S-1/A 1 tv531172_s1a.htm S-1/A

  

As filed with the Securities and Exchange Commission on October 28, 2019

 

  Registration No. 333-233708

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

PRE-EFFECTIVE

AMENDMENT NO. 1 TO THE

 

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

Cincinnati Bancorp, Inc.

Cincinnati Federal 401(k) Profit Sharing Plan and Trust

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland  6035  84-2848636
(State or Other Jurisdiction of  (Primary Standard Industrial  (I.R.S. Employer
Incorporation or Organization)  Classification Code Number)  Identification Number)

 

6581 Harrison Avenue

Cincinnati, Ohio 45247

(513) 574-3025

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

Joseph V. Bunke

President

Cincinnati Bancorp, Inc.

6581 Harrison Avenue

Cincinnati, Ohio 45247

(513) 574-3025

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

Copies to:

Kip A. Weissman, Esq.

Victor L. Cangelosi, Esq.

Luse Gorman, PC

5335 Wisconsin Avenue, N.W., Suite 780

Washington, D.C. 20015

(202) 274-2028

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

 

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

 

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

 

Large accelerated filer¨  Accelerated filer¨     
Non-accelerated filerx  Smaller reporting companyx  Emerging growth company x

 

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 7(a)(2)(B) of the Securities Act: ¨

 

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered Amount to be Registered Proposed Maximum Offering Price Per Share Proposed Maximum Aggregate Offering Price Amount of Registration Fee
Common Stock, $0.01 par value per share 2,975,625 shares $10.00 $29,756,250 (1) $3,607.00 (2)
Participation Interests 413,032 (3)     (3)
(1)Estimated solely for the purpose of calculating the registration fee.
  (2) Previously paid.
(3) The securities to be purchased by the Cincinnati Federal 401(k) Profit Sharing Plan and Trust are included in the amount shown for the common stock. Accordingly, no separate fee is required for the participation interests.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 

 

Prospectus Supplement

 

CINCINNATI FEDERAL 401(k) PLAN

 

Offering of Participation Interests in up to 413,032 Shares

of

CINCINNATI BANCORP, INC.

Common Stock

 

 

Cincinnati Bancorp, Inc., a new Maryland corporation, is offering shares of common stock for sale at $10.00 per share in connection with the conversion of CF Mutual Holding Company from the mutual holding company to the stock holding company form of organization. The shares being offered represent the ownership interest in Cincinnati Bancorp, an existing federal corporation, currently owned by CF Mutual Holding Company. Cincinnati Bancorp’s common stock currently trades on the OTC Pink Marketplace (OTCPK) under the trading symbol “CNNB.” We have applied to list the shares of Cincinnati Bancorp, Inc. common stock on the Nasdaq Capital Market under the symbol “CNNB.”

 

In connection with the offering, Cincinnati Federal is allowing participants in the Cincinnati Federal 401(k) Plan (the “401(k) Plan”) to invest all or a portion of their account balances in Cincinnati Bancorp, Inc. common stock. Based upon the value of the 401(k) Plan assets at June 30, 2019, the trustee of the 401(k) Plan could purchase up to 413,032 shares of Cincinnati Bancorp, Inc. common stock, at the purchase price of $10.00 per share. This prospectus supplement relates to the election of 401(k) Plan participants to direct the trustee of the 401(k) Plan to invest all or a portion of their 401(k) Plan account balances in Cincinnati Bancorp, Inc. common stock at the time of the stock offering.

 

Before you consider investing, you should read the prospectus of Cincinnati Bancorp, Inc., dated [date], which is attached to this prospectus supplement. It contains detailed information regarding the conversion, the stock offering of Cincinnati Bancorp, Inc., and the financial condition, results of operations and business of Cincinnati Federal. This prospectus supplement provides information regarding the 401(k) Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference.

 

________________________________

 

For a discussion of risks that you should consider, see “Risk Factors” in this prospectus supplement, “Risk Factors” beginning on page [1] of the attached prospectus, and “Notice of Your Rights Concerning Employer Securities” in this prospectus supplement.

 

The interests in the 401(k) Plan and the offering of the shares of Cincinnati Bancorp, Inc. common stock have not been approved or disapproved by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission or any other federal or state agency. Any representation to the contrary is a criminal offense.

 

The securities offered by this prospectus supplement are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

 

This prospectus supplement may be used only in connection with offers and sales, by Cincinnati Bancorp, Inc., in the offering of Cincinnati Bancorp, Inc. common stock that may be acquired within the 401(k) Plan. No one may use this prospectus supplement to reoffer or resell interests in shares of Cincinnati Bancorp, Inc. common stock acquired through the 401(k) Plan.

 

   

 

 

You should rely only on the information contained in this prospectus supplement and the attached prospectus. Cincinnati Bancorp, Inc., Cincinnati Federal and the 401(k) Plan have not authorized anyone to provide you with different information.

 

This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the attached prospectus nor any sale of Cincinnati Bancorp, Inc. common stock shall under any circumstances imply that there has been no change in the affairs of Cincinnati Bancorp, Cincinnati Federal or the 401(k) Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.

 

The date of this prospectus supplement is [date].

 

 

   

 

 

TABLE OF CONTENTS

 

RISK FACTORS 1
   
THE OFFERING 1
   
Securities Offered 1
Election to Purchase Cincinnati Bancorp, Inc. Common Stock 2
Purchase Priorities 2
Purchases in the Stock Offering and Oversubscriptions 4
Composition of the Cincinnati Bancorp, Inc. Stock Fund 5
Minimum and Maximum Investment 6
Value of 401(k) Plan Assets 7
How to Order Common Stock Through the 401(k) Plan During the Offering 7
Special Investment Election Form Delivery Deadline 8
Irrevocability of Transfer Direction 8
Future Direction to Purchase and Sell Common Stock 8
Voting Rights of Common Stock 9
   
DESCRIPTION OF THE 401(k) PLAN 9
   
Introduction 9
Eligibility and Participation 10
Contributions under the 401(k) Plan 10
Limitations on Contributions 11
Benefits Under the 401(k) Plan 11
Investment of Contributions and Account Balances 12
Performance History 13
Description of the Investment Funds 14
Cincinnati Bancorp, Inc. Stock Fund 18
Administration of the 401(k) Plan 19
Amendment and Termination 20
Merger, Consolidation or Transfer 20
Federal Income Tax Consequences 20
Notice of Your Rights Concerning Employer Securities 21
Additional Employee Retirement Income Security Act, as amended, Considerations 22
Securities and Exchange Commission Reporting and Short-Swing Profit Liability 23
Financial Information Regarding Plan Assets 23
   
LEGAL OPINION 23

 

   

 

 

RISK FACTORS

 

In addition to considering the material risks disclosed under “Risk Factors” beginning on page [1] of the attached prospectus, you should also consider the following:

 

If you elect to purchase Cincinnati Bancorp, Inc. common stock using your 401(k) Plan account balance and the stock offering is oversubscribed, you will bear the risk of price changes in the investment funds of the 401(k) Plan.

 

If you elect to purchase Cincinnati Bancorp, Inc. common stock using your 401(k) Plan account balance, the 401(k) Plan trustee will sell the designated percentage of your designated investment funds (other than the existing Cincinnati Bancorp Stock Fund) within your 401(k) Plan account based on your investment election. If the stock offering is oversubscribed (i.e., there are more orders for Cincinnati Bancorp, Inc. common stock than shares available for sale in the stock offering) and the 401(k) Plan trustee cannot use any or all of the funds you allocate to purchase Cincinnati Bancorp, Inc. common stock, the funds that cannot be invested in Cincinnati Bancorp, Inc. common stock, and any interest earned on such funds, will be reinvested in your existing investment funds of the 401(k) Plan (other than the existing Cincinnati Bancorp Stock Fund), according to your then existing investment election (i.e., in proportion to your investment direction for future contributions). During the period from when the 401(k) Plan trustee sells a percentage of each of your investment funds until reinvestment of some or all of those funds back into your investment funds as a result of an oversubscription, you will bear the risk of price changes in the investment funds. It is possible that during this period some or all of the investment funds may have increased in value more than the amount of any interest you may have earned on the reinvested funds before reinvestment. See “The Offering – Purchases in the Stock Offering and Oversubscriptions” in this prospectus supplement.

 

THE OFFERING
 
Securities Offered

Cincinnati Bancorp, Inc. is offering participants of the 401(k) Plan the opportunity to purchase participation interests in shares of Cincinnati Bancorp, Inc. common stock through the 401(k) Plan. A “participation interest” represents your indirect ownership of stock units that are acquired by the 401(k) Plan pursuant to your election, and is the equivalent to one share of Cincinnati Bancorp, Inc. common stock. In this prospectus supplement, “participation interests” are referred to as shares of Cincinnati Bancorp, Inc. common stock. At the purchase price of $10.00 per share, the 401(k) Plan may acquire up to 413,032 shares of Cincinnati Bancorp, Inc. common stock in the stock offering, based on the approximate fair market value of the 401(k) Plan’s assets as of June 30, 2019.

 

Only employees of Cincinnati Federal may become participants in the 401(k) Plan and only participants may purchase shares of Cincinnati Bancorp, Inc. common stock through the 401(k) Plan. Your investment in shares of Cincinnati Bancorp, Inc. common stock in connection with the stock offering is subject to the purchase priorities listed below.

 

   

 

 

   

Information regarding the 401(k) Plan is contained in this prospectus supplement and information with respect to the financial condition, results of operations and business of Cincinnati Bancorp and Cincinnati Federal is contained in the accompanying prospectus. The address of the corporate/main office of Cincinnati Bancorp, Inc. and Cincinnati Federal is 6581 Harrison Avenue, Cincinnati, Ohio 45247 and the telephone number at this address is (513) 574-3025.

 

Address all questions about this prospectus supplement to Herbert Brinkman, Chief Financial Officer and Treasurer, at Cincinnati Federal; telephone: (513) 574-3025; email: hbrinkman@cincinnatifederal.com.

 

Direct all questions about the stock offering, the prospectus, or obtaining a stock order form to purchase stock in the offering outside the 401(k) Plan to the Stock Information Center at [#], Monday through Friday, 10:00 a.m. through 4:00 p.m., Eastern time. The Stock Information Center will be closed on bank holidays.

     
Election to Purchase Cincinnati Bancorp, Inc. Common Stock   In connection with the stock offering, you may elect to designate a percentage of your 401(k) Plan (other than the existing Cincinnati Bancorp Stock Fund) account balance (up to 100%) to be used to purchase shares of Cincinnati Bancorp, Inc. common stock in the stock offering.  The trustee of the 401(k) Plan will purchase Cincinnati Bancorp, Inc. common stock at $10.00 per share to be held as stock units, in accordance with your directions.  However, your directions are subject to purchase priorities and purchase limitations described below.
     
Purchase Priorities   All 401(k) Plan participants are eligible to elect to order Cincinnati Bancorp, Inc. common stock in the stock offering.  However, the elections are subject to the purchase priorities in the Plan of Conversion and Reorganization, which provides for a subscription offering and a community offering.  In the stock offering, purchase priorities are as follows and apply in case more shares of Cincinnati Bancorp, Inc. common stock are ordered than are available for sale (i.e., an “oversubscription”):

 

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Subscription Offering:

 

(1)          Each depositor of Cincinnati Federal with aggregate account balances of at least $50 at the close of business on June 30, 2018, get first priority.

 

(2)         Cincinnati Federal’s tax-qualified plans, including the employee stock ownership plan and the 401(k) Plan, get second priority.

 

(3)          Each depositor of Cincinnati Federal aggregate account balances of at least $50 at the close of business on September 30, 2019, get third priority.

 

(4)          Each depositor of Cincinnati Federal at the close of business on November 4, 2019, and each borrower each borrower of Cincinnati Federal at the close of business on January 21, 2015 and borrower of the former Kentucky Federal Savings and Loan Association at the close of business on October 12, 2018, whose borrowings, in each case, remained outstanding at the close of business on November 4, 2019, get fourth priority.

 

Community Offering:

 

Shares of Cincinnati Bancorp, Inc. common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering,” with a preference given to (i) natural persons (including trusts of natural persons) in Butler, Clermont, Hamilton and Warren counties in Ohio, Dearborn County in Indiana, and Boone, Campbell and Kenton counties in Kentucky, (ii) Cincinnati Bancorp’s public stockholders at the close of business on November 4, 2019; and (iii) other members of the general public.

 

If you fall into purchase priority (1), (3) or (4), you have subscription rights to purchase Cincinnati Bancorp, Inc. common stock in the subscription offering. You may use up to 100% of your 401(k) Plan account balance (other the existing Cincinnati Bancorp Stock Fund) to pay for the shares of Cincinnati Bancorp, Inc. common stock.

 

If you do not fall into purchase priority (1), (3) or (4), you may place an order for the purchase of Cincinnati Bancorp, Inc. common stock through the 401(k) Plan in the Community Offering, if any, using the enclosed Special Investment Election Form, to be completed and submitted in the manner described below under “How to Order Common Stock Through the 401(k) Plan During the Offering.”

 

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If you fall into purchase priority (1), (3) or (4), you will separately receive a stock offering materials package in the mail, including a stock order form. You may use the stock order form to order shares of Cincinnati Bancorp, Inc. common stock outside the 401(k) Plan. Refer to the prospectus for information on how to submit such orders.

 

Additionally, or instead of placing an order outside of the 401(k) Plan using a stock order form, you may place an order for the purchase of Cincinnati Bancorp, Inc. common stock through the 401(k) Plan, using the enclosed Special Investment Election Form, to be completed and submitted in the manner described below under “How to Order Common Stock Through the 401(k) Plan During the Offering.”

     
Purchases in the Stock Offering and Oversubscriptions   The trustee of the 401(k) Plan will order shares of Cincinnati Bancorp, Inc. common stock in the stock offering based on the designated percentage set forth on your Special Investment Election Form.  Specifically, on or about the second business day following the conclusion of the 401(k) Plan Offering Period (as defined below), each of your current investments funds within your 401(k) Plan account (other than the existing Cincinnati Bancorp Stock Fund) will be liquidated based on your designated percentage, and the proceeds (rounded down to the nearest $10.00 increment) will be transferred to an interest-bearing account held by the 401(k) Plan pending the formal closing of the stock offering several weeks later.  We will determine whether all, or any portion of, your order will be filled (if the offering is oversubscribed, you may not receive any, or all, of your order, depending on your purchase priority, as described above).  The amount that can be used toward your order will be applied to the purchase of shares of Cincinnati Bancorp, Inc. common stock.  Following the formal closing of the stock offering, your purchased shares of Cincinnati Bancorp, Inc. common stock will be reflected in the new Cincinnati Bancorp, Inc. Stock Fund, which will also then included converted shares of common stock of Cincinnati Bancorp.  Your ownership interest in the Cincinnati Bancorp, Inc. Stock Fund will initially be based on the number of shares of Cincinnati Bancorp, Inc. common stock that you purchased through the 401(k) Plan in the stock offering, plus the converted shares of common stock of Cincinnati Bancorp and any cash from the existing Cincinnati Bancorp Stock Fund.  See “Composition of the Cincinnati Bancorp, Inc. Stock Fund” for further details.  

 

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If the stock offering is oversubscribed (i.e., there are more orders for Cincinnati Bancorp, Inc. common stock than shares available for sale in the stock offering) and the trustee is unable to use the full amount allocated by you to purchase Cincinnati Bancorp, Inc. common stock in the stock offering, the amount that cannot be invested in Cincinnati Bancorp, Inc. common stock, and any interest earned on that amount, will be reinvested in the existing investment funds of the 401(k) Plan (other than the existing Cincinnati Bancorp Stock Fund), in accordance with your then existing investment election (in proportion to your investment direction for future contributions). The prospectus describes the allocation procedures in the event of an oversubscription.

 

If you choose not to direct the investment of your 401(k) Plan account balance towards the purchase of Cincinnati Bancorp, Inc. common stock in the stock offering, your account balance will remain invested in the investment funds of the 401(k) Plan as you previously directed.

     
Composition of the Cincinnati Bancorp, Inc. Stock Fund   Shares purchased by the 401(k) Plan in the stock offering will be transferred to the 401(k) Plan and held by the Cincinnati Bancorp, Inc. Stock Fund.  The Cincinnati Bancorp, Inc. Stock Fund is neither a mutual fund nor a diversified or managed investment option.  Rather, it is merely a recordkeeping mechanism established by the 401(k) Plan custodian to track the shares purchased by the participants in the stock offering through the 401(k) Plan.  The Cincinnati Bancorp, Inc. Stock Fund will initially consist of shares of Cincinnati Bancorp, Inc. common stock purchased by participants in the 401(k) Plan, which will be initially valued at $10.00 per share (i.e., the purchase price), plus any converted shares and cash from the existing Cincinnati Bancorp Stock Fund.  Following the stock offering, the Cincinnati Bancorp, Inc. Stock Fund will maintain a cash component for liquidity purposes in order to facilitate daily transactions, such as investment transfers or distributions from the Cincinnati Bancorp, Inc. Stock Fund.  Your ownership interest in the Cincinnati Bancorp, Inc. Stock Fund will be denominated in stock units.  

 

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After the stock offering, a stock unit will consist of a percentage interest in both Cincinnati Bancorp, Inc. common stock and cash held in the Cincinnati Bancorp, Inc. Stock Fund. Stock unit values (similar to the stock’s share price) and the number of stock units (similar to number of shares) are used to designate the dollar value of the participant’s interest in the Cincinnati Bancorp, Inc. Stock Fund. Each day the stock unit value of the Cincinnati Bancorp, Inc. Stock Fund will be determined by dividing the total market value of the fund at the end of the day by the total number of stock units held in the fund by all participants as of the previous day’s end. The change in stock unit value reflects the day’s change in stock price of Cincinnati Bancorp, Inc. common stock, any cash dividends accrued and the interest earned on the cash component of the Cincinnati Bancorp, Inc. Stock Fund, less any investment management fees (if applicable). Investment in Cincinnati Bancorp, Inc. common stock involves special risks related to investments in shares of Cincinnati Bancorp, Inc. common stock. For a discussion of material risks you should consider, see the “Risk Factors Section” of this prospectus supplement, the “Risk Factors” section of the accompanying prospectus, and the section of this prospectus supplement called “Notice of Your Rights Concerning Employer Securities” (see below).

 

The market value and stock unit holdings of your 401(k) Plan account in the Cincinnati Bancorp, Inc. Stock Fund will be reported to you on your quarterly statements, which may be accessed through your participant website.

     
Minimum and Maximum Investment  

In connection with the stock offering, the 401(k) Plan will permit you to use up to 100% of your 401(k) Plan account balance (other than your account balance in the existing Cincinnati Bancorp Stock Fund) for the purchase of Cincinnati Bancorp, Inc. common stock.

 

The trustee of the 401(k) Plan will then subscribe for shares of the Cincinnati Bancorp, Inc. common stock offered for sale in the stock offering, in accordance with each participant’s direction. The trustee will pay $10.00 per share, which will be the same price paid by all other persons who purchase shares in the subscription and community offerings. In order to purchase Cincinnati Bancorp, Inc. common stock through the 401(k) Plan, the minimum investment will be the purchase of 25 shares of Cincinnati Bancorp, Inc. common stock, which equals $250. The prospectus describes maximum purchase limits for investors in the stock offering.

 

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Value of 401(k) Plan Assets   The market value of the assets of the 401(k) Plan is approximately $4,130,327.
     
How to Order Common Stock Through the 401(k) Plan During the Offering  

Enclosed is a Special Investment Election Form on which you can make a special election to purchase Cincinnati Bancorp, Inc. common stock in the stock offering through the Cincinnati Bancorp, Inc. Stock Fund. This is done by following the procedures described below. Note the following stipulations concerning this election:

 

·            Using your Special Investment Election Form, you can designate a percentage (up to 100%) of your total 401(k) Plan account balance to be used to order Cincinnati Bancorp, Inc. common stock.

 

·            Your election is subject to a minimum purchase of 25 shares of Cincinnati Bancorp, Inc. common stock at the purchase price of $10.00 per share.

 

·            Your election, plus any order you placed outside the 401(k) Plan using a stock order form, are together subject to a maximum purchase limit. The maximum number of shares of Cincinnati Bancorp, Inc. common stock that can be ordered by any person in the offering, or persons exercising subscription rights through a single account held jointly, is 20,000 shares, or $200,000, and no person together with an associate or group of persons acting in concert may purchase more than 60,000 shares or $600,000.

 

·           The election period for the 401(k) Plan ends at 2:00 p.m., Eastern time on December 17, 2019 (the “401(k) Plan Offering Period”).

 

·           During the stock offering period, you will continue to be able to transfer amounts that are not directed to be used to purchase Cincinnati Bancorp, Inc. common stock among all other investment funds. However, you will not be permitted to change the investment amounts that you designated to be used to purchase Bancorp, Inc. common stock on your Special Investment Election Form.

 

·           As soon as practicable following the 401(k) Plan Offering Period (most likely on or about the second day), the 401(k) Plan trustee will sell a percentage of each of your investment funds within your 401(k) Plan account based on the percentage designated in your Special Investment Election Form. Thereafter, the proceeds (rounded down to the nearest $10.00 increment) will be transferred to an interest bearing account held by the 401(k) Plan pending the formal closing of the stock offering several weeks after the 401(k) Plan Offering Period. 

 

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    ·           Following the formal closing of the stock offering, your purchased shares of Cincinnati Bancorp, Inc. common stock will be reflected in the Cincinnati Bancorp, Inc. Stock Fund, which will be denominated in stock units.  Any remaining dollar amounts remaining in the interest bearing account because the amounts could not be used by the trustee to purchase Cincinnati Bancorp, Inc. common stock in the stock offering will be reinvested in the existing investment funds of the 401(k) Plan, in accordance with your then existing investment election (in proportion to your investment direction for future contributions).  
     
Special Investment Election Form Delivery Deadline  

If you wish to elect to order Cincinnati Bancorp, Inc. common stock through the 401(k) Plan, you must return your Special Investment Election Form to Herbert Brinkman, Chief Financial Officer and Treasurer, at Cincinnati Federal, 6581 Harrison Avenue, Cincinnati, Ohio 45247, no later than the deadline.

 

Address all questions about this prospectus supplement to Herbert Brinkman, Chief Financial Officer and Treasurer, at Cincinnati Federal; telephone: (513) 574-3025; email: hbrinkman@cincinnatifederal.com.

 

Irrevocability of Transfer Direction  

Once you make an election to purchase shares of Cincinnati Bancorp, Inc. common stock in the stock offering through the 401(k) Plan, you may not change your election. Your election is irrevocable. You will, however, continue to be able to transfer amounts not directed towards the purchase of shares of Cincinnati Bancorp, Inc. common stock among all of the other investment funds in the 401(k) Plan on a daily basis.

 

Future Direction to Purchase and Sell Common Stock   You will be able to purchase Cincinnati Bancorp, Inc. common stock after the stock offering through the 401(k) Plan.  You will also be able to sell your interest in the Cincinnati Bancorp, Inc. Stock Fund (subject to the restrictions below).

 

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    After the stock offering, you will again have complete access to any amounts you directed towards the purchase of shares in the stock offering.  For example, after the stock offering closes, you may sell any units you purchased in the offering. Special restrictions may apply to purchasing or selling shares of Cincinnati Bancorp, Inc. common stock by the participants who are subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, relating to the purchase and sale of securities by officers, directors and principal stockholders of Cincinnati Bancorp, Inc.  Note that if you are an officer of Cincinnati Federal that is restricted by federal or state regulations from selling shares of Cincinnati Bancorp, Inc. common stock acquired in the stock offering for one year, the Cincinnati Bancorp, Inc. common stock that you purchased in the stock offering through the 401(k) Plan (and held by the Cincinnati Bancorp, Inc. Stock Fund) will not be tradable until the one-year trading restriction has lapsed.
     
Voting Rights of Common Stock   The 401(k) Plan provides that you may direct the trustee as to how to vote your interest in the shares of Cincinnati Bancorp, Inc. common stock held by Cincinnati Bancorp, Inc. Stock Fund.  If the trustee does not receive your voting instructions, the administrator of the 401(k) Plan will direct the trustee to vote your shares in the same proportion as the voting instructions received from other participants related to their shares of Cincinnati Bancorp, Inc. common stock held by the Cincinnati Bancorp, Inc. Stock Fund, provided that such vote is made in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  All voting instructions will be kept confidential.

 

DESCRIPTION OF THE 401(k) PLAN

 

Introduction

 

Cincinnati Federal originally adopted the predecessor plan to the 401(k) Plan effective as of January 1, 1986, and amended and restated the 401(k) Plan effective April 1, 2015. The 401(k) Plan is a single-employer, tax-qualified plan with a cash or deferred compensation feature established in accordance with the requirements under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

Cincinnati Federal intends that the 401(k) Plan, in operation, will comply with the requirements under Section 401(a) and Section 401(k) of the Code. Cincinnati Federal will adopt any amendments to the 401(k) Plan that may be necessary to ensure the continuing qualified status of the 401(k) Plan under the Code and applicable Treasury Regulations.

 

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Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The 401(k) Plan is an “individual account plan” other than a “money purchase pension plan” within the meaning of ERISA. As such, the 401(k) Plan is subject to all of the provisions of Title I (Protection of Employee Benefit Rights) and Title II (Amendments to the Code Relating to Retirement Plans) of ERISA, except to the funding requirements contained in Part 3 of Title I of ERISA, which by their terms do not apply to an individual account plan (other than a money purchase plan). The Plan is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding requirements contained in Title IV of ERISA are not applicable to participants or beneficiaries under the 401(k) Plan.

 

Reference to Full Text of 401(k) Plan. The following portions of this prospectus supplement summarize certain provisions of the 401(k) Plan. They are not complete and are qualified in their entirety by the full text of the 401(k) Plan. Copies of the 401(k) Plan are available to all employees by filing a request with the 401(k) Plan Administrator c/o Cincinnati Federal, Attn: Herb Brinkman. You are urged to read carefully the full text of the 401(k) Plan.

 

Eligibility and Participation

 

As an employee of Cincinnati Federal, you are eligible to become a participant in the 401(k) Plan on the entry date coinciding with or immediately following completion of three months of service and attainment of age 20. The entry dates under the 401(k) Plan are the first day of each calendar month following satisfaction of the eligibility requirements.

 

As of June 30, 2019, there were approximately 54 active and former employees in the 401(k) Plan.

 

Contributions under the 401(k) Plan

 

Elective Deferrals. Participants are permitted to defer on a pre-tax basis any whole percentage of Compensation, from 1% up to 85%, subject to certain restrictions imposed by the Code, and to have that amount contributed to the 401(k) Plan on your behalf. You are also permitted to make Roth (i.e., after-tax) elective deferrals to the 401(k) Plan. Both your pre-tax and Roth deferrals are subject to certain restrictions imposed by the Code. For purposes of the 401(k) Plan, “Compensation” means your Section 3401(a) wages. In addition, any pre-tax contributions that you make to a 401(k) plan and pre-tax contributions to a Section 125 cafeteria plan and qualified transportation fringe benefits are included in Compensation. In 2019, the Compensation of each participant taken into account under the 401(k) Plan is limited to $280,000. (Limits established by the Internal Revenue Service are subject to increase pursuant to an annual cost-of-living adjustment, as permitted by the Code). Canceling or changing your contribution percentage can be accomplished either over the telephone or over the internet at any time.

 

Catch-up Contributions. If you have made the maximum amount of elective deferrals allowed by the 401(k) Plan or other legal limits and you have attained at least age 50 (or will reach age 50 before the end of the Plan Year, which is December 31), you are also eligible to make an additional catch-up contribution. In 2019, the maximum catch-up contribution is $6,000. You may authorize your employer to withhold a specified dollar amount of your compensation for this purpose.

 

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Employer Safe Harbor Contribution. Cincinnati Federal makes a safe harbor nonelective contribution equal to 3% of your compensation. The safe harbor nonelective contribution is fully vested at all times.

 

Discretionary Employer Contributions. Discretionary employer contributions may be made for each plan year in an amount determined by Cincinnati Federal. Discretionary employer contributions will be allocated to your account based on the ratio of your compensation during the plan year for which the contribution is made to the total compensation of all employees eligible for a discretionary employer contribution for that year.

 

Limitations on Contributions

 

Contribution Limits. For the Plan Year beginning January 1, 2019, the amount of your before-tax contributions may not exceed $19,000 per calendar year, or $25,000, if you are eligible to make catch-up contributions. Contributions in excess of this limit are known as excess deferrals. If you defer amounts in excess of this limitation, your gross income for federal income tax purposes will include the excess in the year of the deferral. In addition, unless the excess deferral is distributed before April 15 of the following year, it will be taxed again in the year distributed. Income on the excess deferral distributed by April 15 of the immediately succeeding year will be treated, for federal income tax purposes, as earned and received by you in the tax year in which the contribution is made.

 

The total amount of contributions that you make and any contribution your employer makes on your behalf to your account in one year is limited to the lesser of 100% of your compensation or $56,000, or if applicable, $62,000 including catch-up contributions.

 

Catch-up Contributions. For 2019, the maximum catch-up contribution is $6,000.

 

Rollovers. You may make a rollover contribution of an eligible rollover distribution from any other qualified retirement plan or an individual retirement arrangement (“IRA”). These funds will be maintained in a separate rollover account in which you will have a nonforfeitable vested interest.

 

Benefits Under the 401(k) Plan

 

Vesting. At all times, you have a fully vested, nonforfeitable interest in your elective deferral contributions, safe-harbor matching and safe harbor nonelective contributions and rollover contributions. You will become vested in discretionary employer contributions at the rate of 20% per year, commencing upon completion of two years of service, and will become 100% vested upon completion of six years of service. You will also become 100% vested in your entire account in the event you attain normal retirement age (age 65), you die or you are disabled. If you terminate employment before you are 100% vested in your account, the non-vested portion of your account will be forfeited after the earlier of the date you incur five consecutive one-year breaks in service or the date you receive a distribution of the vested portion of your account. However, if you are reemployed by Cincinnati Federal before incurring five consecutive one-year breaks in service and you pay back to the Plan within five years of reemployment in a cash lump sum the full amount distributed to you from your account, your forfeited employer contributions will be restored to you.

 

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Distribution at Termination of Employment. You (or your beneficiary, in the event of your death) will be entitled to receive a distribution of the vested amounts in your account when your employment terminates for any reason. Your benefit will be equal to the vested balance of your account. You will receive payment of your benefit in a lump sum. You may request a partial distribution of the vested portion of your account; the minimum amount will be $1,000. You may be eligible to elect a direct rollover of your distribution to an IRA or another qualified plan to avoid current taxation of your benefit. The Plan will make involuntary cash-out distributions of vested account balances of $1,000 or less. In determining the value of your vested account balance, the Plan will include rollover contributions. If the value of your vested account balance exceeds $1,000, you must consent to any distribution of such account balance. If you are not a 5% or more owner of your employer, your required benefit commencement date is the April 1st following the close of the year in which the later occurs: you attain age 70-½ or you terminate employment.

 

Distribution after Death of Participant. In the event of your death, the value of your entire account will be payable to your beneficiary. If your spouse is your beneficiary, distribution must begin by December 31 of the calendar year immediately following the calendar year in which you died, or by December 31 of the calendar year in which you would have attained age 70-½, if later.

 

Investment of Contributions and Account Balances

 

All amounts credited to your accounts under the 401(k) Plan are held in the 401(k) Plan trust (the “Trust”), which is administered by the trustee appointed by Cincinnati Federal’s Board of Directors. Before the effective date of the stock offering, you are currently given the opportunity to direct the investment of your account into one or more of the following investment options:

 

Federated Govt Obligations Fund

American Century Govt Bond Fund

JPMorgan Core Bond Fund

Pioneer Strategic Income Fund

Blackrock Equity Dividend Fund

Clearbridge Mid Cap Fund

DWS RREEF Real Estate Securities Fund

Invesco Comstock Fund

Invesco Oppenheimer Developing Mkts Fund

Invesco Oppenheimer GI Fund

Invesco S&P 500 Index Fund

 

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MainStay Large Cap Growth Fund

MainStay MacKay U.S. Small Cap Core Fund

Prudential Jennison Mid-Cap Growth Fund

Prudential Jennison Small Company Fund

Victory Sycamore Established Value Fund

Victory Sycamore Small Company Opp Fund

Virtus Vontobel Foreign Opps. Fund

Wells Fargo Precious Metals Fund

BlackRock Global Allocation Fund

Even Keel Multi-Asset Managed Risk Fund

JPMorgan SmartRetirement 2020 Fund

JPMorgan SmartRetirement 2025 Fund

JPMorgan SmartRetirement 2030 Fund

JPMorgan SmartRetirement 2035 Fund

JPMorgan SmartRetirement 2040 Fund

JPMorgan SmartRetirement 2045 Fund

JPMorgan SmartRetirement 2050 Fund

JPMorgan SmartRetirement 2055 Fund

JPMorgan SmartRetirement 2060 Fund

JPMorgan SmartRetirement Income Fund

Cincinnati Bancorp Stock Fund

 

Qualified Default Investment Alternative. For participants who are automatically enrolled in the 401(k) Plan, or otherwise fail to direct how their 401(k) Plan contributions are to be invested, contribution amounts will be invested in the 401(k) Plan’s “qualified default investment alternative” until such time as the participant provides investment direction. The 401(k) Plan’s qualified default investment alternative is the JP Morgan SmartRetirement Fund Series. The specific fund selected for a given participant will be the fund which approximately coincides with or next follows the year in which the participant will attain age 65.

 

In connection with the stock offering, the 401(k) Plan now provides that, in addition to the investment options specified above, you may direct the trustee, or its representative, to invest all or a portion of your account in the Cincinnati Bancorp, Inc. Stock Fund.

 

Performance History

 

The following table provides performance data with respect to the above investment funds as of June 30, 2019:

  

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       Total Returns as of June 30, 2019 
Fund Name  3 Month
Return as of
June 30, 2019
   1 Year   3 Year   5 Year   10 Year 
Federated Govt Obligations Fund   0.58%   2.17%   2.17%   N/A    0.88%
American Century Govt Bond Fund   2.43%   6.10%   1.08%   1.82%   2.46%
JPMorgan Core Bond Fund   2.96%   7.48%   2.13%   2.72%   3.83%
Pioneer Strategic Income Fund   3.02%   6.81%   4.07%   3.07%   6.03%
Blackrock Equity Dividend Fund   4.67%   7.31%   11.27%   8.41%   12.14%
Clearbridge Mid Cap Fund   4.49%   6.77%   10.37%   6.20%   12.50%
DWS RREEF Real Estate Securities Fund   2.12%   13.42%   4.81%   8.19%   15.23%
Invesco Comstock Fund   2.83%   0.98%   11.93%   6.20%   12.62%
Invesco Oppenheimer Developing Mkts Fund   2.75%   2.71%   12.10%   2.45%   7.93%
Invesco Oppenheimer GI Fund   3.96%   3.33%   15.98%   7.77%   11.81%
Invesco S&P 500 Index Fund   4.18%   9.84%   13.54%   10.09%   14.07%
MainStay Large Cap Growth Fund   4.55%   11.49%   19.58%   13.04%   15.23%
MainStay MacKay U.S. Small Cap Core Fund   -0.93%   -6.74%   6.18%   3.86%   11.61%
Prudential Jennison Mid-Cap Growth Fund   6.88%   13.79%   13.96%   8.79%   13.46%
Prudential Jennison Small Company Fund   4.17%   -1.75%   11.26%   6.68%   13.00%
Victory Sycamore Established Value Fund   4.64%   5.45%   10.77%   9.24%   14.62%
Victory Sycamore Small Company Opp Fund   5.17%   2.99%   13.53%   9.18%   14.29%
Virtus Vontobel Foreign Opps. Fund   6.27%   5.49%   8.94%   5.05%   8.89%
Wells Fargo Precious Metals Fund   14.02%   15.25%   -4.08%   -1.24%   -1.71%
BlackRock Global Allocation Fund   2.80%   3.72%   6.20%   3.14%   6.31%
Even Keel Multi-Asset Managed Risk Fund         N/A      N/A      N/A      N/A      N/A 
JPMorgan SmartRetirement 2020 Fund   3.11%   5.74%   6.82%   4.75%   8.86%
JPMorgan SmartRetirement 2025 Fund   3.33%   5.80%   7.82%   5.27%   9.68%
JPMorgan SmartRetirement 2030 Fund   3.48%   5.82%   8.88%   5.71%   10.33%
JPMorgan SmartRetirement 2035 Fund   3.39%   5.27%   9.27%   5.82%   10.69%
JPMorgan SmartRetirement 2040 Fund   3.46%   5.15%   9.91%   6.10%   10.96%
JPMorgan SmartRetirement 2045 Fund   3.47%   5.17%   9.99%   6.15%   10.95%
JPMorgan SmartRetirement 2050 Fund   3.46%   5.17%   10.60%   6.73%   10.99%
JPMorgan SmartRetirement 2055 Fund   3.44%   5.17%   9.96%   6.14%   9.39%
JPMorgan SmartRetirement 2060 Fund   3.46%   5.27%   N/A    N/A    9.35%
JPMorgan SmartRetirement Income Fund   2.99%   5.65%   5.60%   3.86%   6.56%
Cincinnati Bancorp Stock Fund                         

 

Description of the Investment Funds

 

The following is a description of each fund:

 

Federated Govt Obligations Fund. The primary investment objective of this fund is to preserve principal while generating earnings at rates competitive over time with short-term high quality fixed income investments.

 

American Century Govt Bond Fund. This fund seeks high current income. It normally invests primarily in U.S. government debt securities., including U.S. Treasury securities and other securities issued or guaranteed by the U.S. government and its agencies and instrumentalities.

 

JPMorgan Core Bond Fund. This fund seeks to maximize total return income. It invests in a portfolio of investment-grade intermediate and long-term debt securities, primarily corporate bonds, U.S. Treasury obligations and other U.S. government and agency securities, and asset-backed, mortgage-related and mortgage-backed securities.

 

Pioneer Strategic Income Fund. This fund seeks a high level of current income. It normally invests primarily in debt securities issued or guaranteed by the U.S. government, its agencies or instrumentalities or non-U.S. government entities; debt securities of U.S. and non-U.S. corporate issuers; and mortgage-related securities.

 

Blackrock Equity Dividend Fund. This fund seeks long-term total return and current income. It normally invests primarily in a diversified portfolio of equity securities, most of which are dividend paying securities. It may invest in companies of any size, but will generally focus on large-cap securities. It may invest up to 25% in securities of foreign issuers.

 

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Clearbridge Mid Cap Fund. This fund seeks long-term capital growth. It normally invests primarily in equity securities, or other investments with similar economic characteristics of medium capitalization companies. It may invest a small percentage in foreign issuers.

 

DWS RREEF Real Estate Securities Fund. This fund seeks long-term capital appreciation and current income. It will invest primarily in equity securities of real estate investment trusts (REITS) and real estate companies. It may also invest a portion of assets in other types of securities. These securities may include short-term securities, bonds, notes, securities of companies not principally engaged in the real estate industry and other similar securities.

 

Invesco Comstock Fund. This fund seeks total return through growth of capital and current income. It normally invests primarily in common stocks and in derivatives and other instruments that have economic characteristics similar to such securities. It may invest in securities of issuers of any market cap; however, a substantial number of the issuers in which the fund invests are large-cap issuers.

 

Invesco Oppenheimer Developing Mkts Fund. This fund seeks capital appreciation. It mainly invests in common stocks of issuers in developing and emerging markets, throughout the world and at times it may invest up to 100% of its assets in foreign securities. It will invest in at least three developing markets. It focuses on companies with above average earnings growth.

 

Invesco Oppenheimer GI Fund. This fund seeks capital appreciation. It invests mainly in common stocks of U.S. and foreign companies. It can invest without limit in foreign securities and can invest in any country, including countries with developing or emerging markets, However, it currently emphasizes investments in developed markets. It can invest in companies of any size, but primarily invests in mid- and large-cap companies.

 

Invesco S&P 500 Index Fund. This fund seeks total return through growth of capital and current income. It normally invests primarily in common stocks of companies included in the S&P 500 Index, and in derivatives and other instruments that have economic characteristics similar to such securities. It invests in stocks in approximately the same proportion as they are represented in the Index.

 

MainStay Large Cap Growth Fund. This fund seeks long-term growth of capital. It normally invests primarily in large-cap returns over the long term. It typically invests substantially all of its investable assets in domestic securities, but is permitted to invest up to 20% of its net assets in foreign securities.

 

MainStay MacKay U.S. Small Cap Core Fund. This fund seeks long-term capital appreciation. It normally invests primarily in equity securities of small-cap U.S. companies, which include stocks common stocks, securities convertible into common stock, and exchange traded funds whose underlying securities are issued by small-cap companies. It may invest in mid-cap stocks.

 

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Prudential Jennison Mid-Cap Growth Fund. This fund seeks long-term capital appreciation. It normally invests primarily in equity and equity-related securities of medium-sized companies with the potential for above-average growth.

 

Prudential Jennison Small Company Fund. This fund seeks capital growth. It normally invests primarily in equity and equity-related securities of small, less well-known companies in a variety of different industries and sectors that are believed to be relatively undervalued.

 

Victory Sycamore Established Value Funds. This fund seeks long-term growth of capital. It primarily invests primarily in equity securities of companies with market capitalization within the range of companies in the Russell Midcap Index. It invests in companies believed to be high quality based on criteria such as market share position, profitability, balance sheet strength, competitive advantages, management competence and the ability to generate excess cash flow.

 

Victory Sycamore Small Company Opp Fund. This fund seeks capital appreciation. It primarily invests primarily in equity securities of small companies that are believed to be undervalued relative relatively undervalued.to their underlying earnings potential.

 

Virtus Vontobel Foreign Opps. Fund. This fund seeks long-term capital appreciation. It normally invests primarily in equity securities or equity-linked instruments of issuers located outside the United States, including in emerging markets countries. It seeks high-quality international companies believed to be well-managed with consistent operating histories and financial performance that have favorable long-term economic prospects.

 

Wells Fargo Precious Metals Fund. This fund seeks long-term capital appreciation. It normally invests primarily in investments related to precious metals. It invests any amount of its total assets in equity securities of foreign issuers, including ADRs and similar investments.

 

BlackRock Global Allocation Fund. This fund seeks high total investment return. It invests in a portfolio of equity, debt and money market securities. It may invest up to 35% of its total assets in junk bonds, corporate loans and distressed securities. It may also invest in REITs and securities related to real assets such as stock, bonds or convertible bonds issued by REITs or companies that mine precious metals.

 

Even Keel Multi-Asset Managed Risk Fund. This fund seeks long-term capital appreciation and current income, consistent with capital preservation. It will provide exposure to a diversified portfolio of core holdings, futures contracts and cash with the dual goals of generating long-term capital appreciation and current income, while strategically managing portfolio volatility and downside risk.

 

JPMorgan SmartRetirement 2020 Fund. This fund seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. It is a fund of funds, investing in J.P. Morgan Funds. The fund is designed to provide exposure to a variety of asset classes. Its allocation will change over time, becoming more conservative as the fund nears the target date.

 

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JPMorgan SmartRetirement 2025 Fund. This fund seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. It is a fund of funds, investing in other J.P. Morgan Funds. The fund is designed to provide exposure to a variety of asset classes. Its allocation will change over time, becoming more conservative as the fund nears the target date.

 

JPMorgan SmartRetirement 2030 Fund. This fund seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. It is a fund of funds, investing in J.P. Morgan Funds. The fund is designed to provide exposure to a variety of asset classes. It’s allocation will change over time, becoming more conservative as the fund nears the target date.

 

JPMorgan SmartRetirement 2035 Fund. This fund seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. It is a fund of funds, investing in J.P. Morgan Funds. The fund is designed to provide exposure to a variety of asset classes. Its allocation will change over time, becoming more conservative as the fund nears the target date.

 

JPMorgan SmartRetirement 2040 Fund. This fund seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. It is a fund of funds, investing in J.P. Morgan Funds. The fund is designed to provide exposure to a variety of asset classes. Its allocation will change over time, becoming more conservative as the fund nears the target date.

 

JPMorgan SmartRetirement 2045 Fund. This fund seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. It is a fund of funds, investing in J.P. Morgan Funds. The fund is designed to provide exposure to a variety of asset classes. Its allocation will change over time, becoming more conservative as the fund nears the target date.

 

JPMorgan SmartRetirement 2050 Fund. This fund seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. It is a fund of funds, investing in J.P. Morgan Funds. The fund is designed to provide exposure to a variety of asset classes. Its allocation will change over time, becoming more conservative as the fund nears the target date.

 

JPMorgan SmartRetirement 2055 Fund. This fund seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. It is a fund of funds, investing in J.P. Morgan Funds. The fund is designed to provide exposure to a variety of asset classes. Its allocation will change over time, becoming more conservative as the fund nears the target date.

 

JPMorgan SmartRetirement 2060 Fund. This fund seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. It is a fund of funds, investing in J.P. Morgan Funds. The fund is designed to provide exposure to a variety of asset classes. Its allocation will change over time, becoming more conservative as the fund nears the target date.

 

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JPMorgan SmartRetirement Income Fund. This fund seeks current income and some capital appreciation. It is a fund of funds, investing in J.P. Morgan Funds, and is generally intended for investors who are retired or are expected to retire soon. The fund is designed to provide exposure to a variety of asset classes, with an emphasis on fixed income funds.

 

Cincinnati Bancorp Stock Fund (Current Employer Stock Fund) – The Cincinnati Bancorp Stock Fund consists primarily of common stock of Cincinnati Bancorp. This fund was made available to 401(k) Plan participants in connection with the mutual holding company reorganization and minority stock offering in 2015. Participants were allowed a one-time opportunity to invest 401(k) Plan funds in the Cincinnati Bancorp Stock Fund. While participants were allowed to move funds out of the Cincinnati Bancorp Stock Fund and into other funds, participants were not allowed to direct assets into the fund following the minoity stock offering. Investments in the Cincinnati Bancorp Stock Fund involves special risks common to investments in the shares of common stock of Cincinnati Bancorp. Following the offering, Cincinnati Bancorp will cease to exist, but will be succeeded by a new Maryland corporation, Cincinnati Bancorp, Inc., which will be 100% owned by its public shareholders. Shares of Cincinnati Bancorp which were held in the Cincinnati Bancorp Stock Fund before the conversion and offering will be converted into new shares of common stock of Cincinnati Bancorp, Inc., in accordance with the exchange ratio. As soon as practicable after the closing of the stock offering, the Cincinnati Bancorp Stock Fund will be merged into the Cincinnati Bancorp, Inc. Stock Fund.

 

An investment in any of the funds listed above is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. As with any mutual fund investment, there is always a risk that you may lose money on your investment in any of the funds listed above.

 

For a discussion of material risks you should consider, see “Risk Factors” of this prospectus supplement, “Risk Factors” beginning on page [1] of the attached prospectus, and the section of this prospectus supplement called “Notice of Your Rights Concerning Employer Securities” below.

 

Investors should carefully consider a mutual fund's investment objectives, risks, charges, and expenses before investing. A prospectus, or summary prospectus if available, containing this and other information can be obtained by contacting the 401(k) Plan administrator. Read the prospectus carefully before investing.

 

Before directing retirement funds to a separate account, investors should carefully consider the investment objectives, risks, charges, and expenses of the separate account as well as their individual risk tolerance, time horizon and goals. For additional information, contact the 401(k) Plan administrator.

 

Cincinnati Bancorp, Inc. Stock Fund

 

In connection with the stock offering, you may, in the manner described earlier, elect to direct the trustee to invest all or a portion of your 401(k) Plan account in Cincinnati Bancorp, Inc. common stock. Your purchased shares will be held within the 401(k) Plan by the Cincinnati Bancorp, Inc. Stock Fund. The Cincinnati Bancorp, Inc. Stock Fund is neither a mutual fund nor a diversified or managed investment option. Rather, it is merely a recordkeeping mechanism established by the 401(k) Plan custodian to track the shares purchased by the participants in the stock offering through the 401(k) Plan.

 

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Performance of Cincinnati Bancorp, Inc. Stock Fund depends on a number of factors, including the financial condition and profitability of Cincinnati Bancorp, Inc. and Cincinnati Federal and market conditions for shares of Cincinnati Bancorp, Inc. common stock generally.

 

Investments in Cincinnati Bancorp, Inc. Stock Fund involve special risks related to investments in the shares of common stock of Cincinnati Bancorp, Inc. In making a decision to invest all or a part of your account balance in the Cincinnati Bancorp, Inc. Stock Fund, you should carefully consider the information set forth in this prospectus supplement under “Notice of Your Rights Concerning Employer Securities – The Importance of Diversifying Your Retirement Savings.”

 

For a discussion of material risks you should consider, see “Risk Factors” of this prospectus supplement, “Risk Factors” beginning on page [1] of the attached prospectus, and the section of this prospectus supplement called “Notice of Your Rights Concerning Employer Securities” below.

 

An investment in any of the investment options listed above under “Description of the 401(k) Plan – Description of the Investment Funds” is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. As with any investment option, there is always a risk that you may lose money on your investment in any of the investment options listed above.

 

Administration of the 401(k) Plan

 

The Trustee and Custodian. The trustee of the 401(k) Plan is the Board of Directors of Cincinnati Federal. Reliance Trust Company is appointed Custodian for all investment funds under the 401(k) Plan.

 

401(k) Plan Administrator. Pursuant to the terms of the 401(k) Plan, the 401(k) Plan is administered by the 401(k) Plan administrator. The address of the 401(k) Plan administrator is Cincinnati Federal, 6581 Harrison Avenue, Cincinnati, Ohio 45247. The 401(k) Plan administrator is responsible for the administration of the 401(k) Plan, interpretation of the provisions of the 401(k) Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the 401(k) Plan, maintenance of 401(k) Plan records, books of account and all other data necessary for the proper administration of the 401(k) Plan, preparation and filing of all returns and reports relating to the 401(k) Plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under Sections 104 and 105 of ERISA.

 

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Reports to Plan Participants. The 401(k) Plan administrator will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses (if any). In addition, you may go online to www.pentegra.com at any time to review your account balances.

 

Amendment and Termination

 

Cincinnati Federal intends to continue the 401(k) Plan indefinitely. Nevertheless, Cincinnati Federal may terminate the 401(k) Plan at any time. If the 401(k) Plan is terminated in whole or in part, then regardless of other provisions in the 401(k) Plan, you will have a fully vested interest in your 401(k) Plan account. Cincinnati Federal reserves the right to make any amendment or amendments to the 401(k) Plan which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that Cincinnati Federal may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with ERISA.

 

Merger, Consolidation or Transfer

 

In the event of the merger or consolidation of the 401(k) Plan with another plan, or the transfer of the plan assets to another plan, the 401(k) Plan requires that you would, if either the 401(k) Plan or the other plan terminates, receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer, if the 401(k) Plan had then terminated.

 

Federal Income Tax Consequences

 

The following is a brief summary of the material federal income tax aspects of the 401(k) Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the 401(k) Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. Consult your tax advisor with respect to any distribution from the 401(k) Plan and transactions involving the 401(k) Plan.

 

As a “tax-qualified retirement plan,” the Code affords the 401(k) Plan special tax treatment, including:

 

(1)the sponsoring employer is allowed an immediate tax deduction for the amount contributed to the 401(k) Plan each year;

 

(2)participants pay no current income tax on amounts contributed by the employer on their behalf; and

 

(3)earnings of the 401(k) Plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.

 

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Cincinnati Federal will administer the 401(k) Plan to comply with the requirements of the Code as of the applicable effective date of any change in the law.

 

Lump-Sum Distribution. A distribution from the 401(k) Plan to a participant or the beneficiary of a participant will qualify as a lump-sum distribution if it is made within one taxable year, on account of the participant’s death, disability or separation from service, or after the participant attains age 59½, and consists of the balance credited to participants under the 401(k) Plan and all other profit sharing plans, if any, maintained by Cincinnati Federal. The portion of any lump-sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump-sum distribution, less the amount of after-tax contributions, if any, you have made to this 401(k) Plan and any other profit sharing plans maintained by Cincinnati Federal, which is included in the distribution.

 

Cincinnati Bancorp, Inc. Common Stock Included in Lump-Sum Distribution. If a lump-sum distribution includes Cincinnati Bancorp, Inc. common stock, the distribution generally will be taxed in the manner described above, except that the total taxable amount may be reduced by the amount of any net unrealized appreciation with respect to Cincinnati Bancorp, Inc. common stock; that is, the excess of the value of Cincinnati Bancorp, Inc.at the time of the distribution over its cost or other basis of the securities to the trust. The tax basis of Cincinnati Bancorp, Inc. common stock, for purposes of computing gain or loss on its subsequent sale, equals the value of Cincinnati Bancorp, Inc. common stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of Cincinnati Bancorp, Inc. common stock, to the extent of the amount of net unrealized appreciation at the time of distribution, will constitute long-term capital gain, regardless of the holding period of Cincinnati Bancorp, Inc. common stock. Any gain on a subsequent sale or other taxable disposition of Cincinnati Bancorp, Inc. common stock, in excess of the amount of net unrealized appreciation at the time of distribution, will be considered long-term capital gain. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed by regulations to be issued by the Internal Revenue Service.

 

Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA. You may roll over virtually all distributions from the 401(k) Plan to another qualified plan or to an individual retirement account in accordance with the terms of the other plan or account.

 

Notice of Your Rights Concerning Employer Securities

 

Federal law provides specific rights concerning investments in employer securities. Because you may in the future have investments in Cincinnati Bancorp, Inc. common stock under the 401(k) Plan, you should take the time to read the following information carefully.

 

Your Rights Concerning Employer Securities. The 401(k) Plan must allow you to elect to move any portion of your account that is invested in Cincinnati Bancorp, Inc. common stock from that investment into other investment alternatives under the 401(k) Plan. You may contact the 401(k) Plan administrator shown above for specific information regarding this right, including how to make this election. In deciding whether to exercise this right, you will want to give careful consideration to the information below that describes the importance of diversification. All of the investment options under the 401(k) Plan are available to you if you decide to diversify out of your investment in Cincinnati Bancorp, Inc. common stock.

 

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The Importance of Diversifying Your Retirement Savings. To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk.

 

In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the 401(k) Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerance for risk. Therefore, you should carefully consider the rights described here and how these rights affect the amount of money that you invest in Cincinnati Bancorp, Inc. common stock through the 401(k) Plan.

 

It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the 401(k) Plan to help ensure that your retirement savings will meet your retirement goals.

 

Additional Employee Retirement Income Security Act, as amended, Considerations

 

As noted above, the 401(k) Plan is subject to certain provisions of ERISA, including special provisions relating to control over the 401(k) Plan’s assets by participants and beneficiaries. The 401(k) Plan’s feature that allows you to direct the investment of your account balances is intended to satisfy the requirements of Section 404(c) of ERISA relating to control over plan assets by a participant or beneficiary. The effect of this is two-fold. First, you will not be deemed a “fiduciary” because of your exercise of investment discretion. Second, no person who otherwise is a fiduciary, such as Cincinnati Federal, the 401(k) Plan administrator, or the 401(k) Plan’s trustee is liable under the fiduciary responsibility provision of ERISA for any loss which results from your exercise of control over the assets in your 401(k) Plan account.

 

Because you will be entitled to invest all or a portion of your account balance in the 401(k) Plan in Cincinnati Bancorp, Inc. common stock, the regulations under Section 404(c) of the ERISA require that the 401(k) Plan establish procedures that ensure the confidentiality of your decision to purchase, hold, or sell employer securities, except to the extent that disclosure of such information is necessary to comply with federal or state laws not preempted by ERISA. These regulations also require that your exercise of voting and similar rights with respect to Cincinnati Bancorp, Inc. common stock be conducted in a way that ensures the confidentiality of your exercise of these rights.

 

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Securities and Exchange Commission Reporting and Short-Swing Profit Liability

 

Section 16 of the Securities Exchange Act of 1934 imposes reporting and liability requirements on officers, directors, and persons beneficially owning more than 10% of public companies, such as Cincinnati Bancorp, Inc. Section 16(a) of the Securities Exchange Act of 1934 requires the filing of reports of beneficial ownership. Within 10 days of becoming an officer, director or person beneficially owning more than 10% of the shares of Cincinnati Bancorp, Inc., a Form 3 reporting initial beneficial ownership must be filed with the Securities and Exchange Commission. Changes in beneficial ownership, such as purchases, sales and gifts generally must be reported periodically, either on a Form 4 within two business days after the change occurs, or annually on a Form 5 within 45 days after the close of fiscal year of Cincinnati Bancorp, Inc.. Discretionary transactions in and beneficial ownership of Cincinnati Bancorp, Inc. common stock by officers, directors and persons beneficially owning more than 10% of Cincinnati Bancorp, Inc. common stock generally must be reported to the Securities and Exchange Commission by such individuals.

 

In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934 provides for the recovery by Cincinnati Bancorp, Inc. of profits realized by an officer, director or any person beneficially owning more than 10% of Cincinnati Bancorp, Inc. common stock resulting from non-exempt purchases and sales of Cincinnati Bancorp, Inc. common stock within any six (6)-month period.

 

The Securities and Exchange Commission has adopted rules that provide exemptions from the profit recovery provisions of Section 16(b) for all transactions in employer securities within an employee benefit plan, provided certain requirements are met. These requirements generally involve restrictions upon the timing of elections to acquire or dispose of employer securities for the accounts of Section 16(b) persons.

 

Except for distributions of Cincinnati Bancorp, Inc. common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons affected by Section 16(b) are required to hold shares of Cincinnati Bancorp, Inc. common stock distributed from the 401(k) Plan for six (6) months following such distribution and are prohibited from directing additional purchases of Cincinnati Bancorp, Inc. common stock for six (6) months after receiving such a distribution.

 

Financial Information Regarding Plan Assets

 

Financial information representing the net assets available for 401(k) Plan benefits and the change in net assets available for 401(k) Plan benefits is available upon written request to the 401(k) Plan administrator at the address shown above.

 

LEGAL OPINION

 

The validity of the issuance of Cincinnati Bancorp, Inc. common stock has been passed upon by Luse Gorman, PC, Washington, D.C., which the firm has acted as special counsel to Cincinnati Bancorp, Inc. in connection with the stock offering of Cincinnati Bancorp, Inc.

 

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PROSPECTUS

CINCINNATI BANCORP, INC.

(Proposed Holding Company for Cincinnati Federal)

Up to 1,437,356 Shares of Common Stock

(Subject to Increase to up to 1,652,960 Shares)

 

Cincinnati Bancorp, Inc. is offering shares of common stock for sale on a best efforts basis in connection with the conversion of CF Mutual Holding Company from the mutual holding company to the stock holding company form of organization. The shares we are offering represent the ownership interest in Cincinnati Bancorp, a federal corporation, currently owned by CF Mutual Holding Company. Cincinnati Bancorp’s common stock currently trades on the OTC Pink Marketplace (OTCPK) operated by OTC Markets Group under the symbol “CNNB.” We have applied to list Cincinnati Bancorp, Inc.’s common stock on the Nasdaq Capital Market under the symbol “CNNB.” We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

 

The shares of common stock are first being offered for sale in a subscription offering to eligible depositors and borrowers of Cincinnati Federal as of specified eligibility dates and to tax-qualified employee benefit plans of Cincinnati Federal. Shares not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given first to residents of the communities served by Cincinnati Federal and then to existing stockholders of Cincinnati Bancorp. Any shares of common stock not purchased in the subscription or community offerings may be offered for sale to the public through a syndicate of broker-dealers, referred to in this prospectus as the syndicated community offering. The syndicated community offering may commence before the subscription and community offerings (including any extensions) have expired. However, no shares purchased in the subscription offering or the community offering will be issued until the completion of any syndicated community offering. We may sell up to 1,652,960 shares of common stock because of demand for the shares of common stock or changes in market conditions, without resoliciting subscribers. We must sell a minimum of 1,062,394 shares to complete the offering.

 

In addition to the shares we are selling in the offering, the shares of common stock of Cincinnati Bancorp currently owned by the public will be exchanged for shares of common stock of Cincinnati Bancorp, Inc. based on an exchange ratio that will result in existing public stockholders of Cincinnati Bancorp owning approximately the same percentage of common stock of Cincinnati Bancorp, Inc. as they owned in the common stock of Cincinnati Bancorp immediately before the completion of the conversion. We expect to issue up to 1,150,144 shares in the exchange, which may be increased to up to 1,322,665 shares if we sell 1,652,960 shares of common stock in the offering.

 

The minimum purchase order is 25 shares. Generally, no individual, or individuals acting through a single qualifying account held jointly, may purchase more than 20,000 shares ($200,000) of common stock, and no person or entity, together with associates or persons acting in concert with such person or entity, may purchase more than 60,000 shares ($600,000) of common stock in all categories of the offering combined.

  

The subscription offering will expire at 2:00 p.m., Eastern time, on December 17, 2019. We expect that the community offering, if held, will expire at the same time. We may extend the expiration date of the subscription and/or community offerings without notice to you until January 31, 2020, or longer if the Federal Reserve Board approves a later date. No single extension may exceed 90 days and the offering must be completed by December 27, 2021. Once submitted, orders are irrevocable unless the subscription and community offerings are terminated or extended, with regulatory approval, beyond January 31, 2020, or the number of shares of common stock to be sold is increased to more than 1,652,960 shares or decreased to less than 1,062,394 shares. If the subscription and community offerings are extended past January 31, 2020, all subscribers will be notified and given the opportunity to confirm, change or cancel their orders. If you do not respond to the notice of extension, we will promptly return your funds with interest or cancel your deposit account withdrawal authorization. If the number of shares to be sold in the offering is increased to more than 1,652,960 shares or decreased to less than 1,062,394 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest. Funds received in the subscription and the community offerings will be held in a segregated account at Cincinnati Federal and will earn interest at 0.15% per annum until completion or termination of the offering.

 

Keefe, Bruyette & Woods, Inc. will assist us in selling the shares on a best efforts basis in the subscription and community offerings, and will serve as sole manager for any syndicated community offering. Keefe, Bruyette & Woods, Inc. is not required to purchase any shares of common stock that are sold in the offering.

 

OFFERING SUMMARY

Price: $10.00 per Share

 

   Minimum   Midpoint   Maximum   Adjusted Maximum 
Number of shares   1,062,394    1,249,875    1,437,356    1,652,960 
Gross offering proceeds  $10,623,938   $12,498,750   $14,373,563   $16,529,597 
Estimated offering expenses, excluding selling agent fees and expenses (1) (2)  $950,000   $950,000   $950,000   $950,000 
Selling agent fees and expenses (1)  $350,000   $350,000   $350,000   $350,000 
Estimated net proceeds  $9,323,938   $11,198,750   $13,073,563   $15,229,597 
Estimated net proceeds per share (1)  $8.78   $8.96   $9.10   $9.21 

 

(1)See “The Conversion and Offering – Plan of Distribution; Selling Agent and Underwriter Compensation” for a discussion of Keefe, Bruyette & Woods, Inc.’s compensation for this offering and the compensation to be received by Keefe, Bruyette & Woods, Inc. and the other broker-dealers that may participate in the syndicated community offering.
(2)Excludes records agent fees and expenses payable to Keefe, Bruyette & Woods, Inc., which are included in estimated offering expenses. See “The Conversion and Offering – Records Management.”

 

This investment involves a degree of risk, including the possible loss of principal.

See “Risk Factors” beginning on page 17.

 

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. Neither the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

Keefe, Bruyette & Woods

A Stifel Company

For assistance, contact the Stock Information Center at 1-(877) ________.

The date of this prospectus is _______, 2019.

 

 

 

 

 

 

  

TABLE OF CONTENTS

 

  Page
   
SUMMARY 1
RISK FACTORS 17
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA 27
RECENT DEVELOPMENTS 29
FORWARD-LOOKING STATEMENTS 37
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING 39
OUR DIVIDEND POLICY 40
MARKET FOR THE COMMON STOCK 41
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE 43
CAPITALIZATION 44
PRO FORMA DATA 46
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 52
BUSINESS OF CINCINNATI BANCORP, INC. AND CINCINNATI BANCORP 68
BUSINESS OF CINCINNATI FEDERAL 69
SUPERVISION AND REGULATION 94
TAXATION 103
MANAGEMENT 104
BENEFICIAL OWNERSHIP OF COMMON STOCK 113
SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS 114
THE CONVERSION AND OFFERING 115
COMPARISON OF STOCKHOLDERS’ RIGHTS FOR STOCKHOLDERS OF CINCINNATI BANCORP 137
RESTRICTIONS ON ACQUISITION OF CINCINNATI BANCORP, INC. 144
DESCRIPTION OF CAPITAL STOCK OF CINCINNATI BANCORP, INC. 147
TRANSFER AGENT 148
EXPERTS 148
LEGAL MATTERS 148
WHERE YOU CAN FIND ADDITIONAL INFORMATION 149
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF CINCINNATI BANCORP F-1

 

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SUMMARY

 

The following summary explains the significant aspects of the conversion, the offering and the exchange of existing shares of Cincinnati Bancorp common stock for shares of Cincinnati Bancorp, Inc. common stock. It may not contain all of the information that is important to you. Before making an investment decision, you should read this entire document carefully, including the consolidated financial statements and the related notes, and the section entitled “Risk Factors.”

 

Our Organizational Structure and the Proposed Conversion

 

Since October 14, 2015, when Cincinnati Federal reorganized into the mutual holding company structure, we have operated in a two-tier mutual holding company structure. Cincinnati Bancorp is a federally-chartered corporation that is our publicly-traded stock holding company and the parent company of Cincinnati Federal. At June 30, 2019, Cincinnati Bancorp had consolidated assets of $206.3 million, deposits of $138.7 million and stockholders’ equity of $23.3 million. Cincinnati Bancorp’s parent company is CF Mutual Holding Company, a federally-chartered mutual holding company. At June 30, 2019, Cincinnati Bancorp Corp. had 1,816,517 shares of common stock outstanding, of which 1,008,969 shares, or 55.5%, were owned by CF Mutual Holding Company, and the remaining 807,548 shares were held by the public.

 

Pursuant to the terms of the plan of conversion and reorganization, which we refer to as the plan of conversion, we are converting from the mutual holding company corporate structure to the fully public stock holding company corporate structure. Upon completion of the conversion, CF Mutual Holding Company and Cincinnati Bancorp will cease to exist and Cincinnati Bancorp, Inc. will become the successor corporation to Cincinnati Bancorp. The conversion will be accomplished by the merger of CF Mutual Holding Company with and into Cincinnati Bancorp, followed by the merger of Cincinnati Bancorp with and into Cincinnati Bancorp, Inc. The shares of Cincinnati Bancorp, Inc. common stock being offered for sale represent the majority ownership interest in Cincinnati Bancorp currently owned by CF Mutual Holding Company. Public stockholders of Cincinnati Bancorp will receive shares of common stock of Cincinnati Bancorp, Inc. in exchange for their shares of Cincinnati Bancorp at an exchange ratio intended to preserve the same aggregate ownership interest in Cincinnati Bancorp, Inc. as they had in Cincinnati Bancorp, adjusted downward to reflect certain assets held by CF Mutual Holding Company, without giving effect to new shares purchased in the offering or cash paid in lieu of any fractional shares. The shares of Cincinnati Bancorp common stock owned by CF Mutual Holding Company will be canceled.

 

The following diagram shows our current organizational structure, reflecting ownership percentages at June 30, 2019:

 

 

 

1

 

 

After the conversion and offering are completed, we will be organized as a fully public stock holding company, as follows:

 

 

 

Our Business

 

Our business activities are conducted primarily through Cincinnati Federal. Cincinnati Federal provides financial services to individuals and businesses from our main office in Cincinnati, Ohio and our full service branch offices in Miami Heights, Anderson and Price Hill in Ohio and in Covington and Florence in Northern Kentucky. Our primary market area includes Hamilton County, Ohio, and, to a lesser extent, Warren, Butler and Clermont Counties, Ohio. We also conduct business in the northern Kentucky region and make loans secured by properties in Campbell, Kenton and Boone Counties, Kentucky, as well as in Dearborn County, in southeastern Indiana.

 

Our business consists primarily of taking deposits from the general public and investing those deposits, together with borrowings and funds generated from operations, in one- to four-family residential real estate loans, and, to a lesser extent, nonresidential real estate and multi-family loans, home equity loans and lines of credit and construction and land loans. We also invest in securities, which currently consist primarily of mortgage-backed securities issued by U.S. government sponsored entities and Federal Home Loan Bank stock.

 

Cincinnati Federal also operates an active mortgage banking unit with eight mortgage loan officers. This unit originates loans both for sale in the secondary market and for retention in our portfolio.

 

Cincinnati Federal offers a variety of deposit accounts, including checking accounts, savings accounts and certificate of deposit accounts. It also utilizes advances from the Federal Home Loan Bank of Cincinnati for liquidity and for asset/liability management purposes.

 

Cincinnati Federal is subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency.

 

Cincinnati Federal completed its acquisition of Kentucky Federal Savings and Loan Association on October 12, 2018. Kentucky Federal Savings and Loan Association was a mutual savings association headquartered in Covington, Kentucky.

 

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Cincinnati Bancorp, Inc. is a newly formed Maryland corporation. Following the completion of the conversion and offering, Cincinnati Bancorp, Inc. will be the holding company for Cincinnati Federal and will succeed Cincinnati Bancorp as the publicly traded holding company of Cincinnati Federal. Our executive offices are located at 6581 Harrison Avenue, Cincinnati, Ohio 45247 and our telephone number is (513) 574-3025. Our website address is www.cincinnatifederal.com. Information on this website is not and should not be considered a part of this prospectus.

 

Business Strategy

 

Our current business strategy is to operate as a well-capitalized and profitable community bank dedicated to serving the needs of our consumer and business customers, and offering personalized and efficient customer service. Our goals are to increase interest income through loan portfolio growth and noninterest income with the mortgage banking fees, decrease interest expense by increasing core deposits, and achieve economies of scale through balance sheet growth. Highlights of our current business strategy include:

 

·Increasing our origination of nonresidential real estate and multi-family loans. At June 30, 2019, nonresidential real estate and multifamily loans, together with construction and land loans, totaled $47.2 million and $8.3 million, or 195.4% and 34.2% of Cincinnati Federal’s capital and allowance for loan losses, respectively. Under our current Board-approved loan concentration policy, these loans (including construction and land loans) are limited to 300% of capital and the allowance for loan losses. We intend to continue to increase our origination of nonresidential real estate and multi-family real estate loans, with a focus on multi-family loans. Substantially all of our nonresidential real estate and multi-family loans are originated with adjustable rates. Nonresidential real estate and multi-family lending is expected to increase loan yields with shorter repricing terms than fixed-rate loans. Nonresidential real estate and multi-family originations in 2018 increased $2.4 million or 19.75% over 2017 origination levels. See “Business of Cincinnati Federal – Lending Activities – Commercial Real Estate and Multi-Family Lending.”

 

·Continuing to focus on our residential mortgage banking operations. For the six months ended June 30, 2019, we originated $45.4 million of one-to four-family residential loans and sold $32.4 million of one-to four-family residential loans. For the year ended December 31, 2018, we originated $73.1 million of one-to four-family residential loans and sold $52.8 million of one-to four-family residential loans. For the year ended December 31, 2017, we originated $80.0 million of one-to four family residential loans and sold $58.1 million of one- to four-family residential loans. These loans are all sold on a non-recourse basis primarily to the Federal Home Loan Bank of Cincinnati, Freddie Mac, and private sector third-party buyers. Loans are sold on both a servicing-retained and servicing-released basis. Subject to mortgage market conditions, we intend to continue to increase the number of mortgage loan originators in order to increase our volume of sold loans with the potential for increased servicing income.

 

·Continuing to emphasize one- to four-family residential adjustable rate mortgage lending. We will continue to focus on originating one- to four-family adjustable rate mortgages for retention in our portfolio. At June 30, 2019, $87.8 million, or 49.0%, of our total loans consisted of one- to four-family residential adjustable rate mortgage loans. Adjustable rate loans have shorter repricing terms to mitigate interest rate risk.

 

·Increasing our “core” deposit base. We seek to increase our core deposit base, particularly checking accounts. Core deposits include all deposit account types except certificates of deposit. Core deposits are our least costly source of funds, which improves our interest rate spread, and represent our best opportunity to develop customer relationships that enable us to cross-sell our full complement of products and services. Core deposits also contribute non-interest income from account-related fees and services and are generally less sensitive to withdrawal when interest rates fluctuate. We have continued our marketing efforts for checking accounts through digital, print and outdoor advertising channels. Core deposits at December 31, 2018 grew $15.0 million or 32.2% over December 31, 2017 balances primarily due to the addition of core deposits acquired from Kentucky Federal Savings and Loan Association. At June 30, 2019, core deposits totaled $62.7 million, or 45.2% of total deposits. In recent years, we have significantly expanded and improved the products and services we offer our retail and business deposit customers who maintain core deposit accounts and have improved our infrastructure for electronic banking services, including online banking, mobile banking, bill pay, and e-statements. The deposit infrastructure we have established can accommodate significant increases in retail and business deposit accounts without additional capital expenditure. We intend to continue to use non-core deposits, including certificates of deposit from the National CD Rateline Program, as a source of funds, in accordance with our asset/liability policies and funding strategies.

 

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·Implementing a managed growth strategy. We intend to pursue a growth strategy for the foreseeable future, with the goal of improving the profitability of our business through increased net interest income and retail deposit growth. Subject to market conditions, we intend to grow our one- to four-family residential adjustable rate, nonresidential real estate and multi-family loan portfolios. To a lesser extent we intend to grow our construction loan portfolio. The additional capital raised in the offering will also help to reduce our reliance on wholesale funding sources.

 

Reasons for the Conversion and Offering

 

Our primary reasons for converting to the fully public stock form of ownership and undertaking the stock offering are to:

 

·Support our planned growth and strengthen our regulatory capital position with the additional capital we will raise in the stock offering. While Cincinnati Federal exceeds all regulatory capital requirements, the proceeds from the offering will significantly augment our capital position and enable us to support our planned growth by increasing our regulatory loans-to-one borrower limit and by reducing our loan concentrations as a percent of capital. The augmented capital will be essential to the continued implementation of our business strategy.

 

·Transition our organization to a stock holding company structure, which gives us greater flexibility to access the capital markets compared to our existing mutual holding company structure. The stock holding company structure is a more flexible form of organization that will give us greater flexibility to access the capital markets through possible future equity and debt offerings, although we have no current plans, agreements or understandings regarding any additional securities offerings.

 

·Improve the liquidity of our shares of common stock. The larger number of shares that will be outstanding after completion of the conversion and offering is expected to result in a more liquid and active market for Cincinnati Bancorp, Inc. common stock. A more liquid and active market will make it easier for our stockholders to buy and sell our common stock and will give us greater flexibility in implementing capital management strategies.

 

·Facilitate our stock holding company’s ability to pay dividends to our public stockholders. Current regulations of the Board of Governors of the Federal Reserve System, which we refer to as the Federal Reserve Board, substantially restrict the ability of recently formed mutual holding companies, such as CF Mutual Holding Company, to waive dividends declared by their subsidiaries. Accordingly, because any dividends declared and paid by Cincinnati Bancorp would have to be paid to CF Mutual Holding Company along with all other stockholders, the amount of dividends available for all other stockholders will be less than if CF Mutual Holding Company were to waive the receipt of dividends. The conversion will eliminate our mutual holding company structure and will facilitate our ability to pay dividends to all stockholders of Cincinnati Bancorp, Inc., subject to legal, regulatory and financial considerations applicable to all financial institutions. See “Our Dividend Policy.”

 

4

 

 

·Facilitate future mergers and acquisitions. Although we do not currently have any understandings or agreements regarding any specific acquisition transaction, the stock holding company structure will give us greater flexibility to structure, and make us a more attractive and competitive bidder for, mergers and acquisitions of other financial institutions or business lines as opportunities arise. The additional capital raised in the offering also will enable us to consider larger merger transactions. Although we intend to remain an independent financial institution, the stock holding company structure may make us a more attractive acquisition candidate for other institutions. Applicable regulations prohibit the acquisition of Cincinnati Bancorp, Inc. for three years following completion of the conversion, and also prohibit anyone from acquiring or offering to acquire more than 10% of our stock without regulatory approval.

 

Terms of the Offering

 

We are offering for sale between 1,062,394 and 1,437,356 shares of common stock to eligible depositors and borrowers of Cincinnati Federal, to our tax-qualified employee benefit plans and, to the extent shares remain available, in a community offering to the general public, with a preference given first to natural persons (including trusts of natural persons) residing in the Ohio counties of Butler, Clermont, Hamilton and Warren, the Indiana county of Dearborn, and the Kentucky counties of Boone, Campbell and Kenton, and then to existing public stockholders of Cincinnati Bancorp as of the close of business on November 4, 2019. If necessary, we will also offer for sale shares to the general public in a syndicated community offering. The number of shares of common stock to be sold may be increased to up to 1,652,960 shares as a result of demand for the shares of common stock in the offering or changes in market conditions. Unless the number of shares of common stock to be offered is increased to more than 1,652,960 shares or decreased to fewer than 1,062,394 shares, or the subscription and community offerings are extended beyond January 31, 2020, subscribers will not have the opportunity to change or cancel their stock orders once submitted. If the subscription and community offerings are extended past January 31, 2020, all subscribers will be notified and given an opportunity to confirm, change or cancel their orders. All subscribers will be notified by mail sent to the address the subscriber provides on the stock order form they have submitted. If you do not respond to the notice of extension, your order will be cancelled and we will promptly return your funds with interest at 0.15% per annum or cancel your deposit account withdrawal authorization. If the number of shares to be sold is increased to more than 1,652,960 shares or decreased to less than 1,062,394 shares, all subscribers’ stock orders will be canceled, their withdrawal authorizations will be canceled and funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest at 0.15% per annum. We will then resolicit subscribers, giving them an opportunity to place new orders for a period of time. No shares purchased in the subscription offering and community offering will be issued until the completion of any syndicated community offering.

 

The purchase price of each share of common stock offered for sale in the offering is $10.00. All investors will pay the same purchase price per share, regardless of whether the shares are purchased in the subscription offering, the community offering or a syndicated community offering. Investors will not be charged a commission to purchase shares of common stock in the offering. Keefe, Bruyette & Woods, Inc. (“KBW”), our marketing agent in the offering, will use its best efforts to assist us in selling shares of our common stock in the offering but is not obligated to purchase any shares of common stock in the offering.

 

How We Determined the Offering Range, the Exchange Ratio and the $10.00 Per Share Purchase Price

 

The amount of common stock we are offering for sale and the exchange ratio for the exchange of shares of Cincinnati Bancorp for shares of Cincinnati Bancorp, Inc. are based on an independent appraisal of the estimated market value of Cincinnati Bancorp, Inc., assuming the offering has been completed. Keller & Company, Inc., our independent appraiser, has estimated that, as of August 12, 2019, this market value was $22.5 million. Based on federal regulations, this market value forms the midpoint of a valuation range with a minimum of $19.1 million and a maximum of $25.9 million. Based on this valuation range, the 55.5% ownership interest of CF Mutual Holding Company in Cincinnati Bancorp as of June 30, 2019 being sold in the offering, certain assets held by CF Mutual Holding Company and the $10.00 per share price, the number of shares of common stock being offered for sale by Cincinnati Bancorp, Inc. ranges from 1,062,394 shares to 1,437,356 shares. The purchase price of $10.00 per share was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. The exchange ratio ranges from 1.0528 shares at the minimum of the offering range to 1.4244 shares at the maximum of the offering range, and will generally preserve in Cincinnati Bancorp, Inc. the percentage ownership of public stockholders in Cincinnati Bancorp immediately before the completion of the conversion. Keller & Company, Inc. will update its appraisal before we complete the conversion and offering. If, as a result of demand for the shares or changes in market conditions, Keller & Company, Inc. determines that our estimated pro forma market value has increased, we may sell up to 1,652,960 shares without further notice to you. If our pro forma market value at that time is either below $19.1 million or above $29.8 million, then, after consulting with the Federal Reserve Board, we may: terminate the offering and promptly return all funds with interest; set a new offering range and give all subscribers the opportunity to place a new order; or take such other actions as may be permitted by the Federal Reserve Board and the Securities and Exchange Commission.

 

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The appraisal is based in part on Cincinnati Bancorp’s financial condition and results of operations, the pro forma effect of the additional capital raised by the sale of shares of common stock in the offering, and an analysis of a peer group of 10 publicly traded savings and loan and bank holding companies that Keller & Company, Inc. considers comparable to Cincinnati Bancorp. The appraisal peer group consists of the following companies, all of which are traded on the Nasdaq Stock Market.

 

Company Name   Ticker
Symbol
  Headquarters  

Total Assets (1)

 
            (In millions)  
Eagle Financial Bancorp, Inc.   EFBI   Cincinnati, OH   $ 136.5  
Equitable Financial Corp.   EQFN   Grand Island, NE   $ 323.4  
FSB Bancorp, Inc.   FSBC   Fairport, NY   $ 325.0  
WVS Financial Corp.   WVFC   Pittsburgh, PA   $ 356.2  
Elmira Savings Bank   ESBK   Elrira, NY   $ 596.8  
IF Bancorp, Inc.   IROQ   Watseka, IL   $ 662.5  
HMN Financial, Inc.   HMNF   Rochester, MN   $ 721.6  
Severn Bancorp, Inc.   SVBI   Annapolis, MD   $ 881.2  
Wellesley Bancorp, Inc.   WEBK   Wellesley, MA   $ 909.3  
Prudential Bancorp, Inc.   PBIP   Philadelphia, PA   $ 1,202.2  

 

 

(1)Asset size for all companies is as of June 30, 2019.

 

The following table presents a summary of selected pricing ratios for Cincinnati Bancorp, Inc. (on a pro forma basis) as of and for the twelve months ended June 30, 2019, and for the peer group companies based on earnings and other information as of and for the twelve months ended March 31, 2019, with stock prices as of June 30, 2019, as reflected in the appraisal report. Compared to the average pricing of the peer group, and based upon the information in the following table, our pro forma pricing ratios at the midpoint of the offering range indicated a discount of 36.70% on a price-to-book value basis, a discount of 39.23% on a price-to-tangible book value basis, and a premium of 64.25% on a price-to-earnings basis.

 

   

Price-to-earnings multiple (1)

    Price-to-book value ratio     Price-to-tangible book
value ratio
 
Cincinnati Bancorp, Inc. (on a pro forma basis, assuming completion of the conversion)                        
Adjusted Maximum     53.82 x     81.23 %     81.70 %
Maximum     46.26 x     74.52 %     75.02 %
Midpoint     39.83 x     68.03 %     68.49 %
Minimum     33.53 x     60.83 %     61.27 %
                         
Valuation of peer group companies, all of which are fully converted (on an historical basis)                        
Averages     24.25 x     107.47 %     112.71 %
Medians     13.75 x     108.52 %     112.39 %

 

 

(1)Price-to-earnings multiples calculated by Keller & Company, Inc. in the independent appraisal are based on an estimate of “core” or recurring earnings. These ratios are different than those presented in “Pro Forma Data.”

 

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The independent appraisal does not indicate trading market value. Do not assume or expect that our valuation as indicated in the appraisal means that after the conversion and offering the shares of our common stock will trade at or above the $10.00 per share purchase price. Furthermore, the pricing ratios presented in the appraisal were used by Keller & Company, Inc. to estimate our pro forma appraised value for regulatory purposes and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location.

 

For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see “The Conversion and Offering—Stock Pricing and Number of Shares to be Issued.”

 

Effect of CF Mutual Holding Company’s Assets on Minority Stock Ownership

 

Public stockholders of Cincinnati Bancorp will receive shares of common stock of Cincinnati Bancorp, Inc. in exchange for their shares of common stock of Cincinnati Bancorp pursuant to an exchange ratio that is designed to provide, subject to adjustment, public stockholders with the same ownership percentage of the common stock of Cincinnati Bancorp, Inc. after the conversion as their ownership percentage in Cincinnati Bancorp immediately before the conversion, without giving effect to new shares purchased in the offering or cash paid in lieu of any fractional shares. The exchange ratio will be adjusted downward to reflect assets held by CF Mutual Holding Company (other than shares of common stock of Cincinnati Bancorp) at the completion of the conversion, which assets consist of cash totaling $50,000 at June 30, 2019. However, this amount of assets held by CF Mutual Holding Company would not change the exchange ratio, which is rounded to four decimal places.

 

The Exchange of Existing Shares of Cincinnati Bancorp Common Stock

 

If you are a stockholder of Cincinnati Bancorp immediately before the completion of the conversion, your shares will be exchanged for shares of common stock of Cincinnati Bancorp, Inc. The number of shares of common stock you will receive will be based on the exchange ratio, which will depend upon our final appraised value and the percentage of outstanding shares of Cincinnati Bancorp common stock owned by public stockholders immediately before the completion of the conversion. The following table shows how the exchange ratio will adjust, based on the appraised value of Cincinnati Bancorp, Inc. as of August 12, 2019, assuming public stockholders of Cincinnati Bancorp own 55.5% of Cincinnati Bancorp common stock and CF Mutual Holding Company had assets (excluding its shares of Cincinnati Bancorp common stock) of $50,000 immediately before the completion of the conversion. The table also shows the number of shares of Cincinnati Bancorp, Inc. common stock a hypothetical owner of Cincinnati Bancorp common stock would receive in exchange for 100 shares of Cincinnati Bancorp common stock owned at the completion of the conversion, depending on the number of shares of common stock issued in the offering.

 

   Shares to be Sold in
This Offering
   Shares of Cincinnati Bancorp,
Inc. to be Issued for Shares of
Cincinnati Bancorp
   Total Shares
of Common
Stock to be
Issued in
Exchange and
   Exchange   

Equivalent
Value of
Shares
Based
Upon
Offering

  

Equivalent
Pro Forma
Tangible
Book Value
Per
Exchanged

  

Whole
Shares to
be
Received
for 100
Existing

 
   Amount   Percent   Amount   Percent   Offering   Ratio   Price (1)   Share (2)   Shares (3) 
Minimum   1,062,394    55.5    850,106    44.5    1,912,500    1.0528   $10.53   $16.32    105 
Midpoint   1,249,875    55.5    1,000,125    44.5    2,250,000    1.2386    12.39    14.60    123 
Maximum   1,437,356    55.5    1,150,144    44.5    2,587,500    1.4244    14.24    13.33    142 
Adjusted Maximum   1,652,960    55.5    1,322,665    44.5    2,975,625    1.6381    16.38    12.24    163 

 

 

(1)Represents the value of shares of Cincinnati Bancorp, Inc. common stock to be received in the conversion by a holder of one share of Cincinnati Bancorp, pursuant to the exchange ratio, based upon the $10.00 per share offering price.
(2) Represents the pro forma tangible book value per share at each level of the offering range multiplied by the respective exchange ratio. At June 30, 2019, Cincinnati Bancorp’s tangible book value per share was $12.83.
(3)Cash will be paid in lieu of fractional shares.

 

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No fractional shares of Cincinnati Bancorp, Inc. common stock will be issued to any public stockholder of Cincinnati Bancorp. For each fractional share that otherwise would be issued, Cincinnati Bancorp, Inc. will pay in cash an amount equal to the product obtained by multiplying the fractional share interest to which the holder otherwise would be entitled by the $10.00 per share offering price.

 

Outstanding options to purchase shares of Cincinnati Bancorp common stock will convert into and become options to purchase shares of Cincinnati Bancorp, Inc. common stock based upon the exchange ratio. The aggregate exercise price, duration and vesting schedule of these options will be unaffected by the conversion. At June 30, 2019, there were 75,817 outstanding options to purchase shares of Cincinnati Bancorp common stock, of which 30,327 have vested. The outstanding options will be converted into options to purchase 79,820 shares of common stock at the minimum of the offering range and 124,196 shares of common stock at the adjusted maximum of the offering range. Because federal regulations prohibit us from repurchasing our common stock during the first year following the conversion unless compelling business reasons exist to do so, we may use authorized but unissued shares to fund option exercises that occur during the first year following the conversion. If all existing options were exercised and funded with authorized but unissued shares of common stock following the conversion, stockholders would experience ownership dilution of approximately 9.09% at the minimum of the offering range.

 

Intended Use of the Proceeds From the Offering

 

We intend to invest at least 50% of the net proceeds from the stock offering in Cincinnati Federal, fund a loan to our employee stock ownership plan to finance its purchase of shares of common stock in the stock offering and retain the remainder of the net proceeds from the offering at Cincinnati Bancorp, Inc. Therefore, assuming we sell 1,249,875 shares of common stock in the stock offering at the midpoint of the offering range, and we have net proceeds of $11.2 million, we intend to invest $5.6 million Cincinnati Federal, loan $1.0 million to our employee stock ownership plan to fund its purchase of shares of common stock, and retain the remaining $4.6 million of the net proceeds at Cincinnati Bancorp, Inc.

 

Cincinnati Bancorp, Inc. may use the funds it retains for investment in securities, to repurchase shares of common stock, to acquire other financial institutions or financial services companies, to pay cash dividends and for other general corporate purposes. Cincinnati Federal may use the proceeds it receives to support increased lending, enhance existing, or support growth and the development of, new products and services, or expand its branch network by establishing or acquiring new branches or by acquiring other financial institutions or financial services companies. We do not currently have any agreements or understandings regarding any acquisition transactions.

 

See “How We Intend to Use the Proceeds from the Offering” for additional information.

 

Persons Who May Order Shares of Common Stock in the Offering

 

We are offering the shares of common stock for sale in a subscription offering in the following descending order of priority:

 

(i) To depositors (including depositors of the former Kentucky Federal Savings and Loan Association) with accounts at Cincinnati Federal with aggregate balances of at least $50 at the close of business on June 30, 2018.

 

(ii)To our tax-qualified employee benefit plans (including Cincinnati Federal’s employee stock ownership plan), which may subscribe for, in the aggregate, up to 10% of the shares of common stock sold in the offering. We expect our employee stock ownership plan to purchase 8% of the shares of common stock sold in the stock offering.

 

(iii)To depositors with accounts at Cincinnati Federal with aggregate balances of at least $50 at the close of business on September 30, 2019.

 

(iv)

To depositors of Cincinnati Federal at the close of business on November 4, 2019, and to borrowers of Cincinnati Federal as of January 21, 2015, and borrowers of the former Kentucky Federal Savings and Loan Association as of October 12, 2018, whose borrowings, in each case, remained outstanding as of the close of business on November 4, 2019.

 

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Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given first to natural persons (including trusts of natural persons) residing in the Ohio counties of Butler, Clermont, Hamilton and Warren, the Indiana county of Dearborn, and the Kentucky counties of Boone, Campbell and Kenton, and then to Cincinnati Bancorp’s public stockholders as of the close of business on November 4, 2019. The community offering is expected to begin concurrently with the subscription offering, but may begin concurrently with, during or promptly after the subscription offering. We also may offer for sale shares of common stock not purchased in the subscription offering and the community offering in a syndicated community offering. KBW will act as sole manager for the syndicated community offering. We have the right to accept or reject, in our sole discretion, orders received in the community offering or syndicated community offering, and our interpretation of the terms and conditions of the plan of conversion will be final. Any determination to accept or reject stock orders in the community offering or syndicated community offering will be based on the facts and circumstances available to management at the time of the determination.

 

If we receive orders for more shares than we are offering for sale, we may not be able to fully or partially fill your order. A detailed description of the subscription offering, the community offering and the syndicated community offering, as well as a discussion regarding allocation procedures, can be found in the section of this prospectus entitled “The Conversion and Offering.”

 

Limits on How Much Common Stock You May Purchase

 

The minimum number of shares of common stock that may be purchased is 25 shares.

 

Generally, no individual, or individuals acting through a single qualifying account held jointly, may purchase more than 20,000 shares ($200,000) of common stock. If any of the following persons purchase shares of common stock, their purchases, in all categories of the offering, when combined with your purchases, cannot exceed 60,000 shares ($600,000) of common stock:

 

·your spouse or relatives of you or your spouse living in your house;

 

·most companies, trusts or other entities in which you are a senior officer, partner, trustee or have a substantial beneficial interest; or

 

·other persons who may be your associates or persons acting in concert with you.

 

Unless we determine otherwise, persons having the same address and persons exercising subscription rights through qualifying accounts registered to the same address will be subject to the overall purchase limitation of 60,000 shares ($600,000).

 

In addition to the above purchase limitations, there is an ownership limitation for current stockholders of Cincinnati Bancorp other than our employee stock ownership plan. Shares of common stock that you purchase in the offering individually and together with persons described above, plus any shares you and they receive in exchange for existing shares of Cincinnati Bancorp common stock, may not exceed 9.9% of the total shares of common stock to be issued and outstanding after the completion of the conversion and offering. However, if, based on your current ownership level, you will own more than 9.9% of the total shares of common stock of Cincinnati Bancorp, Inc. to be issued and outstanding after the completion of the conversion and offering following the exchange of your shares of Cincinnati Bancorp common stock, you will be ineligible to purchase any new shares in the offering. You will be required to obtain regulatory approval or non-objection before acquiring 10% or more of Cincinnati Bancorp, Inc.’s common stock.

 

Subject to regulatory approval, we may increase or decrease the purchase and ownership limitations at any time. See the detailed description of the purchase limitations in “The Conversion and Offering – Additional Limitations on Common Stock Purchases.”

 

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How You May Purchase Shares of Common Stock in the Subscription Offering and the Community Offering

 

In the subscription offering and community offering, you may pay for your shares only by:

 

(i)personal check, bank check or money order made payable directly to Cincinnati Bancorp, Inc.; or

 

(ii)authorizing us to withdraw available funds (without any early withdrawal penalty) from your Cincinnati Federal deposit account(s), other than checking accounts or individual retirement accounts (IRAs).

 

Cincinnati Federal is not permitted to lend funds to anyone to purchase shares of common stock in the offering. Additionally, you may not use any type of third party check to pay for shares of common stock. Do not submit cash. Wire transfers will not be accepted. Applicable regulations prohibit Cincinnati Federal from lending funds or extending credit to any person to purchase shares of common stock in the offering. You may not submit a Cincinnati Federal line of credit check. You may not designate withdrawal from Cincinnati Federal’s accounts with check-writing privileges; rather, submit a check. If you request a direct withdrawal, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and will immediately withdraw the amount from your checking account(s). You may not authorize direct withdrawal from a Cincinnati Federal individual retirement account, or IRA. See “—Using Individual Retirement Account Funds to Purchase Shares of Common Stock.”

 

You may subscribe for shares of common stock in the subscription and community offerings by delivering a signed and completed original stock order form, together with full payment payable to Cincinnati Bancorp, Inc. or authorization to withdraw funds from one or more of your Cincinnati Federal deposit accounts, provided that the stock order form is received before 2:00 p.m., Eastern time, on December 17, 2019, which is the expiration of the subscription offering period. You may submit your stock order form and payment by mail using the stock order reply envelope provided or by overnight delivery to the address listed on the stock order form. You may also hand-deliver stock order forms to our main office, located at 6581 Harrison Avenue, Cincinnati, Ohio, which is open between 9:00 a.m. and 5:00 p.m., Eastern time, Monday through Friday. Hand-delivered stock order forms will be accepted only at this location. We will not accept stock order forms at our other offices. Do not mail stock order forms to Cincinnati Federal’s offices.

 

See “The Conversion and Offering – Procedure for Purchasing Shares in the Subscription and Community Offerings – Payment for Shares” for a complete description of how to purchase shares in the subscription and community offerings.

 

Using Individual Retirement Account Funds to Purchase Shares of Common Stock

 

You may be able to subscribe for shares of common stock using funds in your individual retirement account (“IRA”) or other retirement account. If you wish to use some or all of the funds in your Cincinnati Federal IRA or other retirement account, the applicable funds must be transferred to a self-directed account maintained by an independent custodian or trustee, such as a brokerage firm, and the purchase must be made through that account. If you do not have such an account, you will need to establish one before placing your stock order. An annual administrative fee may be payable to the independent custodian or trustee. Because individual circumstances differ and the processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the December 17, 2019 offering deadline, for assistance with purchases using funds in your IRA or other retirement account you may have at Cincinnati Federal or elsewhere. Whether you may use such funds to purchase shares in the stock offering may depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

 

See “The Conversion and Offering – Procedure for Purchasing Shares in the Subscription and Community Offerings – Payment for Shares” and “—Using Individual Retirement Account Funds” for a complete description of how to use IRA funds to purchase shares of common stock in the stock offering.

 

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Market for Common Stock

 

Existing publicly held shares of Cincinnati Bancorp’s common stock are traded on the OTC Pink Marketplace (OTCPK) operated by OTC Markets Group under the symbol “CNNB.” Upon completion of the conversion, the shares of common stock of Cincinnati Bancorp, Inc. will be issued in exchange for the existing shares of Cincinnati Bancorp. We have applied to list the shares of Cincinnati Bancorp, Inc. common stock on the Nasdaq Capital Market under the symbol “CNNB.” To list our stock on the Nasdaq Capital Market, we are required to have at least three broker-dealers who will make a market in our common stock and at least 300 round-lot holders (i.e., a holder of at least 100 shares). We cannot assure you that we will satisfy these requirements. At June 30, 2019, Cincinnati Bancorp had approximately eight registered market makers in its common stock. KBW has advised us that it intends to make a market in our common stock following the offering, but is under no obligation to do so.

 

Our Dividend Policy

 

Following completion of the stock offering, our board of directors will have the authority to declare dividends on our shares of common stock, subject to our capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. However, no decision has been made with respect to the amount, if any, and timing of any dividend payments. We cannot assure you that we will pay dividends in the future, or that any such dividends will not be reduced or eliminated in the future.

 

For information regarding our proposed dividend policy, see “Our Dividend Policy.” For information regarding our recent dividend payment history, see “Selected Consolidated Financial and Other Data” and “Market for the Common Stock.”

 

Purchases by Directors and Executive Officers

 

We expect our directors and executive officers, together with their associates, to subscribe for 116,700 shares of common stock in the offering, representing 11.0% of the shares to be sold at the minimum of the offering range. The purchase price paid by them will be the same $10.00 per share price paid by all other persons who purchase shares of common stock in the offering. Following the conversion, our directors and executive officers, together with their associates, are expected to beneficially own 287,141 shares of common stock (including any stock options exercisable within 60 days of June 30, 2019), or 15.0% of our total outstanding shares of common stock at the minimum of the offering range, which includes shares they currently own in Cincinnati Bancorp that will be exchanged for shares of Cincinnati Bancorp, Inc.

 

See “Subscriptions by Directors and Executive Officers” for more information on the proposed purchases of shares of common stock by our directors and executive officers.

 

Deadline for Orders of Shares of Common Stock in the Subscription and Community Offerings

 

The deadline for submitting orders to purchase shares of common stock in the subscription and community offerings is 2:00 p.m., Eastern time, on December 17, 2019, unless we extend this deadline. If you wish to purchase shares of common stock, a properly completed and signed original stock order form, together with full payment, must be received (not postmarked) by this time.

 

Although we will make reasonable attempts to provide this prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 2:00 p.m., Eastern time, on December 17, 2019, whether or not we have been able to locate each person entitled to subscription rights.

 

See “The Conversion and Offering – Procedure for Purchasing Shares in the Subscription and Community Offerings – Expiration Date” for a complete description of the deadline for purchasing shares in the stock offering.

 

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You May Not Sell or Transfer Your Subscription Rights

 

Applicable regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to certify that you are purchasing the common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights or the shares that you are purchasing. We intend to take legal action, including reporting persons to federal or state agencies, against anyone who we believe has sold or transferred his or her subscription rights. We will not accept your order if we have reason to believe you have sold or transferred your subscription rights. On the stock order form, you cannot add the names of others for joint stock registration who do not have subscription rights or who qualify only in a lower subscription offering priority than you do. Doing so may jeopardize your subscription rights. You may only add those who were eligible to purchase shares of common stock in the subscription offering at your date of eligibility. In addition, the stock order form requires that you list all deposit and loan accounts, giving all names on each account and the account number at the applicable eligibility date. Failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation.

 

Delivery of Shares of Common Stock

 

All shares of common stock sold will be issued in book entry form. Stock certificates will not be issued. A statement reflecting ownership of shares of common stock issued in the subscription and community offerings will be mailed by our transfer agent to the persons entitled thereto at the registration address noted by them on their stock order forms as soon as practicable following consummation of the conversion and offering. We expect trading in the stock to begin on the day of completion of the conversion and offering or the next business day. The conversion and offering are expected to be completed as soon as practicable following satisfaction of the conditions described below in “—Conditions to Completion of the Conversion.” Until a statement reflecting your ownership of shares of common stock is available and delivered to you, you may not be able to sell the shares of common stock that you purchased in the offering, even though the common stock will have begun trading. Your ability to sell your shares of common stock before receiving your statement will depend on arrangements you may make with a brokerage firm.

 

Conditions to Completion of the Conversion

 

We cannot complete the conversion and offering unless:

 

· The plan of conversion is approved by at least a majority of votes eligible to be cast by members of CF Mutual Holding Company (i.e., depositors of Cincinnati Federal, eligible borrowers of Cincinnati Federal and eligible borrowers of the former Kentucky Federal Savings and Loan Association) as of the close of business on November 4, 2019;

 

· The plan of conversion is approved by Cincinnati Bancorp stockholders holding at least two-thirds of the outstanding shares of common stock of Cincinnati Bancorp as of the close of business on November 4, 2019, including shares held by CF Mutual Holding Company;

 

· The plan of conversion is approved by Cincinnati Bancorp stockholders holding at least a majority of the outstanding shares of common stock of Cincinnati Bancorp as of the close of business on November 4, 2019, excluding shares held by CF Mutual Holding Company;

 

·We sell at least the minimum number of shares of common stock offered in the offering;

 

·We receive approval from the Federal Reserve Board; and

 

·The Office of the Comptroller of the Currency approves an amendment to Cincinnati Federal’s charter to provide for a liquidation account.

 

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CF Mutual Holding Company intends to vote its shares in favor of the plan of conversion. At the close of business on June 30, 2019, CF Mutual Holding Company owned 1,008,969 shares, or approximately 55.5%, of the outstanding shares of common stock of Cincinnati Bancorp. At the close of business on June 30, 2019, the directors and executive officers of Cincinnati Bancorp and their affiliates owned 162,100 shares of Cincinnati Bancorp (excluding exercisable options), or 8.9% of the outstanding shares of common stock and 20.1% of the outstanding shares of common stock excluding shares held by CF Mutual Holding Company. They intend to vote those shares in favor of the plan of conversion.

 

Steps We May Take if We Do Not Receive Orders for the Minimum Number of Shares

 

If we do not receive orders for at least 1,062,394 shares of common stock, we may take one or more steps to sell the minimum number of shares of common stock in the offering range. Specifically, we may:

 

(i)increase the purchase and ownership limitations; and/or

 

(ii) seek regulatory approval to extend the offering beyond January 31, 2020, so long as we resolicit subscribers who previously submitted subscriptions in the offering; and/or

 

(iii)increase the shares purchased by the employee stock ownership plan.

 

If we extend the offering past January 31, 2020, all subscribers will be notified and given an opportunity to confirm, change or cancel their orders. If you do not respond to the notice of extension, we will cancel your stock order and promptly return your funds with interest for funds received in the subscription and community offering or cancel your deposit account withdrawal authorization. If one or more purchase limitations are increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large purchasers may be, given the opportunity to increase their subscriptions up to the then-applicable limit.

 

Possible Change in the Offering Range

 

Keller & Company, Inc. will update its appraisal before we complete the conversion and offering. If, as a result of demand for the shares or changes in market conditions, Keller & Company, Inc. determines that our pro forma market value has increased, we may sell up to 1,652,960 shares in the offering without further notice to you. If our pro forma market value at that time is either below $19.1 million or above $29.8 million, then, after consulting with the Federal Reserve Board, we may:

 

·terminate the stock offering and promptly return all funds (with interest paid on funds received in the subscription and community offerings);

 

·set a new offering range; or

 

·take such other actions as may be permitted by the Federal Reserve Board and the Securities and Exchange Commission.

 

If we set a new offering range, we will promptly return funds, with interest at 0.15% per annum, for funds received for purchases in the subscription and community offerings, and cancel any authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. We will then resolicit subscribers, allowing them to place a new stock order for a period of time.

 

Possible Termination of the Offering

 

We may terminate the offering at any time before the special meeting of members of CF Mutual Holding Company and the special meeting of stockholders of Cincinnati Bancorp that have been called to vote on the conversion, and at any time after these approvals with regulatory approval. If we terminate the offering, we will promptly return your funds with interest at 0.15% per annum, and we will cancel deposit account withdrawal authorizations.

 

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Benefits to Management and Potential Dilution to Stockholders Resulting from the Conversion

 

We expect our employee stock ownership plan, which is a tax-qualified retirement plan for the benefit of Cincinnati Federal’s employees, to purchase up to 8% of the shares of common stock we sell in the offering. If market conditions warrant, in the judgment of its trustees, the employee stock ownership plan’s subscription order will not be filled and the employee stock ownership plan may elect to purchase shares in the open market following the completion of the conversion, subject to the approval of the Federal Reserve Board.

 

We intend to implement one or more new stock-based benefit plans no earlier than six months after completion of the conversion. Stockholder approval of these plans would be required. We have not determined whether we would adopt the plans within or after 12 months following the completion of the conversion. If we implement stock-based benefit plans within 12 months following the completion of the conversion, the stock-based benefit plans would be limited to reserving a number of shares (i) up to 4% of the shares of common stock sold in the offering for awards of restricted stock to key employees and directors, at no cost to the recipients, and (ii) up to 10% of the shares of common stock sold in the offering for issuance pursuant to the exercise of stock options by key employees and directors. If the stock-based benefit plan is adopted more than 12 months after the completion of the conversion, it would not be subject to the percentage limitations set forth above. We have not yet determined the definitive number of shares that would be reserved for issuance under these plans. For a description of our current stock-based benefit plan, see “Management – Benefits to be Considered Following Completion of the Conversion – Stock-Based Benefit Plans.”

 

The following table summarizes the number of shares of common stock and the aggregate dollar value of grants that are available under one or more stock-based benefit plans if such plans reserve a number of shares of common stock equal to 4% and 10% of the shares sold in the stock offering for restricted stock awards and stock options, respectively. The table shows the dilution to stockholders if all such shares are issued from authorized but unissued shares, instead of shares purchased in the open market. A portion of the stock grants shown in the table below may be made to non-management employees. The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all qualifying employees.

 

   Number of Shares to be Granted or Purchased   Dilution         
           As a   Resulting   Value of Grants (1) 
   At
Minimum of
Offering
Range
   At
Adjusted
Maximum
of Offering
Range
   Percentage
of Common
Stock to be
Sold in the
Offering
   From
Issuance of
Shares for
Stock-Based
Benefit Plans
   At
Minimum
of Offering
Range
   At
Adjusted
Maximum
of Offering
Range
 
Employee stock ownership plan   84,992    132,237    8.0%   N/A(2)  $849,920   $1,322,370 
Restricted stock awards   42,496    66,118    4.0    3.85%   424,960    661,180 
Stock options   106,239    165,296    10.0    9.09%   275,159    428,117 
Total   233,727    363,651    22.0%   12.94%  $1,550,039   $2,411,667 

 

 

(1)The actual value of restricted stock awards will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value for restricted stock awards is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $2.59 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; an expected option term of 10 years; no dividend yield; a risk-free rate of return of 2.03%; and expected volatility of 13.20%. The actual value of stock options granted will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used and the option pricing model ultimately adopted.
(2)No dilution is reflected for the employee stock ownership plan because such shares are assumed to be purchased in the stock offering.

 

We may fund our stock-based benefit plans through open market purchases, as opposed to new issuances of stock; however, if any options previously granted under our existing 2017 Equity Incentive Plan are exercised during the first year following completion of the offering, they will be funded with newly issued shares as federal regulations do not permit us to repurchase our shares during the first year following the completion of the offering except to fund the grants of restricted stock under a stock-based benefit plan or under extraordinary circumstances.

 

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The following table presents information as of June 30, 2019 regarding our employee stock ownership plan, our 2017 Equity Incentive Plan, and our proposed stock-based benefit plan. The table below assumes that 2,975,625 shares are outstanding after the offering, which includes the sale of 1,652,960 shares in the offering at the adjusted maximum of the offering range and the issuance of shares of Cincinnati Bancorp, Inc. in exchange for shares of Cincinnati Bancorp based on an exchange ratio of 1.6381. It also assumes that the value of the stock is $10.00 per share.

 

Existing and New Stock Benefit Plans  Participants  Shares at Adjusted
Maximum of
Offering Range
   Estimated Value of
Shares
   Percentage of
Shares
Outstanding
After the
Conversion
 
Employee Stock Ownership Plan:  Officers and Employees               
Shares purchased in 2015 offering (1)      110,403 (2)  $1,104,030    3.7%
Shares to be purchased in this offering       132,237    1,322,370    4.4 
Total employee stock ownership plan shares      242,640   $2,426,400    8.1%
                   
Restricted Stock Awards:  Directors, Officers and Employees               
2017 Equity Incentive Plan (1)      55,199 (3)  $551,990 (4)   1.9%
New shares of restricted stock      66,118    661,180 (4)   2.2 
Total shares of restricted stock      121,317   $1,213,170    4.1%
                   
Stock Options:  Directors, Officers and Employees               
2017 Equity Incentive Plan (1)      132,478 (5)  $343,118 (6)   4.4%
New stock options      165,296    428,117 (6)   5.6 
Total stock options      297,774   $771,235    10.0%
                   
Total of stock benefit plans      661,731   $4,410,805    22.2%

 

 

(1)The number of shares indicated has been adjusted for the 1.6381 exchange ratio at the adjusted maximum of the offering range.
(2)At June 30, 2019, 29,440 of these shares have been allocated to participants.
(3)At June 30, 2019, 55,199 of these shares have been awarded and 22,080 have vested.
(4)The value of restricted stock awards is determined based on their fair value as of the date grants are made. For purposes of this table, the fair value of awards under the new stock-based benefit plan is assumed to be the same as the offering price of $10.00 per share.
(5) At June 30, 2019, 124,196 of these options have been awarded and 44,158 have vested.
(6)The weighted-average fair value of stock options has been estimated at $2.59 per option, using the Black-Scholes option pricing model with the following assumptions: exercise price, $10.00; trading price on date of grant, $10.00; no dividend yield; expected term, 10 years; expected volatility, 13.20%; and risk-free rate of return, 2.03%. The actual value of option grants will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used and the option pricing model ultimately adopted.

 

Tax Consequences

 

CF Mutual Holding Company, Cincinnati Bancorp, Cincinnati Federal and Cincinnati Bancorp, Inc. have received an opinion of counsel, Luse Gorman, PC, regarding the material federal income tax consequences of the conversion, and have received an opinion of BKD, LLP regarding the material Ohio tax consequences of the conversion. As a general matter, the conversion will not be a taxable transaction for purposes of federal or state income taxes to CF Mutual Holding Company, Cincinnati Bancorp, Cincinnati Federal, Cincinnati Bancorp, Inc., persons eligible to subscribe in the subscription offering, or existing stockholders of Cincinnati Bancorp (except as to cash paid for fractional shares). Existing stockholders of Cincinnati Bancorp who receive cash in lieu of fractional shares of Cincinnati Bancorp, Inc. will recognize a gain or loss equal to the difference between the cash received and the tax basis of the fractional share.

 

Emerging Growth Company Status

 

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we are an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies. See “Risk Factors – Risks Related to Our Business – We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors” and “Supervision and Regulation – Emerging Growth Company Status.”

 

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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. Such an election is irrevocable during the period a company is an emerging growth company. We have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

 

Risk Factors

 

An investment in Cincinnati Bancorp, Inc.’s common stock is subject to risk, including risks related to our business and this offering.

 

Specific risks related to our business include those related to our commercial real estate loans, multi-family loans, and construction and land loans; our secondary mortgage market operations; our one- to four-family mortgage loans secured by non-owner occupied properties; changes in interest rates; our allowance for loan losses; changes in local and general economic conditions; competition; dependence on technology; changes in management’s estimate and assumptions underlying our consolidated financial statements; reliance on our management team; reliance on our reputation; changes in and compliance with laws and regulations; and environmental risks with our lending activities and properties we own.

 

Specific risks related to this offering include those related to the future trading price of the common stock of Cincinnati Bancorp, Inc.; use of the net offering proceeds; return on equity after the completion of the offering; intended new stock-based benefit plans; anti-takeover factors; forum selection provision for certain litigation; trading market for the common stock of Cincinnati Bancorp, Inc.; and the irrevocability of your investment decision.

 

Before making an investment decision, you should read this entire document carefully, including the section entitled “Risk Factors” that immediately follows and that discusses the above risks in further detail.

 

How You Can Obtain Additional Information – Stock Information Center

 

Our banking personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the conversion or offering, call our Stock Information Center at 1-(877) _________ (toll-free). The Stock Information Center is open Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern time, and will be closed on bank holidays.

 

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RISK FACTORS

 

You should consider carefully the following risk factors in evaluating an investment in the shares of common stock. In addition to these risks and the other risks and uncertainties described elsewhere in this prospectus, there may be additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial that could materially and adversely affect our business, financial condition or results of operations.

 

Risks Related to Our Business

 

Our commercial real estate and multi-family loans, and construction and land loans, carry greater credit risk than loans secured by owner occupied one- to four-family real estate.

 

At June 30, 2019, commercial real estate loans totaled $18.3 million, or 10.2% of our loan portfolio, multi-family loans totaled $28.9 million, or 16.2% of our loan portfolio, and construction and land loans totaled $8.3 million, or 4.6% of our loan portfolio. Commercial real estate, multi-family, and construction and land loans, which generally have larger principal balances than one- to four-family real estate loans, generally have greater credit risk than owner occupied residential real estate loans. Repayment of commercial real estate and multi-family loans depends primarily on the income generated by the property being sufficient to cover operating expenses, property maintenance and debt service. Repayment of construction loans and land loans depends primarily on borrower’s ability to sell the completed project, the value of the completed project, or the successful operation of the borrower’s business after completion, and collateral value depends primarily on the ability of builders/contractors to complete construction per specifications and plans and on budget. If we are unable to recover the full contractual amount of principal and interest that we anticipated at the time we originated such loans, we may have to increase our provision for loan losses which would adversely affect our operating results and financial condition.

 

In addition, commercial real estate and multi-family loans, particularly those secured by non-owner occupied properties, expose us to greater risk of non-payment and loss than loans secured by owner occupied one- to four-family properties because repayment of such loans depend primarily on the tenant’s continuing ability to pay rent to the property owner, who is our borrower, or, if the property owner is unable to find a tenant, the property owner’s ability to repay the loan without the benefit of a rental income stream. In addition, the physical condition of non-owner occupied properties is often below that of owner occupied properties due to lax property maintenance standards, which has a negative impact on the value of the collateral properties.

 

Income from secondary mortgage market operations is volatile, and we may incur losses or charges related to our secondary mortgage market operations which would negatively affect our earnings.

 

A key component of our strategy is to continue to sell in the secondary market a large majority of the fixed-rate residential mortgage loans that we originate, earning non-interest income in the form of gains on sale. Gains on sale of loans totaled $716,000 for the six months ended June 30, 2019, $1.7 million for the year ended December 31, 2018 and $1.6 million for the year ended December 31, 2017. When interest rates rise, the demand for mortgage loans, particularly refinancing of existing mortgage loans, tends to fall, likely reducing loan demand. Weak or deteriorating economic conditions also tend to reduce loan demand. Although we sell loans in the secondary market without recourse, we are required to give customary representations and warranties to the buyers. If we breach those representations and warranties, the buyers will be able to require us to repurchase the loans and we may incur a loss on the repurchase.

 

A portion of our one- to four-family residential mortgage loan portfolio is comprised of non-owner occupied properties, which increases the credit risk on this portion of our loan portfolio.

 

The housing stock in our primary lending market area is comprised in part of single family rental properties as well as two- to four-unit properties. At June 30, 2019, $14.2 million, or 7.9% of our one- to four-family residential loan portfolio, were comprised of non-owner occupied properties. Our non-owner occupied residential loans were secured primarily by single family properties, and to a much lesser extent, by two- to four-unit properties. There generally is greater credit risk inherent in investor-owner and non-owner occupied properties than in owner occupied single family properties since, similar to commercial real estate and multi-family loans, the repayment of these loans may depend, in part, on the successful management of the property and/or the borrower’s ability to lease the units of the property. In addition, the physical condition of non-owner occupied properties is often below that of owner occupied properties due to lax property maintenance standards, which has a negative impact on the value of the collateral properties. Furthermore, some of our non-owner occupied borrowers have more than one loan outstanding with us, which may expose us to a greater risk of loss compared to residential and commercial borrowers with only one loan. A downturn in the real estate market or the local economy could adversely affect the value of properties securing these loans or the revenues derived from these properties which could affect the borrower’s ability to repay the loan.

 

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Future changes in interest rates may reduce our profits and asset values, particularly the value of our mortgage servicing rights asset.

 

Our ability to make a profit largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings.

 

The rates we earn on our assets and the rates we pay on our liabilities are generally fixed for a contractual period of time. Like many savings institutions, our liabilities generally have shorter contractual maturities than our assets. This imbalance can create significant earnings volatility because market interest rates change over time. In a period of rising interest rates, the interest income we earn on our assets may not increase as rapidly as the interest we pay on our liabilities. In a period of declining interest rates, the interest income we earn on our assets may decrease more rapidly than the interest we pay on our liabilities, as borrowers prepay mortgage loans, and mortgage-backed securities and callable investment securities are called, requiring us to reinvest those cash flows at lower interest rates.

 

Any increase in market interest rates may reduce our mortgage banking income. We generate noninterest income primarily from gains on the sale of mortgage loans to investors. We also earn interest on loans held for sale while they are awaiting delivery to our investors. In a rising or higher interest rate environment, our mortgage loan originations may decrease, resulting in fewer loans that are available for sale. This would result in a decrease in interest income and a decrease in revenues from loan sales. In addition, our results of operations are affected by the amount of noninterest expenses associated with mortgage banking activities, such as salaries and employee benefits, occupancy, equipment, data processing and other operating costs. During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity.

 

In addition, changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A decline in interest rates results in increased prepayments of loans and mortgage-backed and related securities as borrowers refinance their debt to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Furthermore, an inverted interest rate yield curve, where short-term interest rates (which are usually the rates at which financial institutions borrow funds) are higher than long-term interest rates (which are usually the rates at which financial institutions lend funds for fixed-rate loans) can reduce a financial institution’s net interest margin and create financial risk for financial institutions who originate longer-term, fixed rate mortgage loans.

 

Because we generally retain the servicing rights on many of the loans we sell in the secondary market, we are required to record a mortgage servicing right asset, which amounted to $1.4 million at June 30, 2019. We are required to test our mortgage right asset quarterly for impairment. The value of mortgage servicing rights tends to increase with rising interest rates and to decrease with falling interest rates. If we are required to take an impairment charge, our earnings could be adversely affected.

 

We monitor interest rate risk through the use of a simulation model that estimates the net present value of cash flows from our assets, liabilities and off-balance sheet items, which is referred to as our net portfolio value, or NPV, under a range of assumed changes in market interest rates. At June 30, 2019, assuming an instantaneous 300 basis point increase in market interest rates, we estimate that our NPV would decline by 26.87%. For further discussion of how changes in market interest rates could impact us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management of Market Risk.”

 

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If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.

 

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions or the results of our analyses are incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance. In addition, our emphasis on loan growth and on increasing our portfolios of commercial real estate and commercial business loans, as well as any future credit deterioration, could require us to increase our allowance for loan losses in the future. At June 30, 2019, our allowance for loan losses was 0.78% of total loans and 462.38% of nonperforming loans. Material additions to our allowance would materially decrease our net income.

 

The Financial Accounting Standards Board has delayed the effective date of the Current Expected Credit Loss, or CECL, standard. CECL will be effective for Cincinnati Bancorp, Inc. and Cincinnati Federal on January 1, 2023. CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses. This will change the current method of providing allowances for loan losses that are incurred or probable, which would likely require us to increase our allowance for loan losses, and to greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for loan losses.

 

In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities or otherwise may have a material adverse effect on our financial condition and results of operations.

 

We have a high concentration of loans secured by real estate in our market area. Adverse economic conditions, both generally and in our market area, could adversely affect our financial condition and results of operations.

 

We have relatively few loans outside of our market area and, as a result, we have a greater risk of loan defaults and losses in the event of a further economic downturn in our market area, as adverse economic conditions may have a negative effect on the ability of our borrowers to make timely payments of their loans. Although economic conditions have improved significantly since the end of the economic recession in 2009, a return of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans, investments, and collateral securing our loans, and our ongoing operations, costs and profitability. Any of these negative events may result in higher than expected loan delinquencies, increase our levels of nonperforming and classified assets, and reduce demand for our products and services, which may cause us to incur losses and may adversely affect our capital, liquidity and financial condition.

 

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A worsening of economic conditions could reduce demand for our products and services and/or increase our level of non-performing loans, which could adversely affect our financial condition and results of operations.

 

Unlike larger financial institutions that are more geographically diversified, our profitability depends primarily on the general economic conditions in our primary market area. In addition to local economic conditions, which could have a significant impact on ability of our borrowers to repay their loans and on the value of the collateral securing their loans, deterioration in general economic conditions could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations:

 

·demand for our products and services may decline;

 

·loan delinquencies, problem assets and foreclosures may increase;

 

·collateral for loans, especially real estate, may decline in value, in turn reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans;

 

·the value of our securities portfolio may decline; and

 

·the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.

 

Moreover, a significant decline in general economic conditions, caused by inflation, recession, tariffs and international trade disputes, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

 

We rely on wholesale funds which are generally a more volatile and costlier source of funds than retail deposits.

 

We rely in part on wholesale funds to fund our business operations, particularly our mortgage banking activities. Our wholesale funds consist of Federal Home Loan Bank of Cincinnati advances, which amounted to $41.3 million at June 30, 2019, and wholesale certificates of deposit obtained through the National CD Rateline Program, which amounted to $8.1 million or 5.8% of total deposits at June 30, 2019. The availability of wholesale funds, particularly wholesale deposits, and the interest rates we are required to pay on them can change depending on market conditions and other factors. If there would be a material increase in the interest rates payable on wholesale funds, it would have an material adverse effect on our results of operations. Furthermore, if we are unable to access readily wholesale funds, regardless of interest rate, it could have a material adverse effect on our liquidity, as well as our results of operations if we would have to increase our deposit rates to attract replacement funds.

 

Strong competition within our market area may limit our growth and profitability.

 

Competition in the banking and financial services industry is intense. In all of our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking firms and unregulated or less regulated non-banking entities, operating locally and elsewhere. Many of these competitors are substantially larger than us and have substantially greater resources and higher lending limits than we have and offer certain services that we do not or cannot provide. In addition, some of our competitors offer loans with lower interest rates on more attractive terms than loans we offer. Competition also makes it increasingly difficult and costly to attract and retain qualified employees. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Our profitability depends upon our continued ability to successfully compete for business and qualified employees in our market areas. The greater resources and deposit and loan products offered by some of our competitors may limit our ability to increase our interest earning assets. For additional information see “Business of Cincinnati Federal – Competition.”

 

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We face significant operational risks because of our reliance on technology. Our information technology systems may be subject to failure, interruption or security breaches.

 

Information technology systems are critical to our business. Our business requires us to collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and our own business, operations, plans and business strategies. We use various technology systems to manage our customer relationships, general ledger, securities investments, deposits, and loans. Our computer systems, data management and internal processes, as well as those of third parties, are integral to our performance. Our operational risks include the risk of malfeasance by employees or persons outside our company, errors relating to transaction processing and technology, systems failures or interruptions, breaches of our internal control systems and compliance requirements, and business continuation and disaster recovery. There have been increasing efforts by third parties to breach data security at financial institutions. Such attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information, damages to systems, or other material disruptions to network access or business operations. Although we take protective measures and have not experienced any of the data breaches described above, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber-attacks that could have an impact on information security. Because the techniques used to cause security breaches change frequently, we may be unable to proactively address these techniques or to implement adequate preventative measures.

 

In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, or a breach of our security systems, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, loss of customers and damage to our reputation, and face regulatory action or civil litigation. Any of these events could have a material adverse effect on our financial condition and results of operations. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits.

 

In addition, we outsource a majority of our data processing requirements to certain third-party providers. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements, or we also could be adversely affected if such an agreement is not renewed by the third party vendor or is renewed on terms less favorable to us. If our third-party providers encounter difficulties, or if we have difficulty communicating with those service providers, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected, which could have a material adverse effect on our financial condition and results of operations. Threats to information security also exist in the processing of customer information through various other vendors and their personnel. To our knowledge, the services and programs provided to us by third parties have not suffered any security breaches. However, the existence of cyber-attacks or security breaches at third parties with access to our data, such as vendors, may not be disclosed to us in a timely manner.

 

Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results.

 

When preparing our consolidated financial statements, our management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date. These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for loan losses, our valuation of investment securities, our valuation of our mortgage servicing rights assets, and our determination of fair value measurements.

 

We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.

 

We depend upon the services of the members of our senior management team who direct our strategy and operations. Our executive officers and lending personnel possess expertise in our markets and key business relationships, and have been integral in the restructuring of our operations, including the implementation of a more aggressive sales culture within our institution. Any one of them could be difficult to replace. Our loss of these persons, or our inability to hire additional qualified personnel, could impact our ability to implement our business strategy and could have a material adverse effect on our results of operations and our ability to compete in our markets. See “Management.”

 

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We are a community bank and our ability to maintain our reputation is critical to the success of our business. The failure to do so may materially adversely affect our performance.

 

We are a community bank, and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, cybersecurity incidents and questionable or fraudulent activities of our customers. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers and employees, costly litigation and increased governmental regulation, all of which could adversely affect our business and operating results.

 

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.

 

Cincinnati Federal is subject to extensive regulation, supervision and examination by the Office of the Comptroller of the Currency, and CF Mutual Holding Company and Cincinnati Bancorp are, and Cincinnati Bancorp, Inc. will be, subject to extensive regulation, supervision and examination by the Federal Reserve Board. Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the federal deposit insurance fund and the depositors of Cincinnati Federal, rather than for our stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firm. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of operations.

 

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

 

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are suspected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on pursuing acquisitions or establishing new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations. Furthermore, these rules and regulations continue to evolve and expand. We have not been subject to fines or other penalties, or have suffered business or reputational harm, as a result of money laundering activities in the past.

 

We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares.

 

Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and defines “capital” for calculating these ratios. The minimum capital requirements are: (i) a common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. The regulations also establish a “capital conservation buffer” of 2.5%, and the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%; (ii) a Tier 1 to risk-based assets capital ratio of 8.5%; and (iii) a total capital ratio of 10.5%. An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the capital conservation buffer amount.

 

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The application of these capital requirements could, among other things, result in lower returns on equity, and result in regulatory actions if we are unable to comply with such requirements. Specifically, following the completion of the offering, Cincinnati Federal’s ability to pay dividends to Cincinnati Bancorp, Inc. will be limited if it does not have the capital conservation buffer required by the new capital rules, which may further limit Cincinnati Bancorp, Inc.’s ability to pay dividends to its stockholders. See “Regulation and Supervision – Federal Banking Regulation – Capital Requirements.”

 

We are subject to environmental liability risk associated with lending activities or properties we own.

 

A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties, or with respect to properties that we own in operating our business. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Our policies, which require us to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.

 

We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

 

Cincinnati Bancorp is an emerging growth company. As successor to Cincinnati Bancorp, Cincinnati Bancorp, Inc. will also be an emerging growth company. For as long as Cincinnati Bancorp, Inc. continues to be an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company, Cincinnati Bancorp, Inc. also will not be subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require that our independent auditors review and attest as to the effectiveness of our internal control over financial reporting. We have also elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

 

Cincinnati Bancorp, Inc. will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the completion of the mutual holding company reorganization of Cincinnati Federal on October 14, 2015; (ii) the first fiscal year after our annual gross revenues are $1.0 billion (adjusted for inflation) or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. Investors may find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.

 

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Risks Related to the Offering

 

The future price of our shares of common stock may be less than the $10.00 purchase price per share in the offering.

 

If you purchase shares of common stock in the offering, you may not be able to sell them later at or above the $10.00 purchase price. In many cases, shares of common stock issued by newly converted savings institutions or mutual holding companies have traded below the initial offering price. The aggregate purchase price of the shares of common stock sold in the offering will be based on an independent appraisal. The independent appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. The independent appraisal is based on certain estimates, assumptions and projections, all of which are subject to change from time to time. After the shares begin trading, the trading price of our common stock will be determined by the marketplace, and may be influenced by many factors, including prevailing interest rates, the overall performance of the economy, changes in federal tax laws, new regulations, investor perceptions of Cincinnati Bancorp, Inc. and the outlook for the financial services industry in general. Price fluctuations in our common stock may be unrelated to our operating performance.

 

Our failure to effectively deploy the net proceeds may have an adverse effect on our financial performance.

 

We intend to invest between $4.7 million and $6.5 million of the net proceeds of the offering (or $7.6 million at the adjusted maximum of the offering range) in Cincinnati Federal. We may use the remaining net proceeds to invest in short-term investments and for general corporate purposes, including repurchasing shares of our common stock and paying dividends. We also expect to use a portion of the net proceeds we retain to fund a loan to our employee stock ownership plan to purchase shares of common stock in the offering. Cincinnati Federal may use the net proceeds it receives to fund new loans, expand its retail banking franchise by establishing or acquiring new branches or by acquiring other financial institutions or other financial services companies, or for other general corporate purposes. However, except for the funding the loan to the employee stock ownership plan, we have not allocated specific amounts of the net proceeds for any of these purposes, and we will have broad discretion in determining the amount of the net proceeds we apply to different uses and when we apply or reinvest such proceeds. We have not established a timetable for investing the net proceeds, and we cannot predict how long we will require to invest the net proceeds. Our failure to reinvest these funds effectively would reduce our profitability and may adversely affect the value of our common stock.

 

Our return on equity will be low following the stock offering. This could negatively affect the trading price of our shares of common stock.

 

Net income divided by average stockholders’ equity, known as “return on equity,” is a ratio many investors use to compare the performance of financial institutions. Our return on equity will be low until we are able to leverage the additional capital we receive from the stock offering. Our return on equity also will be negatively affected by added expenses associated with our employee stock ownership plan and the stock-based benefit plans we intend to adopt, and may be negatively affected by higher minimum regulatory capital requirements. Until we can increase our net interest income and noninterest income and leverage the capital raised in the stock offering, we expect our return on equity to be low, which may reduce the market price of our shares of common stock.

 

Our stock-based benefit plans will increase our expenses and reduce our income.

 

We intend to adopt one or more new stock-based benefit plans after the conversion, subject to stockholder approval, which will increase our annual compensation and benefit expenses related to the stock options and stock awards granted to participants under the new stock-based benefit plans. The actual amount of these new stock-related compensation and benefit expenses will depend on the number of options and stock awards granted under the plans, the fair market value of our stock or options on the date of grant, the vesting period, and other factors which we cannot predict at this time. If we adopt stock-based benefit plans within 12 months following the conversion, the shares of common stock reserved for issuance pursuant to awards of restricted stock and grants of options under such plans would be limited to 4% and 10%, respectively, of the total shares of our common stock sold in the offering. If we adopt stock-based benefit plans more than 12 months after the completion of the conversion, we may award restricted shares of common stock or grant options in excess of these amounts, which would further increase costs.

 

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In addition, we will recognize expense for our employee stock ownership plan when shares are committed to be released to participants’ accounts, and we will recognize expense for restricted stock awards and stock options over the vesting period of awards made to recipients. The expense in the first year following the offering for our employee stock ownership plan and for our new stock-based benefit plans, assuming such plans had been implemented at the beginning of the year, is estimated to be approximately $284,000 ($237,000 after tax) at the adjusted maximum of the offering range as set forth in the pro forma financial information under “Pro Forma Data,” assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock. For further discussion of our proposed stock-based plans, see “Management – Benefits to be Considered Following Completion of the Conversion.”

 

The implementation of stock-based benefit plans may dilute your ownership interest. Historically, stockholders have approved these stock-based benefit plans.

 

We intend to adopt one or more new stock-based benefit plans following the stock offering. These plans may be funded either through open market purchases of our common stock or from the issuance of authorized but unissued shares of common stock. Our ability to repurchase shares of our common stock to fund these plans will be subject to many factors, including applicable regulatory restrictions on stock repurchases, the availability of stock in the market, the trading price of our stock, our capital levels, alternative uses for our capital and our financial performance. While our intention is to fund the new stock-based benefit plans through open market purchases, stockholders would experience a 9.09% dilution in ownership interest if newly issued shares of our common stock are used to fund stock options in an amount equal to 10% of the shares sold in the offering, and all such stock options are exercised, and a 3.85% dilution in ownership interest if newly issued shares of our common stock are used to fund shares of restricted common stock in an amount equal to 4% of the shares sold in the offering. Such dilution would also reduce earnings per share. If we adopt the plans more than 12 months following the conversion, new stock-based benefit plans would not be subject to these limitations and stockholders could experience greater dilution.

 

Although the implementation of new stock-based benefit plans would be subject to stockholder approval, historically, the overwhelming majority of stock-based benefit plans adopted by savings institutions and their holding companies following mutual-to-stock conversions have been approved by stockholders.

 

We have not determined when we will adopt one or more new stock-based benefit plans. Stock-based benefit plans adopted more than 12 months following the completion of the conversion may exceed regulatory restrictions on the size of stock-based benefit plans adopted within 12 months, which would further increase our costs.

 

If we adopt stock-based benefit plans more than 12 months following the completion of the conversion, then grants of shares of common stock or stock options under our proposed stock-based benefit plans may exceed 4% and 10%, respectively, of shares of common stock sold in the stock offering. Stock-based benefit plans that provide for awards in excess of these amounts would increase our costs beyond the amounts estimated in “—Our stock-based benefit plans will increase our expenses and reduce our income.” Stock-based benefit plans that provide for awards in excess of these amounts could also result in dilution to stockholders in excess of that described in “—The implementation of stock-based benefit plans may dilute your ownership interest. Historically, stockholders have approved these stock-based benefit plans.” Although the implementation of stock-based benefit plans would be subject to stockholder approval, the timing of the implementation of such plans will be at the discretion of our board of directors.

 

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Various factors may make takeover attempts more difficult to achieve.

 

Certain provisions of our articles of incorporation and bylaws and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire control of Cincinnati Bancorp, Inc. without our board of directors’ approval. Under regulations applicable to the conversion, for a period of three years following completion of the conversion, no person may offer to acquire or acquire beneficial ownership of more than 10% of our common stock without prior approval of the Federal Reserve Board. Under federal law, subject to certain exemptions, a person, entity or group must notify the Federal Reserve Board and receive the Federal Reserve Board’s non-objection before acquiring control of a savings and loan holding company. There also are provisions in our articles of incorporation and bylaws that we may use to delay or block a takeover attempt, including a provision that prohibits any person from voting more than 10% of our outstanding shares of common stock. Cincinnati Federal’s charter will contain a similar restriction on acquisitions of 10% or more of its common stock, directly or indirectly, for five years following the conversion. Furthermore, shares of restricted stock and stock options that we may grant to employees and directors, stock ownership by our management and directors and other factors may make it more difficult for companies or persons to acquire control of Cincinnati Bancorp, Inc. without the consent of our board of directors. Taken as a whole, these statutory or regulatory provisions and provisions in our articles of incorporation and bylaws could result in our being less attractive to a potential acquirer and therefore could adversely affect the market price of our common stock. For additional information, see “Restrictions on Acquisition of Cincinnati Bancorp, Inc.” and “Management—Benefits to be Considered Following Completion of the Conversion.”

 

Our articles of incorporation provide that, subject to limited exception, state and federal courts in the State of Maryland are the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, and other employees.

 

The Articles of Incorporation of Cincinnati Bancorp, Inc. provide that, unless Cincinnati Bancorp, Inc. consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of Cincinnati Bancorp, Inc., (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Cincinnati Bancorp, Inc. to Cincinnati Bancorp, Inc. or Cincinnati Bancorp, Inc.’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Maryland General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court located within the State of Maryland, in all cases subject to the court’s having personal jurisdiction over the indispensible parties named as defendants. This exclusive forum provision does not apply to claims arising under the federal securities laws. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum it finds favorable for disputes with Cincinnati Bancorp, Inc. and its directors, officers, and other employees or may cause a stockholder to incur additional expense by having to bring a claim in a judicial forum that is distant from where the stockholder resides, or both. In addition, if a court were to find this exclusive forum provision to be inapplicable or unenforceable in a particular action, we may incur additional costs associated with resolving the action in another jurisdiction, which could have a material adverse effect on our financial condition and results of operations.

 

 

There may be a limited trading market in our shares of common stock, which would hinder your ability to sell our common stock and may lower the market price of our common stock.

 

Before the conversion and offering, transactions in shares of Cincinnati Bancorp common stock have been quoted on the OTC Pink Marketplace operated by OTC Markets Group Inc., but the shares have not been actively traded. We have applied to list the shares of Cincinnati Bancorp, Inc. common stock on the Nasdaq Capital Market following the conversion and offering. In order to list on the Nasdaq Capital Market, we must have at least three broker-dealers who will make a market in our common stock and at least 300 round-lot holders.  We cannot assure you that we will satisfy these requirements. KBW has advised us that it intends to make a market in our common stock following the offering, but is under no obligation to do so.  The development of a public market having the desirable characteristics of depth, liquidity and orderliness depends on the existence of willing buyers and sellers, the presence of which is not within our control or that of any market maker. The number of active buyers and sellers of our common stock at any particular time may be limited, which may have an adverse effect on the price at which our common stock can be sold.  Persons purchasing the common stock may not be able to sell their shares at or above the $10.00 price per share in the offering. Purchasers of our common stock should recognize that there are risks involved in their investment and that there may be a limited trading market in the common stock.

 

You may not revoke your decision to purchase Cincinnati Bancorp, Inc. common stock in the subscription or community offerings after you send us your order.

 

Funds submitted or automatic withdrawals authorized in connection with the purchase of shares of common stock in the subscription and community offerings will be held by us until the completion or termination of the conversion and offering, including any extension of the expiration date and consummation of a syndicated community offering. Because completion of the conversion and offering will be subject to regulatory approvals and an update of the independent appraisal prepared by Keller & Company, Inc., among other factors, there may be one or more delays in completing the conversion and offering. Orders submitted in the subscription and community offerings are irrevocable, and purchasers will have no access to their funds unless the offering is terminated, or extended beyond January 31, 2020, or the number of shares to be sold in the offering is increased to more than 1,652,960 shares or decreased to fewer than 1,062,394 shares.

 

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

 

The summary information presented below at each date or for each of the periods presented is derived in part from the consolidated financial statements of Cincinnati Bancorp. The financial condition data at December 31, 2018 and 2017 and the operating data for the years ended December 31, 2018 and 2017 were derived from the audited consolidated financial statements of Cincinnati Bancorp included elsewhere in this prospectus. The information at and for the year ended December 31, 2016 was derived in part from the audited consolidated financial statements of Cincinnati Bancorp that are not included in this prospectus. The information at June 30, 2019 and for the six months ended June 30, 2019 and 2018 is unaudited and reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments included in the interim data. The results of operations for the six months ended June 30, 2019 are not necessarily indicative of the results of operations for the entire year or any other interim period. The following information is only a summary, and should be read in conjunction with the consolidated financial statements and related notes of Cincinnati Bancorp beginning on page F-1 of this prospectus.

 

   At June 30,   At December 31, 
   2019   2018   2017   2016 
                 
   (In thousands) 
Selected Financial Condition Data:                    
Total assets  $206,334   $197,694   $170,453   $154,974 
Cash and cash equivalents   11,148    11,089    10,267    11,128 
Interest-bearing time deposits   200    200         
Available-for-sale securities   427    630    910    1,779 
Federal Home Loan Bank stock   2,657    2,583    1,021    908 
Loans receivable, net   176,160    170,365    147,020    131,103 
Loans held for sale   4,128    1,282    2,221    1,315 
Federal Home Loan Bank lender risk account receivable   1,584    1,703    1,709    1,706 
Bank-owned life insurance   4,042    3,997    3,254    3,173 
Total deposits   138,656    142,392    113,948    108,092 
Federal Home Loan Bank advances   41,316    28,580    34,310    25,559 
Total stockholders’ equity   23,311    22,961    19,325    18,392 

 

    For the Six Months Ended
June 30,
    For the Years Ended
December 31,
 
    2019     2018     2018     2017     2016  
                               
    (In thousands)  
Selected Operating Data:                                        
Interest and dividend income   $ 4,192     $ 3,288     $ 6,994     $ 5,789     $ 5,297  
Interest expense     1,330       929       2,083       1,418       1,367  
Net interest income     2,862       2,359       4,911       4,371       3,930  
Provision (credit) for loan losses           30       45       30       (121 )
Net interest income after provision (credit) for loan losses     2,862       2,329       4,866       4,341       4,051  
Noninterest income     1,298       1,358       4,876       2,477       2,602  
Noninterest expense     3,805       3,217       7,250       5,909       5,571  
Income before income taxes     355       470       2,492       909       1,082  
Provision for income taxes     43       105       191       34       349  
Net income   $ 312     $ 365     $ 2,301     $ 875     $ 734  

 

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   At or For the Six Months Ended
June 30,
   At or For the Years Ended
December 31,
 
   2019   2018   2018   2017   2016 
Performance Ratios (1):                         
Return on average assets   0.31%   0.42%   1.27%   0.55%   0.49%
Return on average equity   2.75%   3.87%   11.85%   4.74%   4.18%
Interest rate spread (2)   2.79%   2.66%   2.67%   2.81%   2.67%
Net interest margin (3)   3.04%   2.89%   2.91%   2.97%   2.84%
Non-interest expense to average assets   3.76%   3.69%   4.01%   3.70%   3.70%
Efficiency ratio (4)   91.47%   86.55%   74.08%   86.29%   85.29%
Average interest-earning assets to average interest-bearing liabilities   117.52%   119.97%   119.04%   117.70%   117.66%
Average equity to average assets   11.19%   10.81%   10.74%   11.56%   11.68%
                          
Capital Ratios (Bank only):                         
Total risk-based capital to risk weighted assets   16.5%   16.3%   17.5%   16.5%   18.1%
Tier 1 capital to risk-weighted assets   15.6%   15.2%   16.5%   15.4%   16.9%
Common equity Tier 1 capital to risk-weighted assets   15.6%   15.2%   16.5%   15.4%   16.9%
Tier 1 capital to adjusted total assets   11.1%   11.0%   11.5%   11.3%   11.9%
                          
Asset Quality Ratios (1):                         
Allowance for loan losses as a percentage of total loans   0.78%   0.89%   0.81%   0.91%   0.99%
Allowance for loan losses as a percentage of non-performing loans   462.38%   360.10%   188.81%   888.29%   2,286.21%
Net (charge-offs) recoveries to average outstanding loans during the period   0.00%   0.00%   0.00%   2.73%   0.06%
Non-performing loans as a percentage of total loans   0.17%   0.25%   0.43%   0.10%   0.04%
Non-performing loans as a percentage of total assets   0.15%   0.22%   0.38%   0.09%   0.04%
Total non-performing assets as a percentage of total assets   0.15%   0.22%   0.43%   0.09%   0.04%
Total non-performing assets and  accruing troubled debt restructured loans as a percentage of total assets   0.68%   1.04%   1.12%   0.95%   1.10%
                          
Other Data:                         
Number of offices   6    5    8    4    4 
Number of full-time equivalent employees   52    47    54    45    41 

  

 

(1)Annualized, where appropriate, for the six months ended June 30, 2019 and 2018.
(2)Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3)Represents net interest income as a percentage of average interest-earning assets.
(4)Represents noninterest expense divided by the sum of net interest income and noninterest income.

 

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RECENT DEVELOPMENTS

 

The information presented below at the dates and for the periods indicated is derived in part from the consolidated financial statements of Cincinnati Bancorp. The financial condition data at December 31, 2018 is derived from the audited consolidated financial statements of Cincinnati Bancorp included elsewhere in this prospectus. The financial condition data at September 30, 2019 and the operating data for the three and nine months ended September 30, 2019 and 2018 are not audited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments included in the interim data. The results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the results of operations for the entire year. The following information is only a summary and should be read in conjunction with the consolidated financial statements and related notes of Cincinnati Bancorp beginning on page F-1 of this prospectus.

 

    At September 30, 2019     At December 31, 2018  
    (In thousands)  
Selected Financial Condition Data:                
Total assets   $ 221,474     $ 197,694  
Cash and cash equivalents     15,006       11,089  
Interest-bearing time deposits     -       200  
Available-for-sale securities     2,331       630  
Federal Home Loan Bank stock     2,657       2,583  
Loans receivable, net     183,789       170,365  
Loans held for sale     5,996       1,282  
Federal Home Loan Bank lender risk account receivable     1,571       1,703  
Bank-owned life insurance     4,065       3,997  
Total deposits     138,274       142,392  
Federal Home Loan Bank advances     55,746       28,580  
Total stockholders’ equity     23,482       22,961  

 

    For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
    2019     2018     2019     2018  
    (In thousands)  
Selected Operating Data:                                
Interest and dividend income   $ 2,170     $ 1,732     $ 6,362     $ 5,019  
Interest expense     763       537       2,093       1,465  
Net interest income     1,407       1,195       4,269       3,554  
Provision for loan losses     25       15       25       45  
Net interest income after provision for loan losses     1,382       1,180       4,244       3,509  
Noninterest income     681       662       1,979       2,020  
Noninterest expenses     1,900       1,747       5,705       4,964  
Income before income taxes     163       95       518       565  
Provision for income taxes     17       69       60       174  
Net income   $ 146     $ 26     $ 458     $ 391  

 

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    At or For the Three Months Ended
September 30,
    At or For the Nine Months Ended
September 30,
 
    2019     2018     2019     2018  
Performance Ratios (1):                                
Return on average assets     0.27 %     0.06 %     0.30 %     0.30 %
Return on average equity     2.55 %     0.54 %     2.69 %     2.98 %
Interest rate spread (2)     2.63 %     2.63 %     2.76 %     2.64 %
Net interest margin (3)     2.82 %     2.88 %     2.95 %     2.88 %
Noninterest expense to average assets     3.57 %     3.95 %     3.69 %     3.78 %
Efficiency ratio (4)     91.00 %     94.08 %     91.31 %     89.06 %
Average interest-earning assets to average interest-bearing liabilities     112.61 %     119.37 %     112.92 %     119.37 %
Average equity to average assets     10.75 %     10.89 %     11.02 %     10.84 %
                                 
Capital Ratios (Bank only):                                
Total risk-based capital to risk-weighted assets     15.5 %     16.5 %     15.5 %     16.5 %
Tier 1 capital to risk-weighted assets     14.6 %     15.4 %     14.6 %     15.4 %
Common equity Tier 1 capital to risk-weighted assets     14.6 %     15.4 %     14.6 %     15.4 %
Tier 1 capital to adjusted total assets     11.0 %     11.2 %     11.0 %     11.2 %
                                 
Asset Quality Ratios (1):                                
Allowance for loan losses as a percentage of total loans     0.76 %     0.89 %     0.76 %     0.89 %
Allowance for loan losses as a percentage of non-performing loans     468.76 %     369.13 %     468.76 %     369.13 %
Net (charge-offs) recoveries to average outstanding loans during the period     (0.01 )%     - %     (0.01 )%     - %
Non-performing loans as a percentage of total loans     0.16 %     0.24 %     0.16 %     0.24 %
Non-performing loans as a percentage of total assets     0.14 %     0.22 %     0.14 %     0.22 %
Total non-performing assets as a percentage of total assets     0.14 %     0.22 %     0.14 %     0.22 %
Total non-performing assets and accruing troubled debt restructurings as a percentage of total assets     0.79 %     1.00 %     0.79 %     1.00 %
                                 
Other Data:                                
Number of offices     6       7       6       7  
Number of full-time equivalent employees     55       44       55       44  

 

 

 

(1) Annualized, where appropriate.
(2) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of average interest-bearing liabilities.
(3) Represents net interest income as a percentage of average interest-earning assets.
(4) Represents noninterest expense divided by the sum of net interest income and noninterest income.

 

30

 

 

Comparison of Financial Condition at September 30, 2019 and December 31, 2018

 

Total Assets. Total assets were $221.5 million at September 30, 2019, an increase of $23.8 million, or 12.0%, from the $197.7 million at December 31, 2018. The increase resulted primarily from an increase in loans, net of allowances, of $13.4 million, an increase of $4.7 million in loans held for sale and an increase of $3.9 million in cash and cash equivalents.

 

Cash and Cash Equivalents. Cash and cash equivalents increased $3.9 million, or 35.3%, to $15.0 million at September 30, 2019. The increase in cash and cash equivalents during the nine months ended September 30, 2019, represents a strategic determination by management to increase and maintain a higher level of liquidity, primarily in view of current and anticipated economic conditions.

 

Available-for-Sale Securities. Available-for-sale securities, which consisted entirely of U.S. government-sponsored mortgage-backed securities, increased $1.7 million, or 269.7%, to $2.3 million at September 30, 2019 from $630,000 at December 31, 2018. Securities purchased during the nine months ended September 30, 2019 totaled $2.0 million, which were partially offset by $252,000 in maturities. The increase in available for sale securities during the nine months ended September 30, 2019, represents a strategic determination by management to increase and maintain a higher level of liquidity, primarily in view of current and anticipated economic conditions.

 

Net Loans. Net loans increased $13.4 million, or 7.9%, to $183.8 million at September 30, 2019 from $170.4 million at December 31, 2018. During the nine months ended September 30, 2019, we originated $41.8 million of loans for portfolio, primarily comprised of $16.7 million of one-to-four family residential real estate loans, $14.5 million of multifamily loans, $4.5 million of home equity lines of credit, $3.5 million of construction and land loans and $2.1 million of nonresidential loans. During the nine months ended September 30, 2019, we sold $58.5 million of one-to- four family residential loans, on both a servicing–retained and servicing–released basis, and $1.8 million in multifamily loans on a servicing-retained basis. Subject to market conditions, management intends to continue this sales activity in future periods to generate gains on sale and servicing fee income.

 

The increase in net loans was comprised primarily of an increase in one-to-four family owner-occupied loans of $2.6 million, or 2.8%; an increase in multi-family loans of $9.5 million, or 34.8%; and an increase in nonresidential loans of $1.4 million, or 7.5%. We intend to continue to emphasize growth primarily in our commercial real estate and multi-family loan segments.

 

Loans Held for Sale. We currently sell certain fixed-rate, 15- and 30-year term one-to-four family mortgage loans. We have sold loans on both a servicing-released and servicing-retained basis to: the FHLB-Cincinnati, through its mortgage purchase program; Freddie Mac; and certain private sector third-party buyers. Loans held for sale increased $4.7 million, or 367.7%, to $6.0 million at September 30, 2019 from $1.3 million at December 31, 2018 as a result of increased origination of loans to be sold, due primarily to declining mortgage interest rates. Additionally, we sell participation interests on multi-family and nonresidential loans to manage our loans-to-one borrower exposures.

 

Deposits. Deposits decreased $4.1 million, or 2.9%, to $138.3 million at September 30, 2019 from $142.4 million at December 31, 2018. Core deposits, defined as demand, NOW and savings accounts, increased $3.4 million, or 5.5%, to $65.2 million at September 30, 2019 from $61.8 million at December 31, 2018. The increase was primarily the result of marketing efforts directed at increasing retail deposit accounts and an increase in interest paid on larger balance savings accounts. Time deposits decreased $7.5 million, or 9.3%, to $73.0 million at September 30, 2019 from $80.5 million at December 31, 2018. Certificates originated through the National CD Rateline service decreased $7.1 million to $6.0 million at September 30, 2019, and are included in the decrease in time deposits noted above. During the nine months ended September 30, 2019, management continued its strategy of pursuing growth in lower cost core deposits, and intends to continue its efforts to increase core deposits.

 

Federal Home Loan Bank Advances. Federal Home Loan Bank advances increased $27.2 million, or 95.1%, to $55.7 million at September 30, 2019. The additional advances were used to fund loan originations and net deposit outflows, as well as the increases in cash and cash equivalents and investment securities during the period.

 

Stockholders’ Equity. Stockholders’ equity increased $521,000, or 2.3%, to $23.5 million at September 30, 2019. The increase was primarily due to net income for the nine month period ended September 30, 2019.

 

31

 

 

Comparison of Operating Results for the Three Months Ended September 30, 2019 and 2018

 

General. The Company recorded net income of $146,000 the three months ended September 30, 2019, an increase of $120,000, or 465.6%, compared to the three months ended September 30, 2018. The increase was primarily due to a $212,000 increase in net interest income, a $19,000 increase in noninterest income, and a $52,000 decrease in federal income taxes, which were partially offset by a $152,000 increase in noninterest expense. The merger with Kentucky Federal Savings and Loan Association was completed in October 2018. As a result, the results of operations for the three months ended September 30, 2019 include the effects of the merger, while the results of operations for the three months ended September 30, 2018 have not been adjusted to reflect any effect of the merger. Accordingly, the income and expense items in the income statement for the three months ended September 30, 2019, can be expected to show overall increases in comparison to the three months ended September 30, 2018. See Note 2 to the Consolidated Financial Statements for additional information regarding the merger.

 

Interest and Dividend Income. Interest income increased $438,000, or 25.3%, to $2.2 million for the three months ended September 30, 2019 compared to the comparable period in 2018. Interest income on loans increased $413,000, or 24.6%, to $2.1 million as of September 30, 2019. The average balance of loans during the three months ended September 30, 2019 increased $30.5 million to $186.2 million, compared to the three months ended September 30, 2018. The increase in average loans outstanding was primarily due to the merger. The average yield on loans increased 18 basis points to 4.49% for the three months ended September 30, 2019 from 4.31% for the three months ended September 30, 2018 primarily due to the increase in market interest rates. Interest income on other investments increased $24,000, or 50.0%, for the three months ended September 30, 2019 due to an increase in dividends on Federal Home Loan Bank of Cincinnati stock from the stock acquired in the merger and an increase in average balances of $2.5 million. The yield on other interest-earning assets increased 38 basis points due to higher short term market interest rates.

 

Interest Expense. Total interest expense increased $226,000, or 42.1%, to $763,000 for the three months ended September 30, 2019 from $537,000 for the three months ended September 30, 2018. Interest expense on deposit accounts increased $145,000, or 42.1%, to $488,000 for the three months ended September 30, 2019 from $343,000 for the three months ended September 30, 2018. The increase in deposit expense between comparable periods in 2019 from 2018 was primarily due to a $27.2 million increase in average interest-bearing deposit accounts, and a 15 basis point increase in average cost primarily due to the increase in deposit rates in the local market. The increase in average interest-bearing deposit accounts was primarily due to the merger.

 

Interest expense on savings increased $36,000 during the three months ended September 30, 2019 compared to the three months ended September 30, 2018 due to the offering of a higher yielding savings account to attract retail deposits. These higher yielding savings accounts grew by $10.2 million. Interest expense on interest-bearing demand accounts increased $5,000, or 15.2%, to $38,000 for the three months ended September 30, 2019. The average balances in interest-bearing demand accounts increased $11.0 million during the three months ended September 30, 2019 compared to September 30, 2018. Interest expense on certificates of deposit increased $103,000, or 34.9%, as a result of a $6.1 million, or 9.1%, increase in the average balance of these certificates. The average cost of certificates increased 42 basis points to 2.19% primarily due to the increase in certificate of deposit rates in the local market.

 

Interest expense on FHLB advances increased $82,000, or 42.2%, to $275,000 for the three months ended September 30, 2019 from $193,000 for the three months ended September 30, 2018. The average balance of advances increased $10.5 million, or 26.8%, for the three months ended September 30, 2019. The average cost of Federal Home Loan Bank borrowings increased 24 basis points due primarily to an increase in market interest rates.

 

Net Interest Income. Net interest income increased $212,000, or 17.7%, to $1.4 million for the three months ended September 30, 2019 compared to the same period in 2018. The interest rate spread was unchanged at 2.63% for the three months ended September 30, 2019 and 2018. The net interest margin decreased six basis points to 2.82% for the three months ended September 30, 2019 compared to 2.88% for the three months ended September 30, 2018.

 

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies – Allowance for Loan Losses,” we recorded a $25,000 provision for loan losses for the three months ended September 30, 2019, an increase of $10,000 from the three months ended September 30, 2018. The allowance for loan losses was $1.4 million, or 0.76% of total loans, at September 30, 2019, compared to $1.4 million, or 0.89% of total loans, at September 30, 2018. There were $23,000 in net charge-offs during the three months ended September 30, 2019 compared to no net charge-offs during the three months ended September 30, 2018. As a percentage of nonperforming loans, the allowance for loan losses was 468.8% at September 30, 2019, compared to 368.8% at September 30, 2018.

 

32

 

 

The allowance for loan losses reflects the estimate we believe to be adequate to cover probable losses which were inherent in the loan portfolio at September 30, 2019. While we believe the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact our financial condition and results of operations. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.

 

Non-Interest Income. Non-interest income increased $19,000, or 2.9%, to $681,000 for the three months ended September 30, 2019 from $662,000 for the comparable period in 2018. The gain on sale of loans increased $64,000, or 13.4%, to $544,000 for the three months ended September 30, 2019 from $480,000 for the comparable period in 2018. Mortgage servicing fees decreased $91,000, due primarily to a decrease in the fair value of mortgage servicing rights, which was partially offset by the recognition of new mortgage servicing rights on loans sales of $60,000 for the three months ended September 30, 2019. The change in fair value of mortgage servicing rights is highly dependent on estimated changes in mortgage prepayment speeds. Generally, estimated mortgage prepayment speeds increase when market rates decrease resulting in a decrease in the fair value of mortgage servicing rights. Increasing mortgage prepayment speeds had an adverse impact on the value of our mortgage servicing rights. Other income increased $46,000, or 25.8%, to $225,000 for the three months ended September 30, 2019, compared to the same period in 2018, due primarily to an increase in fees collected on loans and deposit accounts.

 

Non-Interest Expense. Non-interest expense increased $152,000, or 8.7%, to $1.9 million for the three months ended September 30, 2019 compared to the comparable period in 2018. The increase in noninterest expense was primarily attributable to the merger of Kentucky Federal. Salaries and employee benefits increased $228,000, or 26.7%, to $1.1 million for the three months ended September 30, 2019 from $852,000 for the comparable period in 2018, due to increased loan officer commission expense, increased healthcare costs, and increased payroll expense. Loan costs increased $20,000, or 20.8% due to increased loan origination activity. Offsetting the overall increase in non-interest expenses were a $36,000 gain on sale of foreclosed assets during the three months ended September 30, 2019 and the absence of $149,000 of merger-related expenses recorded in the three months ended September 30, 2018. In addition, data processing expense decreased $22,000, or 13.8%, to $136,000 during the three months ended September 30, 2019 from $158,000 for the three months ended September 30, 2018, due to cost savings from the integration of accounts acquired in the merger. The migration of the Kentucky Federal Savings and Loan Association accounts to our data processing system was completed during the second quarter of 2019, and resulted in the elimination of the overlap of maintaining dual data processing systems. Advertising expense decreased $29,000, or 66.0%, due to a pause in advertising while newer marketing strategies were being formulated and implemented.

 

Federal Income Taxes. Federal income taxes decreased $52,000, or 75.0%, to $17,000 for the three months ended September 30, 2019 compared to the same period in 2018. The decrease was due primarily due to the effects of nondeductible merger-related expenses included in the results for the three months ended September 30, 2018, which was partially offset by a $69,000, or 72.3%, increase in pre-tax income. The effective tax rates were 10.5% and 72.7% for the three months ended September 30, 2019 and 2018, respectively.

 

33

 

  

Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information at the dates and for the periods indicated. No tax-equivalent yield adjustments have been made. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant. All average balances are monthly average balances. Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented. Non-accrual loans are included in the computation of average balances only. 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 September 30,  
    2019     2018  
    Average
Outstanding
Balance
    Interest    

Average
Yield/Rate (5)

    Average
Outstanding
Balance
    Interest    

Average
Yield/Rate (5)

 
    (Dollars in thousands)  
Interest-earning assets:                                                
Loans   $ 186,159     $ 2,091       4.49 %   $ 155,635     $ 1,678       4.31 %
Securities     883       6       2.72       732       5       2.73  
Other (1)     12,350       73       2.36       9,893       49       1.98  
Total interest-earning assets     199,392       2,170       4.35       166,260       1,732       4.17  
Non-interest-earning assets     13,431                       10,455                  
Total assets   $ 212,823                     $ 176,715                  
                                                 
Interest-bearing liabilities:                                                
Savings   $ 35,381     $ 52       0.59     $ 25,169     $ 16       0.25  
Interest-bearing demand     19,114       38       0.80       8,133       33       1.62  
Certificates of deposit     72,676       398       2.19       66,621       295       1.77  
Total deposits     127,171       488       1.53       99,923       344       1.38  
Borrowings     49,901       275       2.20       39,364       193       1.96  
Total interest-bearing liabilities     177,072       763       1.72       139,287       537       1.54  
Non-interest-bearing Demand     9,233                       15,587                  
Other non-interest-bearing liabilities     3,632                       2,601                  
Total non- interest-bearing liabilities     12,865                       18,188                  
Total equity     22,886                       19,240                  
Total liabilities and total equity   $ 212,823                     $ 176,715                  
Net interest income           $ 1,407                     $ 1,195          
Net interest rate spread (2)                     2.63 %                     2.63 %
Net interest-earning assets (3)   $ 22,320                     $ 26,973                  
Net interest margin (4)                     2.82 %                     2.88 %
Average interest-earning assets to interest-bearing liabilities                     112.61 %                     119.37 %

 

 

  

(1) Consists of Federal Home Loan Bank of Cincinnati stock, Federal Home Loan Bank demand deposit account, certificates of deposit, Fed Funds sold, and cash reserves.
(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(3)     Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4)     Net interest margin represents annualized net interest income divided by average total interest-earning assets.

(5)    Annualized.

  

Comparison of Operating Results for the Nine Months Ended September 30, 2019 and 2018

 

General. Net income for the nine months ended September 30, 2019 was $458,000, compared to net income of $391,000 for the nine months ended September 30, 2018, an increase of $67,000, or 17.1%. The increase was primarily due to a $715,000 increase in net interest income and a decrease in the provision for income tax of $114,000, partially offset by an increase in noninterest expense of $741,000 and a decrease in noninterest income of $41,000. The merger with Kentucky Federal Savings and Loan Association was completed in October 2018. As a result, the results of operations for the nine months ended September 30, 2019 include the effects of the merger, while the results of operations for the nine months ended September 30, 2018 have not been adjusted to reflect any effect of the merger. Accordingly, the income and expense items in the income statement for the nine months ended September 30, 2019, can be expected to show overall increases in comparison to the nine months ended September 30, 2018. See footnote No. 2 to the financial statements for additional information regarding the merger.

 

Interest and Dividend Income. Interest income increased $1.3 million, or 26.8%, to $6.4 million for the nine months ended September 30, 2019 from the comparable nine months in 2018. Interest income on loans increased $1.2 million, or 25.4%, to $6.1 million as of September 30, 2019. The average balance of loans during the nine months ended September 30, 2019 increased $27.0 million to $180.9 million, compared to $153.9 million for the nine months ended September 30, 2018. The average yield on loans increased 29 basis points to 4.51% for the nine months ended September 30, 2019 from 4.22% for the nine months ended September 30, 2018. Interest income on other investments increased $105,000 for the nine months ended September 30, 2019 primarily due to an increase in the average yield of 107 basis points and an increase of $1.1 million in the average balance of other interest earning assets compared to the nine months ended September 30, 2018.

 

34

 

 

Interest Expense. Total interest expense increased $628,000, or 42.8%, to $2.1 million for the nine months ended September 30, 2019 from $1.5 million for the nine months ended September 30, 2018. Interest expense on deposit accounts increased $436,000, or 44.3%, to $1.4 million for the nine months ended September 30, 2019 from $984,000 for the nine months ended September 30, 2018. The increase between comparable nine month periods in 2019 from 2018 was primarily due to a $329,000 increase in interest expense on certificates of deposit resulting from a $7.7 million, or 11.3%, increase in the average balance of these certificates. The average cost of certificates increased 41 basis points to 2.08%. Savings interest expense increased $93,000 as average balances increased $9.9 million. The average cost of savings deposits increased 31 basis points during the nine months ended September 30, 2019 compared to September 30, 2018. Interest expense on interest-bearing demand accounts increased $14,000 from the comparable nine months in 2018. The increase reflects the promotion of a high-yielding checking account product for large balance demand deposit accounts. The average balances in interest-bearing demand accounts during the nine months ended September 30, 2019 increased $11.8 million to $19.6 million compared to $7.8 million for the nine months ended September 30, 2018.

 

Interest expense on FHLB advances increased $192,000, or 39.8%, to $673,000 for the nine months ended September 30, 2019 from $481,000 for the nine months ended September 30, 2018. The average balance of advances increased $4.4 million, or 12.1%, for the nine months ended September 30, 2019. The average cost of FHLB borrowings increased 45 basis points during the nine months ended September 30, 2019, due primarily to increases in market interest rates.

 

Net Interest Income. Net interest income increased $716,000, or 20.1%, to $4.3 million for the nine months ended September 30, 2019. The interest rate spread increased 12 basis points to 2.76% for the nine months ended September 30, 2019 compared to 2.64% for the nine months ended September 30, 2018. The net interest margin increased seven basis points to 2.95% for the nine months ended September 30, 2019 from 2.88% for the nine months ended September 30, 2018.

 

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies – Allowance for Loan Losses,” we recorded a provision for loan losses of $25,000 for the nine months ended September 30, 2019, a decrease of $20,000 from the nine months ended September 30, 2018. The allowance for loan losses was $1.4 million, or 0.76% of total loans, at September 30, 2019, compared to $1.4 million, or 0.89% of total loans, at September 30, 2018. The determination to record a provision for loan losses in the nine months ended September 30, 2019, was due primarily to the increase in outstanding loans. Total nonperforming loans were $300,000 at September 30, 2019, compared to $381,000 at September 30, 2018. The Company had $23,000, or 0.01% in net charge-offs during the nine month period ended September 30, 2019 and had no charge-offs during the nine month period ending September 30, 2018. As a percentage of nonperforming loans, the allowance for loan losses was 468.8% at September 30, 2019, compared to 368.8% at September 30, 2018.

 

Non-Interest Income. Non-interest income decreased $42,000, or 2.1%, to $2.0 million for the nine months ended September 30, 2019 from the comparable nine months in 2018. The decrease was primarily due to a $24,000 decrease in gain on sales of loans and a $103,000 decrease in mortgage servicing fees, partially offset by an increase of $86,000 in other income. The decrease in gain on sale of loans was due primarily to competitive pricing pressures in the local market. The decrease in mortgage servicing fees was due primarily to a decline in the appraised fair value of mortgage servicing rights during the nine months ended September 30, 2019. The change in fair value of mortgage servicing rights is highly dependent on estimated changes in mortgage prepayment speeds. Generally, estimated mortgage prepayment speeds increase when market rates decrease resulting in a decrease in the fair value of mortgage servicing rights. Increasing mortgage prepayment speeds had an adverse impact on the value of our mortgage servicing rights. The increase in other income was due primarily to an increase in loan fees and service fees on deposits.

 

Non-Interest Expense. Non-interest expense increased $741,000, or 14.9%, to $5.7 million for the nine months ended September 30, 2019, compared to the same period in 2018. The increase was due primarily to a $639,000, or 25.6%, increase in salary and employee benefits to $3.1 million in the first nine months of 2019 from $2.5 million for the comparable nine months in 2018, attributable to increased staffing levels as well as termination and retention bonuses for certain former Kentucky Federal Savings and Loan Association employees. Merger-related expenses decreased $213,000 with the completion of the merger. Data processing expense increased $68,000, or 15.1%, to $518,000 during the nine months ended September 30, 2019 from $450,000 for the nine months ended September 30, 2018, due primarily to overall growth including the addition of the Kentucky Federal Savings and Loan Association accounts. Efficiencies in data processing costs following the merger were not realized until the final integration of Kentucky Federal Savings and Loan Association’s data processing was completed on April 26, 2019. Franchise tax expense increased $38,000, or 32.6% due to the increase in equity from the merger. Advertising expense decreased $41,000, or 35.0% due to a reduction in billboard, print and social media marketing while newer marketing strategies were being formulated and implemented. The increases in non-interest expenses were partially offset by an increase in gains on sales of foreclosed real estate of $90,000 during the nine months ended September 30, 2019.

 

Federal Income Taxes. The provision for federal income taxes decreased $114,000, or 65.5%, to $60,000 for the nine months ended September 30, 2019, compared to the same period in 2018. The decrease was due primarily due to the effects of nondeductible merger-related expenses included in the 2018 period results, and a $47,000, or 8.2%, decrease in pre-tax income. The effective tax rates were 11.6% and 30.8% for the nine months ended September 30, 2019 and 2018, respectively.

  

35

 

  

Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information at the dates and for the periods indicated. No tax-equivalent yield adjustments have been made. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant. All average balances are monthly average balances. Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented. Non-accrual loans are included in the computation of average balances only. 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 Nine Months Ended September 30,  
    2019     2018  
    Average
Outstanding
Balance
    Interest    

Average
Yield/Rate (5)

    Average
Outstanding
Balance
    Interest    

Average
Yield/Rate (5)

 
    (Dollars in thousands)  
Interest-earning assets:                                                
Loans   $ 180,875     $ 6,114       4.51 %   $ 153,867     $ 4,875       4.22 %
Securities     685       12       2.34       798       12       2.01  
Other (1)     11,072       236       2.84       9,957       132       1.77  
Total interest-earning assets     192,632       6,362       4.40       164,622       5,019       4.07  
Non-interest-earning assets     13,639                       10,390                  
Total assets   $ 206,271                     $ 175,012                  
                                                 
Interest-bearing liabilities:                                                
Savings   $ 34,446     $ 127       0.49     $ 24,581     $ 34       0.18  
Interest-bearing demand     19,593       111       0.76       7,804       97       1.66  
Certificates of deposit     75,782       1,182       2.08       68,097       853       1.67  
Total deposits     129,821       1,420       1.46       100,482       984       1.31  
Borrowings     40,768       673       2.20       36,550       481       1.75  
Total interest-bearing liabilities     170,589       2,093       1.64       137,032       1,465       1.43  
Non-interest-bearing Demand     9,434                       16,301                  
Other non-interest-bearing liabilities     3,511                       2,700                  
Total non- interest-bearing liabilities     12,945                       19,001                  
Total equity     22,737                       18,979                  
Total liabilities and total equity   $ 206,271                     $ 175,012                  
Net interest income           $ 4,269                     $ 3,554          
Net interest rate spread (2)                     2.76 %                     2.64 %
Net interest-earning assets (3)   $ 22,043                     $ 27,590                  
Net interest margin (4)                     2.95 %                     2.88 %
Average interest-earning assets to interest-bearing liabilities                     112.92 %                     120.13 %

 

 

 

(1) Consists of Federal Home Loan Bank of Cincinnati stock, Federal Home Loan Bank demand deposit account, certificates of deposit, Fed Funds sold, and cash reserves.
(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(3)       Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4)       Net interest margin represents annualized net interest income divided by average total interest-earning assets.

(5)       Annualized.

 

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FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “would,” “should,” “could” or “may,” 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 quality of our loan and investment portfolios; and

 

·estimates of our risks and future costs and benefits.

 

These forward-looking statements are based on current beliefs and expectations of our management 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.

 

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;

 

·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, including by increasing core deposits and reducing reliance on wholesale funds;

 

·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, including our mortgage servicing rights asset, 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;

 

37

 

 

·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

 

·changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

 

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. See “Risk Factors” beginning on page 17. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

 

38

 

 

HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

 

Although we cannot determine what the actual net proceeds from the sale of the shares of common stock in the offering will be until the offering is completed, we anticipate that the net proceeds will be between $9.3 million and $13.0 million, or $15.2 million if the offering range is increased by 15%.

 

We intend to use the net proceeds as follows:

 

    Based Upon the Sale at $10.00 Per Share of:  
    1,062,394 Shares     1,249,875 Shares     1,437,356 Shares    

1,652,960 Shares (1)

 
    Amount     Percent of
Net
Proceeds
    Amount     Percent of
Net
Proceeds
    Amount     Percent of
Net
Proceeds
    Amount     Percent of
Net
Proceeds
 
                                                 
    (Dollars in thousands)  
Gross offering proceeds   $ 10,624             $ 12,499             $ 14,374             $ 16,530          
Less: offering expenses     1,300               1,300               1,300               1,300          
Net offering proceeds   $ 9,324       100.0 %   $ 11,199       100.0 %   $ 13,074       100.0 %   $ 15,230       100.0 %
                                                                 
Distribution of net proceeds:                                                                
To Cincinnati Federal   $ 4,662       50.0 %   $ 5,600       50.0 %   $ 6,537       50.0 %   $ 7,615       50.0 %
To fund loan to employee stock ownership plan   $ 850       9.1 %   $ 1,000       8.9 %   $ 1,150       8.8 %   $ 1,322       8.7 %
Retained by Cincinnati Bancorp, Inc.   $ 3,812       40.9 %   $ 4,600       41.1 %   $ 5,387       41.2 %   $ 6,293       41.3 %

 

 

(1)As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

 

Payments for shares of common stock made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will reduce Cincinnati Federal’s deposits. The net proceeds may vary because total expenses relating to the offering may be more or less than our estimates. For example, our expenses would increase if all shares were not sold in the subscription and community offerings and a portion of the shares were sold in a syndicated community offering.

 

Cincinnati Bancorp, Inc. may use the proceeds it retains from the offering:

 

·to invest in securities;

 

·to repurchase shares of its common stock;

 

·to finance the potential acquisition of financial institutions or financial services companies, although we do not currently have any agreements or understandings regarding any specific acquisition transaction;

 

·to pay cash dividends to stockholders; and

 

·for other general corporate purposes.

 

See “Our Dividend Policy” for a discussion of our expected dividend policy following the completion of the conversion. Under current federal regulations, we may not repurchase shares of our common stock during the first year following the completion of the conversion, except when extraordinary circumstances exist and with prior regulatory approval, or except to fund the granting of restricted stock awards (which would require notification to the Federal Reserve Board) or tax-qualified employee stock benefit plans.

 

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Cincinnati Federal may use the net proceeds it receives from the offering:

 

·to fund new loans;

 

·to enhance existing products and services, hire additional employees and support growth and the development of new products and services;

 

·to expand its banking franchise by establishing or acquiring new branches or by acquiring other financial institutions or other financial services companies as opportunities arise, although we do not currently have any understandings or agreements to acquire a financial institution or other entity;

 

·to invest in securities; and

 

·for other general corporate purposes.

 

Initially, a substantial portion of the net proceeds will be invested in short-term investments, investment-grade debt obligations and mortgage-backed securities. We have not determined specific amounts of the net proceeds that would be used for the purposes described above. The use of the proceeds outlined above may change based on many factors, including, but not limited to, changes in interest rates, equity markets, laws and regulations affecting the financial services industry, the attractiveness of potential acquisitions to expand our operations, and overall market conditions. The use of the proceeds may also change depending on our ability to receive regulatory approval to establish new branches or acquire other financial institutions.

 

We expect our return on equity to be low until we are able to reinvest effectively the additional capital raised in the offering. Until we can increase our net interest income and noninterest income, we expect our return on equity to be below the industry average, which may negatively affect the value of our common stock. See “Risk Factors – Risks Related to the Offering – Our failure to effectively deploy the net proceeds may have an adverse effect on our financial performance.”

 

OUR DIVIDEND POLICY

 

Following completion of the stock offering, our board of directors will have the authority to declare dividends on our shares of common stock, subject to our capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. However, no decision has been made with respect to the amount, if any, and timing of any dividend payments. We cannot assure you that we will pay dividends in the future, or that any such dividends will not be reduced or eliminated in the future.

 

Cincinnati Bancorp, Inc. will not be permitted to pay dividends on its common stock if its stockholders’ equity would be reduced below the amount of the liquidation account established by Cincinnati Bancorp, Inc. in connection with the conversion. The source of dividends will depend on the net proceeds retained by Cincinnati Bancorp, Inc. and earnings thereon, and dividends from Cincinnati Federal. In addition, Cincinnati Bancorp, Inc. will be subject to state law limitations and federal bank regulatory policy on the payment of dividends. Maryland law generally limits dividends if the corporation would not be able to pay its debts in the usual course of business after giving effect to the dividend or if the corporation’s total assets would be less than the corporation’s total liabilities plus the amount needed to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the distribution.

 

After the completion of the conversion, Cincinnati Federal will not be permitted to pay dividends on its capital stock owned by Cincinnati Bancorp, Inc., its sole stockholder, if Cincinnati Federal’s stockholder’s equity would be reduced below the amount of the liquidation account established in connection with the conversion. In addition, Cincinnati Federal will not be permitted to make a capital distribution if, after making such distribution, it would be undercapitalized. Cincinnati Federal must file an application with the Federal Reserve Board for approval of a capital distribution if the total capital distributions for the applicable calendar year exceed the sum of its net income for that year to date plus its retained net income for the preceding two years, or it would not be at least adequately capitalized following the distribution.

 

40

 

 

Any payment of dividends by Cincinnati Federal to Cincinnati Bancorp, Inc. that would be deemed to be drawn from Cincinnati Federal’s bad debt reserves established before 1988, if any, would require a payment of taxes at the then-current tax rate by Cincinnati Federal on the amount of earnings deemed to be removed from the pre-1988 bad debt reserves for such distribution. Cincinnati Federal does not intend to make any distribution that would create such a federal tax liability. See “The Conversion and Offering – Liquidation Rights.” For further information concerning additional federal law and regulations regarding the ability of Cincinnati Federal to make capital distributions, including the payment of dividends to Cincinnati Bancorp, Inc., see “Taxation – Federal Taxation.”

 

We intend to file a consolidated federal tax return with Cincinnati Federal. Accordingly, it is anticipated that any cash distributions made by us to our stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal tax purposes. Additionally, during the three-year period following the conversion, we will not be permitted to make any capital distribution to stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.

 

MARKET FOR THE COMMON STOCK

 

Cincinnati Bancorp’s common stock is currently traded on the OTC Pink Marketplace (OTCPK) operated by OTC Markets Group under the symbol “CNNB.” Upon completion of the conversion, the shares of common stock of Cincinnati Bancorp, Inc. will be issued in exchange for the existing shares of Cincinnati Bancorp. We have applied to list the shares of Cincinnati Bancorp, Inc. common stock on the Nasdaq Capital Market under the symbol “CNNB.” To list our stock on the Nasdaq Capital Market, we are required to have at least three broker-dealers who will make a market in our common stock and at least 300 round-lot holders. We cannot assure you that we will satisfy these requirements. At June 30, 2019, Cincinnati Bancorp had approximately eight registered market makers in its common stock. KBW has advised us that it intends to make a market in our common stock following the offering, but is under no obligation to do so.

 

The following tables set forth the high and low closing bid prices per share of common stock of Cincinnati Bancorp for the periods indicated as reported on the OTCPink Market. The indicated prices do not include retail markups or markdowns or any commissions and do not necessarily reflect prices in actual transactions.

 

Fiscal Year Ending December 31, 2019:

  

Quarter Ended:   High     Low     Dividend Paid  
December 31, 2019 (through November ___, 2019)   $       $       $  
September 30, 2019     16.25       14.00        
June 30, 2019     14.00       13.50        
March 31, 2019     13.90       11.80        

 

Fiscal Year Ended December 31, 2018:

 

Quarter Ended:   High     Low     Dividend Paid  
December 31, 2018   $ 13.99     $ 11.80     $  
September 30, 2018     14.40       12.90        
June 30, 2018     12.85       10.07        
March 31, 2018     11.00       10.40        

 

Fiscal Year Ended December 31, 2017:

 

Quarter Ended:   High     Low     Dividend Paid  
December 31, 2017   $ 10.43     $ 9.75     $  
September 30, 2017     10.50       9.46        
June 30, 2017     10.15       9.40        
March 31, 2017     9.80       9.50        

 

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At the close of business on June 30, 2019, there were 1,816,517 shares of common stock outstanding, including 1,008,969 publicly held shares (shares held by stockholders other than CF Mutual Holding Company), and approximately 94 stockholders of record (excluding stockholders who hold shares in street name through a broker).

 

On July 19, 2019, the business day immediately preceding the public announcement of the conversion, and on ________, 2019, the most recent practicable date before the printing of this prospectus, the closing prices of Cincinnati Bancorp common stock as reported on the OTC Pink Marketplace were $14.75 per share and $______ per share, respectively. On the effective date of the conversion, all publicly held shares of Cincinnati Bancorp common stock, including shares of common stock held by our officers and directors, will be converted automatically into and become the right to receive a number of shares of Cincinnati Bancorp, Inc. common stock determined pursuant to the exchange ratio. See “The Conversion and Offering – Share Exchange Ratio for Current Stockholders.” The above table reflects actual prices and has not been adjusted to reflect the exchange ratio. Options to purchase shares of Cincinnati Bancorp common stock will be converted into options to purchase a number of shares of Cincinnati Bancorp, Inc. common stock determined pursuant to the exchange ratio, for the same aggregate exercise price. See “Beneficial Ownership of Common Stock.”

 

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HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

 

At June 30, 2019, Cincinnati Federal exceeded all of the applicable regulatory capital requirements and was considered “well capitalized.” The table below sets forth the historical equity capital and regulatory capital of Cincinnati Federal at June 30, 2019, and the pro forma equity capital and regulatory capital of Cincinnati Federal after giving effect to the sale of shares of common stock at $10.00 per share. The table also compares historical and pro forma capital levels to those required to be considered “well capitalized.” The table assumes that Cincinnati Federal receives 50% of the net offering proceeds. See “How We Intend to Use the Proceeds from the Offering.”

 

   Cincinnati Federal   Cincinnati Federal Pro Forma at June 30, 2019 Based Upon the Sale in the Offering of: 
   Historical at June 30, 2019   1,062,394 Shares   1,249,875 Shares   1,437,356 Shares   1,652,960 Shares (1) 
   Amount   Percent of
Assets
   Amount   Percent of
Assets
   Amount   Percent of
Assets
   Amount   Percent of
Assets
   Amount   Percent of
Assets
 
                                         
   (Dollars in thousands) 
Equity  $22,773    11.0%  $26,160    12.4%  $26,873    12.7%  $27,585    13.0%  $28,404    13.3%
                                                   
Tier 1 leverage capital (2)(3)  $22,832    11.1%  $26,219    12.4%  $26,931    12.7%  $27,644    13.0%  $28,464    13.3%
Tier 1 leverage requirement   10,306    5.0    10,539    5.0    10,586    5.0    10,633    5.0    10,687    5.0 
Excess  $12,526    6.1%  $15,680    7.4%  $16,345    77%  $17,011    8.0%  $17,777    8.3%
                                                   
Tier 1 risk-based capital (2)(3)  $22,832    15.6%  $26,219    17.7%  $26,931    18.2%  $27,644    18.7%  $28,464    19.2%
Tier 1 risk-based requirement   11,743    8.0    11,818    8.0    11,833    8.0    11,848    8.0    11,865    8.0 
Excess  $11,089    7.6%  $14,401    9.7%  $15,098    10.2%  $15,796    10.7%  $16,599    11.2%
                                                   
Total risk-based capital (2)(3)  $24,237    16.5%  $27,624    18.7%  $28,336    19.2%  $29,049    19.6%  $29,869    20.1%
Total risk-based requirement   14,679    10.0    14,772    10.0    14,791    10.0    14,810    10.0    14,831    10.0 
Excess  $9,558    6.5%  $12,852    8.7%  $13,545    9.2%  $14,239    9.6%  $15,038    10.1%
                                                   
Common equity tier 1 risk-based capital (2)(3)  $22,832    15.6%  $26,219    17.7%  $26,931    18.2%  $27,644    18.7%  $28,464    19.2%
Common equity tier 1 risk-based requirement   9,541    6.5    9,628    6.5    9,619    6.5    9,609    6.5    9,670    6.5 
Excess  $13,291    9.1%  $16,591    11.2%  $17,312    11.7%  $18,035    12.2%  $18,794    12.7%
                                                   
Reconciliation of capital infused into Cincinnati Federal:                                         
Net proceeds            $4,662        $5,600        $6,537        $7,615      
Less:  Common stock acquired by stock-based benefit plan    425         500         575         661      
Less:  Common stock acquired by employee stock ownership plan    850         1,000         1,150         1,322      
Pro forma increase            $3,387        $4,099        $4,812        $5,632      

 

 

(1)As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.
(2)Tier 1 leverage capital levels are shown as a percentage of total average assets. Risk-based capital levels are shown as a percentage of risk-weighted assets.
(3)Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk weighting.

 

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CAPITALIZATION

 

The following table presents the historical consolidated capitalization of Cincinnati Bancorp at June 30, 2019 and the pro forma consolidated capitalization of Cincinnati Bancorp, Inc. after giving effect to the conversion and offering based upon the assumptions set forth in the “Pro Forma Data” section.

 

   Cincinnati
Bancorp
   Cincinnati Bancorp, Inc. Pro Forma at June 30, 2019
Based upon the Sale in the Offering at $10.00 per share of:
 
   Historical at
June 30, 2019
   1,062,394
Shares
   1,249,875
Shares
   1,437,356
Shares
   1,652,960
Shares (1)
 
                     
   (Dollars in thousands) 
Deposits (2)  $138,656   $138,656   $138,656   $138,656   $138,656 
Borrowed funds   41,316    41,316    41,316    41,316    41,316 
Total deposits and borrowed funds  $179,972   $179,972   $179,972   $179,972   $179,972 
                          
Stockholders’ equity:                         
Preferred stock, $0.01 par value, 1,000,000 shares authorized (post-conversion) (3)                    
Common stock, $0.01 par value, 14,000,000 shares authorized (post-conversion); shares to be issued as reflected (3) (4)   30    19    23    26    30 
Additional paid-in capital (3)   7,489    16,824    18,695    20,567    22,719 
MHC capital contribution       50    50    50    50 
Retained earnings (5)   16,531    16,531    16,531    16,531    16,531 
Accumulated other comprehensive loss   (267)   (267)   (267)   (267)   (267)
Unearned employee stock ownership plan shares   (472)   (472)   (472)   (472)   (472)
Common stock to be acquired by employee stock ownership plan (6)       (850)   (1,000)   (1,150)   (1,322)
Common stock to be acquired by stock-based benefit plan (7)       (425)   (500)   (575)   (661)
Total stockholders’ equity  $23,311   $31,410   $33,060   $34,710   $36,608 
                          
Pro Forma Shares Outstanding                         
Shares offered for sale       1,062,394    1,249,875    1,437,356    1,652,960 
Exchange shares issued       850,106    1,000,125    1,150,144    1,322,665 
Total shares outstanding       1,912,500    2,250,000    2,587,500    2,975,625 
                          
Total stockholders’ equity as a percentage of total assets   11.30%   14.65%   15.30%   15.94%   16.67%
Tangible equity as a percentage of total assets   11.19%   14.54%   15.20%   15.84%   16.57%

 

 

(1)As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.
(2)Does not reflect withdrawals from deposit accounts to purchase shares of common stock in the conversion and offering. These withdrawals would reduce pro forma deposits and assets by the amount of the withdrawals.
(3)Cincinnati Bancorp currently has 9,000,000 authorized shares of common stock, $0.01 par value per share, and 1,000,000 authorized shares of preferred stock, par value $0.01 per share. On a pro forma basis, common stock and additional paid-in capital have been revised to reflect the number of shares of Cincinnati Bancorp, Inc. common stock to be outstanding.
(4)No effect has been given to the issuance of additional shares of Cincinnati Bancorp, Inc. common stock pursuant to the exercise of options under one or more stock-based benefit plans. If the plans are implemented within the first year after the closing of the offering, an amount up to 10% of the shares of Cincinnati Bancorp, Inc. common stock sold in the offering will be reserved for issuance upon the exercise of options under the plans. No effect has been given to the exercise of options currently outstanding. See “Management.”
(5)The retained earnings of Cincinnati Federal will be substantially restricted after the conversion. See “The Conversion and Offering – Liquidation Rights” and “Supervision and Regulation – Federal Banking Regulation – Capital Distributions.”

 

(footnotes continue on following page)

 

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(continued from previous page)

 

(6)Assumes that 8% of the shares sold in the offering will be acquired by the employee stock ownership plan financed by a loan from Cincinnati Bancorp, Inc. The loan will be repaid principally from Cincinnati Bancorp, Inc.’s contributions to the employee stock ownership plan. Since Cincinnati Bancorp, Inc. will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no liability will be reflected on Cincinnati Bancorp, Inc.’s consolidated financial statements. Accordingly, the amount of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total stockholders’ equity.
(7)Assumes a number of shares of common stock equal to 4% of the shares of common stock to be sold in the offering will be purchased for grant by one or more stock-based benefit plans. The funds to be used by such plans to purchase the shares will be provided by Cincinnati Bancorp, Inc. The dollar amount of common stock to be purchased is based on the $10.00 per share purchase price in the offering and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the purchase price in the offering. Cincinnati Bancorp, Inc. will accrue compensation expense to reflect the vesting of shares pursuant to such stock-based benefit plans and will credit capital in an amount equal to the charge to operations. Implementation of such plans will require stockholder approval.

 

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PRO FORMA DATA

 

The following tables summarize historical data of Cincinnati Bancorp and pro forma data of Cincinnati Bancorp, Inc. at and for the six months ended June 30, 2019 and at and for the year ended December 31, 2018. This information is based on assumptions set forth below and in the tables and related footnotes, and should not be used as a basis for projections of market value of the shares of common stock following the conversion.

 

The net proceeds disclosed in the tables are based upon the following assumptions:

 

(i)all of the shares of common stock will be sold in the subscription and community offerings;

 

(ii)our employee stock ownership plan will purchase 8% of the shares of common stock sold in the offering with a loan from Cincinnati Bancorp, Inc. The existing loan obligation of our employee stock ownership plan, equal to $471,779 at June 30, 2019, will be combined with the new loan. The combined loan will be repaid in substantially equal payments of principal and interest (at the prime rate of interest, as may be adjusted annually) over 20 years. Interest income that we earn on the loan will offset the interest paid by Cincinnati Federal. The effect on earnings for the employee stock ownership plan is the cost of amortizing the combined loan over 20 years, net of historical expense for the period;

 

(iii)we will pay KBW a fixed fee of $250,000 with respect to shares sold in the subscription and community offerings; and

 

(iv)total expenses of the offering, other than the fees and commissions to be paid to KBW and other broker-dealers, will be $1.05 million.

 

We calculated pro forma consolidated net income for each period as if the estimated net proceeds we received had been invested at the beginning of the period at an assumed interest rate of 1.66% (1.31% on an after-tax basis). This represents the yield on the five-year U.S. Treasury Note at December 31, 2018, which, in light of current market interest rates, we consider to more accurately reflect the pro forma reinvestment rate than the arithmetic average of the weighted average yield earned on our interest earning assets and the weighted average rate paid on our deposits, which is the reinvestment rate federal regulations require that we assume in presenting pro forma data.

 

We further believe that the reinvestment rate is factually supportable because:

 

·the yield on the U.S. Treasury Note can be determined and/or estimated from third-party sources; and

 

·we believe that U.S. Treasury securities are not subject to credit losses due to a U.S. Government guarantee of payment of principal and interest.

 

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of consolidated net income and stockholders’ equity by the indicated number of shares of common stock. For pro forma earnings per share calculations, we adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts as if the shares of common stock were outstanding at the beginning of the period, but we did not adjust per share historical or pro forma stockholders’ equity to reflect the earnings on the estimated net proceeds.

 

The pro forma data gives effect to the implementation of one or more stock-based benefit plans. We have assumed that stock-based benefit plans will acquire for restricted stock awards a number of shares of common stock equal to 4% of the shares of common stock sold in the stock offering at the same price for which they were sold in the stock offering. We have assumed that awards of common stock granted under such plans vest over a five-year period.

 

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We also have assumed that options will be granted under stock-based benefit plans to acquire shares of common stock equal to 10% of the shares of common stock sold in the stock offering. In preparing the tables below, we assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $2.59 for each option.

 

We may grant options and award shares of common stock under one or more stock-based benefit plans in excess of 10% and 4%, respectively, of the shares of common stock sold in the stock offering and that vest sooner than over a five-year period if the stock-based benefit plans are adopted more than one year following the completion of the stock offering.

 

As discussed under “How We Intend to Use the Proceeds from the Offering,” we intend to contribute 50% of the net proceeds from the stock offering to Cincinnati Federal, and we will retain the remainder of the net proceeds from the stock offering. We will use a portion of the proceeds we retain to fund a loan to the employee stock ownership plan and retain the rest of the proceeds for future use.

 

The pro forma data does not give effect to:

 

·withdrawals from deposit accounts to purchase shares of common stock in the stock offering;

 

·our results of operations after the stock offering; or

 

·changes in the market price of the shares of common stock after the stock offering.

 

The following pro forma data may not be representative of the financial effects of the offering at the dates on which the offering actually occurs, and should not be taken as indicative of future results of operations. Pro forma consolidated stockholders’ equity represents the difference between the stated amounts of our assets and liabilities. The pro forma stockholders’ equity is not intended to represent the fair market value of the shares of common stock and may be different than the amounts that would be available for distribution to stockholders if we liquidated. Moreover, pro forma stockholders’ equity per share does not give effect to the liquidation accounts to be established in the conversion or, in the unlikely event of a liquidation of Cincinnati Federal, to the tax effect of the recapture of the bad debt reserve. See “The Conversion and Offering – Liquidation Rights.”

 

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   At or for the Six Months Ended June 30, 2019
Based upon the Sale at $10.00 Per Share of:
 
   1,062,394
Shares
   1,249,875
Shares
   1,437,356
Shares
   1,652,960
Shares (1)
 
                 
   (Dollars in thousands, except per share amounts) 
Gross proceeds of offering  $10,624   $12,499   $14,374   $16,530 
Market value of shares issued in the exchange   8,501    10,001    11,501    13,226 
Pro forma market capitalization  $19,125   $22,500   $25,875   $29,756 
                     
Gross proceeds of offering  $10,624   $12,499   $14,374   $16,530 
Expenses   (1,300)   (1,300)   (1,300)   (1,300)
Estimated net proceeds   9,324    11,199    13,074    15,230 
Assets received from CF Mutual Holding Company   50    50    50    50 
Common stock purchased by employee stock ownership plan   (850)   (1,000)   (1,150)   (1,322)
Common stock purchased by stock-based benefit plans   (425)   (500)   (575)   (661)
Estimated net proceeds, as adjusted  $8,099   $9,749   $11,399   $13,297 
                     
For the Six Months Ended June 30, 2019                    
Consolidated net earnings:                    
Historical  $312   $312   $312   $312 
Income on adjusted net proceeds   53    64    75    87 
Employee stock ownership plan (2)   (17)   (20)   (23)   (26)
Stock awards (3)   (34)   (39)   (45)   (52)
Stock options (4)   (26)   (31)   (35)   (41)
Pro forma net income  $288   $286   $284   $280 
                     
Earnings per share (5):                    
Historical  $0.17   $0.14   $0.13   $0.11 
Income on adjusted net proceeds   0.03    0.03    0.03    0.03 
Employee stock ownership plan (2)   (0.01)   (0.01)   (0.01)   (0.01)
Stock awards (3)   (0.02)   (0.02)   (0.02)   (0.02)
Stock options (4)   (0.02)   (0.02)   (0.02)   (0.02)
Pro forma earnings per share (5)  $0.16   $0.13   $0.12   $0.10 
                     
Offering price to pro forma net earnings per share   63.53x   75.26x   87.16x   101.67x
Number of shares used in earnings per share calculations   1,829,633    2,152,510    2,475,387    2,846,694 
                     
At June 30, 2019                    
Stockholders’ equity: