FFBW.~~ The Conversion was completed on January 16, 2020. In the Conversion, ~~New FFBW~~the Company sold 4,268,570 shares of common stock at $10.00 per share, for net proceeds of approximately $37.9 million (including purchase of 341,485 ESOP shares), and issued 3,436,430 shares of common stock in exchange for the shares of Old FFBW common stock ~~of FFBW, Inc. a federal corporation, (“Old FFBW”)~~ owned by ~~stockholders of~~ Old FFBW stockholders, other than ~~FFBW,~~the MHC, as of the effective date of the conversion. As a result of the conversion, ~~FFBW,~~the MHC and Old FFBW ~~have~~ ceased to exist.

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The Conversion was conducted pursuant to the MHC’s Plan of Conversion. The Plan of Conversion provided for the establishment, upon the completion of the Conversion, of special “liquidation accounts” for the benefit of certain depositors of the Bank in an amount equal to the MHC’s ownership interest in the stockholders’ equity of ~~the Company~~Old FFBW as of the date of the latest balance sheet contained in the prospectus plus the MHC’s net assets (excluding its ownership of ~~the Company)~~Old FFBW). Following the completion of the Conversion, the Company and the Bank are not permitted to pay dividends on their capital stock if the ~~shareholders'~~Company’s shareholder’s equity, ~~of New FFBW,~~ or the shareholder's equity of the Bank, would be reduced below the amount of the liquidation accounts. The liquidation accounts will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder's interest in the liquidation accounts. Direct costs of the ~~conversion~~Conversion and public offering, totaling approximately $1.2 million, have been applied against the proceeds from the shares sold in the public offering.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and 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 in the near term relate to the determination of the allowance for loan losses, the fair values of securities, fair value of financial instruments, the valuation of other real estate owned and the valuation of deferred income tax assets.

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 the Company's revenue-generating transactions are not subject to ASC 606, including ~~revenue~~ all interest and dividend income generated from financial instruments. Certain noninterest income items, including loan servicing income, gain on sales of loans, gain on sales of securities, and other noninterest income have been evaluated and were determined to not fall within the scope of ASC 606. Elements of noninterest income that are within the scope of ASC 606, are as follows:

Service charges and other fees - The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Management reviewed the deposit account agreements and determined that the agreements can be terminated at any time by either the Company or the account holder. Transaction fees, such as balance transfers, wires and overdraft charges are settled the day the performance obligation is satisfied. The Company's monthly service charges and maintenance fees are for services provided to the customer on a monthly basis and are considered a series of services that have the same pattern of transfer each month. The review of service charges assessed on deposit accounts included the amount of variable consideration that is a part of the monthly charges. It was found that the waiver of service charges due to insufficient funds and dormant account fees is immaterial and would not require a change in

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the accounting treatment for these fees under the new revenue standards. ~~Recognition of revenue under ASC 606 did not materially change the timing or magnitude of revenue recognition.~~

Interchange fees - Customers use a Bank-issued debit card to purchase goods and services, and the Company earns interchange fees on those transactions, typically a percentage of the sale amount of the transaction. The Company records the amount due when it receives the settlement from the payment network. Payments from the payment network are received and recorded into income on a daily basis. These fees are included in “service charges and other fees” on the Consolidated Statements of Operations. There are no contingent debit card interchange fees recorded by the Company that could be subject to a clawback in future periods. ~~Recognition~~

Table of ~~revenue under ASC 606 did not materially change the timing or magnitude of revenue recognition.~~Contents

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and balances due from banks, non-maturity deposits in the Federal Home Loan Bank of Chicago (FHLB), and fed funds sold. The Company has not experienced any losses in such accounts.

Available for Sale Securities

Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital requirements, and other similar factors. Securities classified as available for sale are carried at fair value. Unrealized gains or losses are reported as increases or decreases in other comprehensive income, net of the related deferred tax effect. Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings. Gains and losses on the sale of securities are recorded on the trade date and determined using the specific-identification method.

Declines in fair value of securities that are deemed to be other than temporary, if applicable, are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient enough to allow for any anticipated recovery in fair value.

Loans Acquired in a Transfer

The Company acquires loans (including debt securities) individually and in groups or portfolios. These loans are initially measured at fair value with no allowance for loan losses. The Company’s allowance for loan losses on all acquired loans reflect only those losses incurred subsequent to acquisition.

Certain acquired loans may have experienced deterioration of credit quality between origination and the Company’s acquisition of the loans. At acquisition, the Company reviews each loan to determine whether there is evidence of deterioration of credit quality since origination and if it is probable that the Company will be unable to collect all amounts due according to the loan’s contractual terms. If both conditions exist, the Company determines whether each such loan is to be accounted for individually or whether such loans will be assembled into pools of loans based on common risk characteristics (for example, credit score, loan type, and date of origination). The Company considers expected prepayments and estimates the amount and timing of undiscounted principal, interest, and other cash flows expected at acquisition for each loan and aggregated pool of loans. The excess of the loan’s or pool’s scheduled contractual principal and interest payments over all cash flows expected at acquisition is calculated as the nonaccretable difference. The excess of cash flows expected to be collected over the fair value of each loan or pool (accretable yield) is accreted into interest income over the remaining life of the loan or pool.

At each reporting date, the Company continues to estimate cash flows expected to be collected for each loan or pool. If expected cash flows have decreased from the acquisition date estimate, the Company recognizes an allowance for loan

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losses. If expected cash flows have increased from the acquisition date estimate, the Company increases the amount of accretable yield to be recognized as interest income over the remaining life of the loan or pool.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Mortgage loans held for sale are sold with the mortgage servicing rights released by the Company. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loan sold.

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Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances adjusted for deferred loan fees and costs, charge-offs, and an allowance for loan losses. Interest on loans is accrued and credited to income based on the unpaid principal balance. Loan-origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication that the borrower may be unable to make payments as they become due. When loans are placed on nonaccrual status or charged off, all unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is maintained at the level considered adequate by management to provide for losses that are probable as of the balance sheet date. The allowance for loan losses is established through a provision for loan losses charged to expense as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. In determining the adequacy of the allowance balance, the Company makes evaluations of the loan portfolio and related off-balance sheet commitments, considers current economic conditions and historical loss experience, and reviews specific problem loans and other factors.

When establishing the allowance for loan losses, management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment. These risk categories and their relevant risk characteristics are as follows:

Commercial development: These loans are secured by vacant land and/or property that are in the process of improvement. Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user. Construction loans include not only construction of new structures, but loans originated to finance additions to or alterations of existing structures. Until a permanent loan originates, or payoff occurs, all commercial construction loans secured by real estate are reported in this loan pool. Development loans also have the risk that improvements will not be completed on time, or in accordance with specifications and projected costs.

Commercial real estate: These loans are primarily secured by office and industrial buildings, warehouses, small retail shopping facilities, and various special purpose properties, including restaurants. These loans are subject to underwriting standards and processes similar to commercial and industrial loans. Loans to closely held businesses are generally guaranteed in full by the owners of the business. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property. The cash flows of the borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to the general economic factors or conditions specific to the real estate market, such as geographic location and/or purpose type.

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Commercial and industrial: Commercial and industrial loans are extended primarily to small and middle market customers. Such credits typically comprise working capital loans, asset acquisition loans, and loans for other business purposes. Loans to closely held businesses are generally guaranteed in full by the owners of the business. Commercial and industrial loans are made based primarily on the historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of the borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to economic or individual performance factors. Minimum standards and underwriting guidelines have been established for commercial and industrial loans.

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One-to-four family owner-occupied: These loans are generally to individuals and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations, the underlying collateral, and the loan to collateral value. Also included in this category are junior liens on one-to-four family residential properties. Underwriting standards for one-to-four family owner-occupied loans are heavily influenced by statutory requirements, which include, but are not limited to, loan-to-value and affordability ratios, risk-based pricing strategies, and documentation requirements.

One-to-four family investor-owned: These loans may be to individuals or businesses and are subject to underwriting standards and processes similar to commercial and industrial loans. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property(ies). The cash flows of the borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to the general economic factors or conditions specific to the real estate market, such as geographic location and/or purpose type.

Multifamily real estate: These loans include loans to finance non-farm properties with five or more units in structures primarily to accommodate households. Such credits are typically originated to finance the acquisition or refinancing of an apartment building. These loans are subject to underwriting standards and processes similar to commercial and industrial loans. Loans to closely held businesses are generally guaranteed in full by the owners of the business. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the subject multifamily property, with assumptions made for vacancy rates. Cash flows of the borrowers rely on the receipt of rental income from the tenants of the property who are themselves subject to fluctuations in national and local economic conditions and unemployment trends.

Consumer: These loans may take the form of installment loans, demand loans, or single payment loans, and are extended to individuals for household, family, and other personal expenditures. These loans generally include direct consumer automobile loans and credit card loans. These loans are generally smaller in size and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations.

Management regularly evaluates the allowance for loan losses using the Company’s past loan loss experience, known and inherent risks in the loan portfolio, composition of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, current economic conditions, and other relevant factors. This evaluation is inherently subjective since it requires material estimates that may be susceptible to significant change.

A loan is impaired when, based on current information, it is probable that the Company will not collect all amounts due in accordance with the contractual terms of the loan agreement. Management determines whether a loan is impaired on a case-by-case basis, taking into consideration the payment status, collateral value, length and reason of any payment delays, the borrower’s prior payment record, and any other relevant factors. Large groups of smaller-balance homogeneous loans, such as residential mortgage and consumer loans, are collectively evaluated in the allowance for loan losses analysis and are not subject to impairment analysis unless such loans have been subject to a restructuring agreement. Specific allowances for impaired loans are based on discounted cash flows of expected future payments using the loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent.

In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require the Company to make additions to the allowance for loan losses based on their judgments of collectability based on information available to them at the time of their examination.

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Troubled Debt Restructurings

Loans are accounted for as troubled debt restructurings when a borrower is experiencing financial difficulties that lead to a restructuring of the loan and the Company grants a “concession” to the borrower that they would not otherwise consider. These concessions include a modification of terms, such as a reduction of the stated interest rate or loan balance, a reduction of accrued interest, an extension of the maturity date at an interest rate lower than a current market rate for a new loan with similar risk, or some combination thereof to facilitate repayment. Troubled debt restructurings are considered impaired loans.

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Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value, less costs to sell, at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Provisions for depreciation are computed on straight-line and accelerated methods over the estimated useful lives of the assets.

Other Equity Investments

Other Equity Investments consist of Federal Home Loan Bank of Chicago (“FHLB”) stock and Bankers’ Bank stock. TheCompany'sinvestmentintheFHLB stockiscarriedatcost,whichapproximatesfairvalue. The Company is required to hold the stock as a member of the FHLB and transfer of the stock is substantially restricted. The stock is evaluated for impairment on an annual basis. The Company is required to adjust its reported value of Bankers’ Bank stock, which is considered an equity security without a readily determinable market value, if a comparable transaction is observed.

Income Taxes

Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

As changes in tax laws or rates are enacted, deferred income tax assets and liabilities are adjusted through the provision for income taxes. The differences relate principally to the allowances for loan losses, deferred compensation, depreciation, FHLB stock dividends and non-accrual interest. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Based on its evaluation, the Company has concluded that there are no0 significant uncertain tax positions requiring recognition in its financial statements.

The Company’s policy is to recognize interest and penalties related to income tax issues as components of income tax expense. During the periods shown, the Company did not recognize any interest or penalties related to income tax expense in its statements of operations.

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Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

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Advertising

Advertising costs are expensed as incurred.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) is shown on the statements of comprehensive income. The Company’s accumulated other comprehensive income (loss) is composed of the unrealized gains (losses) on securities available for sale, net of tax and is shown on the statements of changes in equity. Reclassification adjustments out of other comprehensive income (loss) for losses realized on sales of securities available for sale comprise the entire balance of “net ~~loss~~gain on sale of securities” on the statements of operations.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, unfunded commitments under lines of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.

Life Insurance

The Company has purchased life insurance policies on certain key ~~executives.~~members of the management team. Life insurance is measured at the amount that could be realized under the insurance contract as of the balance sheet date, which is generally the cash surrender value of the policy.

Subsequent Events

Subsequent events have been evaluated through ~~May 8, 2020,~~August 6, 2021, which is the date the financial statements are available to be issued.

The outbreak of Coronavirus Disease 2019 (“COVID-19”) could adversely impact a broad range of industries in which the Company’s customers operate and impair their ability to fulfill their obligations to the Company. The World Health Organization has declared Covid-19 to be a global pandemic indicating that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections.

The spread of the outbreak will likely cause disruptions in the U.S. economy and is highly likely to disrupt banking and other financial activity in the areas in which the Company operates and could potentially create widespread business continuity issues for the Company.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions. If the global response to contain COVID-19 escalates or is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows.

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Recent Accounting Pronouncements

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Company is an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies. An emerging growth company may elect 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, but must make such election when the Company is first required to file a registration statement. The Company has elected to use the extended transition period described above and intends to maintain its emerging growth company status as allowed under the JOBS Act.

The ~~Company recently adopted the following Accounting Standards Updates (ASU) issued by the Financial Accounting Standards Board (FASB).~~

~~ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”~~

This ASU modifies the disclosure requirements on fair value measurements in Topic 820, including the removal, modification to, and addition of certain disclosure requirements. This ASU will be effective for fiscal years beginning after December 15, 2019 with early adoption permitted. The majority of the disclosure changes are to be applied on a prospective basis. Although this ASU has a significant impact to the Company’s fair value disclosures, there is no additional impact to the financial statements.

~~The~~ following ASUs have been issued by the FASB and may impact the Company's financial statements in future reporting periods:

ASU No. 2016-13, “Credit Losses (Topic 326).”

ASU No. 2019-04, “Codification Improvements to Topic 326.”

ASU No. 2019-05, “Financial Instruments-Credit Losses.”

ASU 2016-13 requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently assessing the impact of adopting ASU 2016-13 on its financial statements.

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ASU No. 2016-02, “Leases (Topic 842): Amendments to the Leases Analysis.”

ASU No. 2018-10, "Codification Improvements to Topic 842."

ASU No. 2018-11, "Targeted Improvements"

For lessees, Topic 842 requires leases to be recognized on the balance sheet, along with disclosure of key information about leasing arrangements. Topic 842 was subsequently amended by ASU 2018-01, 2018-10 and 2018-11. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification expense recognition in the income statement.

For lessors, Topic 842 requires lessors to classify leases as sales-type, direct financing or operating leases. A lease is a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee and a third party, the lease is a direct financing lease. All leases that are not sales-type or direct financing leases are operating leases.

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The new standard is effective for the Company on January 1, ~~2021,~~2022, with early adoption permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) the new standard's effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company expects to adopt the new standard on January 1, ~~2021~~2022 using the effective date as its date of initial application. The Company is evaluating what impact this standard will have on its consolidated financial statements.

NOTE 3 – Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding, adjusted for weighted average unallocated ESOP shares, during the applicable period, excluding outstanding participating securities. Participating securities include non-vested restricted stock awards and restricted stock units, though no actual shares of common stock related to restricted stock units are issued until the settlement of such units, to the extent holders of these securities receive non-forfeitable dividends or dividend equivalents at the same rate as holders of the Company’s common stock. Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. Antidilutive options are disregarded in earnings per share calculations.

The following table presents the earnings per share calculations for the three and six months ended ~~March 31:~~June 30:


	March 31,
	2020		2019

					Three months ended				Six months ended
					June 30,				June 30,
					2021		2020		2021		2020
Net income	$	407	$	249	$	452	$	365	$	1,122	$	772
Basic potential common shares
Weighted average shares outstanding		7,704,875		7,850,247		7,141,848		7,704,875		7,319,258		7,704,875
Weighted average unallocated Employee Stock Ownership Plan Shares		(607,924)		(284,085)		(568,414)		(599,002)		(573,512)		(604,100)
Basic weighted average shares outstanding		7,096,951		7,566,162		6,573,434		7,105,873		6,745,746		7,100,775
Dilutive potential common shares		—		258		15,809		0		13,128		0
Dilutive weighted average shares outstanding		7,096,951		7,566,420		6,589,243		7,105,873		6,758,874		7,100,775


Basic earnings per share	$	0.06	$	0.03	$	0.07	$	0.05	$	0.17	$	0.11
Diluted earnings per share	$	0.06	$	0.03	$	0.07	$	0.05	$	0.17	$	0.11

1615

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NOTE 4 – Available for Sale Securities

Amortized costs and fair values of available for sale securities are summarized as follows:


			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
March 31, 2020

											Gross		Gross		Estimated
									Amortized		Unrealized		Unrealized		Fair
									Cost		Gains		Losses		Value
June 30, 2021
Obligations of the US government and US government sponsored agencies	$	866	$	22	$	—	$	888	$	619	$	$ 32	$	—	$	651
Obligations of states and political subdivisions		10,957		205		(28)		11,134		14,517		476		(44)		14,949
Mortgage-backed securities		39,222		1,312		(60)		40,474		30,265		999		(42)		31,222
Certificates of deposit		750		25		—		775		1,885		39		—		1,924
Corporate debt securities		1,801		10		(19)		1,792		2,575		132		—		2,707
Total available for sale securities	$	53,596	$	1,574	$	(107)	$	55,063	$	49,861	$	1,678	$	(86)	$	51,453

December 31, 2019

December 31, 2020
Obligations of the US government and US government sponsored agencies	$	944	$	14	$	—	$	958	$	717	$	37	$	—	$	754
Obligations of states and political subdivisions		8,590		36		(21)		8,605		15,012		612		(19)		15,605
Mortgage-backed securities		35,095		486		(99)		35,482		36,347		1,361		(28)		37,680
Certificates of deposit		1,000		17		—		1,017		7,880		57		—		7,937
Corporate debt securities		2,080		37		—		2,117		2,179		92		(4)		2,267
Total available for sale securities	$	47,709	$	590	$	(120)	$	48,179	$	62,135	$	2,159	$	(51)	$	64,243

Fair values of securities are estimated based on financial models or prices paid for similar securities. It is possible interest rates could change considerably, resulting in a material change in estimated fair value.

The following table presents the portion of the Company’s portfolio which has gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position:


	Less Than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
March 31, 2020

													Less Than 12 Months				12 Months or More				Total
															Unrealized				Unrealized				Unrealized
													Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
June 30, 2021
Obligations of states and political subdivisions													$	2,614	$	(42)	$	133	$	(2)	$	2,747	$	(44)
Mortgage-backed securities														2,718		(36)		1,202		(6)		3,920		(42)
Total													$	5,332	$	(78)	$	1,335	$	(8)	$	6,667	$	(86)
December 31, 2020
Obligations of states and political subdivisions	$	1,638	$	(27)	$	1,052	$	(1)	$	2,690	$	(28)	$	1,543	$	(19)	$	—	$	—	$	1,543	$	(19)
Mortgage-backed securities		3,982		(53)		683		(7)		4,665		(60)		4,140		(21)		736		(7)		4,876		(28)
Corporate debt securities		1,014		(19)		—		—		1,014		(19)		849		(4)		—		—		849		(4)
Total	$	6,634	$	(99)	$	1,735	$	(8)	$	8,369	$	(107)	$	6,532	$	(44)	$	736	$	(7)	$	7,268	$	(51)
December 31, 2019
Obligations of states and political subdivisions	$	2,569	$	(17)	$	1,059	$	(4)	$	3,628	$	(21)
Mortgage-backed securities		7,604		(57)		4,372		(42)		11,976		(99)
Total	$	10,173	$	(74)	$	5,431	$	(46)	$	15,604	$	(120)

1716

Table of Contents

At ~~March 31, 2020,~~June 30, 2021, the investment portfolio included 85 securities available for sale, which had been in an unrealized loss position for greater than twelve months, and 1610 securities available for sale, which had been in an unrealized loss position for less than twelve months. At December 31, ~~2019,~~2020, the investment portfolio included 144 securities available for sale, which had been in an unrealized loss position for greater than twelve months, and 1813 securities available for sale, which had been in an unrealized loss position for less than twelve months. Because these securities have a fixed interest rate, their fair value is sensitive to movements in market interest rates. These unrealized losses are considered temporary because the Company does not currently have the intent to sell the securities before recovery of the losses; therefore we expect to collect all contractually due amounts from these securities. Accordingly, these investments were reduced to their fair values through accumulated other comprehensive income, not through earnings.

We regularly assess our securities portfolio for ~~OTTI.~~other than temporary impairment (“OTTI”). These assessments are based on the nature of the securities, the underlying collateral, the financial condition of the issuer, the extent and duration of the loss, our intent related to the individual securities, and the likelihood that we will have to sell securities prior to expected recovery. We did ~~not~~0t have any impairment losses recognized in earnings for the three and six months ended ~~March 31, 2020~~June 30, 2021 or ~~March 31, 2019.~~June 30, 2020.

The amortized cost and fair value of available for sale securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities in mortgage-backed securities since the anticipated maturities are not readily determinable. Therefore, these securities are not included in the maturity categories in the following maturity summary listed below:


	March 31, 2020
	Amortized Cost		Fair Value

					June 30, 2021
					Amortized Cost		Fair Value
Due in one year or less	$	1,020	$	1,019	$	1,553	$	1,571
Due after one year through 5 years		2,708		2,731		2,963		3,127
Due after 5 years through 10 years		4,525		4,660		8,860		9,205
Due after 10 years		6,121		6,179		6,220		6,328
Subtotal	$	14,374	$	14,589	$	19,596	$	20,231
Mortgage-backed securities		39,222		40,474		30,265		31,222
Total	$	53,596	$	55,063	$	49,861	$	51,453

Proceeds from ~~sales~~the sale of available for sale securities during the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020 were $3 and ~~2019 were $0 and $2,133,~~$1,017, respectively. Gross realized gains or losses on these sales ~~amounted~~amount to $0 and ~~$0,~~$17, while gross realized losses ~~on these sales~~ were $0 and ~~$8,~~$2, respectively.

Available for sale securities with a carrying value of $1~~,036~~ $1,014 and ~~$999~~$1,036 were pledged at ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, respectively.

1817

Table of Contents

NOTE 5 - Loans

Major classifications of loans are as follows:


	March 31,		December 31,
	2020		2019

					June 30,		December 31,
					2021		2020
Commercial
Development	$	15,765	$	18,222	$	14,302	$	14,090
Real estate		75,046		68,621		87,410		87,605
Commercial and industrial		12,850		13,681		17,048		20,758
Residential real estate and consumer
One-to-four family owner-occupied		29,852		29,380		20,065		30,548
One-to-four family investor-owned		30,021		28,077		26,672		32,638
Multifamily		27,720		29,531		32,041		29,303
Consumer		4,148		4,230		2,750		3,016
Subtotal	$	195,402	$	191,742	$	200,288	$	217,958
Deferred loan fees		(179)		(187)		(340)		(424)
Allowance for loan losses		(2,307)		(2,264)		(2,424)		(2,811)
Net loans	$	192,916	$	189,291	$	197,524	$	214,723

Deposit accounts in an overdraft position and reclassified as loans approximated $2$8 and $6$5 at ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, respectively.

A summary of the activity in the allowance for loan losses by portfolio segment is as follows:


			Residential real
			estate

									Residential real
									estate
Three Months Ended	Commercial		and consumer		Total		Commercial		and consumer		Total
March 31, 2020
Beginning balance	$	1,251	$	1,013	$	2,264

Balance at March 31, 2021							$	1,892	$	921	$	2,813
Provision for loan losses		50		(10)		40		89		(89)		0
Loans charged off		—		—		—		(392)		0		(392)
Recoveries of loans previously charged off		—		3		3		1		2		3
Total ending allowance balance	$	1,301	$	1,006	$	2,307

March 31, 2019
Beginning balance	$	940	$	1,178	$	2,118
Balance at June 30, 2021							$	1,590	$	834	$	2,424


Balance at March 31, 2020							$	1,301	$	1,006	$	2,307
Provision for loan losses		44		26		70		232		(17)		215
Loans charged off		—		—		—		0		0		0
Recoveries of loans previously charged off		—		—		—		19		1		20
Total ending allowance balance	$	984	$	1,204	$	2,188
Balance at June 30, 2020							$	1,552	$	990	$	2,542

1918

Table of Contents


			Residential real
			estate
Six Months Ended	Commercial		and consumer		Total

June 30, 2021
Balance at December 31, 2020	$	1,834	$	977	$	2,811
Provision for loan losses		147		(147)		0
Loans charged off		(392)		0		(392)
Recoveries of loans previously charged off		1		4		5
Total ending allowance balance	$	1,590	$	834	$	2,424


June 30, 2020
Balance at December 31, 2019	$	1,251	$	1,013	$	2,264
Provision for loan losses		282		(27)		255
Loans charged off		0		0		0
Recoveries of loans previously charged off		19		4		23
Total ending allowance balance	$	1,552	$	990	$	2,542

Information about how loans were evaluated for impairment and the related allowance for loan losses follows:


			Residential Real
			Estate and
June 30, 2021	Commercial		Consumer		Total
Loans:
Individually evaluated for impairment	$	307	$	942	$	1,249
Collectively evaluated for impairment		118,453		80,586		199,039
Total loans	$	118,760	$	81,528	$	200,288

Allowance for loan losses:
Individually evaluated for impairment	$	57	$	0	$	57
Collectively evaluated for impairment		1,533		834		2,367
Total allowance for loan losses	$	1,590	$	834	$	2,424


			Residential Real
			Estate and
December 31, 2020	Commercial		Consumer		Total
Loans:
Individually evaluated for impairment	$	792	$	1,228	$	2,020
Collectively evaluated for impairment		121,661		94,277		215,938
Total loans	$	122,453	$	95,505	$	217,958

Allowance for loan losses:
Individually evaluated for impairment	$	450	$	0	$	450
Collectively evaluated for impairment		1,384		977		2,361
Total allowance for loan losses	$	1,834	$	977	$	2,811

Residential real


estate and

March 31, 2020

Commercial

consumer

Total
Loans:







Individually evaluated for impairment

$
781

$
1,784

$
2,565
Collectively evaluated for impairment

102,880

89,957

192,837
Total loans

$
103,661

$
91,741

$
195,402






Allowance for loan losses:






Individually evaluated for impairment

$
142

$
77

$
219
Collectively evaluated for impairment

1,159

929

2,088
Total allowance for loan losses

$
1,301

$
1,006

$
2,307

Table of Contents

Residential real


estate and

December 31, 2019

Commercial

consumer

Total
Loans:







Individually evaluated for impairment

$
798

$
1,457

$
2,255
Collectively evaluated for impairment

99,726

89,761

189,487
Total loans

$
100,524

$
91,218

$
191,742






Allowance for loan losses:






Individually evaluated for impairment

$
158

$
77

$
235
Collectively evaluated for impairment

1,093

936

2,029
Total allowance for loan losses

$
1,251

$
1,013

$
2,264

Information regarding impaired loans follows:


	Principal		Recorded		Related		Average		Interest
As of March 31, 2020	Balance		Investment		Allowance		Investment		Recognized

											Principal		Recorded		Related		Average		Interest
As of June 30, 2021											Balance		Investment		Allowance		Investment		Recognized
Loans with related allowance for loan losses:
Commercial
Commercial and industrial	$	717	$	717	$	142	$	723	$	11	$	553	$	151	$	57	$	352	$	0
Residential real estate and consumer
One-to-four family investor-owned		411		393		77		398		—
Total loans with related allowance for loan losses		1,128		1,110		219		1,121		11		553		151		57		352		0
Loans with no related allowance for loan losses:
Commercial
Commercial and industrial		68		64		—		67		1		45		40		—		42		1
Real estate												117		116		—		116		0
Residential real estate and consumer
One-to-four family owner-occupied		1,093		1,090		—		1,093		11		941		893		—		917		9
One-to-four family investor-owned		242		216		—		218		—
Consumer		98		85		—		87		—		49		49		—		49		0
Total loans with no related allowance for loan losses		1,501		1,455		—		1,465		12		1,152		1,098		—		1,124		10


Total impaired loans	$	2,629	$	2,565	$	219	$	2,586	$	23	$	1,705	$	1,249	$	57	$	1,476	$	10


	Principal		Recorded		Related		Average		Interest
As of December 31, 2020	Balance		Investment		Allowance		Investment		Recognized
Loans with related allowance for loan losses:
Commercial
Commercial and industrial	$	713	$	704	$	450	$	713	$	19
Total loans with related allowance for loan losses		713		704		450		713		19
Loans with no related allowance for loan losses:
Commercial
Commercial and industrial		108		88		—		109		5
Residential real estate and consumer
One-to-four family owner-occupied		1,017		971		—		979		9
One-to-four family investor-owned		242		206		—		242		0
Consumer		52		51		—		54		0
Total loans with no related allowance for loan losses		1,419		1,316		—		1,384		14

Total impaired loans	$	2,132	$	2,020	$	450	$	2,097	$	33

~~Table~~Additional funds of ~~Contents~~

Principal

Recorded

Related

Average

Interest
As of December 31, 2019

Balance

Investment

Allowance

Investment

Recognized
Loans with related allowance for loan losses:











Commercial

Commercial and industrial

$
729

$
729

$
158

$
740

$
19
Residential real estate and consumer










One-to-four family investor-owned

415

403

77

412

—
Total loans with related allowance for loan losses

1,144

1,132

235

1,152

19
Loans with no related allowance for loan losses:

Commercial

Commercial and industrial

73

69

—

77

5
Residential real estate and consumer








  One-to-four family owner-occupied

795

744

—

754

5
One-to-four family investor-owned

243

221

—

231

—
Consumer

114

89

—

98

—
Total loans with no related allowance for loan losses

1,225

1,123

—

1,160

10

Total impaired loans

$
2,369

$
2,255

$
235

$
2,312

$
29

~~There~~$0 and $215 were ~~no additional funds~~ committed to impaired loans as of ~~March~~June 30, 2021 and December 31, 2020, ~~or December 31, 2019.~~respectively.

The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan losses. The credit quality indicators monitored differ depending on the class of loan.

Commercial loans and one-to-four family investor-owned and multifamily loans are generally evaluated using the following internally prepared ratings:

“Pass” ratings are assigned to loans with adequate collateral and debt service ability such that collectability of the contractual loan payments is highly probable.

“Special mention” ratings are assigned to loans where management has some concern that the collateral or debt service ability may not be adequate, though the collectability of the contractual loan payments is still probable.

“Substandard” ratings are assigned to loans that do not have adequate collateral and/or debt service ability such that collectability of the contractual loan payments is no longer probable.

Table of Contents

“Doubtful” ratings are assigned to loans that do not have adequate collateral and/or debt service ability, and collectability of the contractual loan payments is unlikely.

~~Table of Contents~~

Information regarding the credit quality indicators most closely monitored for commercial loans by class follows:


			Special
	Pass		Mention		Substandard		Doubtful		Totals
March 31, 2020

													Special
											Pass		Mention			Substandard		Doubtful		Totals
June 30, 2021
Development	$	15,765	$	—	$	—	$	—	$	15,765	$	14,302	$	0		$	0	$	0	$	14,302
Real estate		74,467		579		—		—		75,046		87,062		0			348		0		87,410
Commercial and industrial		9,985		2,853		12		—		12,850		16,886		6			5		151		17,048
One-to-four family investor-owned		29,334		—		687		—		30,021		26,672		0			0		0		26,672
Multifamily		27,720		—		—		—		27,720		32,041		0			0		0		32,041
Totals	$	157,271	$	3,432	$	699	$	—	$	161,402	$	176,963	$	6		$	353	$	151	$	177,473
December 31, 2019
December 31, 2020
Development	$	18,222	$	—	$	—	$	—	$	18,222	$	14,090	$	0		$	0	$	0	$	14,090
Real estate		68,036		585		—		—		68,621		87,605		0			0		0		87,605
Commercial and industrial		10,888		2,779		14		—		13,681		20,046		0			8		704		20,758
One-to-four family investor-owned		27,453		—		624		—		28,077		32,358		0	��		280		0		32,638
Multifamily		29,531		—		—		—		29,531		29,303		0			0		0		29,303
Totals	$	154,130	$	3,364	$	638	$	—	$	158,132	$	183,402	$	0		$	288	$	704	$	184,394

Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing according to the contractual terms of the loan.

Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class follows:


	Performing		Non-performing		Totals
March 31, 2020

							Performing		Non-performing		Totals
June 30, 2021
One-to-four family owner-occupied	$	29,852	$	—	$	29,852	$	20,001	$	64	$	20,065
Consumer		4,064		84		4,148		2,750		0		2,750
	$	33,916	$	84	$	34,000
December 31, 2019
							$	22,751	$	64	$	22,815
December 31, 2020
One-to-four family owner-occupied	$	28,636	$	744	$	29,380	$	30,548	$	0	$	30,548
Consumer		4,141		89		4,230		3,016		0		3,016
	$	32,777	$	833	$	33,610
							$	33,564	$	0	$	33,564

Loan aging information follows:


			Loans Past Due		Loans Past Due				Nonaccrual
	Current Loans		30-89 Days		90+ Days		Total Loans		Loans
March 31, 2020

													Loans Past Due		Loans Past Due				Nonaccrual
											Current Loans		30-89 Days		90+ Days		Total Loans		Loans
June 30, 2021
Commercial
Development	$	15,765	$	—	$	—	$	15,765	$	—	$	14,302	$	0	$	0	$	14,302	$	0
Real estate		75,046		—		—		75,046		—		87,410		0		0		87,410		116
Commercial and industrial		12,850		—		—		12,850		12		16,891		0		157		17,048		157
Residential real estate and consumer
One-to-four family owner-occupied		29,683		169		—		29,852		—		20,065		0		0		20,065		64
One-to-four family investor-owned		29,934		87		—		30,021		610		26,672		0		0		26,672		0
Multifamily		27,720		—		—		27,720		—		32,041		0		0		32,041		0
Consumer		4,093		55		—		4,148		84		2,750		0		0		2,750		0
Total	$	195,091	$	311	$	—	$	195,402	$	706	$	200,131	$	0	$	157	$	200,288	$	337

2221

Table of Contents

Loans Past Due

Loans Past Due

Nonaccrual


Current Loans

30-89 Days

90+ Days

Total Loans

Loans
December 31, 2019










Commercial










Development

$
18,222

$
—

$
—

$
18,222

$
—
Real estate

68,621

—

—

68,621

—
Commercial and industrial

13,681

—

—

13,681

14
Residential real estate and consumer








One-to-four family owner-occupied

29,034

—

346

29,380

346
One-to-four family investor-owned

28,077

—

—

28,077

624
Multifamily

29,531

—

—

29,531

—
Consumer

4,230

—

—

4,230

86
Total

$
191,396

$
—

$
346

$
191,742

$
1,070


			Loans Past Due		Loans Past Due				Nonaccrual
	Current Loans		30-89 Days		90+ Days		Total Loans		Loans
December 31, 2020
Commercial
Development	$	14,090	$	0	$	0	$	14,090	$	0
Real estate		87,040		565		0		87,605		0
Commercial and industrial		20,054		704		0		20,758		792
Residential real estate and consumer
One-to-four family owner-occupied		30,347		201		0		30,548		69
One-to-four family investor-owned		32,638		0		0		32,638		206
Multifamily		29,303		0		0		29,303		0
Consumer		3,016		0		0		3,016		0
Total	$	216,488	$	1,470	$	0	$	217,958	$	1,067

There are no0 loans 90 or more days past due and accruing interest as of ~~March 31, 2020~~June 30, 2021 or December 31, ~~2019.~~2020.

When, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that the Company would not otherwise consider, the modified loan is classified as a troubled ~~debt-restructuring.~~debt restructuring. Loan modifications may consist of forgiveness of interest and/or principal, a reduction of the interest rate, allowing interest-only payments for a period of time, and/or extending amortization terms. During the ~~three~~six months ended and as of ~~March 31, 2020,~~June 30, 2021, there was 1 commercial real estate loan totaling $116 and 1 1-4 family owner-occupied loan totaling $115 that were no new troubled debt restructurings. NoNaN troubled debt restructurings defaulted within 12 months of their modification date during the ~~three~~six months ended ~~March 31, 2020.~~June 30, 2021. During the year ended and as of December 31, ~~2019,~~2020, there were two commercial and industrial loans totaling $729 and three one-to-four family owner-occupied loans totaling $285 that were restructured. $0 was charged to the allowance for loan losses related to these loans. No0 new troubled debt restructurings. NaN troubled debt restructurings defaulted within 12 months of their modifications during the year ended December 31, ~~2019.~~ 2020.

During April 2020, the Coronavirus Aid, Relief and Economic Security Act (“Cares Act”) was signed into law which provides optional, temporary relief from accounting for certain pandemic-related loan modifications as a TDR. During 2020, the Bank offered payment deferrals to loan customers that were excluded from TDR classification based on the Cares Act. There were 0 loans remaining on a modified status as of June 30, 2021.

Management ~~regularly~~regularly monitors impaired loan relationships. In the event facts and circumstances change, an additional provision for loan losses may be necessary.

NOTE 6 - Deposits

The composition of deposits are as follows:


	March 31,		December 31,
	2020		2019

Non-interest bearing checking	$	20,519	$	20,733
Interest bearing checking		7,154		6,941

					June 30,		December 31,
					2021		2020

Non interest-bearing checking					$	52,965	$	51,802
Interest-bearing checking						10,489		10,899
Money market		48,238		46,673		81,312		70,455
Statement savings accounts		14,204		12,359		33,865		31,977
Health savings accounts		10,745		10,670		10,893		10,854
Deposits held in escrow for stock subscriptions		—		52,648
Certificates of deposit		62,534		67,228		55,655		50,511
Total	$	163,394	$	217,252	$	245,179	$	226,498

Certificates of deposit that meet or exceed the FDIC insurance limit of $250 totaled ~~$20,673~~$10,548 and ~~$21,5~~69$9,485 at ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, respectively.

2322

Table of Contents

The scheduled maturities of certificates of deposit are as follows as of ~~March 31, 2020:~~June 30, 2021:


2020	$	34,436

2021		23,241	$	19,931
2022		2,733		28,334
2023		1,041		5,463
2024		1,025		1,319
2025		58		407

2026				201
Total	$	62,534	$	55,655

NOTE 7– FHLB Advances

FHLB advances consist of the following:


	March 31, 2020			December 31, 2019
	Rates	Amount		Rates	Amount


							June 30, 2021			December 31, 2020
							Rates	Amount		Rates	Amount

Fixed rate, fixed term advances	1.62% - 2.70%	$	7,500	1.62% - 2.70%	$	7,500	0.0%-1.71%	$	6,500	0.0%-1.71%	$	5,500
Fixed term advances with floating spread	0.84% - 2.02%		4,000	1.69% - 2.09%		4,000	2.10%		2,000	2.10%		2,000

		$	11,500		$	11,500

								$	8,500		$	7,500

The following is a summary of scheduled maturities of fixed term FHLB advances as of ~~March 31, 2020:~~June 30, 2021:


	Fixed Rate Advances				Adjustable Rate Advances
	Weighted				Weighted				Total
	Average Rate		Amount		Average Rate		Amount		Amount
2020	2.34	%	$	6,000	0.84	%	$	2,000	$	8,000

											Fixed Rate Advances				Adjustable Rate Advances
											Weighted				Weighted				Total
											Average Rate		Amount		Average Rate		Amount		Amount

2021	—	%		—	2.02	%		2,000		2,000			$	0	2.10	%	$	2,000	$	2,000
2022	1.71	%		1,500	—	%		—		1,500	0.39	%		6,500	0			0		6,500


Total	2.21	%	$	7,500	1.43	%	$	4,000	$	11,500	0.39	%	$	6,500	2.10	%	$	2,000	$	8,500

Actual maturities may differ from the scheduled principal maturities due to call options on the various advances.

The Company has a master contract agreement with the FHLB that provides for a borrowing up to the lesser of a determined multiple of FHLB stock owned or a determined percentage of the book value of the Company’s qualifying one-to-four family, multifamily, ~~and~~ commercial real estate and commercial business loans. The Company pledged approximately ~~$134,181~~$148,138 and ~~$147,039~~$149,304 of one-to-four family, multifamily, ~~and~~ commercial real estate and commercial business loans to secure FHLB advances at ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, respectively. FHLB provides both fixed and floating rate advances. Floating rates are tied to short-term market rates of interest, such as ~~LIBOR,~~ Federal funds, FHLB discount note or ~~Treasury Bill~~prime rates. Fixed rate advances are priced in reference to market rates of interest at the time of the advance, namely the rates that FHLB pays to borrowers at various maturities. FHLB advances are subject to a prepayment penalty if they are repaid prior to maturity. FHLB advances are also secured by ~~$574 and $574~~$851 of FHLB stock owned by the Company at ~~March 31, 2020~~both June 30, 2021 and December 31, ~~2019, respectively.~~2020.

At ~~March 31, 2020,~~June 30, 2021, the Company’s available and unused portion of this borrowing agreement based on the amount of FHLB stock was ~~$3,194.~~$14,014.

In addition, the Company has a $7,000 federal funds line of credit through Bankers’ Bank of Wisconsin, which was not drawn on as of ~~March 31, 2020.~~June 30, 2021. The Company also has the authority to borrow through the Federal Reserve’s Discount Window.

2423

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NOTE 8 – Employee Stock Ownership Plan

The Company maintains a leveraged employee stock ownership plan (“ESOP”) that covers substantially all employees. The ESOP was established in conjunction with ~~the Company’s~~Old FFBW’s initial stock offering completed in October 2017 and operates on a plan year ending December 31. The loan to fund the acquisition of stock by the ESOP was made by ~~the Company.~~Old FFBW. Additional shares were purchased by the ESOP in conjunction with the Company’s stock offering completed in January 2020, which was ~~also~~ financed by a loan from the ~~Bank.~~Company. The Bank makes annual contributions to the ESOP equal to the ESOP’s debt service. The ESOP shares initially were pledged as collateral for this debt. As the debt is repaid, shares are released from collateral and allocated to active participants, based on the proportion of debt service paid in the year. Because the debt is intercompany, it is eliminated in consolidation for presentation in these financial statements. The shares pledged as collateral are reported as unearned ESOP shares in the balance sheet.

As shares are committed to be released from collateral and allocated to active participants, the Company reports compensation expense equal to the current market price of the shares and the shares will become outstanding for earnings-per-shares (EPS) computations. During the ~~periods~~quarters ended ~~March 31,~~June 30, 2021 and 2020, 15,294 and ~~2019, 7,647 and 3,801~~15,294 shares were committed to be released, respectively. During the ~~three~~six months ended ~~March 31,~~June 30, 2021 the average fair value per share of stock was $11.00 resulting in total ESOP compensation expense of $167 for the six months ended June 30, 2021. During the six months ended June 30, 2020 the average fair value per share of stock was ~~$10.15~~$8.80 resulting in total ESOP compensation expense of ~~$61~~$128 for the ~~three~~six months ended ~~March 31,~~June 30, 2020. ~~During the three months ended March 31, 2019 the average fair value per share of stock was $10.66 resulting in total ESOP compensation expense of $~~35 ~~for the three months ended March 31, 2019.~~

The ESOP shares as of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019~~2020 were as follows:


	March 31, 2020		December 31, 2019

					June 30, 2021		December 31, 2020
Shares allocated to active participants		32,406		15,907		62,305		33,861
Shares committed to be released and allocated to participants		7,647		12,960		15,294		30,584
Shares distributed						0		(2,140)
Total unallocated shares		604,100		230,343		565,799		581,093
Total ESOP shares		644,153		259,210		643,398		643,398
Fair value of unallocated shares (based on $7.89 and $11.55 share price at March 31, 2020 and December 31, 2019, respectively)	$	4,766	$	2,660
Fair value of unallocated shares (based on $11.25 and $10.02 share price at June 30, 2021 and December 31, 2020, respectively)					$	6,365	$	5,823

NOTE 9 - Share-based Compensation Plans

The Company adopted the FFBW, Inc. 2018 Equity Incentive Plan ~~(the “2018~~in 2018. In May 2021 the Company adopted the FFBW, Inc. 2021 Equity Incentive ~~Plan”) in 2018.~~Plan. ASC Topic 718 requires that the grant date fair value of equity awards to employees and directors be recognized as compensation expense over the period during which they are required to provide service in exchange for such awards.

The following table summarizes the impact of the Company’s share-based payment plans in the financial statements for the period shown:


	Three Months Ended
	March 31,
	2020		2019

					Six Months Ended
					June 30,
					2021		2020
Total cost of stock grant plan during the year	$	50	$	45	$	102	$	102
Total cost of stock option plan during the year		37		32		80		76
Total cost of share-based payment plans during the year	$	87	$	77	$	182	$	178


Amount of related income tax benefit recognized in income	$	23	$	21	$	43	$	48

Options are granted with an exercise price equal to no less than the market price of the Company’s shares at the date of grant: those option awards generally vest pro-rata over five years of service and have ~~10‑year~~10-year contractual terms. Restricted shares typically vest pro-rata over a five year period, 20% per year beginning one year from the issuance date. Under the FFBW, Inc. 2021 Equity Incentive Plan, restricted shares to Board of Director members vest in one year. In 2021, 4,000 restricted shares were granted to directors under the 2021 plan.

Table of Contents

Share amounts related to periods prior to the date of the closing of the Offering on January 16, 2020 have been restated to give retroactive recognition to the 1.1730 exchange ratio applied in the offering.

~~Table of Contents~~

The following table summarizes stock options activity for the three months ended ~~March 31, 2020:~~June 30, 2021:

Outstanding

Nonvested

Weighted

Weighted

Average

Weighted

Average

Remaining

Aggregate

Average

Stock Option

Exercise

Contractual

Intrinsic

Number of

Grant Date Fair

Awards

Price

Term (years)

Value

Options

Value
Balance at December 31, 2019

260,510

$
9.20

215,450

$
2.83
Granted

—

—

—

—
Vested

—

—

—

—
Exercised

—

—

—

—
Forfeited

—

—

—

—
Balance at March 31, 2020

260,510

$
9.20

8.76

$
—

215,450

$
2.83
Exercisable as of March 31, 2020

45,060

$
9.22

8.70

$
—


	Outstanding
				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Stock Option	Exercise		Contractual	Intrinsic
	Awards	Price		Term (years)	Value
Options outstanding as of December 31, 2020	269,220	$	10.51
Granted	76,000		11.27
Exercised	0		0
Forfeited	(19,057)		10.01
Options outstanding as of June 30, 2021	326,163	$	10.72	8.00	$	207,476
Options exercisable as of June 30, 2021	134,066	$	10.80	7.50	$	63,140

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model based on certain assumptions. Since the Company does not have sufficient historical fair value estimates of its stock, the Company calculates expected volatility using the historical volatility of the Dow Jones U.S. Financial Services Index. The risk-free interest rate for periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life of options is estimated based on the assumption that options will be exercised evenly throughout their life after vesting and represents the period of time that options granted are expected to remain outstanding.

There were no76,000 options granted during the three months ended ~~March 31, 2020.~~June 30, 2021.

The following is a summary of changes in restricted shares for the ~~three~~six months ended ~~March 31, 2020:~~June 30, 2021:


		Weighted
		Average
	Number of	Grant Date Fair
	Shares	Value
Nonvested stock awards as of December 31, 2019	90,790	$	9.20

					Weighted
					Average
				Number of	Grant Date Fair
				Shares	Value
Nonvested stock awards as of December 31, 2020				62,060	$	10.73
Granted	—		—	19,750		11.25
Vested	—		—	(19,561)		10.77
Forfeited	—		—	(5,519)		10.08
Nonvested stock awards as of March 31, 2020	90,790	$	9.20
Nonvested stock awards as of June 30, 2021				56,730	$	10.97

As of ~~March 31, 2020,~~June 30, 2021, there was $1.3 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share option and non-vested share awards) granted under the ~~2018 Equity Incentive Plan.~~Company’s equity incentive plans. At ~~March 31, 2020,~~June 30, 2021, the weighted-average period over which the unrecognized compensation expense is expected to be recognized was approximately~~2.3~~ 3.2 years.

NOTE 10 – Equity and Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by 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 Company’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 assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Table of Contents

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1, and Total capital to risk-weighted

~~Table of Contents~~

assets and of Tier 1 capital to average assets. It is management’s opinion, as of ~~March 31, 2020,~~June 30, 2021, that the Bank ~~meet~~met all applicable capital adequacy requirements.

As of ~~March 31, 2020,~~June 30, 2021, the Bank is categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum regulatory capital ratios as set forth in the table. There are no conditions or events since ~~March 31, 2020~~June 30, 2021 that management believes have changed the category.

The Bank’s actual capital amounts and ratios are presented in the following tables:


									To Be Well
									Capitalized
									Under Prompt
					For Capital Adequacy				Corrective
	Actual				Purposes				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2020

																							To Be Well
																							Capitalized
																							Under Prompt
																	For Capital Adequacy						Corrective
													Actual				Purposes						Action Provisions
													Amount		Ratio		Amount				Ratio		Amount				Ratio
June 30, 2021
Common Equity Tier 1 capital (to risk‑weighted assets)	$	72,159	34.9	%	$	≥ 9,310	≥ 4.5	%	$	≥ 13,447	≥ 6.5	%	$	74,642	33.6	%	$	≥	9,994	≥	4.5	%	$	≥	14,435	≥	6.5	%
Tier 1 capital (to risk‑weighted assets)		72,159	34.9			≥ 12,413	≥ 6.0			≥ 16,551	≥ 8.0			74,642	33.6			≥	13,325	≥	6.0			≥	17,766	≥	8.0
Total capital (to risk‑weighted assets)		74,466	36.0			≥ 16,551	≥ 8.0			≥ 20,688	≥ 10.0			77,066	34.7			≥	17,766	≥	8.0			≥	22,208	≥	10.0
Tier 1 capital (to average assets)		72,159	26.1			≥ 11,051	≥ 4.0			≥ 13,814	≥ 5.0			74,642	21.7			≥	13,741	≥	4.0			≥	17,176	≥	5.0

December 31, 2019

December 31, 2020
Common Equity Tier 1 capital (to risk‑weighted assets)	$	50,446	23.7	%	$	≥ 9,591	≥ 4.5	%	$	≥ 13,854	≥ 6.5	%	$	73,665	33.1	%	$	≥	10,018	≥	4.5	%	$	≥	14,471	≥	6.5	%
Tier 1 capital (to risk‑weighted assets)		50,446	23.7			≥ 12,788	≥ 6.0			≥ 17,051	≥ 8.0			73,665	33.1			≥	13,358	≥	6.0			≥	17,810	≥	8.0
Total capital (to risk‑weighted assets)		52,710	24.7			≥ 17,051	≥ 8.0			≥ 21,313	≥ 10.0			76,448	34.3			≥	17,810	≥	8.0			≥	22,263	≥	10.0
Tier 1 capital (to average assets)		50,446	19.4			≥ 10,400	≥ 4.0			≥ 13,000	≥ 5.0			73,665	25.2			≥	11,700	≥	4.0			≥	14,625	≥	5.0

NOTE 11 – Fair Value

Accounting standards describe three levels of inputs that may be used to measure fair value (the fair value hierarchy). The level of an asset or liability within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement of that asset or liability.

Following is a brief description of each level of the fair value hierarchy:

Level 1 - Fair value measurement is based on quoted prices for identical assets or liabilities in active markets.

Level 2 - Fair value measurement is based on: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; or (3) valuation models and methodologies for which all significant assumptions are or can be corroborated by observable market data.

Level 3 - Fair value measurement is based on valuation models and methodologies that incorporate at least one significant assumption that cannot be corroborated by observable market data. Level 3 measurements reflect the Company’s estimates about assumptions market participants would use in measuring fair value of the asset or liability.

Some assets and liabilities, such as securities available for sale, are measured at fair value on a recurring basis under accounting principles generally accepted in the United States. Other assets and liabilities, such as impaired loans, may be measured at fair value on a nonrecurring basis.

Following is a description of the Company’s valuation methodology and significant inputs used for each asset and liability measured at fair value on a recurring or nonrecurring basis, as well as the classification of the asset or liability within the fair value hierarchy.

2726

Table of Contents

Available for sale securities - Available for sale securities may be classified as Level 1 or Level 2 measurements within the fair value hierarchy. Level 1 securities include equity securities traded on a national exchange. The fair value measurement of a Level 1 security is based on the quoted price of the security. Level 2 securities include U.S. government and agency securities, obligations of states and political subdivisions, corporate debt securities, and mortgage related securities. The fair value measurement of a Level 2 security is obtained from an independent pricing service and is based on recent sales of similar securities and other observable market data.

Loans - Loans are not measured at fair value on a recurring basis. However, loans considered to be impaired may be measured at fair value on a nonrecurring basis. The fair value measurement of an impaired loan that is collateral dependent is based on the fair value of the underlying collateral. Independent appraisals are obtained that utilize one or more valuation methodologies - typically they will incorporate a comparable sales approach and an income approach. Management routinely evaluates the fair value measurements of independent appraisers and adjusts those valuations based on differences noted between actual selling prices of collateral and the most recent appraised value. Such adjustments are usually significant, which results in a Level 3 classification. All other impaired loan measurements are based on the present value of expected future cash flows discounted at the applicable effective interest rate and, thus, are not fair value measurements.

Foreclosed assets- Real estate acquired through or in lieu of loan foreclosure are not measured at fair value on a recurring basis. However, foreclosed assets are initially measured at fair value (less estimated costs to sell) when they are acquired and may also be measured at fair value (less estimated costs to sell) if they become subsequently impaired. The fair value measurement for each asset may be obtained from an independent appraiser or prepared internally. Fair value measurements obtained from independent appraisers generally utilize a market approach based on sales of comparable assets and/or an income approach. Such measurements are usually considered Level 2 measurements. However, management routinely evaluates fair value measurements of independent appraisers by comparing actual selling prices to the most recent appraisals. If management determines significant adjustments should be made to the independent appraisals based on these evaluations, these measurements are considered Level 3 measurements. Fair value measurements prepared internally are based on management’s comparisons to sales of comparable assets, but include significant unobservable data and are therefore considered Level 3 measurements.

Other equity investments - Certain equity investments are measured at fair value on a non-recurring basis using observable transactions and are classified as Level 2.

Table of Contents

Assets measured at fair value on a recurring basis are summarized below:


	Recurring Fair Value Measurements Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total

As of March 31, 2020

									Recurring Fair Value Measurements Using
									Quoted Prices
									in Active		Significant
									Markets for		Other		Significant
									Identical		Observable		Unobservable
									Instruments		Inputs		Inputs
									(Level 1)		(Level 2)		(Level 3)		Total

As of June 30, 2021
Assets:
Available for sale securities:	$	—	$	55,063	$	—	$	55,063

As of December 31, 2019
Obligations of the US government and US government sponsored agencies									$	0	$	651	$	0	$	651
Obligations of states and political subdivisions										0		14,949		0		14,949
Mortgage-backed securities										0		31,222		0		31,222
Certificates of deposit										0		1,924		0		1,924
Corporate debt securities										0		2,707		0		2,707
Total available for sale securities									$	0	$	51,453	$	0	$	51,453


As of December 31, 2020
Assets:
Available for sale securities:	$	—	$	48,179	$	—	$	48,179
Obligations of the US government and US government sponsored agencies									$	0	$	754	$	0	$	754
Obligations of states and political subdivisions										0		15,605		0		15,605
Mortgage-backed securities										0		37,680		0		37,680
Certificates of deposit										0		7,937		0		7,937
Corporate debt securities										0		2,267		0		2,267
Total available for sale securities									$	0	$	64,243	$	0	$	64,243

~~Table of Contents~~

Information regarding the fair value of assets measured at fair value on a nonrecurring basis follows:


			Nonrecurring Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
	Assets		Identical		Observable		Unobservable
	Measured at		Instruments		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)

As of June 30, 2021
Assets:
Loans	$	94	$	0	$	0	$	94
Other equity investments		225		0		225		0

As of December 31, 2020
Assets:
Loans	$	254	$	0	$	0	$	254
Foreclosed assets		125		0		0		125
Other equity investments		225		0		225		0

Nonrecurring Fair Value Measurements Using


Quoted Prices




in Active

Significant

Markets for

Other

Significant

Assets

Identical

Observable

Unobservable

Measured at

Instruments

Inputs

Inputs


Fair Value

(Level 1)

(Level 2)

(Level 3)

As of March 31, 2020

Assets:

Loans

$
891

$
—

$
—

$
891
Foreclosed assets

347

—

—

347

As of December 31, 2019

Assets:

Loans

$
897

$
—

$
—

$
897
Foreclosed assets

84

—

—

84

Table of Contents

Loans with a carrying amount of ~~$1,110~~$151 were considered impaired and were written down to their estimated fair value of ~~$891~~$94 as of ~~March 31, 2020.~~June 30, 2021. Loans with a carrying amount of ~~$1,132~~$704 were considered impaired and were written down to their estimated fair value of ~~$897~~$254 as of December 31, ~~2019.~~2020. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling ~~$219~~$57 and ~~$235~~$450 as of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, respectively.

Foreclosed assets with a carrying amount of ~~$347~~$0 and ~~$84~~$125 were determined to be at their fair value as of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, respectively.

The following presents quantitative information about nonrecurring Level 3 fair value measurements:


					Range/Weighted
	Fair Value		Valuation Technique	Unobservable Input(s)	Average
As of March 31, 2020

														Range/Weighted
										Fair Value		Valuation Technique	Unobservable Input(s)	Average
As of June 30, 2021
Loans	$	891	Market and/or income approach	Management discount on appraised values	10	%	-	20	%	$	94	Market and/or income approach	Management discount on appraised values	10	%	-	20	%
Foreclosed assets	$	347	Market and/or income approach	Management discount on appraised values	10	%	-	20	%	$	0	Market and/or income approach	Management discount on appraised values	10	%	-	20	%

As of December 31, 2019

As of December 31, 2020
Loans	$	897	Market and/or income approach	Management discount on appraised values	10	%	-	20	%	$	254	Market and/or income approach	Management discount on appraised values	10	%	-	20	%
Foreclosed assets	$	84	Market and/or income approach	Management discount on appraised values	10	%	-	20	%	$	125	Market and/or income approach	Management discount on appraised values	10	%	-	20	%

~~Table of Contents~~

The carrying value and estimated fair value of financial instruments as of ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019~~2020 follow:


	June 30, 2021
	Carrying			Fair Value
	Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	84,420	$	84,420	$	0	$	0
Available for sale securities		51,453		0		51,453		0
Loans held for sale		473		0		473		0
Loans		197,524		0		0		200,397
Accrued interest receivable		787		787		0		0
Cash value of life insurance		9,891		0		0		9,891
Other equity investments		1,279		0		225		1,054

Financial liabilities:
Deposits		245,179		189,525		0		55,863
Advance payments by borrowers for taxes and insurance		742		742		0		0
FHLB advances		8,500		0		0		8,506
Accrued interest payable		173		173		0		0


	December 31, 2020
	Carrying			Fair Value
	Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	41,479	$	41,479	$	0	$	0
Available for sale securities		64,243		0		64,243		0
Loans held for sale		1,708		0		1,708		0
Loans		214,723		0		0		217,893
Accrued interest receivable		995		995		0		0
Cash value of life insurance		7,272		0		0		7,272
Other equity investments		1,279		0		225		1,054

Financial liabilities:
Deposits		226,498		175,987		0		50,732
Advance payments by borrowers for taxes and insurance		127		127		0		0
FHLB advances		7,500		0		0		7,544
Accrued interest payable		17		17		0		0

March 31, 2020

Carrying

Fair Value

Value

Level 1

Level 2

Level 3
Financial assets:

Cash and cash equivalents

$
14,857

$
14,857

$
—

$
—
Available for sale securities

55,063

—

55,063

—
Loans held for sale

543

—

543

—
Loans

192,916

—

—

195,177
Accrued interest receivable

816

816

—

—
Cash value of life insurance

7,117

—

—

7,117
Other equity investments

780

—

—

780

Financial liabilities:

Deposits

163,394

99,526

—

63,120
Advance payments by borrowers for taxes and insurance

380

380

—

—
FHLB advances

11,500

—

—

11,622
Accrued interest payable

259

259

—

—

Table of Contents

December 31, 2019

Carrying

Fair Value

Value

Level 1

Level 2

Level 3
Financial assets:

Cash and cash equivalents

$
39,377

$
39,377

$
—

$
—
Available for sale securities

48,179

—

48,179

—
Loans held for sale

200

—

200

—
Loans

189,291

—

—

190,561
Accrued interest receivable

725

725

—

—
Cash value of life insurance

7,068

—

—

7,068
Other equity investments

780

—

—

780

Financial liabilities:

Deposits

217,252

150,024

—

67,391
Advance payments by borrowers for taxes and insurance

46

46

—

—
FHLB advances

11,500

—

—

11,509
Accrued interest payable

51

51

—

—

Limitations - The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based on quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

NOTE 12 – Business Combination

On December 31, 2020, the Company acquired substantially all of the assets and assumed substantially all of the liabilities of Mitchell Bank pursuant to the Purchase and Acquisition Agreement dated July 24, 2020. The assets acquired and the liabilities assumed from Mitchell Bank were recorded at their fair value as of the closing date of the acquisition. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding fair values becomes available. A bargain purchase gain of $7,000 was recorded at the time of the acquisition.



		As Recorded		Fair Value and Other		As Recorded
		by Mitchell Bank		Merger Related Adjustments		by the Company
Consideration Paid
Cash					$	4,978

Recognized amounts of identifiable assets acquired and liabilities assumed:

Cash and due from banks	$	38,266	$	0	$	38,266
Securities		7,133		16		7,149
Other equity securities		51		177		228
Loans, net of allowance		14,512		(217)		14,295
Premises and equipment		529		499		1,028
Core deposit intangibles		0		369		369
Accrued interest receivable		83		0		83
Foreclosed assets		185		(60)		125
Deferred tax asset		228		(228)		0
Other assets		209		(88)		121
Total assets acquired	$	61,196	$	468		61,664

Deposits	$	56,641	$	0		56,641
Other liabilities		38		0		38
Total liabilities assumed	$	56,679	$	0		56,679

Total identifiable assets		4,517		468		4,985

Bargain purchase gain resulting from acquisition						(7)

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

FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

●Statements of our goals, intentions and expectations;

●Statements regarding our business plans, prospects, growth and operating strategies;

●Statements regarding the asset quality of our loan and investment portfolios; and

●Estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Quarterly Report.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

●General economic conditions, either nationally or in our market areas, that are worse than expected;

●

Economic and/or policy changes related to the COVID-19 pandemic;

●

Changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

●Our ability to access cost-effective funding;

●Fluctuations in real estate values and both residential and commercial real estate market conditions;

●Demand for loans and deposits in our market area;

●Our ability to implement and change our business strategies;

●Competition among depository and other financial institutions;

●Inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

●Adverse changes in the securities or secondary mortgage markets;

●Changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;

●The impact of the Dodd-Frank Act and the implementing regulations;

●Changes in the quality or composition of our loan or investment portfolios;

●Technological changes that may be more difficult or expensive than expected;

●The inability of third-party providers to perform as expected;

●Our ability to manage market risk, credit risk and operational risk in the current economic environment;

●Our ability to enter new markets successfully and capitalize on growth opportunities;

●Our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;

●Changes in consumer spending, borrowing and savings habits;

●Changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

●Our ability to retain key employees;

●Our compensation expense associated with equity allocated or awarded to our employees; and

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●Changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Impact of COVID-19

~~Economic activity in~~During the first quarter of 2020, ~~contracted sharply across~~global financial markets experienced significant volatility resulting from the spread of a novel coronavirus known as COVID-19. In March 2020, the World Health Organization declared COVID-19 a global pandemic and the United States asdeclared a ~~result~~National Public Health Emergency. The COVID-19 pandemic has restricted the level of economic activity in our markets. In response to the pandemic, the governments of the ~~COVID-19 pandemic, which mandated~~State of Wisconsin and of most other states have taken preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forego time outside of their homes, and ordering temporary closures of ~~non-essential~~businesses that have been deemed to be non-essential. These measures dramatically increased unemployment in the United States and have negatively impacted many businesses, and ~~restricted activities to attempt to slow~~thereby threatened the ~~spread~~repayment ability of some of our borrowers.

To address the ~~disease. This has become a global public health crisis, causing volatility and uncertainty~~economic impact in the ~~markets, and large disruptions in many industries such as energy, hospitality and nonessential healthcare. Section 4013 of~~United States, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, ~~2020, allows financial institutions~~2020. The CARES Act included a number of provisions that affected us, including accounting relief for troubled debt restructurings (“TDRs”), or loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates. The CARES Act also established the Paycheck Protection Program (“PPP”), which allowed us to ~~exclude eligible~~lend money to small businesses to maintain employee payrolls through the crisis with guarantees from the SBA. Under this program, loan amounts may be forgiven if the borrower maintains employee payrolls and meets certain other requirements.

In addition, the Federal Reserve Board took steps to bolster the economy by, among other things, reducing the federal funds rate and the discount-window borrowing rate to near zero. In response to the COVID-19 pandemic and to protect our employees and customers from potential exposure to the virus, all First Federal Bank of Wisconsin lobbies continue to observe best practice protocols to limit exposure and/or spread of the virus.

We have implemented loan modification programs to provide our borrowers relief from the economic impacts of COVID-19. Based on guidance in the CARES Act, COVID-19 related modifications ~~from TDR reporting, providing they are (1) related~~ to ~~COVID-19, (2) executed on a loan~~loans that ~~was not more than 30 days past due~~were current as of December 31, 2019 are exempt from TDR classification under accounting principles generally accepted in the United States (“U.S. GAAP”). Although 15 COVID-19 related loans totaling $14.6 million were placed on deferral during 2020, no loans remained on a COVID-19 related deferral at June 30, 2021.

The health of the banking industry is highly correlated with that of the economy. The temporary and/or partial closures of non-essential businesses in our local and ~~(3) executed between March 1, 2020~~national economies increases the likelihood of recession, which typically results in an increased level of credit losses. Accordingly, our provisions for loan losses have increased and will be closely monitored throughout the COVID-19 pandemic. In addition to utilizing quantitative loss factors, we consider qualitative factors, such as changes in underwriting policies, current economic conditions, delinquency statistics, the adequacy of the underlying collateral, and the ~~earlier of 60 days after the date~~financial strength of the ~~termination~~borrower. The impact of the ~~national emergency or December 31, 2020. As~~COVID-19 pandemic on the performance of ~~April 30, 2020, we had nine commercial customers with notes totaling $14.1 million and one residential customer with notes totaling $686,000 who qualified for deferrals under this program.~~

~~The CARES Act also provides over $2.0 trillion~~our loan portfolio in ~~emergency economic relief~~future quarters is unknown, however all of these factors are likely to ~~individuals and businesses impacted~~be affected by the COVID-19 pandemic. ~~The CARES act authorized~~

Given the ~~Small Business Administration (“SBA”)~~unprecedented uncertainty and rapidly evolving economic effects and social impacts of the COVID-19 pandemic, the future direct and indirect impact on our business, results of operations and financial condition are highly uncertain. Should current economic conditions persist or continue to ~~temporarily guarantee loans under~~deteriorate, we expect that this

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macroeconomic environment will have a ~~new 7(a) loan program called the Paycheck Protection Program (“PPP”). We enrolled~~continued adverse effect on our business and results of operations, which could include, but not be limited to: decreased demand for our products and services, protracted periods of lower interest rates, and increased credit losses due to deterioration in the ~~PPP by completing the required documentation. An eligible business can apply~~financial condition of our consumer and commercial borrowers, including declining asset and collateral values, which may continue to increase our provision for ~~a PPP loan up to the greater of: (1) 2.5 times its average monthly “payroll costs”; or (2) $10.0 million. PPP loans will have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity,~~credit losses and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and at least 75% of the loan proceeds are used for payroll expenses, with the remaining 25% or less of the loan proceeds used for other qualifying expenses. The Company disbursed 114 loans totaling $12.3 million in this round of PPP funding. On April 27, 2020, the SBA resumed accepting PPP loan applications as a result of the Paycheck Protection Program and Health Care Enhancement Act which was passed on April 24, 2020. As of April 30, 2020, we had received approximately, 38 applications for up to $1.2 million of loans under the PPP.net charge-offs.

Comparison of Financial Condition at ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019~~2020

Total Assets. Total assets ~~decreased $14.8~~increased $13.6 million, or ~~5.1%~~4.0%, to ~~$278.0~~$352.6 million at ~~March 31, 2020~~June 30, 2021 from ~~$292.2~~$339.0 million at December 31, ~~2019. The decrease was primarily a result of the decrease~~2020 due, in ~~fed funds sold of $31.4 million partially~~part, to an increase in cash and cash equivalents offset, in part, by ~~an increase~~decreases in available for sale securities ~~of $6.9 million~~ and ~~an increase in~~ net ~~loans of $3.6 million.~~loans.

Cash and ~~due from banks.~~cash equivalents. Cash and ~~due from banks~~cash equivalents increased ~~$6.9~~$42.9 million, or ~~168.7%~~103.5%, to ~~$11.0~~$84.4 million at ~~March 31, 2020~~June 30, 2021 from ~~$4.1~~$41.5 million at December 31, ~~2019.~~ 2020. The increase resulted from an increase in deposits offset in part by decreases in net loans and available-for-sale securities.

~~Fed funds sold.~~ ~~Fed funds sold~~Net Loans. Net loans decreased ~~$31.4~~$17.2 million, or ~~89.1%~~8.0%, to ~~$3.8~~$197.5 million at ~~March 31, 2020~~June 30, 2021 from ~~$35.3~~$214.7 million at December 31, ~~2019, primarily from the use of the of cash from stock offering subscriptions in the conversion.~~

~~Net Loans.~~ ~~Net loans increased $3.6 million, or 1.9%, to $192.9 million at March 31, 2020 from $189.3 million at December 31, 2019.~~2020. The ~~increase~~decrease resulted from ~~the net of increases~~decreases in commercial real estate loans of ~~$6.4 million,~~$195,000, or ~~9.4%~~0.2%, one-to-four family owner-occupied loans of ~~$472,000,~~$10.5 million, or ~~1.6%, and~~34.3 %, one-to-four family investor-owned loans of

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~~$1.9~~ $6.0 million, or ~~6.9%~~18.3%, consumer loans of $266,000, or 8.8% and commercial business loans of $3.7 million, or 17.9%, offset, in part, by ~~decreases~~increases of ~~$2.5 million,~~$212,000, or ~~13.5%~~1.5%, in commercial development loans ~~$831,000, or 6.1%, in commercial business loans, $1.8~~and $2.7 million, or ~~6.1%~~9.3%, in multifamily ~~loans and $82,000, or 1.9%, in consumer~~ loans.

During the ~~three~~six months ended ~~March 31, 2020,~~June 30, 2021, we sold ~~$3.9~~$9.5 million of one-to-four family owner-occupied residential real estate loans, on a servicing-released basis. Subject to market and economic conditions, management intends to continue this sales activity in future periods to generate gain on sale of loans income.

Available for sale securities. Available for sale securities ~~increased $6.9~~decreased $12.8 million, or ~~14.3%,~~19.9 %, to ~~$55.1~~$51.5 million at ~~March 31, 2020~~June 30, 2021 from ~~$48.2~~$64.2 million at December 31, ~~2019. This was a result of deploying funds received from the stock offering subscriptions.~~2020 as maturing investments were not replaced.

Other equity investments. Other equity investments remained ~~consistent~~unchanged at ~~$780,000~~$1.3 million at ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019,~~2020, respectively.

Deposits. Deposits ~~decreased $53.9~~increased $18.7 million, or ~~24.8%~~8.3 %, to $245.2 million at June 30, 2021 from $226.5 million at December 31, 2020. The increase resulted from an increase in certificates of deposit of $5.1 million, or 10.2%, to ~~$163.4~~$55.7 million at ~~March 31, 2020~~June 30, 2021 from ~~$217.3~~$50.5 million at December 31, ~~2019. The decrease resulted primarily from $52.6 million~~2020, noninterest-bearing checking accounts of ~~stock offering subscriptions being included in deposits as of December 31, 2019. In addition, certificates of deposit decreased $4.7~~$1.2 million, or ~~7.0%~~2.2%, to ~~$62.5~~$52.9 million at ~~March 31, 2020 from $67.2~~June 30, 2021, compared to $51.8 million at December 31, ~~2019, and noninterest-bearing checking~~2020, money market accounts ~~decreased $214,000,~~of $10.9 million, or ~~1.0%~~15.4%, to ~~$20.5~~$81.3 million at ~~March 31, 2020,~~June 30, 2021 compared to ~~$20.7~~$70.5 million at December 31, ~~2019. Partially offsetting these decreases, interest-bearing checking~~2020 and savings accounts ~~increased $213,000,~~of $1.9 million, or ~~3.1%~~5.9%, to ~~$7.1 million as of March 31, 2020 compared to $6.9 million as of December 31, 2019, money market accounts increased $1.5 million to $48.2~~$33.9 million at ~~March 31, 2020~~June 30, 2021 from ~~$46.7 million as of December 31, 2019, savings accounts increased $1.8 million, or 14.9%, to $14.2 million at March 31, 2020, compared to $12.4~~$32.0 million at December 31, ~~2019, and health savings~~2020. Offsetting these increases, interest-bearing checking accounts ~~increased $75,000,~~decreased $410,000, or ~~0.7%~~3.8%, to ~~$10.8~~$10.5 million at ~~March 31, 2020, compared to $10.7~~June 30, 2021 from $10.9 million at December 31, ~~2019.~~2020, while health savings accounts remained unchanged at $10.9 million at both June 30, 2021 and December 31, 2020. Included in the certificates of deposit were brokered deposits of $8$1.0 million as of both ~~March 31, 2020~~June 30, 2021 and December 31, ~~2019.~~2020.

Borrowings. Borrowings, consisting entirely of FHLB advances, ~~remained consistent at $11.5~~increased $1.0 million, or 13.3% to $8.5 million at ~~March 31, 2020 as well as~~June 30, 2021 from $7.5 million at December 31, ~~2019.~~2020. The aggregate cost of outstanding advances from the FHLB was ~~2.10%~~0.8% at ~~December 31, 2019,~~June 30, 2021 compared to the Bank’s cost of deposits of ~~1.25%~~0.5% at that date.

Other liabilities. Other liabilities decreased ~~$60,000,~~$325,000, or ~~4.0%~~20.8%, to ~~$1.4~~$1.2 million at ~~March 31, 2020~~June 30, 2021 from ~~$1.5~~$1.6 million at December 31, ~~2019.~~2020. The decrease resulted, in part, from a decrease in outstanding accounts payable and a decrease in accrued expenses.

Total Equity. Total equity ~~increased $39.1~~decreased $6.5 million, or ~~63.3%~~6.3%, to ~~$101.0~~$96.8 million at ~~March 31, 2020~~June 30, 2021 from ~~$61.9~~$103.3 million at December 31, ~~2019.~~2020. The ~~increase~~decrease resulted primarily from ~~net~~ stock ~~offering proceeds~~repurchases of ~~$37.9~~$7.6 million ~~net~~offset, in part, by income of ~~$407,000, and other comprehensive income~~$1.1 million.

Table of ~~$727,000.~~Contents

Nonperforming Loans, Potential Problem Loans and Foreclosed Properties. We practice early identification of non-accrual and problem loans in order to minimize the Company’s risk of loss. Non-performing loans are defined as non-accrual loans and restructured loans that were 90 days or more past due at the time of their restructure, or when management determines that such classification is warranted. The accrual of interest income is generally discontinued when contractual payments have become 90 or more days past due or when management has serious doubts about further collectability of principal or interest. Cash receipts on non-accrual loans are used to reduce principal rather than being recorded as interest income. aA TDR typically involves the granting of some concession to the borrower involved in the loan modification, such as modifying the payment schedule or making interest changes. TDR loans may involve loans that have had a charge-off taken against the loan to reduce the carrying amount of the loan to fair market value as determined pursuant to ASC 310-10.

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The following table identifies the various components of non-performing assets and other balance sheet information as of the dates indicated below and changes in the ALLL for the periods then ended:

March 31,

December 31,


2020 and

2019 and

Three Months

Twelve Months

Then

Then

Ended

Ended


(in thousands)
Nonperforming assets:





Nonaccrual loans

$
706

$
1,070

Accruing loans past due 90 days or more

—

—

Total nonperforming loans ("NPLs")

$
706

$
1,070

Foreclosed assets

347

84

Total nonperforming assets ("NPAs")

$
1,053

$
1,154

Troubled Debt Restructurings ("TDRs")

1,464

1,839

Nonaccrual TDRs

300

654

Average outstanding loan balance

194,528

197,766

Loans, end of period

195,402

191,742

ALLL, at beginning of period

2,264

2,118

Loans charged off:





Commercial

—

—

Residential real estate and consumer

—

(58)

Total loans charged off

$
—

$
(58)

Recoveries of loans previously charged off:





Residential real estate and consumer

3

3

Total recoveries of loans previous charged off

3

3

Net loans charged off ("NCOs'")

$
3

$
(55)

Additions to ALLL via provision for loan losses charged to operations

40

201

ALLL, at end of period

$
2,307

$
2,264

Ratios:





ALLL to NCOs (annualized)

(19,225.00)
%

4,116.36
%
NCOs (annualized) to average loans

(0.01)
%

0.03
%
ALLL to total loans

1.18
%

1.18
%
NPL to total loans

0.36
%

0.56
%
NPAs to total assets

0.38
%

0.39
%
Total Assets

$
277,980

$
292,218


	June 30,			December 31,
	2021 and			2020 and
	Six Months			Twelve Months
	Then			Then
	Ended			Ended

	(in thousands)
Nonperforming assets:
Nonaccrual loans	$	337		$	1,067
Accruing loans past due 90 days or more		—			—
Total nonperforming loans ("NPLs")	$	337		$	1,067
Foreclosed assets		—			125
Total nonperforming assets ("NPAs")	$	337		$	1,192
Troubled Debt Restructurings ("TDRs")		793			1,414
Nonaccrual TDRs		267			990
Average outstanding loan balance		208,365			205,351
Loans, end of period		200,288			217,958
ALLL, at beginning of period		2,811			2,264
Loans charged off:
Commercial		(392)			—
Residential real estate and consumer		—			—
Total loans charged off	$	(392)		$	—
Recoveries of loans previously charged off:
Commercial		1			—
Residential real estate and consumer		4			27
Total recoveries of loans previous charged off		5			27
Net loans charged off ("NCOs'")	$	(387)		$	27
Additions to ALLL via provision for loan losses charged to operations		—			520
ALLL, at end of period	$	2,424		$	2,811
Ratios:
NCOs (annualized) to average loans		0.37	%		(0.01)	%
ALLL to total loans		1.21	%		1.29	%
NPL to total loans		0.17	%		0.49	%
NPAs to total assets		0.10	%		0.35	%
Total Assets	$	352,603		$	338,972

Total loans past due decreased ~~from $346,000~~to $0 as of ~~December 31, 2019 to $311,000~~June 30, 2021 from $1.5 million as of ~~March~~December 31, 2020. We believe our credit and underwriting policies continue to support more effective lending decisions by the Company, which increases the likelihood of maintaining loan quality going forward. Moreover, we believe the favorable trends regarding our nonperforming loans and nonperforming assets reflect our continued adherence to improved underwriting criteria and practices. We believe our current ALLL is adequate to cover ~~probably~~probable losses in our current loan portfolio.

Non-performing loans of ~~$706,000~~$337,000 as of ~~March 31, 2020,~~June 30, 2021, which included ~~$300,000~~$267,000 of non-accrual trouble debt restructured loans, reflected a decrease of ~~$364,000~~$855,000 from the non-performing loan balance as of December 31, ~~2019.~~2020.

Our non-performing assets were ~~$1.1 million~~$337,000 at ~~March 31, 2020,~~June 30, 2021, or ~~0.38%~~0.10% of total assets, compared to $1.2 million, or ~~0.39%~~0.35% of total assets as of December 31, ~~2019.~~2020.

Foreclosed assets ~~increased $263,000~~decreased to ~~$347,000 as of March 31, 2020, compared to $84,000 as of~~$0 at June 30, 2021 from $125,000 at December 31, ~~2019.~~2020. We strive to aggressively liquidate foreclosed assets as a part of our overall credit risk management strategy.

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Comparison of Operating Results for the Three Months Ended ~~March 31,~~June 30, 2021 and June 30, 2020

General. Net income was $452,000 for the three months ended June 30, 2021, compared to net income of $365,000 for the three months ended June 30, 2020, an increase of $87,000, or 23.8%. The increase was the net effect of an increase in net interest income after provision for loan losses of $418,000, or 19.3%, offset in part by an increase in noninterest expense of $273,000, or 13.6%, and an increase in income taxes of $87,000, or 23.8%.

Interest and Dividend Income. Total interest and dividend income increased $25,000 or 0.9%, to $2.8 million for the three months ended June 30, 2021, compared to $2.8 million for the three months ended June 30, 2020. Average interest-earning assets increased $39.4 million, or 14.1%, to $319.1 million for the three months ended June 30, 2021, compared to $279.7 million for the three months ended June 30, 2020, and ~~March 31, 2019~~the weighted average yield on interest-earning assets decreased 47 basis points when comparing the 2021 and 2020 periods. The decrease in average yield was primarily the result of an increase in our cash balance.

Interest Expense. Total interest expense decreased $178,000, or 40.2%, to $265,000 for the three months ended June 30, 2021, compared to $443,000 for the three months ended June 30, 2020. Average interest-bearing liabilities increased $47.8 million, or 32.6%, to $194.4 million for the three months ended June 30, 2021, from $146.6 million for the three months ended June 30, 2020.The rate paid on interest-bearing liabilities decreased 66 basis points to 0.55% for the three months ended June 30, 2021, compared to 1.21% for the three months ended June 30, 2020.

Provision for Loan Losses. The loan loss provision was $0 for the three months ended June 30, 2021, compared to $215,000 for the three months ended June 30, 2020.

Noninterest Income. Noninterest income decreased $40,000, or 13.3%, to $260,000 for the three months ended June 30, 2021, compared to $300,000 for the three months ended June 30, 2020. The decrease was due primarily to a decrease in the gain on sale of loans of $53,000 resulting from a decrease in refinance volume.

Noninterest Expense. Noninterest expense increased $273,000, or 13.6%, to $2.3 million for the three months ended June 30, 2021, compared to $2.0 million for the three months ended June 30, 2020. The increase was primarily due to an increase in salaries and employee benefits expenses of $363,000 which was influenced by the acquisition of Mitchell Bank.

Income Tax Expense. We recorded an income tax expense of $104,000 for the three months ended June 30, 2021 compared to $86,000 for the three months ended June 30, 2020, an increase of $18,000, or 23.8%.

Comparison of Operating Results for the Six Months Ended June 30, 2021 and June 30, 2020

General. We had net income of ~~$407,000~~$1.1 million for the ~~three~~six months ended ~~March 31, 2020,~~June 30, 2021, compared to net income of ~~$249,000~~$772,000 for the ~~three~~six months ended ~~March 31, 2019,~~June 30, 2020, an increase of ~~$158,000,~~$350,000, or ~~63.5%~~45.3%. The increase in net income was the net effect of an increase in net interest income after provision for loan losses of ~~$230,000,~~$1.1 million, or ~~11.5%~~25.0%, and an increase in noninterest income of ~~$23,000,~~$152,000, or ~~16.4%~~32.8%, offset in part by an increase in noninterest expense of ~~$36,000,~~$832,000, or ~~2.0%, and an increase in income taxes of $59,000, or 77.6%~~21.6%.

Interest and ~~dividend income.~~ ~~Interest~~Dividend Income. Total interest and dividend income increased ~~$57,000,~~$384,000 or ~~2.1%~~6.8%, to ~~$2.8~~$6.0 million for the ~~three~~six months ended ~~March 31, 2020 from $2.7~~June 30, 2021 compared to $5.6 million for the ~~three~~six months ended ~~March 31, 2019.~~June 30, 2020. Average interest-earning assets increased $55.8 million, or 21.4%, to $316.1 million for the six months ended June 30, 2021 compared to $261.1 million for the six months ended June 30, 2020, and the weighted average yield on interest-earning assets decreased 52 basis points when comparing the 2021 and 2020 periods. The ~~increase~~decrease in average yield was primarily ~~attributable to a $71,000 increase in~~the result of lower market interest ~~on available for sale securities~~rates and interest-bearing deposits, due to an increase in the average balance of those line items of $16.4 million quarter over quarter. This was partially offset by a decrease in interest on loans of $13,000, due to a decrease in the average balance of loans of $6.7 million quarter over quarter.increased market competition during 2021.

Interest Expense. ~~Interest~~Total interest expense decreased ~~$143,000,~~$456,000, or ~~20.8%~~46.2%, to ~~$544,000~~$531,000 for the ~~three~~six months ended ~~March 31, 2020, from $687,000~~June 30, 2021 compared to $987,000 for the ~~three~~six months ended ~~March 31, 2019. Interest expense~~June 30, 2020. Average interest-bearing liabilities increased

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$42.4 million, or 29.3%, to $187.2 million for the six months ended June 30, 2021 from $144.8 million for the six months ended June 30, 2020.The rate paid on interest-bearing ~~deposits~~liabilities decreased ~~$116,000, or 19.4%, quarter to quarter. The average cost of our interest-bearing deposits decreased 9~~80 basis points to ~~1.36% from 1.45%, while~~0.57% for the average balance of interest-bearing deposits decreased by $23.5 million, or 14.2%, during the same period. Interest expense on borrowings, consisting entirely of FHLB advances, decreased $27,000, or 30.7%, to $61,000 during the threesix months ended ~~March 31, 2020 from $88,000 during~~June 30, 2021 compared to 1.37% for the ~~three~~six months ended March 31, 2019, as the average balance of borrowings decreased $5.1 million to $11.5 million for the 2020 period from $16.6 million for 2019, and the cost of borrowings remained consistent at 2.12% for both periods.June 30, 2020.

~~Net Interest Income.~~ Net interest income increased $200,000, or 9.7%, to $2.3 million for the three months ended March 31, 2020 from $2.1 million for the three months ended March 31, 2019. Average net interest-earning assets increased $38.4 million to $104.7 million for 2020 from $66.3 million for 2019 due to the investment of fund received from the stock offering. Our net interest rate spread increased to 2.93% for the three months ended March 31, 2020 from 2.92% for the three months ended March 31, 2019, and our net interest margin increased to 3.51% for the first quarter of 2020 from 3.33% for the same quarter of 2019.

Provision for Loan Losses. ~~We recorded a~~The loan loss provision for loan losses of $40,000 for the three months ended March 31, 2020, compared to a $70,000 provision for the three months ended March 31, 2019. The allowance for loan losses remained consistent at $2.3 million, or 1.18% of total loans, at both March 31, 2020 and December 31, 2019. Classified (substandard, doubtful and loss) loans increased to $699,000 at March 31, 2020 from $638,000 at December 31, 2019. Total nonperforming loans decreased to $706,000 at March 31, 2020 from $1.1 million at December 31, 2019. Net recoveries for the three months ended March 31, 2020 were $3,000, compared towas $0 for the ~~prior year period. At March 31, 2020, all of~~six months ended June 30, 2021 compared to $255,000 for the ~~nonperforming loans were contractually current.~~six months ended June 30, 2020.

Noninterest Income. Noninterest income increased ~~$23,000,~~$152,000, or ~~16.4%~~32.8% to $615,000 for the ~~three~~six months ended ~~March 31, 2020 to $163,000,~~June 30, 2021 compared to ~~$140,000~~$463,000 for the same period in the prior year. The increase was primarily due to service charges and other fees increasing $20,000, net gain/loss on sale of securities increasing $8,000, and increase in cash surrender value of life insurance increasing by $2,000 for the quarter. These gains were partially offset by a $6,000 reduction in net gain on sale of loans quarter-over-quarter.

~~Noninterest Expense.~~ ~~Noninterest expense increased $36,000, or 2.0%, for the three~~six months ended ~~March 31, 2020 compared to the three months ended March 31, 2019.~~June 30, 2020. The increase was due primarily to an increase in the gain on sale of ~~$35,000,~~loans of $73,000 due to an increase in refinance volume.

Noninterest Expense. Noninterest expense increased $832,000, or ~~3.2%~~21.6%, to $4.7 million for the six months ended June 30, 2021 compared to $3.9 million for the six months ended June 30, 2020. The increase was primarily due to an increase in salaries and employee benefits ~~$2,000, or 0.8%, in occupancy~~expenses of $593,000 and ~~equipment expense, $31,000, or 17.7%,~~an increase in data processing expenses ~~and $7,000, or 6.8%, in other operating expenses for~~of $210,000. Both increases resulted primarily from the ~~three months ended March 31, 2020 compared to the three months ended March 31, 2019. These increases were offset in part by decreases~~acquisition of ~~$18,000, or 23.1%, in technology expense, foreclosed assets expense of $17,000, and professional fees of $4,000, or 3.6%.~~Mitchell Bank.

~~Table of Contents~~

Income Tax Expense. We recorded an income tax expense of ~~$135,000~~$286,000 for the ~~three~~six months ended ~~March 31, 2020~~June 30, 2021 compared to ~~$76,000~~$221,000 for the ~~three~~six months ended ~~March 31, 2019,~~June 30, 2020, an increase of ~~$59,000,~~$65,000, or ~~77.6%, due to increase in income before income taxes of $217,000.~~29.4%.

Average balances and yields. The following tables ~~sets~~set forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or interest expense.

For the Three Months Ended March 31,

2020

2019

Average

Average

Outstanding

Outstanding

Yield/


Balance

Interest

Yield/ Rate

Balance

Interest

Rate


(in thousands)

(in thousands)

Interest-earning assets:













Loans

$
194,528

$
2,435

5.01
%
$
201,267

$
2,448

4.87
%
Available for sale securities

49,503

288

2.33
%

43,658

277

2.54
%
Interest-bearing deposits

13,163

76

2.31
%

2,595

16

2.47
%
Other equity investments

780

8

4.10
%

645

9

5.58
%
Total interest-earning assets

257,974

2,807

4.35
%

248,165

2,750

4.43
%
Noninterest-earning assets

42,844

16,233





Allowance for loan losses

(2,274)

(2,145)





Total assets

$
298,544

$
262,253





Interest-bearing liabilities:













Demand accounts

$
6,794

10

0.59
%
$
9,680

31

1.28
%
Money market accounts

45,702

133

1.16
%

41,202

111

1.08
%
Savings accounts

12,886

4

0.12
%

14,740

5

0.14
%
Health savings accounts

10,910

8

0.29
%

11,370

9

0.32
%
Certificates of deposit

65,514

328

2.00
%

88,272

443

2.01
%
Total interest-bearing deposits

141,806

483

1.36
%

165,264

599

1.45
%
Borrowings

11,500

61

2.12
%

16,596

88

2.12
%
Total interest-bearing liabilities

153,306

544

1.42
%

181,860

687

1.51
%
Noninterest-bearing deposits

21,737

17,716





Other non-interest bearing liabilities

34,630

1,969





Total liabilities

209,673

201,545





Equity

88,871

60,708





Total liabilities and equity

$
298,544

$
262,253





Net interest income

2,263

2,063



Net interest rate spread(1)

2.93
%





2.92
%
Net interest-earning assets(2)

104,668

66,305





Net interest margin(3)

3.51
%





3.33
%
Average of interest-earning assets to interest-bearing liabilities

168
%

136
%

~~(1)Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.~~

~~(2)Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.~~

~~(3)Net interest margin represents net interest income divided by total interest-earning assets.~~

3637

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	For the Three Months Ended June 30,
	2021								2020
	Average								Average
	Outstanding								Outstanding					Yield/
	Balance			Interest		Yield/ Rate			Balance			Interest		Rate

	(in thousands)								(in thousands)
Interest-earning assets:
Loans	$	202,461		$	2,598		5.13	%	$	204,329		$	2,505	4.90	%
Available for sale securities		53,717			222		1.65	%		56,390			311	2.21	%
Interest-bearing deposits		61,678			12		0.08	%		18,187			2	0.04	%
Other equity investments		1,278			11		3.44	%		780			—	-	%
Total interest-earning assets		319,134			2,843		3.56	%		279,686			2,818	4.03	%
Noninterest-earning assets		29,892								11,304
Allowance for loan losses		(2,784)								(2,504)
Total assets	$	346,242							$	288,486

Interest-bearing liabilities:
Demand accounts	$	10,456			8		0.31	%	$	7,576			8	0.42	%
Money market accounts		76,678			78		0.41	%		51,686			91	0.70	%
Savings accounts		35,062			10		0.11	%		14,339			5	0.14	%
Health savings accounts		10,928			4		0.15	%		10,929			5	0.18	%
Certificates of deposit		54,498			148		1.09	%		49,581			286	2.31	%
Total interest-bearing deposits		187,622			248		0.53	%		134,111			395	1.18	%
Borrowings		6,775			17		1.00	%		12,511			48	1.53	%
Total interest-bearing liabilities		194,397			265		0.55	%		146,622			443	1.21	%
Noninterest-bearing deposits		51,111								54,325
Other non-interest bearing liabilities		1,641								13,127
Total liabilities		247,149								214,074
Equity		99,093								74,412
Total liabilities and equity	$	346,242							$	288,486
Net interest income					2,578								2,375
Net interest rate spread⁽¹⁾							3.02	%						2.82	%
Net interest-earning assets⁽²⁾		124,737								133,064
Net interest margin⁽³⁾							3.23	%						3.40	%
Average of interest-earning assets to interest-bearing liabilities		164.17	%							190.75	%

(1)	Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2)	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by total interest-earning assets.

Table of Contents


	For the Six Months Ended June 30,
	2021								2020
	Average								Average
	Outstanding								Outstanding					Yield/
	Balance			Interest		Yield/ Rate			Balance			Interest		Rate

	(in thousands)								(in thousands)
Interest-earning assets:
Loans	$	208,365		$	5,470		5.29	%	$	199,520		$	4,940	4.99	%
Available for sale securities		57,584			507		1.78	%		52,947			599	2.28	%
Interest-bearing deposits		49,683			21		0.09	%		7,876			64	1.64	%
Other equity investments		1,278			11		1.66	%		780			22	5.69	%
Total interest-earning assets		316,910			6,009		3.82	%		261,123			5,625	4.34	%
Noninterest-earning assets		27,054								26,799
Allowance for loan losses		(2,798)								(2,352)
Total assets	$	341,166							$	285,570

Interest-bearing liabilities:
Demand accounts	$	10,476			15		0.29	%	$	7,185			18	0.51	%
Money market accounts		71,820			141		0.40	%		48,964			224	0.92	%
Savings accounts		34,111			17		0.10	%		13,612			9	0.13	%
Health savings accounts		10,902			8		0.15	%		10,920			13	0.24	%
Certificates of deposit		52,752			316		1.21	%		52,069			614	2.38	%
Total interest-bearing deposits		180,061			497		0.56	%		132,750			878	1.33	%
Borrowings		7,135			34		0.96	%		12,005			109	1.83	%
Total interest-bearing liabilities		187,196			531		0.57	%		144,755			987	1.37	%
Noninterest-bearing deposits		51,453								57,735
Other non-interest bearing liabilities		1,126								12,659
Total liabilities		239,775								215,149
Equity		101,391								70,421
Total liabilities and equity	$	341,166							$	285,570
Net interest income					5,478								4,638
Net interest rate spread⁽¹⁾							3.25	%						2.97	%
Net interest-earning assets⁽²⁾		129,714								116,368
Net interest margin⁽³⁾							3.49	%						3.58	%
Average of interest-earning assets to interest-bearing liabilities		169.29	%							180.39	%

(1)	Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2)	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by total interest-earning assets.

Table of Contents

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in average rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior period average rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.


	For Three Months Ended June 30,
	2021 vs.2020
	Increase (Decrease) Due to				Total Increase
	Volume		Rate		(Decrease)

	(In thousands)
Interest-earning assets:
Loans	$	(23)		116	$	93
Available for sale securities		(15)		(74)		(89)
Interest-bearing deposits		3		9		12
Other equity investments		—		9		9
Total interest-earning assets	$	(35)	$	60	$	25

Interest-bearing liabilities:
Demand accounts	$	3	$	(3)	$	—
Money market accounts		44		(57)		(13)
Savings accounts		7		(2)		5
Health savings accounts		—		(1)		(1)
Certificates of deposit		28		(166)		(138)
Total deposits	$	82	$	(229)	$	(147)
Borrowings		(22)		(9)		(31)
Total interest-bearing liabilities		60		(238)		(178)
Change in net interest income	$	(95)	$	298	$	203


	For Six Months Ended June 30,
	2021 vs. 2020
	Increase (Decrease) Due to				Total Increase
	Volume		Rate		(Decrease)

	(In thousands)
Interest-earning assets:
Loans	$	219	$	311	$	530
Available for sale securities		52		(144)		(92)
Interest-bearing deposits		340		(382)		(42)
Other equity investments		14		(26)		(12)
Total interest-earning assets	$	625	$	(241)	$	384

Interest-bearing liabilities:
Demand accounts	$	8	$	(11)	$	(3)
Money market accounts		105		(188)		(83)
Savings accounts		14		(6)		8
Health savings accounts		—		(5)		(5)
Certificates of deposit		8		(306)		(298)
Total deposits	$	135	$	(516)	$	(381)
Borrowings		(44)		(31)		(75)
Total interest-bearing liabilities		91		(547)		(456)
Change in net interest income	$	534	$	306	$	840

For Three Months Ended March 31,

2020 vs. 2019

Increase (Decrease) Due to

Total Increase


Volume

Rate

(Decrease)

(In thousands)
Interest-earning assets:






Loans

$
(82)

$
69

$
(13)
Available for sale securities

37

(26)

11
Interest-bearing deposits

65

(5)

60
Other equity investments

2

(3)

(1)
Total interest-earning assets

$
22

$
35

$
57

Interest-bearing liabilities:






Demand accounts

$
(9)

$
(12)

$
(21)
Money market accounts

12

10

22
Savings accounts

(1)

—

(1)
Health savings accounts

—

(1)

(1)
Certificates of deposit

(114)

(1)

(115)
Total deposits

$
(112)

$
(4)

$
(116)
Borrowings

(27)

—

(27)
Total interest-bearing liabilities

(139)

(4)

(143)
Change in net interest income

$
161

$
39

$
200

Table of Contents

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB-Chicago. At ~~March 31, 2020,~~June 30, 2021, we had ~~$11.5~~$8.5 million outstanding in advances from the ~~FHLB-Chicago. At March 31, 2020~~FHLB-Chicago and we had ~~$3.2~~an additional availability of $14.0 million ~~available additional~~of FHLB-Chicago advances based on the FHLB stock owned.

Additionally, at ~~March 31, 2020~~June 30, 2021 we had a $7 million federal funds rate line of credit with the Bankers’ Bank of Wisconsin, of which $0 was drawn at ~~March 31, 2020.~~June 30, 2021.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents and available-for-sale investment securities. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our current strategy to change our mix of deposits to become less reliant on certificates of deposit, we anticipate that we will continue to allow a significant portion of higher-costing certificates of deposit to run off at maturity. We also anticipate continued

~~Table of Contents~~

use of FHLB-Chicago advances as well as continuing to utilize brokered certificates of deposit and online sources, as needed, to fund future loan growth and our operations.

At ~~March 31, 2020,~~June 30, 2021, we exceeded all of our regulatory capital requirements with a Tier 1 leverage capital level of ~~$72.2~~$74.6 million, or ~~26.1%~~21.7% of adjusted total assets, which is above the well-capitalized required level of ~~$13.8~~$17.2 million, or 5.0%; and total risk-based capital of ~~$74.5~~$77.1 million, or ~~36.0%~~34.7% of risk-weighted assets, which is above the well-capitalized required level of ~~$20.7~~$22.2 million, or 10.0%. Management is not aware of any conditions or events since ~~March 31, 2020,~~June 30, 2021, that would change our category.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule ~~13a‑15(e)~~13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of ~~March 31, 2020.~~June 30, 2021. Based on that evaluation, the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the ~~quarter~~period ended ~~March 31, 2020,~~June 30, 2021, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

3841

Table of Contents

Part II – Other Information

Item 1. Legal Proceedings

We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at ~~March 31, 2020,~~June 30, 2021, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

Item 1A. Risk Factors

The presentation of Risk Factors is not required for smaller reporting companies like FFBW, Inc.

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

(a)

There were no sales of unregistered securities during the period covered by this Report.

(b)

Not applicable.

(c)

~~There were no~~On January 27, 2021 the Company’s Board of Directors authorized the repurchase of up to 769,271 shares of the Company’s common stock, representing approximately 10% of the Company’s then outstanding shares. Repurchases will be made from time to time in the open market, through block trades, in privately negotiated stock purchases or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. Such repurchases will be made at management’s discretion at prices management considers to be attractive and in the best interest of ~~equity securities during~~both the ~~period covered by this Report.~~

Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital and the Company’s financial performance. Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Securities and Exchange Commission and other applicable legal requirements.

The table below sets forth the Company’s common stock repurchases during the three months ended June 30, 2021.


					(d)
				(c)	Maximum number
				Total number of	of
				shares	shares that may yet
	(a)	(b)		purchased as part	be
	Total number of	Average		of publicly	purchased under
	shares	price paid		announced plans or	the plans
Period	purchased	per share		programs	or programs
April 1 - April 30, 2021	87,741	$	11.29	87,741	272,777
May 1 - May 31, 2021	17,003	$	11.29	17,003	255,774
June 1 - June 30, 2021	158,396	$	11.39	158,396	97,378
Total	263,140			263,140

Table of Contents

Item 3.Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

~~Notapplicable.~~

Item 5. Other Information

None.

3943

Table of Contents

Item 6. Exhibits

3.1	Amended and Restated Articles of Incorporation of FFBW⁽¹⁾
3.2	Bylaws of FFBW⁽²⁾
4	Form of Common Stock Certificate⁽²⁾
31.1	Certification required pursuant to Section302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification required pursuant to Section302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section906 of the Sarbanes-Oxley Act of 2002.
	101.INS XBRL Instance Document
	101.SCH XBRL Taxonomy Extension Schema Document
	101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB XBRL Taxonomy Extension Label Linkbase Document
	101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

(1)

Incorporated by reference to pre-effective amendment No. 1 to the Registration Statement on Form ~~S‑1~~S-1 (file no. ~~333‑233740)~~333-233740), filed on November 1, 2019.

(2)

Incorporated by reference to the Registration Statement on Form ~~S‑1~~S-1 (file no. ~~333‑233740)~~333-233740), filed on September 13, 2019.

4044

Table of Contents

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		FFBW,Inc.
		~~FFBW, Inc.~~

Date: ~~May 8, 2020~~August 6, 2021	By:	/s/Edward H. Schaefer
		Edward H. Schaefer
		President and Chief Executive Officer





Date: ~~May 8, 2020~~August 6, 2021	By:	/s/ ~~Nikola B. Schaumberg~~Steven L. Wierschem
		Steven L. Wierschem
		~~Nikola B. Schaumberg~~
		Chief Financial Officer

4145