10-Q

Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

[X] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2017

OR

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to ______________________

Commission File No. 001-35034

Wolverine Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	27-3939016
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

5710 Eastman Avenue, Midland, Michigan	48640
(Address of Principal Executive Offices)	Zip Code

(989) 631-4280

(Registrant’s telephone number)

N/A

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

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

YES    X      NO        .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES    X      NO        .

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(Do not check if smaller reporting company)		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES         NO    X   

The number of shares outstanding of the Registrant’s common stock, $0.01 per share, as of May 3, 2017, was 2,106,153.

Wolverine Bancorp, Inc.
Form 10-Q

Index 

  Page

Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016	1
	Condensed Consolidated Statements of Income and Comprehensive Income for the three months and three months ended March 31, 2017 and 2016 (unaudited)	2
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 (unaudited)	3
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2017 (unaudited)	4
	Notes to Condensed Consolidated Interim Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40
Part II. Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
	Signature Page	43

Wolverine Bancorp, Inc.

Condensed Consolidated Balance Sheets

(Amounts in Thousands, except per share data)

	March 31, 2017			December 31, 2016
	(unaudited)
Assets
Cash and due from banks	$	403		$	318
Interest-earning demand deposits		53,846			103,316
Cash and cash equivalents		54,249			103,634
Investment securities held to maturity		-			499
Loans held for sale		-			238
Loans, net of allowance for loan losses of $8,734 and $9,326		315,946			320,606
Premises and equipment, net		1,090			1,127
Federal Home Loan Bank stock		2,700			2,700
Other real estate owned		8			86
Accrued interest receivable		839			846
Other assets		4,493			4,699
Total assets	$	379,325		$	434,435
Liabilities and Stockholders’ Equity
Liabilities
Deposits	$	271,110		$	280,548
Federal Home Loan Bank advances		42,000			60,000
Federal funds purchased		-			27,000
Interest payable and other liabilities		3,746			5,913
Total liabilities		316,856			373,461
Commitments and Contingencies
Stockholders’ Equity
Common Stock, $0.01 par value per share: Authorized – 100,000,000 shares Issued and outstanding – 2,106,153 and 2,106,153 at March 31, 2017 and December 31, 2016		21			21
Unearned employee stock ownership plan (ESOP)		(1,190	)		(1,215	)
Additional paid-in capital		15,715			15,577
Retained earnings		47,923			46,591
Total stockholders’ equity		62,469			60,974
Total liabilities and stockholders’ equity	$	379,325		$	434,435

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

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Wolverine Bancorp, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(Amounts in Thousands, except per share data)

	Three Months Ended March 31,
	2017			2016
	(Unaudited)
Interest and Dividend Income
Loans	$	4,006		$	3,932
Investment securities and other		136			129
Total interest and dividend income		4,142			4,061
Interest Expense
Deposits		555			508
Borrowings		435			459
Total interest expense		990			967
Net Interest Income		3,152			3,094
Provision (Credit) for Loan Losses		(600	)		-
Net Interest Income After Provision for Loan Losses		3,752			3,094
Noninterest Income
Service charges and fees		69			80
Net gain on loan sales		32			96
Net gain on sale of real estate owned		1			27
Other		68			80
Total noninterest income		170			283
Noninterest Expense
Salaries and employee benefits		1,074			1,090
Net occupancy and equipment expense		191			207
Information technology expense		57			62
Federal deposit insurance corporation premiums		30			54
Professional and services fees		198			94
Other real estate owned expense (recovery)		(3	)		24
Loan legal expense		16			81
Advertising expense		31			21
Michigan business tax		45			45
Other		247			209
Total noninterest expense		1,886			1,887
Income Before Income Tax		2,036			1,490
Provision for Income Taxes		704			523
Net Income and Comprehensive Income	$	1,332		$	967
Earnings Per Share:
Basic	$	0.67		$	0.48
Diluted	$	0.66		$	0.47

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

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Wolverine Bancorp, Inc.

Condensed Consolidated Statement of Cash Flows

(Amounts in Thousands, except share data)

(Unaudited)

	Three months ended
	March 31,
	2017			2016
	(Unaudited)
Operating Activities
Net income	$	1,332		$	967
Items not requiring (providing) cash
Depreciation		50			57
Provision (credit) for loan losses		(600	)		-
Loss (gain) on other real estate owned		1			(27	)
Loans originated for sale		(1,420	)		(3,716	)
Proceeds from loans sold		1,690			3,186
Net gain on sale of loans		(32	)		(96	)
Share based compensation		80			128
Earned ESOP shares		83			26
Changes in
Interest receivable and other assets		213			(196	)
Interest payable and other liabilities		1,062			(1,107	)
Net cash provided by (used) in operating activities		2,457			(778	)
Investing Activities
Net change in interest-bearing time deposits		-			598
Purchase of held to maturity securities		-			(498	)
Proceeds from calls, maturities and pay-downs of held to maturity securities		499			500
Net change in loans		5,260			(9,043	)
Proceeds from sale of real estate owned		79			37
Purchase of premises and equipment		(13	)		-
Net cash provided by (used in) investing activities		5,825			(8,406	)
Financing Activities
Net change in demand deposits, money market, checking and savings accounts		(7,888	)		1,833
Net change in certificates of deposit		(1,550	)		(9,124	)
Repayment of Federal Home Loan Bank advances		(18,000	)		-
Net change in Fed funds purchased		(27,000	)		(24,000	)
Purchase of common stock		-			(147	)
Dividends paid		(3,229	)		-
Net cash used in financing activities		(57,667	)		(31,438	)
Change in Cash and Cash Equivalents		(49,385	)		(40,622	)
Cash and Cash Equivalents, Beginning of Period		103,634			52,865
Cash and Cash Equivalents, End of Period	$	54,249		$	12,243
Supplemental Disclosures of Cash Flows Information
Interest paid	$	902		$	909
Income taxes paid		-			895
Loans transferred to real estate owned		-			104

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

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Wolverine Bancorp, Inc.

Condensed Consolidated Statement of Change in Stockholders’ Equity

(Amounts in Thousands, except share data)

(Unaudited)

	Common Stock		Additional Paid-in Capital		Unearned ESOP Shares			Retained Earnings		Total Stockholders' Equity
Balances at January 1, 2017	$	21	$	15,577	$	(1,215	)	$	46,591	$	60,974
Net income		-		-		-			1,332		1,332
Share based compensation expense		-		80		-			-		80
ESOP shares earned		-		58		25			-		83
Balances at March 31, 2017	$	21	$	15,715	$	(1,190	)	$	47,923	$	62,469

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

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Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Note 1:     Basis of Presentation

The unaudited condensed consolidated financial statements of Wolverine Bancorp, Inc. (the “Company”), the holding company of Wolverine Bank (the "Bank"), have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) believed necessary for a fair presentation have been included. The condensed consolidated balance sheet of the Company as of December 31, 2016 has been derived from the audited consolidated balance sheet of the Company as of that date. Operating results for the three and nine month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto filed as part of our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 30, 2017.

Note 2:     Accounting Developments

FASB Accounting Standards Updates No. 2017-08, Receivable – Nonrefundable Fees and Other Costs (Subtopic 310-20)

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.  The guidance provides amendments to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. These amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.

The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB Accounting Standards Updates No. 2017-04, Intangibles – Goodwill and Other (Topic 350)

The FASB has issued Accounting Standards Update (ASU) No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance is intended to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.

The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition.

The amendments in this update should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted on testing dates after January 1, 2017. The Company does not expect adoption of this ASU to have a material impact on its consolidated financial statements.

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Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

FASB Accounting Standards Updates No. 2017-01, Business Combinations (Topic 805)

The FASB has issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does not permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.

The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements, but it is not expected to have a material impact.

FASB ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)

The FASB has issued Accounting Standards Update (ASU) No. 2016-15, Statement of Cash Flows (Topic 230). This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flow. In November 2016, the FASB issued ASU No. 2016-18, which gave clarification on how restricted cash was to be presented in the cash flow statement.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

The FASB has issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of this amendment is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

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Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.

The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. All entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will be evaluating the impact of adopting this ASU and has not determined the anticipated impact on the consolidated financial statements.

FASB ASU No. 2016-09, Compensation—Stock Compensation (Topic 718)

The FASB issued ASU No. 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.

The ASU is intended to improve the accounting for employee shared-base payments and affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows.

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Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For public business entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period. The amendments in this update became effective on January 1, 2017 and did not have a material impact on the consolidated financial statements.

FASB ASU No. 2016-08, 2016-10, 2016-12, Revenue from Contracts with Customers (Topic 606)

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the guidance in determining revenue recognition as principal versus agent. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” which provides guidance in accounting for immaterial performance obligations and shipping and handling. In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients,” which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. This ASU also provides a practical expedient for contract modifications.

For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods with that reporting period, as deferred by ASU 2015-14. Early application is permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within the reporting period.

All other entities should apply the guidance to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Early application is permitted for all other entities as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in Update 2014-09. Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

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Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

FASB ASU No. 2016-07, Investments – Equity Method and Joint Ventures (Topic 323)

The amendments eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held.

The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required.

The amendments require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method.

The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. Adoption of the ASU did not have a significant effect on the Company’s consolidated financial statements.

FASB ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments

The FASB has issued Accounting Standards Update (ASU) No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations and Existing Hedge Accounting Relationships. The amendments apply to all reporting entities for which there is a change in the counterparty to a derivative instrument that has been designated as a hedging instrument.

The amendments clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks.

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Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

This standard will be effective for pubic business entities for fiscal year beginning after December 15, 2016 including interim periods within those fiscal years. Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. Early application is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Adoption of the ASU did not have a significant effect on the Company’s consolidated financial statements.

FASB ASU No. 2016-02 – Leases (Topic 842)

The FASB has issued Accounting Standards Update (ASU) No. 2016-02, Leases. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

●     A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and

●     A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

This standard will be effective for pubic business entities for fiscal year beginning after December 15, 2018 including interim periods within those fiscal years. Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020.

Early application is permitted for all public business entities and all nonpublic business entities upon issuance.

Lessees (for capital and operating leases) and lessors (for sales-type, direct financing and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.

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Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach.

Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB Accounting Standards Updates No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

The FASB has issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The ASU affects public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities.

The new guidance makes targeted improvements to existing U.S. GAAP by:

● Requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income;

● Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;

● Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements;

● Eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities;

● Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and

● Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.

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Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The new guidance permits early adoption of the own credit provision. In addition, the new guidance permits early adoption of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost. Adoption of the

ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

Note 3:     Securities

There were no held to maturity securities as of the three months ended March 31, 2017.

The amortized cost and approximate fair values of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to Maturity Securities:
March 31, 2017
Treasury bond	$	--	$	--	$	--	$	--
December 31, 2016
Treasury bond	$	499	$	1	$	--	$	500

There were no sales of securities during the three months ended March 31, 2017 and 2016. 

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Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Note 4:     Loans and Allowance for Loan Losses

Categories of loans include:

	March 31, 2017		December 31, 2016
Real Estate
One-to four-family	$	35,257	$	35,389
Home equity		3,269		4,031
Commercial mortgage loans
Commercial real estate		198,855		195,924
Multifamily		54,286		54,827
Land		11,351		11,547
Construction		12,428		13,475
Commercial non-mortgage		14,931		20,047
Consumer		1,084		1,074
Total loans		331,461		336,314
Less
Net deferred loan costs, premiums and discounts		553		563
Undisbursed portion of loan		6,228		5,819
Allowance for loan losses		8,734		9,326
Net Loans	$	315,946	$	320,606

The risk characteristics of each loan portfolio segment are as follows:

1-4 family, home equity, and consumer

With respect to residential loans that are secured by one-to four-family residences and are primarily owner-occupied, we generally establish a maximum loan-to-value ratio and require PMI if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in one-to four-family residences, and consumer loans are typically secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties.

Home equity loans secured by second mortgages have greater risk than one- to four-family residential mortgage loans secured by first mortgages. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure. When customers default on their loans, we attempt to foreclose on the property and resell the property as soon as possible to minimize foreclosure and carrying costs. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid loan and we may be unsuccessful in recovering the remaining balance from those customers.

13

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Amounts in Thousands)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Particularly with respect to our home equity loans, decreases in real estate values could adversely affect the value of property used as collateral for our loans.

Consumer and other loans generally have greater risk compared to longer-term loans secured by improved, owner-occupied real estate, particularly consumer loans that are secured by rapidly depreciable assets, such as automobiles. In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. As a result, consumer loan collections are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Commercial real estate and multifamily

Commercial real estate and multifamily loans generally have greater credit risk than the owner-occupied one- to four-family residential mortgage loans that we originate for retention in our loan portfolio. Repayment of these loans generally depends, in large part, on sufficient income from the property securing the loan or the borrower’s business to cover operating expenses and debt service. These types of loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. Changes in economic conditions that are beyond the control of the borrower may affect the value of the security for the loan, the future cash flow of the affected property or business, or the marketability of a construction project with respect to loans originated for the acquisition and development of property. Additionally, due to declining property values in our primary market area and in Michigan, the loan to value ratios of many of our commercial real estate and multifamily loans have increased significantly from the loan to value ratios that were assigned to these loans at the time of origination.

Land

Land loans generally have greater credit risk than the owner-occupied one-to four-family residential mortgage loans that we originate for retention in our portfolio. Repayment of these loans generally depends, in large part, on the sale of the land. The sale of land can either take place when the land is undeveloped or developed. Generally, other cash flow sources of the borrower are utilized to make additional payments on land loans. Changes in economic conditions that are beyond the control of the borrower may affect the value of the security for the loan, the future cash flow of the affected property or business, or the marketability of a construction project with respect to loans originated for the acquisition and development of property. Additionally, due to declining property values in our primary market area and in Michigan, the loan to value ratios of many of our land loans have increased significantly from the loan to value ratios that were assigned to these loans at the time of origination.

Construction

Construction loans include those for one- to four-family residential properties and commercial properties, including multifamily loans and commercial “mixed-use” buildings and homes built by developers on speculation. With respect to construction loans for one- to four-family residential properties and which are primarily owner-occupied, we generally establish a maximum loan-to-value ratio and require PMI if that ratio is exceeded.  These are generally “interest-only” loans during the construction period which typically does not exceed three months.

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Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Construction loans for commercial real estate are made in accordance with a schedule reflecting the cost of construction, and are generally limited to a 75% loan-to-completed appraised value ratio.  For all construction loans, we generally require that a commitment for permanent financing be in place prior to closing the construction loan

Repayment of one-to four-family residential property loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment of commercial property loans and homes built by developers on speculation is normally expected from the property’s eventual rental income, income from the borrower’s operations, the personal resources of the guarantor, or the sale of the subject property. Generally, before making a commitment to fund a construction loan, we require an appraisal of the property by a state-certified or state-licensed appraiser. We generally review and inspect properties before disbursement of funds during the term of the construction loan.

Construction financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost is inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project is inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property. Construction loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated.

Commercial non-mortgage

Commercial non-mortgage loans generally have a greater credit risk than residential mortgage loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial non-mortgage loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.

As a result, the availability of funds for the repayment of commercial non-mortgage loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. In determining the appropriate level of allowance for loan loss, we analyze various components of our portfolio. The following components are analyzed: all substandard loans on an individual basis; all loans that are designated special mention or closely monitored; loans not classified according to purpose or collateral type; and overdrawn deposit account balances.

We also factor in historical loss experience and qualitative considerations, including trends in charge offs and recoveries; trends in delinquencies and impaired/classified loans; effects of credit concentrations; changes in underwriting standards and loan review system; experience in lending staff; current industry conditions; and current market conditions. 

15

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2017, December 31, 2016 and March 31, 2016:

Loan Class	1-4 Family			Home Equity			Commercial Real Estate		Multifamily			Land			Construction			Commercial Non-Mortgage			Consumer		Total
Year to date analysis as of March 31, 2017
Allowance for loan losses:
Balance, beginning of period	$	798		$	49		$	5,422	$	1,084		$	1,142		$	294		$	524		$	13	$	9,326
Provision (credit) charged to expense		(52	)		(9	)		448		(212	)		(602	)		(24	)		(149	)		-		(600	)
Losses charged off		-			-			-		-			-			-			-			-		-
Recoveries		7			-			-		-			-			-			-			1		8
Balance, end of period	$	753		$	40		$	5,870	$	872		$	540		$	270		$	375		$	14	$	8,734
Ending Balance: individually evaluated for impairment	$	19		$	-		$	478	$	-		$	250		$	-		$	203		$	-	$	950
Ending balance: collectively evaluated for impairment	$	734		$	40		$	5,392	$	872		$	290		$	270		$	172		$	14	$	7,784
Loans:
Ending Balance	$	35,257		$	3,269		$	198,855	$	54,286		$	11,351		$	12,428		$	14,931		$	1,084	$	331,461
Ending Balance: individually evaluated for impairment	$	1,607		$	-		$	8,164	$	6,240		$	677		$	-		$	2,527		$	-	$	19,215
Ending balance: collectively evaluated for impairment	$	33,650		$	3,269		$	190,691	$	48,046		$	10,674		$	12,428		$	12,404		$	1,084	$	312,246

16

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements

Loan Class	1-4 Family			Home Equity			Commercial Real Estate			Multifamily			Land			Construction			Commercial Non-Mortgage		Consumer			Total
Year to date analysis as of December 31, 2016
Allowance for loan losses:
Balance, beginning of period	$	948		$	108		$	4,913		$	1,515		$	1,605		$	604		$	344	$	24		$	10,061
Provision (credit) charged to expense		(137	)		(59	)		555			(431	)		(544	)		(310	)		180		(14	)		(760	)
Losses charged off		(67	)		-			(85	)		-			-			-			-		(1	)		(153	)
Recoveries		54			-			39			-			81			-			-		4			178
Balance, end of period	$	798		$	49		$	5,422		$	1,084		$	1,142		$	294		$	524	$	13		$	9,326
Ending Balance: individually evaluated for impairment	$	-		$	-		$	235		$	-		$	550		$	-		$	-	$	-		$	785
Ending balance: collectively evaluated for impairment	$	798		$	49		$	5,187		$	1,084		$	592		$	294		$	524	$	13		$	8,541
Loans:
Ending Balance	$	35,389		$	4,031		$	195,924		$	54,827		$	11,547		$	13,475		$	20,047	$	1,074		$	336,314
Ending Balance: individually evaluated for impairment	$	1,500		$	-		$	8,103		$	6,311		$	1,061		$	-		$	-	$	-		$	16,975
Ending balance: collectively evaluated for impairment	$	33,889		$	4,031		$	187,821		$	48,516		$	10,486		$	13,475		$	20,047	$	1,074		$	319,339

Loan Class	1-4 Family			Home Equity			Commercial Real Estate			Multifamily			Land		Construction		Commercial Non-Mortgage		Consumer			Total
Year to date analysis as of March 31, 2016
Allowance for loan losses:
Balance, beginning of period	$	948		$	108		$	4,913		$	1,515		$	1,605	$	604	$	344	$	24		$	10,061
Provision (credit) charged to expense		23			(9	)		(115	)		(106	)		28		132		48		(1	)		-
Losses charged off		(66	)		-			-			-			-		-		-		-			(66	)
Recoveries		4			-			24			-			1		-		-		-			29
Balance, end of period	$	909		$	99		$	4,822		$	1,409		$	1,634	$	736	$	392	$	23		$	10,024
Ending Balance: individually evaluated for impairment	$	-		$	-		$	-		$	100		$	850	$	-	$	-	$	-		$	950
Ending balance: collectively evaluated for impairment	$	909		$	99		$	4,822		$	1,309		$	784	$	736	$	392	$	23		$	9,074
Loans:
Ending Balance	$	38,898		$	5,073		$	191,230		$	60,166		$	12,863	$	11,804	$	17,742	$	1,175		$	338,951
Ending Balance: individually evaluated for impairment	$	1,241		$	-		$	9,211		$	7,493		$	1,769	$	-	$	-	$	-		$	19,714
Ending balance: collectively evaluated for impairment	$	37,657		$	5,073		$	182,019		$	52,673		$	11,094	$	11,804	$	17,742	$	1,175		$	319,237

17

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Consistent with regulatory guidance, charge offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. Our policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except one-to-four family residential loans and consumer loans, we promptly charge off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

We charge off one-to-four family residential and consumer loans, or portions thereof, when we reasonably determine the amount of the loss. We adhere to timeframes established by applicable regulatory guidance which provides for the charge off of one-to-four family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge off of unsecured open-end loans when the loan is 180 days past due, and charge down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which we can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

18

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The following table presents the credit risk profile of our loan portfolio based on rating category and payment activity as of March 31, 2017 and December 31, 2016:

	1-4 Family				Home Equity				Commercial Real Estate
	2017		2016		2017		2016		2017		2016
Pass	$	33,665	$	33,787	$	3,269	$	4,031	$	177,012	$	173,375
Pass (Closely Monitored)		515		490		-		-		14,366		14,349
Special Mention		240		241		-		-		2,124		2,630
Substandard		837		871		-		-		5,353		5,570
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
	$	35,257	$	35,389	$	3,269	$	4,031	$	198,855	$	195,924

	Multifamily				Land				Construction
	2017		2016		2017		2016		2017		2016
Pass	$	51,084	$	48,241	$	9,791	$	9,631	$	12,428	$	13,475
Pass (Closely Monitored)		3,202		6,586		883		855		-		-
Special Mention		-		-		-		-		-		-
Substandard		-		-		677		1,061		-		-
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
	$	54,286	$	54,827	$	11,351	$	11,547	$	12,428	$	13,475

	Commercial Non-Mortgage				Consumer				Total
	2017		2016		2017		2016		2017		2016
Pass	$	11,741	$	16,500	$	1,084	$	1,074	$	300,074	$	300,114
Pass (Closely Monitored)		663		658		-		-		19,629		22,938
Special Mention		2,527		2,889		-		-		4,891		5,760
Substandard		-		-		-		-		6,867		7,502
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
	$	14,931	$	20,047	$	1,084	$	1,074	$	331,461	$	336,314

We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation and current economic trends, among other factors. We analyze loans individually by classifying the loans as to credit risk. This analysis is performed during the loan approval process and is updated as circumstances warrant.

The Pass asset quality rating encompasses assets that have performed as expected. These assets generally do not have delinquency or servicing issues. Loans assigned this rating include loans to borrowers possessing solid credit quality with acceptable risk.  Borrowers in these grades are differentiated from higher grades on the basis of size (capital and/or revenue), leverage, asset quality, stability of the industry or specific market area and quality/coverage of collateral.  These borrowers generally have a history of consistent earnings and reasonable leverage.   

19

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The Closely Monitored asset quality rating encompasses assets that have been brought to the attention of management and may, if not corrected, warrant a more serious quality rating by management. These assets are usually in the first phase of a deficiency situation and may possess similar criteria as Special Mention assets. This grade includes loans to borrowers which require special monitoring because of deteriorating financial results, declining credit ratings, decreasing cash flow, increasing leverage, marginal collateral coverage or industry stress that has resulted or may result in a changing overall risk profile.

The Special Mention asset quality rating encompasses assets that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. This grade is intended to include loans to borrowers whose credit quality has clearly deteriorated and where risk of further decline is possible unless active measures are taken to correct the situation.  Weaknesses are considered potential at this state and are not yet fully defined.

The Substandard asset quality rating encompasses assets that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any; assets having a well-defined weakness(es) based upon objective evidence; assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected; or the possibility that liquidation will not be timely. Loans categorized in this grade possess a well-defined credit weakness and the likelihood of repayment from the primary source is uncertain.  Significant financial deterioration has occurred and very close attention is warranted to ensure the full repayment without loss.  Collateral coverage may be marginal and the accrual of interest has been suspended.

The Doubtful asset quality rating encompasses assets that have all of the weaknesses of those classified as Substandard.  In addition, these weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

The Loss asset quality rating encompasses assets that are considered uncollectible and of such little value that their continuance as assets of the Bank is not warranted. A loss classification does not mean that an asset has no recovery or salvage value; instead, it means that it is not practical or desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be realized in the future.

20

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The following table is a summary of our past due and non-accrual loans as of March 31, 2017 and December 31, 2016:

As of March 31, 2017	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans >90 Days & Accruing		Total Nonaccrual
1-4 Family	$	11	$	43	$	286	$	340	$	34,917	$	35,257	$	-	$	286
Home Equity		-		-		-		-		3,269		3,269		-		-
Commercial Real Estate		261		642		105		1,008		197,847		198,855		-		4,002
Multifamily		-		-		-		-		54,286		54,286		-		-
Land		-		-		677		677		10,674		11,351		-		677
Construction		-		-		-		-		12,428		12,428		-		-
Commercial Non-Mortgage		-		-		-		-		14,931		14,931		-		-
Consumer		-		-		-		-		1,084		1,084		-		-
Total	$	272	$	685	$	1,068	$	2,025	$	329,436	$	331,461	$	-	$	4,965

As of December 31, 2016	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans >90 Days & Accruing		Total Nonaccrual
1-4 Family	$	165	$	94	$	137	$	396	$	34,993	$	35,389	$	-	$	137
Home Equity		-		-		-		-		4,031		4,031		-		-
Commercial Real Estate		-		648		100		748		195,176		195,924		-		4,872
Multifamily		-		-		-		-		54,827		54,827		-		-
Land		-		-		1,061		1,061		10,486		11,547		-		1,061
Construction		-		-		-		-		13,475		13,475		-		-
Commercial Non-Mortgage		-		-		-		-		20,047		20,047		-		-
Consumer		-		-		-		-		1,074		1,074		-		-
Total	$	165	$	742	$	1,298	$	2,205	$	334,109	$	336,314	$	-	$	6,070

The accrual of interest is discontinued on all loan classes at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. Subsequent payments on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. We generally require a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable we will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include non-performing commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.

21

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements

These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Interest income on loans individually classified as impaired is recognized on a cash basis after all past due and current principal payments have been made.

The following table presents impaired loans at March 31, 2017:

			Unpaid
	Recorded		Principal		Specific		YTD Average		YTD Interest
	Balance		Balance		Allowance		Balance		Income
Loans without a specific valuation allowance:
1-4 Family	$	1,367	$	1,489	$	-	$	1,208	$	10
Home Equity		-		-		-		-		-
Commercial real estate		6,076		8,181		-		6,654		39
Multi Family		6,240		7,055		-		6,276		75
Land		-		-		-		-		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
1-4 Family	$	240	$	240	$	19	$	120	$	2
Home Equity		-		-		-		-		-
Commercial real estate		2,088		2,179		478		1,349		8
Multi Family		-		-		-		-		-
Land		677		2,815		250		869		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		2,527		2,527		203		1,265		35
Consumer		-		-		-		-		-
Totals
1-4 Family	$	1,607	$	1,729	$	19	$	1,328	$	12
Home Equity		-		-		-		-		-
Commercial real estate		8,164		10,360		478		8,003		47
Multi Family		6,240		7,055		-		6,276		75
Land		677		2,815		250		869		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		2,527		2,527		203		1,265		35
Consumer		-		-		-		-		-
Total	$	19,215	$	24,486	$	950	$	17,741	$	169

22

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements

The following table presents impaired loans at December 31, 2016:

			Unpaid
	Recorded		Principal		Specific		YTD Average		YTD Interest
	Balance		Balance		Allowance		Balance		Income
Loans without a specific valuation allowance:
1-4 Family	$	1,500	$	1,620	$	-	$	1,311	$	70
Home Equity		-		-		-		-		-
Commercial real estate		7,494		9,669		-		8,296		426
Multi Family		6,311		7,125		-		6,884		402
Land		-		-		-		24		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
1-4 Family	$	-	$	-	$	-	$	-	$	-
Home Equity		-		-		-		-		-
Commercial real estate		609		695		235		385		41
Multi Family		-		-		-		-		-
Land		1,061		3,158		550		1,832		123
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Totals
1-4 Family	$	1,500	$	1,620	$	-	$	1,311	$	70
Home Equity		-		-		-		-		-
Commercial real estate		8,103		10,364		235		8,681		467
Multi Family		6,311		7,125		-		6,884		402
Land		1,061		3,158		550		1,856		123
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Total	$	16,975	$	22,267	$	785	$	18,773	$	1,062

23

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The following table presents impaired loans at March 31, 2016:

			Unpaid
	Recorded		Principal		Specific		YTD Average		YTD Interest
	Balance		Balance		Allowance		Balance		Income
Loans without a specific valuation allowance:
1-4 Family	$	1,241	$	1,369	$	-	$	1,342	$	9
Home Equity		-		-		-		-		-
Commercial real estate		9,211		11,177		-		9,561		47
Multi Family		6,516		7,330		-		6,551		76
Land		41		95		-		41		1
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		148		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
1-4 Family	$	-	$	-	$	-	$	30	$	-
Home Equity		-		-		-		-		-
Commercial real estate		-		-		-		1,184		-
Multi Family		977		997		100		1,134		17
Land		1,728		3,575		850		1,785		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Totals
1-4 Family	$	1,241	$	1,369	$	-	$	1,372	$	9
Home Equity		-		-		-		-		-
Commercial real estate		9,211		11,177		-		10,745		47
Multi Family		7,493		8,327		100		7,685		93
Land		1,769		3,670		850		1,826		1
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		148		-
Consumer		-		-		-		-		-
Total	$	19,714	$	24,543	$	950	$	21,776	$	150

24

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assumed, in which case interest is recognized on a cash basis and is reasonable compared to interest income noted above.

Troubled Debt Restructuring (TDR)

We may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that we would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring. We may modify loans through rate reductions, short-term extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.

We identify loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

For one-to-four family residential and home equity lines of credit, a restructure often occurs with past due loans and may be offered as an alternative to foreclosure. There are other situations where borrowers, who are not past due, experience a sudden job loss, become over-extended with credit obligations, or other problems, have indicated that they will be unable to make the required monthly payment and request payment relief.

When considering a loan restructure, management will determine if: (i) the financial distress is short or long term; (ii) loan concessions are necessary; and (iii) the restructure is a viable solution.

When a loan is restructured, the new terms often require a reduced monthly debt service payment. No TDRs that were on non-accrual status at the time the concessions were granted have been returned to accrual status. For commercial loans, management completes an analysis of the operating entity’s ability to repay the debt. If the operating entity is capable of servicing the new debt service requirements and the underlying collateral value is believed to be sufficient to repay the debt in the event of a future default, the new loan can be placed on accrual status after six months of performance with the new loan terms. To date, there have been no commercial loans restructured and immediately placed on accrual status after the execution of the TDR.

For retail loans, an analysis of the individual’s ability to service the new required payments is performed. If the borrower is capable of servicing the newly restructured debt and the underlying collateral value is believed to be sufficient to repay the debt in the event of a future default, the new loan can be placed on accrual status after six months of performance to the new loan terms. The reason for the TDR is also considered, such as paying past due real estate taxes or payments caused by a temporary job loss, when determining whether a retail TDR loan could be returned to accrual status. Retail TDRs remain on nonaccrual status until sufficient payments have been made to bring the past due principal and interest current and/or after six months of performance to the new loan terms at which point the loan could be transferred to accrual status.

25

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

There were no loans that were restructured as TDRs during the three months ended March 31, 2017.

There were no TDRs that had payment defaults during the three months ended March 31, 2017. Default occurs when a TDR is 90 days or more past due, transferred to nonaccrual status, or transferred to other real estate owned within twelve months of restructuring.

Management monitors the TDRs based on the type of modification or concession granted to the borrower. These types of modifications may include rate reductions, payment/term extensions, forgiveness of principal, forbearance, and other applicable actions. Management predominantly utilizes rate reductions and lower monthly payments, either from a longer amortization period or interest only repayment schedule, because these concessions provide needed payment relief without risking the loss of principal. Management will also agree to a forbearance agreement when it is deemed appropriate to avoid foreclosure.

The following table summarizes the loans that were restructured as TDRs during the three months ended March 31, 2017 and March 31, 2016:

	Three months ended
	March 31, 2017
			Balance		Balance
			prior to		after
	Count		TDR		TDR
	(Dollars in thousands)
Total loans		--	$	--	$	--

	Three months ended
	March 31, 2016
			Balance		Balance
			prior to		after
	Count		TDR		TDR
	(Dollars in thousands)
Commercial real estate		1		996		996
Total loans		1	$	996	$	996

The commercial real estate TDR in 2016 was modified with a forbearance agreement and maturity extension.

26

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Note 5:     Disclosures About Fair Value of Assets and Liabilities

ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets under the valuation hierarchy. We have no assets or liabilities measured at fair value on a recurring basis and no liabilities measured at fair value on a nonrecurring basis.

Recurring and Nonrecurring Measurements

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2017 and December 31, 2016.

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2017
Collateral-dependent Impaired loans	$	3,828	$	--	$	--	$	3,828
December 31, 2016
Collateral-dependent Impaired loans	$	885	$	--	$	--	$	885

27

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Collateral-dependent Impaired Loans

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or an evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent or subsequently as deemed necessary and approved by management. Appraisals are reviewed for accuracy and consistency by the Credit Analysis department. Typically, appraisers are selected from the list of approved appraisers maintained by the Underwriting department. The appraised values may be reduced by discounts to consider a lack of marketability or estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the Credit Analysis department and approved by management.

Unobservable (Level 3) inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill at March 31, 2017 and December 31, 2016.

	Collateral-dependent Impaired Loans
	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
As of March 31, 2017
Collateral-dependent impaired loans	$	3,828	Market comparable properties	Marketability discount	0	-	17%	(16%)
December 31, 2016
Collateral-dependent impaired loans	$	885	Market comparable properties	Marketability discount	3	-	13%	(6%)

28

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Fair Value of Financial Instruments

The following table presents estimated fair values of our financial instruments recognized in the accompanying consolidated balance sheets at amounts other than fair value at the individual dates. The fair values of certain instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Because no market exists for certain financial instruments and because management does not intend to sell these financial instruments, we do not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

			Fair Value Measurements Using
As of March 31, 2017	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets
Cash and cash equivalents	$	54,249	$	54,249	$	-	$	-
Loans, net of allowance for loan losses		315,946		-		-		318,922
Federal Home Loan Bank stock		2,700		-		2,700		-
Interest receivable		839		-		839		-
Financial liabilities
Deposits	$	271,110	$	147,473	$	-	$	124,724
Federal Home Loan Bank advances		42,000		-		41,369		-
Interest payable		252		-		252		-

29

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

			Fair Value Measurements Using
As of December 31, 2016	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets
Cash and cash equivalents	$	103,634	$	103,634	$	-	$	-
Interest-earning time deposits		-		-		-		-
Held to maturity securities		499		-		500		-
Loans held for sale		238		-		239		-
Loans, net of allowance for loan losses		320,606		-		-		323,601
Federal Home Loan Bank stock		2,700		-		2,700		-
Interest receivable		846		-		846		-
Financial liabilities
Deposits	$	280,548	$	153,290	$	-	$	128,655
Federal Home Loan Bank advances		60,000		-		59,187		-
Federal funds purchased		27,000		-		27,000		-
Interest payable		249		-		249		-

The following methods and assumptions were used to estimate the fair value of all other financial instruments recognized in the accompanying consolidated balance sheets at amounts other than fair value.

Cash and Cash Equivalents, Interest-Earning Time Deposits, Federal Home Loan Bank Stock, Federal Funds Purchased, Interest Receivable, and Interest Payable

The carrying amount approximates fair value.

Held to Maturity Securities

Fair values equal quoted market prices, if available. If quoted market prices are not available, fair value is estimated based on quoted market prices of similar securities.

Loans Held for Sale

Fair value of loans held for sale is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar remaining maturities.

Loans

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations.

30

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Deposits

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

Federal Home Loan Bank Advances

Rates currently available to us for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Commitments to Originate Loans, Letters of Credit and Lines of Credit

Loan commitments and letters-of-credit generally have short-term, variable rate features and contain clauses, which limit our exposure to changes in customer credit quality. Accordingly, their carrying values, which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value.

Note 6:     Earnings Per Share (In thousands except per share amounts)

Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method.

Unvested share-based payment awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered to participate with common stock in undistributed earnings for purposes of computing EPS. Accordingly, the Company is required to calculate basic and diluted EPS using the two-class method. Restricted stock awards granted by the Company are considered participating securities. Calculations of EPS under the two-class method (i) exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.

Unearned ESOP shares, which are not vested and unvested restricted stock awards, are excluded from the computation of average shares outstanding.

31

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

(Table Amounts in Thousands Except Per Share Amounts)

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Earnings per share analysis for the three months ended March 31, 2017 and 2016 is as follows (dollars in thousands, except per share data):

	Three month ended March 31,			Three month ended March 31,
	2017			2016
Net Income	$	1,332		$	967
Dividends and undistributed earnings allocated to participating securities		(13	)		(17	)
Income attributable to common shareholders		1,319			950
Weighted average shares outstanding (in thousands)		2,106			2,154
Less: average unearned ESOP and unvested restricted stock		(148	)		(177	)
Average Shares		1,958			1,977
Effect of dilutive based awards		54			32
Average common and common-equivalent shares for diluted EPS (in thousands)		2,012			2,009
Basic EPS	$	0.67		$	0.48
Diluted EPS	$	0.66		$	0.47

32

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

(Dollars in Thousands)

Note 7:     Share-Based Compensation

In May 2012, the Company’s stockholders approved the Wolverine Bancorp, Inc. 2012 Equity Incentive Plan (“Plan”) which provides for awards of stock options and restricted stock to key officers and outside directors. The cost of the Plan is based on the fair value of the awards on the grant date. The fair value of restricted stock awards is based on the closing price of the Company’s stock on the grant date. The fair value of stock options is estimated using a Black-Scholes option pricing model using assumptions for dividend yield, stock price volatility, risk-free interest rate, and option term. These assumptions are based on management’s judgments regarding future events, are subjective in nature, and contain uncertainties inherent in an estimate. The cost of the awards are being recognized on a straight-line basis over the five-year vesting period during which participants are required to provide services in exchange for the awards.

Until such time as awards of stock are granted and vest or options are exercised, shares of the Company’s common stock under the Plan shall be authorized but unissued shares. The maximum number of shares authorized under the Plan is 351,050. Total shared-based compensation expense for the three months ended March 31, 2017 and 2016 was $80 and $87, respectively.

Stock Options 

The table below presents the stock option activity for the period shown:

	Options		Weighted average exercise price		Remaining contractual life (years)		Aggregate intrinsic value
Options outstanding at January 1, 2017		181,585	$	20.76		7	$	1,956
Granted		--		--		--		--
Exercised		--		--		--		--
Forfeited		--		--		--		--
Expired		--		--		--		--
Options outstanding at March 31, 2017		181,585	$	20.76		7	$	2,146
Exercisable at March 31, 2017		92,748	$	17.44		5	$	1,404

As of March 31, 2017, the Company had $156 of unrecognized compensation expense related to stock options. Stock option expense for the three months ended March 31, 2017 and 2016 was $17 and $16, respectively.

33

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

(Dollars in Thousands)

Restricted Stock Awards

Restricted stock awards are accounted for as fixed grants using the fair value of the Company’s stock at the time of grant. Unvested restricted stock awards may not be disposed of or transferred during the vesting period. Restricted stock awards carry with them the right to receive dividends.

The table below presents the restricted stock award activity for the period shown:

	Service-Based Restricted stock awards		Weighted average grant date fair value
Non-vested at January 1, 2017		26,572	$	22.38
Granted		-		-
Vested		-		-
Forfeited		-		-
Non-vested at March 31, 2017		26,572		22.38

As of March 31, 2017, the Company had $448 of unrecognized compensation expense related to restricted stock awards. The cost of the restricted stock awards will be amortized in monthly installments over the five-year vesting period. Restricted stock expense for the three months ended March 31, 2017 and 2016 was $63 and $71, respectively.

34

Table of Contents

Wolverine Bancorp, Inc.

Form 10-Q

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

(Dollars in Thousands)

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

General 

Management’s discussion and analysis of the financial condition at March 31, 2017 and the results of operations for the three and three months ended March 31, 2017 and 2016 is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) is designed to provide a narrative on our financial condition, results of operations, liquidity, critical accounting policies, off-balance sheet arrangements and the future impact of accounting standards. It is useful to read our MD&A in conjunction with the consolidated financial statements contained in Part I in this Quarterly Report on Form 10-Q (this "Form 10-Q"), our Annual Report on Form 10-K for the year ended December 31, 2016 (the “Form 10-K”), and our other reports on Forms 10-Q and current reports on Forms 8-K and other publicly available information.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

● estimates of our risks and future costs and benefits.

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

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

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

● competition among depository and other financial institutions;

35

Table of Contents

● changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

● adverse changes in the securities markets;

● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

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

● our ability to successfully integrate acquired entities, if any;

● 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 and the Public Company Accounting Oversight Board;

● changes in our organization, compensation and benefit plans;

● changes in our financial condition or results of operations that reduce capital; and

● changes in the financial condition or future prospects of issuers of securities that we own.

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

Critical Accounting Policies

We consider accounting policies that require management to exercise significant judgment or discretion or make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income, to be critical accounting policies. We consider the following to be our critical accounting policies.

Allowance for Loan Losses. We believe that the allowance for loan losses and related provision for loan losses are particularly susceptible to change in the near term, due to changes in credit quality which are evidenced by trends in charge offs and in the volume and severity of past due loans. In addition, our portfolio is comprised of a substantial amount of commercial real estate loans which generally have greater credit risk than one- to four-family residential mortgage and consumer loans because these loans generally have larger principal balances and are non-homogenous.

The allowance for loan losses is maintained at a level to cover probable credit losses inherent in the loan portfolio at the balance sheet date. Based on our estimate of the level of allowance for loan losses required, we record a provision for loan losses as a charge to earnings to maintain the allowance for loan losses at an appropriate level. The estimate of our credit losses is applied to two general categories of loans:

● loans that we evaluate individually for impairment under ASC 310-10, “Receivables;” and

● groups of loans with similar risk characteristics that we evaluate collectively for impairment under ASC 450-20, “Loss Contingencies.”

The allowance for loan losses is evaluated on a regular basis by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. The factors used to evaluate the collectability of the loan portfolio include, but are not limited to, current economic conditions, our historical loss experience, the nature and volume of the loan portfolio, the financial strength of the borrower, and estimated value of any underlying collateral. This evaluation is inherently subjective as it requires estimates that are subject to significant revision as more information becomes available. Actual loan losses may be significantly more than the allowance for loan losses we have established which could have a material negative effect on our financial results.

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Income Tax Accounting. The provision for income taxes is based upon income in our consolidated financial statements, rather than amounts reported on our income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date. Under U.S. GAAP, a valuation allowance is required to be recognized if it is more likely than not that a deferred tax asset will not be realized. The determination as to whether we will be able to realize the deferred tax assets is highly subjective and dependent upon judgment concerning our evaluation of both positive and negative evidence, our forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. Positive evidence includes the existence of taxes paid in available carryback years as well as the probability that taxable income will be generated in future periods, while negative evidence includes any cumulative losses in the current year and prior two years and general business and economic trends. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. Any required valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings. Positions taken in our tax returns may be subject to challenge by the taxing authorities upon examination. The benefit of an uncertain tax position is initially recognized in the financial statements only when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. Differences between our position and the position of tax authorities could result in a reduction of a tax benefit or an increase to a tax liability, which could adversely affect our future income tax expense.

We believe our tax policies and practices are critical accounting policies because the determination of our tax provision and current and deferred tax assets and liabilities have a material impact on our net income and the carrying value of our assets. We believe our tax liabilities and assets are properly recorded in the consolidated financial statements at March 31, 2017 and December 31, 2016 and no valuation allowance was necessary.

Comparison of Financial Condition at March 31, 2017 and December 31, 2016

Total assets decreased $55.1 million, or 12.7%, to $379.3 million at March 31, 2017 from $434.4 million at December 31, 2016. The decrease was primarily the result of a decrease of $49.5 million in interest-earning demand deposits due to the payoff in early January 2017 of $27.0 million of federal funds purchased and the payoff of $13.0 million variable-rate advances that originated in December 2016 and a decrease of $4.7 million in loans receivable.

Loans held for sale decreased $238,000 to $0 at March 31, 2017 from $238,000 at December 31, 2016.

Net loans decreased $4.7 million, or 1.5%, to $316.0 million at March 31, 2017 from $320.6 million at December 31, 2016. Commercial non-mortgage loans decreased $5.1 million, or 25.5%, and construction loans decreased $1.0 million, or 7.8%, partially offset by an increase in commercial real estate loans of $2.9 million, or 1.5%.

37

Table of Contents

The undisbursed portion of loans increased $400,000 to $6.2 million at March 31, 2017 from $5.8 million at December 31, 2016.

Other real estate owned decreased $78,000, or 93.0%, to $8,000 at March 31, 2017, from $86,000 at December 31, 2016 resulting from net sales of $78,000.

Other assets, consisting primarily of net deferred and accrued federal taxes, decreased $206,000 to $4.5 million at March 31, 2017 from $4.7 million at December 31, 2016.

Deposits decreased $9.4 million to $271.1 million at March 31, 2017 from $280.5 million at December 31, 2016. Core deposits (consisting of interest-bearing and noninterest-bearing checking accounts, money market accounts and savings accounts) decreased $9.1 million, primarily due to money market and checking accounts. Certificates of deposit decreased $3.6 million, or 2.8%, to $123.6 million at March 31, 2017 from $127.2 million at December 31, 2016, primarily due to maturities that were not renewed.

Federal Home Loan Bank advances decreased $18.0 million to $42.0 million at March 31, 2017 from $60.0 million at December 31, 2016 due to the payoff of $13.0 million variable rate advances in early January and other scheduled maturities.

Federal Funds purchased decreased $27.0 million, or 100.0%, to $0 at March 31, 2017 from $27.0 million at December 31, 2016 due to the payoff in early January.

Interest payable and other liabilities, consisting primarily of liabilities for checks and money orders, and accrued expenses, decreased $2.1 million from $5.9 million at December 31, 2016 to $3.7 million at March 31, 2017 million primarily due to a $3.2 million decrease in dividends payable offset in part by a $0.9 million increase in borrower’s prepaid taxes and insurances.

Total stockholders’ equity increased $1.5 million, or 2.0%, to $62.5 million at March 31, 2017 from $61.0 million at December 31, 2016, primarily due to net income of $1.3 million.

Comparison of Operating Results for the Three Months ended March 31, 2017 and 2016

General. We recorded net income of $1.3 million for the three months ended March 31, 2017 compared to net income of $967,000 for the three months ended March 31, 2016. The increase was primarily related to a decrease in provision for loan losses of $600,000 due to a negative provision for the three months ended March 31, 2017 from an expense of $0 for the three months ended March 31, 2016. This was offset in part by an increase in professional and service fees of $104,000 to an expense of $198,000 for the three months ended March 31, 2017 from an expense of $94,000 for the three months ended March 31, 2016. There was also a $64,000 decrease in net gain on loan sales from $96,000 for the three months ended March 31, 2016 to $32,000 for the three months ended March 31, 2017.

Interest and Dividend Income. Interest and dividend income increased $81,000, or 2.0%, to $4.1 million for the three months ended March 31, 2017. Average balances of interest-earnings assets decreased $12.1 million to $368.9 million for the three months ended March 31, 2017 from $381.0 million for the three months ended March 31, 2016, and the average yield on interest-earning assets increased 23 basis points to 4.49% during the 2017 period from 4.26% during the 2016 period.

Interest income on loans increased $74,000, or 1.9%, to $4.0 million for the three months ended March 31, 2017 from $3.9 million for the three months ended March 31, 2016. This increase was in part due to $30,000 in loan interest income related to one-time prepayment penalties. There was an increase of 18 basis points in the average yield to 5.07% during the 2017 period versus 4.89% during the 2016 period, and average net loans decreased $5.9 million, or 1.8%, to $316.0 million for the three months ended March 31, 2017 from $321.9 million for the three months ended March 31, 2016.

38

Table of Contents

Income from dividends and investment securities increased $7,000 to $136,000 for the quarter ended March 31, 2017 from $129,000 for the quarter ended March 31, 2016.

Interest Expense. Interest expense increased $23,000, or 2.4%, to $990,000 for the three months ended March 31, 2017 from $967,000 for the three months ended March 31, 2016. Interest expense on deposits increased $47,000 to $555,000 during the 2017 period from $508,000 during the 2016 period. Interest expense on borrowed funds decreased $24,000 to $435,000 for the three months ended March 31, 2017 from $459,000 for the three months ended March 31, 2016.

Average interest-bearing liabilities decreased $14.0 million, or 4.3%, to $310.5 million for the three months ended March 31, 2017 from $324.5 million for the three months ended March 31, 2016. The average rate paid on these liabilities increased 9 basis points to 1.28% during the 2017 period from 1.19% during the 2016 period. Interest expense on certificates of deposit decreased $47,000, or 10.8%, to $390,000 for the three months ended March 31, 2017 from $437,000 for the three months ended March 31, 2016. The average balance of certificates of deposits decreased to $124.7 million for the 2017 quarter, from $165.3 million for the 2016 quarter, while the rate on certificates of deposit increased 19 basis points to 1.25% for the three months ended March 31, 2017 from 1.06% for the three months ended March 31, 2016 primarily due to the increase in the overall market interest rate.

The average balance of core deposits, consisting of checking accounts, money market accounts and savings accounts, increased $28.1 million, or 25.0%, to $140.4 million for the three months ended March 31, 2017 from $112.3 million for the three months ended March 31, 2016. The interest paid on core deposits increased $94,000 to $165,000 for the three months ended March 31, 2017 from $71,000 for three months ended March 31, 2016. The rate on core deposits for the three months ended March 31, 2017 increased 22 basis points to 0.47% from 0.25% for the three months ended March 31, 2016 primarily due to the increase in the overall market interest rate.

Net Interest Income. Net interest income increased $56,000 to $3.2 million for the three months ended March 31, 2017 from $3.1 million for the three months ended March 31, 2016. Changes in net interest income are influenced by a variety of factors, including changes in the level and mix of interest-earning assets and interest-bearing liabilities, the level and direction of interest rates, the difference between short-term and long-term interest rates and the general strength of the economy.

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies — Allowance for Loan Losses,” we recorded a negative provision for loan losses of $600,000 for the three months ended March 31, 2017 and we did not record a provision for loan losses for the three months ended March 31, 2016. The negative provision in the 2017 quarter was primarily due to a decrease of $300,000 in specific allocations related to one commercial relationship and changes in quarterly factors used to calculate the allowance for loan losses and improved loan quality. At March 31, 2017, non-performing loans totaled $5.0 million, or 1.5% of total loans, as compared to $7.4 million, or 2.3% of total loans, at March 31, 2016. The allowance for loan losses to total loans receivable was 2.7% at March 31, 2017 and 3.0% at March 31, 2016. We have a negative provision expense in 2017 primarily because of continued economic improvement, stabilized levels of non-performing assets, and stabilized delinquencies. All loans rated Substandard are reviewed for impairment at least in the quarter in which the loan was downgraded to Substandard. All loans deemed impaired are reviewed for additional impairment at least each quarter. Overall, management continues to focus on resolving non-performing assets and improving asset quality. In addition to our collections department personnel in working out loans, we continue to involve business development officers and, on significant assets, underwriters and senior management.

Noninterest Income. Noninterest income decreased $113,000, or 40.0%, to $170,000 for the three months ended March 31, 2017 from $283,000 for the three months ended March 31, 2016. The decrease was primarily attributable to a decrease of $64,000 in the net gain on loan sales, a $26,000 decrease in the net gain on the sale of other real estate owned, and a $11,000 decrease in service charges and fees.

39

Table of Contents

Noninterest Expense. Noninterest expense decreased $1,000 for the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. This was primarily due to a $65,000 decrease in loan legal expense, a $27,000 decrease in other real estate owned expense, and a $16,000 decrease in occupancy and equipment expense. This was offset in part by an increase of $104,000 in professional and service fees.

Income Tax Expense. We recorded $704,000 of income tax expense for the three months ended March 31, 2017 compared to $523,000 of income tax expense for the three months ended March 31, 2016. Our effective tax rate was 34.5% for the three months ended March 31, 2017 and 35.1% for the three months ended March 31, 2016.

Asset Quality

Other real estate owned totaled $8,000, or 0.0% of total assets, at March 31, 2017 compared to $86,000, or 0.2% of total assets, at December 31, 2016. The largest relationship as of March 31, 2017 was $8,000, which consisted of land.

Non-performing assets, which includes non-performing loans, other real estate owned and troubled debt restructurings, totaled $5.0 million, or 1.3% of total assets, at March 31, 2017 compared to $6.5 million, or 1.5% of total assets, at December 31, 2016.

Our largest substandard and non-performing relationship as of March 31, 2017 has a balance of $2.9 million. Of the $6.9 million loans rated substandard, approximately $1.8 million are performing.

New Capital Requirements

As of January 1, 2015, the Company has adopted new minimum risk-based capital and leverage ratios and refines the definition of what constitutes as “capital” for purposes of calculating these ratios based on rules effective January 1, 2015. The new minimum capital requirements include: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based asset capital ratio of 6% (increased from 4%); a “capital conservation buffer” of 2.5%, and resulting in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7%, (ii) a Tier 1 risk-based asset capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement was phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase each year until January 2019. These changes had no significant impact on the Company.

Item 3.            Quantitative and Qualitative Disclosures about Market Risk

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

Item 4.       Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Operating Officer and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2017. Based on that evaluation, our management, including the Chief Executive Officer and the Chief Operating Officer and Treasurer, concluded that our disclosure controls and procedures were effective.

During the quarter ended March 31, 2017, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

40

Table of Contents

Part II – Other Information

Item 1. Legal Proceedings 

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

Item 1A.     Risk Factors

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

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

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

(b) Not applicable.

(c) The Company did not repurchase any shares of its common stock during the quarter ended March 31, 2017.

Item 3. Defaults Upon Senior Securities 

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

41 

Table of Contents

Item 6. Exhibits 

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

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

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

101 INS XBRL Instance

101 SCH XBRL Taxonomy Extension Schema

101 CAL XBRL Taxonomy Extension Calculation

101 DEF XBRL Taxonomy Extension Definition

101 LAB XBRL Taxonomy Extension Label

101 PRE XBRL Taxonomy Extension Presentation

42

Table of Contents

SIGNATURES

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

	WOLVERINE BANCORP, INC.
Date:     May 12, 2017	/s/ David H. Dunn
	David H. Dunn
	President and Chief Executive Officer
Date:     May 12, 2017	/s/ Rick A. Rosinski
	Rick A. Rosinski
	Chief Operating Officer and Treasurer

43

EX-31.1

Exhibit 31.1

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

I, David H. Dunn, certify that:

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

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

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

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

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

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

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

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

5. The registrant’s other certifying officer and I have disclosed, based on the Bank’s most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

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

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

Date: May 12, 2017	/s/ David H. Dunn
	David H. Dunn
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

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

I, Rick A. Rosinski, certify that:

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

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

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

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

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

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

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

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

5. The registrant’s other certifying officer and I have disclosed, based on the Bank’s most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

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

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

Date: May 12, 2017	/s/ Rick A. Rosinski
	Rick A. Rosinski
	Chief Operating Officer and Treasurer

EX-32

Exhibit 32

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

David H. Dunn, President and Chief Executive Officer of Wolverine Bancorp, Inc., (the “Company”) and Rick A. Rosinski, Chief Operating Officer and Treasurer of the Company, each certify in his capacity as an officer of the Company that he has reviewed the quarterly report on Form 10-Q for the quarter ended March 31, 2017 (the “Report”) and that to the best of his knowledge:

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

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

Date: May 12, 2017	/s/ David H. Dunn
	David H. Dunn
	President and Chief Executive Officer
Date: May 12, 2017	/s/ Rick A. Rosinski
	Rick A. Rosinski
	Chief Operating Officer and Treasurer

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

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 03, 2017
Document Information [Line Items]
Entity Registrant Name	WOLVERINE BANCORP, INC.
Entity Central Index Key	0001500836
Trading Symbol	wbkc
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		2,106,153
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 403	$ 318
Interest-earning demand deposits	53,846	103,316
Cash and cash equivalents	54,249	103,634
Investment securities held to maturity	0	499
Loans held for sale		238
Loans, net of allowance for loan losses of $8,734 and $9,326	315,946	320,606
Premises and equipment, net	1,090	1,127
Federal Home Loan Bank stock	2,700	2,700
Other real estate owned	8	86
Accrued interest receivable	839	846
Other assets	4,493	4,699
Total assets	379,325	434,435
Liabilities
Deposits	271,110	280,548
Federal Home Loan Bank advances	42,000	60,000
Federal funds purchased		27,000
Interest payable and other liabilities	3,746	5,913
Total liabilities	316,856	373,461
Commitments and Contingencies
Stockholders’ Equity
Common Stock, $0.01 par value per share: Authorized – 100,000,000 shares Issued and outstanding – 2,106,153 and 2,106,153 at March 31, 2017 and December 31, 2016	21	21
Unearned employee stock ownership plan (ESOP)	(1,190)	(1,215)
Additional paid-in capital	15,715	15,577
Retained earnings	47,923	46,591
Total stockholders’ equity	62,469	60,974
Total liabilities and stockholders’ equity	$ 379,325	$ 434,435

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Allowance for loan losses	$ 8,734	$ 9,326
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	2,106,153	2,106,153
Common stock, shares outstanding (in shares)	2,106,153	2,106,153

XML

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Interest and Dividend Income
Loans	$ 4,006	$ 3,932
Investment securities and other	136	129
Total interest and dividend income	4,142	4,061
Interest Expense
Deposits	555	508
Borrowings	435	459
Total interest expense	990	967
Net Interest Income	3,152	3,094
Provision (Credit) for Loan Losses	(600)
Net Interest Income After Provision for Loan Losses	3,752	3,094
Noninterest Income
Service charges and fees	69	80
Net gain on loan sales	32	96
Net gain on sale of real estate owned	1	27
Other	68	80
Total noninterest income	170	283
Noninterest Expense
Salaries and employee benefits	1,074	1,090
Net occupancy and equipment expense	191	207
Information technology expense	57	62
Federal deposit insurance corporation premiums	30	54
Professional and services fees	198	94
Other real estate owned expense (recovery)	(3)	24
Loan legal expense	16	81
Advertising expense	31	21
Michigan business tax	45	45
Other	247	209
Total noninterest expense	1,886	1,887
Income Before Income Tax	2,036	1,490
Provision for Income Taxes	704	523
Net Income and Comprehensive Income	$ 1,332	$ 967
Earnings Per Share:
Basic (in dollars per share)	$ 0.67	$ 0.48
Diluted (in dollars per share)	$ 0.66	$ 0.47

XML

Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Operating Activities
Net income	$ 1,332	$ 967
Items not requiring (providing) cash
Depreciation	50	57
Provision (credit) charged to expense	(600)
Loss (gain) on other real estate owned	1	(27)
Loans originated for sale	(1,420)	(3,716)
Proceeds from loans sold	1,690	3,186
Net gain on sale of loans	(32)	(96)
Share based compensation	80	128
Earned ESOP shares	83	26
Changes in
Interest receivable and other assets	213	(196)
Interest payable and other liabilities	1,062	(1,107)
Net cash provided by (used) in operating activities	2,457	(778)
Investing Activities
Net change in interest-bearing time deposits		598
Purchase of held to maturity securities		(498)
Proceeds from calls, maturities and pay-downs of held to maturity securities	499	500
Net change in loans	5,260	(9,043)
Proceeds from sale of real estate owned	79	37
Purchase of premises and equipment	(13)
Net cash provided by (used in) investing activities	5,825	(8,406)
Financing Activities
Net change in demand deposits, money market, checking and savings accounts	(7,888)	1,833
Net change in certificates of deposit	(1,550)	(9,124)
Repayment of Federal Home Loan Bank advances	(18,000)
Net change in Fed funds purchased	(27,000)	(24,000)
Purchase of common stock		(147)
Dividends paid	(3,229)
Net cash used in financing activities	(57,667)	(31,438)
Change in Cash and Cash Equivalents	(49,385)	(40,622)
Cash and Cash Equivalents, Beginning of Period	103,634	52,865
Cash and Cash Equivalents, End of Period	54,249	12,243
Supplemental Disclosures of Cash Flows Information
Interest paid	902	909
Income taxes paid		895
Loans transferred to real estate owned		$ 104

XML

Condensed Consolidated Statement of Change in Stockholders' Equity (Unaudited) - 3 months ended Mar. 31, 2017 - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Unearned ESOP Shares [Member]	Retained Earnings [Member]	Total
Balances at Dec. 31, 2016	$ 21	$ 15,577	$ (1,215)	$ 46,591	$ 60,974
Net income				1,332	1,332
Share based compensation expense		80			80
ESOP shares earned		58	25		83
Balances at Mar. 31, 2017	$ 21	$ 15,715	$ (1,190)	$ 47,923	$ 62,469

XML

Note 1 - Basis of Presentation

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

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

Note

1:

     Basis of Presentation

The unaudited condensed consolidated financial statements of Wolverine Bancorp, Inc. (the “Company”), the holding company of Wolverine Bank (the "Bank"), have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the instructions to Form

10

-Q and Rule

10

-

01

of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) believed necessary for a fair presentation have been included. The condensed consolidated balance sheet of the Company as of

December

31,

2016

has been derived from the audited consolidated balance sheet of the Company as of that date. Operating results for the

three

and

nine

month period ended

March

31,

2017

are not necessarily indicative of the results that

may

be expected for the year ending

December

31,

2017.

These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto filed as part of our Annual Report on Form

10

-K as filed with the Securities and Exchange Commission on

March

30,

2017.

XML

Note 2 - Accounting Developments

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Note

2:

     Accounting Developments

FASB Accounti

ng Standards Updates No.

2017

-

08

,

Receivable – Nonrefundable Fees and Other Costs (Subtopic

31

0

-

20

)

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2017

-

08,

Receivables - Nonrefundable Fees and Other Costs (Subtopic

310

-

20):

Premium Amortization on Purchased Callable Debt Securities.The guidance provides amendments to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. These amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.

The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after

December

15,

2018.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB Accounting Standards Updates No.

2017

-

04,

Intangibles – Goodwill and Other (Topic

350)

The FASB has issued Accounting Standards Update (ASU) No.

2017

-

04,

Intangibles – Goodwill and Other (Topic

350):

Simplifying the Test for Goodwill Impairment. The new guidance is intended to simplify the subsequent measurement of goodwill by eliminating Step

2

from the goodwill impairment test.

The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a

zero

or negative carrying amount to perform Step

2

of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition.

The amendments in this update should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after

December

15,

2019.

Early adoption is permitted on testing dates after

January

1,

2017.

The Company does not expect adoption of this ASU to have a material impact on its consolidated financial statements.

FASB Accounting Standards Updates No.

2017

-

01,

Business Combinations (Topic

805)

The FASB has issued Accounting Standards Update (ASU) No.

2017

-

01,

Business Combinations (Topic

805):

Clarifying the Definition of a Business

. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does not permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.

The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after

December

15,

2017.

We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements, but it is not expected to have a material impact.

FASB ASU No.

2016

-

15,

Statement of Cash Flows (Topic

230):

Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

15,

Statement of Cash Flows (Topic

230).

This update addresses

eight

specific cash flow issues with the objective of reducing the existing diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flow. In

November

2016,

the FASB issued ASU No.

2016

-

18,

which gave clarification on how restricted cash was to be presented in the cash flow statement.

The amendments are effective for public business entities for fiscal years beginning after

December

15,

2017,

and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after

December

15,

2018,

and interim periods within fiscal years beginning after

December

15,

2019.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB ASU No.

2016

-

13,

Financial Instruments—Credit Losses (Topic

326):

Measurement of Credit Losses on Financial Instruments

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

13,

Financial Instruments – Credit Losses (Topic

326):

Measurement of Credit Losses on Financial Instruments.

The main objective of this amendment is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.

The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in this Update are effective for fiscal years beginning after

December

15,

2019,

including interim periods within those fiscal years. For all other public business entities, the amendments in this Update are effective for fiscal years beginning after

December

15,

2020,

including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after

December

15,

2020,

and interim periods within fiscal years beginning after

December

15,

2021.

All entities

may

adopt the amendments in this Update earlier as of the fiscal years beginning after

December

15,

2018,

including interim periods within those fiscal years. The Company will be evaluating the impact of adopting this ASU and has not determined the anticipated impact on the consolidated financial statements.

FASB ASU No.

2016

-

09,

Compensation—Stock Compensation (Topic

718)

The FASB issued ASU No.

2016

-

09,

Compensation–Stock Compensation

(Topic

718):

Improvements to Employee Share-Based Payment Accounting

.

The ASU is intended to improve the accounting for employee shared-base payments and affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows.

For public business entities, the amendments are effective for annual periods beginning after

December

15,

2016,

and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after

December

15,

2017,

and interim periods within annual periods beginning after

December

15,

2018.

Early adoption is permitted for any entity in any interim or annual period. The amendments in this update became effective on

January

1,

2017

and did not have a material impact on the consolidated financial statements.

FASB ASU No.

2016

-

08,

2016

-

10,

2016

-

12,

Revenue from Contracts with Customers (Topic

606)

In

May

2014,

the FASB issued ASU

2014

-

09,

“

Revenue from Contracts with Customers

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

March

2016,

the FASB issued ASU

2016

-

08,

“

Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

,” which clarifies the guidance in determining revenue recognition as principal versus agent. In

April

2016,

the FASB issued ASU

2016

-

10,

“

Identifying Performance Obligations and Licensing

,” which provides guidance in accounting for immaterial performance obligations and shipping and handling. In

May

2016,

the FASB issued ASU

2016

-

12,

“

Narrow-Scope Improvements and Practical Expedients

,” which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. This ASU also provides a practical expedient for contract modifications.

For public business entities, the amendments are effective for annual reporting periods beginning after

December

15,

2017,

including interim reporting periods with that reporting period, as deferred by ASU

2015

-

14.

Early application is permitted as of annual reporting periods beginning after

December

15,

2016,

including interim reporting periods within the reporting period.

All other entities should apply the guidance to annual reporting periods beginning after

December

15,

2018,

and interim reporting periods within annual reporting periods beginning after

December

15,

2019.

Early application is permitted for all other entities as of annual reporting periods beginning after

December

15,

2016,

including interim reporting periods within annual reporting periods beginning

one

year after the annual reporting period in which the entity

first

applies the guidance in Update

2014

-

09.

Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB ASU No.

2016

-

07,

Investments – Equity Method and Joint Ventures (Topic

323)

The amendments eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held.

The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required.

The amendments require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method.

The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after

December

15,

2016.

The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. Adoption of the ASU did not have a significant effect on the Company’s consolidated financial statements.

FASB ASU No.

2016

-

06,

Derivatives and Hedging (Topic

815):

Contingent Put and Call Options in Debt Instruments

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

05,

Derivatives and Hedging (Topic

815):

Effect of Derivative Contract Novations and Existing Hedge Accounting Relationships

. The amendments apply to all reporting entities for which there is a change in the counterparty to a derivative instrument that has been designated as a hedging instrument.

The amendments clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is

one

of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks.

This standard will be effective for pubic business entities for fiscal year beginning after

December

15,

2016

including interim periods within those fiscal years. Nonpublic business entities should apply the amendments for fiscal years beginning after

December

15,

2017,

and interim periods within fiscal years beginning after

December

15,

2018.

Early application is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Adoption of the ASU did not have a significant effect on the Company’s consolidated financial statements.

FASB ASU No.

2016

-

02

– Leases (Topic

842)

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

02,

Leases

. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

●     

A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and

●     

A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic

606,

Revenue from Contracts with Customers

.

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

This standard will be effective for pubic business entities for fiscal year beginning after

December

15,

2018

including interim periods within those fiscal years. Nonpublic business entities should apply the amendments for fiscal years beginning after

December

15,

2019

and interim periods within fiscal years beginning after

December

15,

2020.

Early application is permitted for all public business entities and all nonpublic business entities upon issuance.

Lessees (for capital and operating leases) and lessors (for sales-type, direct financing and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.

The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors

may

not apply a full retrospective transition approach.

Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB Accounting Standards Updates No.

2016

-

01,

Financial Instruments – Overall

(Subtopic

825

-

10):

Recognition and Measurement of Financial Assets and Financial Liabilities

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

01,

Financial Instruments – Overall (Subtopic

825

-

10):

Recognition and Measurement of Financial Assets and Financial Liabilities.

The new guidance is intended to improve the recognition and measurement of financial instruments. The ASU affects public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities.

The new guidance makes targeted improvements to existing U.S. GAAP by:

● Requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income;

● Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;

● Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements;

● Eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities;

● Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and

● Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.

The new guidance is effective for public companies for fiscal years beginning after

December

15,

2017,

including interim periods within those fiscal years. The new guidance permits early adoption of the own credit provision. In addition, the new guidance permits early adoption of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost. Adoption of the

ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

XML

Note 3 - Securities

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

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

Note

3:

     Securities

There were

no

held to maturity securities as of the

three

months ended

March

31,

2017.

The amortized cost and approximate fair values of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to Maturity Securities:
March 31, 2017
Treasury bond	$	--	$	--	$	--	$	--
December 31, 2016
Treasury bond	$	499	$	1	$	--	$	500

There were

no

sales of securities during the

three

months ended

March

31,

2017

and

2016.

 

XML

Note 4 - Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

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

Note

4:

     Loans and Allowance for Loan Losses

Categories of loans include:

	March 31, 2017		December 31, 2016
Real Estate
One-to four-family	$	35,257	$	35,389
Home equity		3,269		4,031
Commercial mortgage loans
Commercial real estate		198,855		195,924
Multifamily		54,286		54,827
Land		11,351		11,547
Construction		12,428		13,475
Commercial non-mortgage		14,931		20,047
Consumer		1,084		1,074
Total loans		331,461		336,314
Less
Net deferred loan costs, premiums and discounts		553		563
Undisbursed portion of loan		6,228		5,819
Allowance for loan losses		8,734		9,326
Net Loans	$	315,946	$	320,606

The risk characteristics of each loan portfolio segment are as follows:

1

-

4

f

amily,

h

ome

e

quity, and

c

onsumer

With respect to residential loans that are secured by

one

-to

four

-family residences and are primarily owner-occupied, we generally establish a maximum loan-to-value ratio and require PMI if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in

one

-to

four

-family residences, and consumer loans are typically secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties.

Home equity loans secured by

second

mortgages have greater risk than

one

- to

four

-family residential mortgage loans secured by

first

mortgages. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure. When customers default on their loans, we attempt to foreclose on the property and resell the property as soon as possible to minimize foreclosure and carrying costs. However, the value of the collateral

may

not be sufficient to compensate us for the amount of the unpaid loan and we

may

be unsuccessful in recovering the remaining balance from those customers.

Particularly with respect to our home equity loans, decreases in real estate values could adversely affect the value of property used as collateral for our loans.

Consumer and other loans generally have greater risk compared to longer-term loans secured by improved, owner-occupied real estate, particularly consumer loans that are secured by rapidly depreciable assets, such as automobiles. In these cases, any repossessed collateral for a defaulted loan

may

not provide an adequate source of repayment of the outstanding loan balance. As a result, consumer loan collections are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Commercial real estate and multifamily

Commercial real estate and multifamily loans generally have greater credit risk than the owner-occupied

one

- to

four

-family residential mortgage loans that we originate for retention in our loan portfolio. Repayment of these loans generally depends, in large part, on sufficient income from the property securing the loan or the borrower’s business to cover operating expenses and debt service. These types of loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to

one

- to

four

-family residential mortgage loans. Changes in economic conditions that are beyond the control of the borrower

may

affect the value of the security for the loan, the future cash flow of the affected property or business, or the marketability of a construction project with respect to loans originated for the acquisition and development of property. Additionally, due to declining property values in our primary market area and in Michigan, the loan to value ratios of many of our commercial real estate and multifamily loans have increased significantly from the loan to value ratios that were assigned to these loans at the time of origination.

Land

Land loans generally have greater credit risk than the owner-occupied

one

-to

four

-family residential mortgage loans that we originate for retention in our portfolio. Repayment of these loans generally depends, in large part, on the sale of the land. The sale of land can either take place when the land is undeveloped or developed. Generally, other cash flow sources of the borrower are utilized to make additional payments on land loans. Changes in economic conditions that are beyond the control of the borrower

may

affect the value of the security for the loan, the future cash flow of the affected property or business, or the marketability of a construction project with respect to loans originated for the acquisition and development of property. Additionally, due to declining property values in our primary market area and in Michigan, the loan to value ratios of many of our land loans have increased significantly from the loan to value ratios that were assigned to these loans at the time of origination.

Construction

Construction loans include those for

one

- to

four

-family residential properties and commercial properties, including multifamily loans and commercial “mixed-use” buildings and homes built by developers on speculation. With respect to construction loans for

one

- to

four

-family residential properties and which are primarily owner-occupied, we generally establish a maximum loan-to-value ratio and require PMI if that ratio is exceeded.  These are generally “interest-only” loans during the construction period which typically does not exceed

three

months.

Construction loans for commercial real estate are made in accordance with a schedule reflecting the cost of construction, and are generally limited to a

75%

loan-to-completed appraised value ratio.  For all construction loans, we generally require that a commitment for permanent financing be in place prior to closing the construction loan

Repayment of

one

-to

four

-family residential property loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.

Repayment of commercial property loans and homes built by developers on speculation is normally expected from the property’s eventual rental income, income from the borrower’s operations, the personal resources of the guarantor, or the sale of the subject property. Generally, before making a commitment to fund a construction loan, we require an appraisal of the property by a state-certified or state-licensed appraiser. We generally review and inspect properties before disbursement of funds during the term of the construction loan.

Construction financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost is inaccurate, we

may

be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project is inaccurate, the borrower

may

hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property. Construction loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property

may

not occur as anticipated.

Commercial non-mortgage

Commercial non-mortgage loans generally have a greater credit risk than residential mortgage loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income, and which are secured by real property whose value

tends

to be more easily ascertainable, commercial non-mortgage loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business.

As a result, the availability of funds for the repayment of commercial non-mortgage loans

may

be substantially dependent on the success of the business itself. Further, the collateral securing the loans

may

depreciate over time,

may

be difficult to appraise and

may

fluctuate in value based on the success of the business.

In determining the appropriate level of allowance for loan loss, we analyze various components of our portfolio. The following components are analyzed: all substandard loans on an individual basis; all loans that are designated special mention or closely monitored; loans not classified according to purpose or collateral type; and overdrawn deposit account balances.

We also factor in historical loss experience and qualitative considerations, including trends in charge offs and recoveries; trends in delinquencies and impaired/classified loans; effects of credit concentrations; changes in underwriting standards and loan review system; experience in lending staff; current industry conditions; and current market conditions. 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of

March

31,

2017,

December

31,

2016

and

March

31,

2016:

Loan Class	1-4 Family			Home Equity			Commercial Real Estate		Multifamily			Land			Construction			Commercial Non-Mortgage			Consumer		Total
Year to date analysis as of March 31, 2017
Allowance for loan losses:
Balance, beginning of period	$	798		$	49		$	5,422	$	1,084		$	1,142		$	294		$	524		$	13	$	9,326
Provision (credit) charged to expense		(52	)		(9	)		448		(212	)		(602	)		(24	)		(149	)		-		(600	)
Losses charged off		-			-			-		-			-			-			-			-		-
Recoveries		7			-			-		-			-			-			-			1		8
Balance, end of period	$	753		$	40		$	5,870	$	872		$	540		$	270		$	375		$	14	$	8,734
Ending Balance: individually evaluated for impairment	$	19		$	-		$	478	$	-		$	250		$	-		$	203		$	-	$	950
Ending balance: collectively evaluated for impairment	$	734		$	40		$	5,392	$	872		$	290		$	270		$	172		$	14	$	7,784
Loans:
Ending Balance	$	35,257		$	3,269		$	198,855	$	54,286		$	11,351		$	12,428		$	14,931		$	1,084	$	331,461
Ending Balance: individually evaluated for impairment	$	1,607		$	-		$	8,164	$	6,240		$	677		$	-		$	2,527		$	-	$	19,215
Ending balance: collectively evaluated for impairment	$	33,650		$	3,269		$	190,691	$	48,046		$	10,674		$	12,428		$	12,404		$	1,084	$	312,246

Loan Class	1-4 Family			Home Equity			Commercial Real Estate			Multifamily			Land			Construction			Commercial Non-Mortgage		Consumer			Total
Year to date analysis as of December 31, 2016
Allowance for loan losses:
Balance, beginning of period	$	948		$	108		$	4,913		$	1,515		$	1,605		$	604		$	344	$	24		$	10,061
Provision (credit) charged to expense		(137	)		(59	)		555			(431	)		(544	)		(310	)		180		(14	)		(760	)
Losses charged off		(67	)		-			(85	)		-			-			-			-		(1	)		(153	)
Recoveries		54			-			39			-			81			-			-		4			178
Balance, end of period	$	798		$	49		$	5,422		$	1,084		$	1,142		$	294		$	524	$	13		$	9,326
Ending Balance: individually evaluated for impairment	$	-		$	-		$	235		$	-		$	550		$	-		$	-	$	-		$	785
Ending balance: collectively evaluated for impairment	$	798		$	49		$	5,187		$	1,084		$	592		$	294		$	524	$	13		$	8,541
Loans:
Ending Balance	$	35,389		$	4,031		$	195,924		$	54,827		$	11,547		$	13,475		$	20,047	$	1,074		$	336,314
Ending Balance: individually evaluated for impairment	$	1,500		$	-		$	8,103		$	6,311		$	1,061		$	-		$	-	$	-		$	16,975
Ending balance: collectively evaluated for impairment	$	33,889		$	4,031		$	187,821		$	48,516		$	10,486		$	13,475		$	20,047	$	1,074		$	319,339

Loan Class	1-4 Family			Home Equity			Commercial Real Estate			Multifamily			Land		Construction		Commercial Non-Mortgage		Consumer			Total
Year to date analysis as of March 31, 2016
Allowance for loan losses:
Balance, beginning of period	$	948		$	108		$	4,913		$	1,515		$	1,605	$	604	$	344	$	24		$	10,061
Provision (credit) charged to expense		23			(9	)		(115	)		(106	)		28		132		48		(1	)		-
Losses charged off		(66	)		-			-			-			-		-		-		-			(66	)
Recoveries		4			-			24			-			1		-		-		-			29
Balance, end of period	$	909		$	99		$	4,822		$	1,409		$	1,634	$	736	$	392	$	23		$	10,024
Ending Balance: individually evaluated for impairment	$	-		$	-		$	-		$	100		$	850	$	-	$	-	$	-		$	950
Ending balance: collectively evaluated for impairment	$	909		$	99		$	4,822		$	1,309		$	784	$	736	$	392	$	23		$	9,074
Loans:
Ending Balance	$	38,898		$	5,073		$	191,230		$	60,166		$	12,863	$	11,804	$	17,742	$	1,175		$	338,951
Ending Balance: individually evaluated for impairment	$	1,241		$	-		$	9,211		$	7,493		$	1,769	$	-	$	-	$	-		$	19,714
Ending balance: collectively evaluated for impairment	$	37,657		$	5,073		$	182,019		$	52,673		$	11,094	$	11,804	$	17,742	$	1,175		$	319,237

Consistent with regulatory guidance, charge offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. Our policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except

one

-to-

four

family residential loans and consumer loans, we promptly charge off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to,

(1)

the deteriorating financial condition of the borrower,

(2)

declining collateral values, and/or

(3)

legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

We charge off

one

-to-

four

family residential and consumer loans, or portions thereof, when we reasonably determine the amount of the loss. We adhere to timeframes established by applicable regulatory guidance which provides for the charge off of

one

-to-

four

family

first

and junior lien mortgages to the net realizable value less costs to sell when the loan is

180

days past due, charge off of unsecured open-end loans when the loan is

180

days past due, and charge down to the net realizable value when other secured loans are

120

days past due. Loans at these respective delinquency thresholds for which we can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

The following table presents the credit risk profile of our loan portfolio based on rating category and payment activity as of

March

31,

2017

and

December

31,

2016:

	1-4 Family				Home Equity				Commercial Real Estate
	2017		2016		2017		2016		2017		2016
Pass	$	33,665	$	33,787	$	3,269	$	4,031	$	177,012	$	173,375
Pass (Closely Monitored)		515		490		-		-		14,366		14,349
Special Mention		240		241		-		-		2,124		2,630
Substandard		837		871		-		-		5,353		5,570
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
	$	35,257	$	35,389	$	3,269	$	4,031	$	198,855	$	195,924

	Multifamily				Land				Construction
	2017		2016		2017		2016		2017		2016
Pass	$	51,084	$	48,241	$	9,791	$	9,631	$	12,428	$	13,475
Pass (Closely Monitored)		3,202		6,586		883		855		-		-
Special Mention		-		-		-		-		-		-
Substandard		-		-		677		1,061		-		-
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
	$	54,286	$	54,827	$	11,351	$	11,547	$	12,428	$	13,475

	Commercial Non-Mortgage				Consumer				Total
	2017		2016		2017		2016		2017		2016
Pass	$	11,741	$	16,500	$	1,084	$	1,074	$	300,074	$	300,114
Pass (Closely Monitored)		663		658		-		-		19,629		22,938
Special Mention		2,527		2,889		-		-		4,891		5,760
Substandard		-		-		-		-		6,867		7,502
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
	$	14,931	$	20,047	$	1,084	$	1,074	$	331,461	$	336,314

We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation and current economic trends, among other factors. We analyze loans individually by classifying the loans as to credit risk. This analysis is performed during the loan approval process and is updated as circumstances warrant.

The Pass asset quality rating encompasses assets that have performed as expected. These assets generally do not have delinquency or servicing issues. Loans assigned this rating include loans to borrowers possessing solid credit quality with acceptable risk.  Borrowers in these grades are differentiated from higher grades on the basis of size (capital and/or revenue), leverage, asset quality, stability of the industry or specific market area and quality/coverage of collateral.  These borrowers generally have a history of consistent earnings and reasonable leverage.   

The Closely Monitored asset quality rating encompasses assets that have been brought to the attention of management and

may,

if not corrected, warrant a more serious quality rating by management. These assets are usually in the

first

phase of a deficiency situation and

may

possess similar criteria as Special Mention assets. This grade includes loans to borrowers which require special monitoring because of deteriorating financial results, declining credit ratings, decreasing cash flow, increasing leverage, marginal collateral coverage or industry stress that has resulted or

may

result in a changing overall risk profile.

The Special Mention asset quality rating encompasses assets that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses

may

result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. This grade is intended to include loans to borrowers whose credit quality has clearly deteriorated and where risk of further decline is possible unless active measures are taken to correct the situation.  Weaknesses are considered potential at this state and are not yet fully defined.

The Substandard asset quality rating encompasses assets that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any; assets having a well-defined weakness(es) based upon objective evidence; assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected; or the possibility that liquidation will not be timely. Loans categorized in this grade possess a well-defined credit weakness and the likelihood of repayment from the primary source is uncertain.  Significant financial deterioration has occurred and very close attention is warranted to ensure the full repayment without loss.  Collateral coverage

may

be marginal and the accrual of interest has been suspended.

The Doubtful asset quality rating encompasses assets that have all of the weaknesses of those classified as Substandard.  In addition, these weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

The Loss asset quality rating encompasses assets that are considered uncollectible and of such little value that their continuance as assets of the Bank is not warranted. A loss classification does not mean that an asset has no recovery or salvage value; instead, it means that it is not practical or desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery

may

be realized in the future.

The following table is a summary of our past due and non-accrual loans as of

March

31,

2017

and

December

31,

2016:

As of March 31, 2017	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans >90 Days & Accruing		Total Nonaccrual
1-4 Family	$	11	$	43	$	286	$	340	$	34,917	$	35,257	$	-	$	286
Home Equity		-		-		-		-		3,269		3,269		-		-
Commercial Real Estate		261		642		105		1,008		197,847		198,855		-		4,002
Multifamily		-		-		-		-		54,286		54,286		-		-
Land		-		-		677		677		10,674		11,351		-		677
Construction		-		-		-		-		12,428		12,428		-		-
Commercial Non-Mortgage		-		-		-		-		14,931		14,931		-		-
Consumer		-		-		-		-		1,084		1,084		-		-
Total	$	272	$	685	$	1,068	$	2,025	$	329,436	$	331,461	$	-	$	4,965

As of December 31, 2016	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans >90 Days & Accruing		Total Nonaccrual
1-4 Family	$	165	$	94	$	137	$	396	$	34,993	$	35,389	$	-	$	137
Home Equity		-		-		-		-		4,031		4,031		-		-
Commercial Real Estate		-		648		100		748		195,176		195,924		-		4,872
Multifamily		-		-		-		-		54,827		54,827		-		-
Land		-		-		1,061		1,061		10,486		11,547		-		1,061
Construction		-		-		-		-		13,475		13,475		-		-
Commercial Non-Mortgage		-		-		-		-		20,047		20,047		-		-
Consumer		-		-		-		-		1,074		1,074		-		-
Total	$	165	$	742	$	1,298	$	2,205	$	334,109	$	336,314	$	-	$	6,070

The accrual of interest is discontinued on all loan classes at the time the loan is

90

days past due unless the credit is well-secured and in process of collection. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. Subsequent payments on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. We generally require a period of satisfactory performance of not less than

six

months before returning a nonaccrual loan to accrual status.

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC

310

-

10

-

35

-

16),

when based on current information and events, it is probable we will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include non-performing commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.

These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Interest income on loans individually classified as impaired is recognized on a cash basis after all past due and current principal payments have been made.

The following table presents impaired loans at

March

31,

2017:

			Unpaid
	Recorded		Principal		Specific		YTD Average		YTD Interest
	Balance		Balance		Allowance		Balance		Income
Loans without a specific valuation allowance:
1-4 Family	$	1,367	$	1,489	$	-	$	1,208	$	10
Home Equity		-		-		-		-		-
Commercial real estate		6,076		8,181		-		6,654		39
Multi Family		6,240		7,055		-		6,276		75
Land		-		-		-		-		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
1-4 Family	$	240	$	240	$	19	$	120	$	2
Home Equity		-		-		-		-		-
Commercial real estate		2,088		2,179		478		1,349		8
Multi Family		-		-		-		-		-
Land		677		2,815		250		869		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		2,527		2,527		203		1,265		35
Consumer		-		-		-		-		-
Totals
1-4 Family	$	1,607	$	1,729	$	19	$	1,328	$	12
Home Equity		-		-		-		-		-
Commercial real estate		8,164		10,360		478		8,003		47
Multi Family		6,240		7,055		-		6,276		75
Land		677		2,815		250		869		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		2,527		2,527		203		1,265		35
Consumer		-		-		-		-		-
Total	$	19,215	$	24,486	$	950	$	17,741	$	169

The following table presents impaired loans at

December

31,

2016:

			Unpaid
	Recorded		Principal		Specific		YTD Average		YTD Interest
	Balance		Balance		Allowance		Balance		Income
Loans without a specific valuation allowance:
1-4 Family	$	1,500	$	1,620	$	-	$	1,311	$	70
Home Equity		-		-		-		-		-
Commercial real estate		7,494		9,669		-		8,296		426
Multi Family		6,311		7,125		-		6,884		402
Land		-		-		-		24		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
1-4 Family	$	-	$	-	$	-	$	-	$	-
Home Equity		-		-		-		-		-
Commercial real estate		609		695		235		385		41
Multi Family		-		-		-		-		-
Land		1,061		3,158		550		1,832		123
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Totals
1-4 Family	$	1,500	$	1,620	$	-	$	1,311	$	70
Home Equity		-		-		-		-		-
Commercial real estate		8,103		10,364		235		8,681		467
Multi Family		6,311		7,125		-		6,884		402
Land		1,061		3,158		550		1,856		123
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Total	$	16,975	$	22,267	$	785	$	18,773	$	1,062

The following table presents impaired loans at

March

31,

2016:

			Unpaid
	Recorded		Principal		Specific		YTD Average		YTD Interest
	Balance		Balance		Allowance		Balance		Income
Loans without a specific valuation allowance:
1-4 Family	$	1,241	$	1,369	$	-	$	1,342	$	9
Home Equity		-		-		-		-		-
Commercial real estate		9,211		11,177		-		9,561		47
Multi Family		6,516		7,330		-		6,551		76
Land		41		95		-		41		1
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		148		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
1-4 Family	$	-	$	-	$	-	$	30	$	-
Home Equity		-		-		-		-		-
Commercial real estate		-		-		-		1,184		-
Multi Family		977		997		100		1,134		17
Land		1,728		3,575		850		1,785		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Totals
1-4 Family	$	1,241	$	1,369	$	-	$	1,372	$	9
Home Equity		-		-		-		-		-
Commercial real estate		9,211		11,177		-		10,745		47
Multi Family		7,493		8,327		100		7,685		93
Land		1,769		3,670		850		1,826		1
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		148		-
Consumer		-		-		-		-		-
Total	$	19,714	$	24,543	$	950	$	21,776	$	150

Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assumed, in which case interest is recognized on a cash basis and is reasonable compared to interest income noted above.

Troubled Debt Restructuring (TDR)

We

may

grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that we would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring. We

may

modify loans through rate reductions, short-term extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.

We identify loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends

may

result in a payment default in the near future.

For

one

-to-

four

family residential and home equity lines of credit, a restructure often occurs with past due loans and

may

be offered as an alternative to foreclosure. There are other situations where borrowers, who are not past due, experience a sudden job loss, become over-extended with credit obligations, or other problems, have indicated that they will be unable to make the required monthly payment and request payment relief.

When considering a loan restructure, management will determine if: (i) the financial distress is short or long term; (ii) loan concessions are necessary; and (iii) the restructure is a viable solution.

When a loan is restructured, the new terms often require a reduced monthly debt service payment. No TDRs that were on non-accrual status at the time the concessions were granted have been returned to accrual status. For commercial loans, management completes an analysis of the operating entity’s ability to repay the debt. If the operating entity is capable of servicing the new debt service requirements and the underlying collateral value is believed to be sufficient to repay the debt in the event of a future default, the new loan can be placed on accrual status after

six

months of performance with the new loan terms. To date, there have been no commercial loans restructured and immediately placed on accrual status after the execution of the TDR.

For retail loans, an analysis of the individual’s ability to service the new required payments is performed. If the borrower is capable of servicing the newly restructured debt and the underlying collateral value is believed to be sufficient to repay the debt in the event of a future default, the new loan can be placed on accrual status after

six

months of performance to the new loan terms. The reason for the TDR is also considered, such as paying past due real estate taxes or payments caused by a temporary job loss, when determining whether a retail TDR loan could be returned to accrual status. Retail TDRs remain on nonaccrual status until sufficient payments have been made to bring the past due principal and interest current and/or after

six

months of performance to the new loan terms at which point the loan could be transferred to accrual status.

There were

no

loans that were restructured as TDRs during the

three

months ended

March

31,

2017.

There were

no

TDRs that had payment defaults during the

three

months ended

March

31,

2017.

Default occurs when a TDR is

90

days or more past due, transferred to nonaccrual status, or transferred to other real estate owned within

twelve

months of restructuring.

Management monitors the TDRs based on the type of modification or concession granted to the borrower. These types of modifications

may

include rate reductions, payment/term extensions, forgiveness of principal, forbearance, and other applicable actions. Management predominantly utilizes rate reductions and lower monthly payments, either from a longer amortization period or interest only repayment schedule, because these concessions provide needed payment relief without risking the loss of principal. Management will also agree to a forbearance agreement when it is deemed appropriate to avoid foreclosure.

The following table summarizes the loans that were restructured as TDRs during the

three

months ended

March

31,

2017

and

March

31,

2016:

	Three m onths e nded
	March 31, 2017
			Balance		Balance
			prior to		after
	Count		TDR		TDR
	(Dollars in thousands)
Total loans		--	$	--	$	--

	Three m onths e nded
	March 31, 2016
			Balance		Balance
			prior to		after
	Count		TDR		TDR
	(Dollars in thousands)
Commercial real estate		1		996		996
Total loans		1	$	996	$	996

The commercial real estate TDR in

2016

was modified with a forbearance agreement and maturity extension.

XML

Note 5 - Disclosures About Fair Value of Assets and Liabilities

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

5:

     Disclosures About Fair Value of Assets and Liabilities

ASC Topic

820,

Fair Value Measurements

, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic

820

also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes

three

levels of inputs that

may

be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets under the valuation hierarchy. We have

no

assets or liabilities measured at fair value on a recurring basis and

no

liabilities measured at fair value on a nonrecurring basis.

Recurring and Nonrecurring Measurements

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at

March

31,

2017

and

December

31,

2016.

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2017
Collateral-dependent Impaired loans	$	3,828	$	--	$	--	$	3,828
December 31, 2016
Collateral-dependent Impaired loans	$	885	$	--	$	--	$	885

Collateral-dependent Impaired Loans

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level

3

of the fair value hierarchy.

The Company considers the appraisal or an evaluation as the starting point for determining fair value and then considers other factors and events in the environment that

may

affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent or subsequently as deemed necessary and approved by management. Appraisals are reviewed for accuracy and consistency by the Credit Analysis department. Typically, appraisers are selected from the list of approved appraisers maintained by the Underwriting department. The appraised values

may

be reduced by discounts to consider a lack of marketability or estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the Credit Analysis department and approved by management.

Unobservable (Level

3)

inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level

3

fair value measurements other than goodwill at

March

31,

2017

and

December

31,

2016.

	Collateral-dependent Impaired Loans
	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
As of March 31, 2017
Collateral-dependent impaired loans	$	3,828	Market comparable properties	Marketability discount	0	-	17%	(16%)
December 31, 2016
Collateral-dependent impaired loans	$	885	Market comparable properties	Marketability discount	3	-	13%	(6%)

Fair Value of Financial Instruments

The following table presents estimated fair values of our financial instruments recognized in the accompanying consolidated balance sheets at amounts other than fair value at the individual dates. The fair values of certain instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Because no market exists for certain financial instruments and because management does not intend to sell these financial instruments, we do not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

			Fair Value Measurements Using
As of March 31, 2017	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets
Cash and cash equivalents	$	54,249	$	54,249	$	-	$	-
Loans, net of allowance for loan losses		315,946		-		-		318,922
Federal Home Loan Bank stock		2,700		-		2,700		-
Interest receivable		839		-		839		-
Financial liabilities
Deposits	$	271,110	$	147,473	$	-	$	124,724
Federal Home Loan Bank advances		42,000		-		41,369		-
Interest payable		252		-		252		-

			Fair Value Measurements Using
As of December 31, 2016	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets
Cash and cash equivalents	$	103,634	$	103,634	$	-	$	-
Interest-earning time deposits		-		-		-		-
Held to maturity securities		499		-		500		-
Loans held for sale		238		-		239		-
Loans, net of allowance for loan losses		320,606		-		-		323,601
Federal Home Loan Bank stock		2,700		-		2,700		-
Interest receivable		846		-		846		-
Financial liabilities
Deposits	$	280,548	$	153,290	$	-	$	128,655
Federal Home Loan Bank advances		60,000		-		59,187		-
Federal funds purchased		27,000		-		27,000		-
Interest payable		249		-		249		-

The following methods and assumptions were used to estimate the fair value of all other financial instruments recognized in the accompanying consolidated balance sheets at amounts other than fair value.

Cash and Cash Equivalents, Interest-Earning Time Deposits, Federal Home Loan Bank Stock, Federal Funds Purchased, Interest Receivable, and Interest Payable

The carrying amount approximates fair value.

Held to Maturity Securities

Fair values equal quoted market prices, if available. If quoted market prices are not available, fair value is estimated based on quoted market prices of similar securities.

Loans Held for Sale

Fair value of loans held for sale is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar remaining maturities.

Loans

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations.

Deposits

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

Federal Home Loan Bank Advances

Rates currently available to us for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Commitments to Originate Loans, Letters of Credit and Lines of Credit

Loan commitments and letters-of-credit generally have short-term, variable rate features and contain clauses, which limit our exposure to changes in customer credit quality. Accordingly, their carrying values, which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value.

XML

Note 6 - Earnings Per Share

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

6:

     Earnings Per Share (In thousands except per share amounts)

Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method.

Unvested share-based payment awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered to participate with common stock in undistributed earnings for purposes of computing EPS. Accordingly, the Company is required to calculate basic and diluted EPS using the

two

-class method. Restricted stock awards granted by the Company are considered participating securities. Calculations of EPS under the

two

-class method (i) exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.

Unearned ESOP shares, which are not vested and unvested restricted stock awards, are excluded from the computation of average shares outstanding.

Earnings per share analysis for the

three

months ended

March

31,

2017

and

2016

is as follows (dollars in thousands, except per share data):

	Three month ended March 31,			Three month ended March 31,
	2017			2016
Net Income	$	1,332		$	967
Dividends and undistributed earnings allocated to participating securities		(13	)		(17	)
Income attributable to common shareholders		1,319			950
Weighted average shares outstanding (in thousands)		2,106			2,154
Less: average unearned ESOP and unvested restricted stock		(148	)		(177	)
Average Shares		1,958			1,977
Effect of dilutive based awards		54			32
Average common and common-equivalent shares for diluted EPS (in thousands)		2,012			2,009
Basic EPS	$	0.67		$	0.48
Diluted EPS	$	0.66		$	0.47

XML

Note 7 - Share-based Compensation

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note

7:

     Share-Based Compensation

In

May

2012,

the Company’s stockholders approved the Wolverine Bancorp, Inc.

2012

Equity Incentive Plan (“Plan”) which provides for awards of stock options and restricted stock to key officers and outside directors. The cost of the Plan is based on the fair value of the awards on the grant date. The fair value of restricted stock awards is based on the closing price of the Company’s stock on the grant date. The fair value of stock options is estimated using a Black-Scholes option pricing model using assumptions for dividend yield, stock price volatility, risk-free interest rate, and option term. These assumptions are based on management’s judgments regarding future events, are subjective in nature, and contain uncertainties inherent in an estimate. The cost of the awards are being recognized on a straight-line basis over the

five

-year vesting period during which participants are required to provide services in exchange for the awards.

Until such time as awards of stock are granted and vest or options are exercised, shares of the Company’s common stock under the Plan shall be authorized but unissued shares. The maximum number of shares authorized under the Plan is

351,050.

Total shared-based compensation expense for the

three

months ended

March

31,

2017

and

2016

was

$80

and

$87,

respectively.

Stock Options

The table below presents the stock option activity for the period shown

:

	Options		Weighted average exercise price		Remaining contractual life (years)		Aggregate intrinsic value
Options outstanding at January 1, 2017		181,585	$	20.76		7	$	1,956
Granted		--		--		--		--
Exercised		--		--		--		--
Forfeited		--		--		--		--
Expired		--		--		--		--
Options outstanding at March 31, 2017		181,585	$	20.76		7	$	2,146
Exercisable at March 31, 2017		92,748	$	17.44		5	$	1,404

As of

March

31,

2017,

the Company had

$156

of unrecognized compensation expense related to stock options. Stock option expense for the

three

months ended

March

31,

2017

and

2016

was

$17

and

$16,

respectively.

Restricted Stock Awards

Restricted stock awards are accounted for as fixed grants using the fair value of the Company’s stock at the time of grant. Unvested restricted stock awards

may

not be disposed of or transferred during the vesting period. Restricted stock awards carry with them the right to receive dividends.

The table below presents the restricted stock award activity for the period shown:

	Service-Based Restricted stock awards		Weighted average grant date fair value
Non-vested at January 1, 2017		26,572	$	22.38
Granted		-		-
Vested		-		-
Forfeited		-		-
Non-vested at March 31, 2017		26,572		22.38

As of

March

31,

2017,

the Company had

$448

of unrecognized compensation expense related to restricted stock awards. The cost of the restricted stock awards will be amortized in monthly installments over the

five

-year vesting period. Restricted stock expense for the

three

months ended

March

31,

2017

and

2016

was

$63

and

$71,

respectively.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

FASB Accounti

ng Standards Updates No.

2017

-

08

,

Receivable – Nonrefundable Fees and Other Costs (Subtopic

31

0

-

20

)

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2017

-

08,

Receivables - Nonrefundable Fees and Other Costs (Subtopic

310

-

20):

Premium Amortization on Purchased Callable Debt Securities.The guidance provides amendments to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. These amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.

The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after

December

15,

2018.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB Accounting Standards Updates No.

2017

-

04,

Intangibles – Goodwill and Other (Topic

350)

The FASB has issued Accounting Standards Update (ASU) No.

2017

-

04,

Intangibles – Goodwill and Other (Topic

350):

Simplifying the Test for Goodwill Impairment. The new guidance is intended to simplify the subsequent measurement of goodwill by eliminating Step

2

from the goodwill impairment test.

The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a

zero

or negative carrying amount to perform Step

2

of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition.

The amendments in this update should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after

December

15,

2019.

Early adoption is permitted on testing dates after

January

1,

2017.

The Company does not expect adoption of this ASU to have a material impact on its consolidated financial statements.

FASB Accounting Standards Updates No.

2017

-

01,

Business Combinations (Topic

805)

The FASB has issued Accounting Standards Update (ASU) No.

2017

-

01,

Business Combinations (Topic

805):

Clarifying the Definition of a Business

. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does not permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.

The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after

December

15,

2017.

We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements, but it is not expected to have a material impact.

FASB ASU No.

2016

-

15,

Statement of Cash Flows (Topic

230):

Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

15,

Statement of Cash Flows (Topic

230).

This update addresses

eight

specific cash flow issues with the objective of reducing the existing diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flow. In

November

2016,

the FASB issued ASU No.

2016

-

18,

which gave clarification on how restricted cash was to be presented in the cash flow statement.

The amendments are effective for public business entities for fiscal years beginning after

December

15,

2017,

and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after

December

15,

2018,

and interim periods within fiscal years beginning after

December

15,

2019.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB ASU No.

2016

-

13,

Financial Instruments—Credit Losses (Topic

326):

Measurement of Credit Losses on Financial Instruments

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

13,

Financial Instruments – Credit Losses (Topic

326):

Measurement of Credit Losses on Financial Instruments.

The main objective of this amendment is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.

The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in this Update are effective for fiscal years beginning after

December

15,

2019,

including interim periods within those fiscal years. For all other public business entities, the amendments in this Update are effective for fiscal years beginning after

December

15,

2020,

including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after

December

15,

2020,

and interim periods within fiscal years beginning after

December

15,

2021.

All entities

may

adopt the amendments in this Update earlier as of the fiscal years beginning after

December

15,

2018,

including interim periods within those fiscal years. The Company will be evaluating the impact of adopting this ASU and has not determined the anticipated impact on the consolidated financial statements.

FASB ASU No.

2016

-

09,

Compensation—Stock Compensation (Topic

718)

The FASB issued ASU No.

2016

-

09,

Compensation–Stock Compensation

(Topic

718):

Improvements to Employee Share-Based Payment Accounting

.

The ASU is intended to improve the accounting for employee shared-base payments and affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows.

For public business entities, the amendments are effective for annual periods beginning after

December

15,

2016,

and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after

December

15,

2017,

and interim periods within annual periods beginning after

December

15,

2018.

Early adoption is permitted for any entity in any interim or annual period. The amendments in this update became effective on

January

1,

2017

and did not have a material impact on the consolidated financial statements.

FASB ASU No.

2016

-

08,

2016

-

10,

2016

-

12,

Revenue from Contracts with Customers (Topic

606)

In

May

2014,

the FASB issued ASU

2014

-

09,

“

Revenue from Contracts with Customers

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

March

2016,

the FASB issued ASU

2016

-

08,

“

Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

,” which clarifies the guidance in determining revenue recognition as principal versus agent. In

April

2016,

the FASB issued ASU

2016

-

10,

“

Identifying Performance Obligations and Licensing

,” which provides guidance in accounting for immaterial performance obligations and shipping and handling. In

May

2016,

the FASB issued ASU

2016

-

12,

“

Narrow-Scope Improvements and Practical Expedients

,” which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. This ASU also provides a practical expedient for contract modifications.

For public business entities, the amendments are effective for annual reporting periods beginning after

December

15,

2017,

including interim reporting periods with that reporting period, as deferred by ASU

2015

-

14.

Early application is permitted as of annual reporting periods beginning after

December

15,

2016,

including interim reporting periods within the reporting period.

All other entities should apply the guidance to annual reporting periods beginning after

December

15,

2018,

and interim reporting periods within annual reporting periods beginning after

December

15,

2019.

Early application is permitted for all other entities as of annual reporting periods beginning after

December

15,

2016,

including interim reporting periods within annual reporting periods beginning

one

year after the annual reporting period in which the entity

first

applies the guidance in Update

2014

-

09.

Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB ASU No.

2016

-

07,

Investments – Equity Method and Joint Ventures (Topic

323)

The amendments eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held.

The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required.

The amendments require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method.

The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after

December

15,

2016.

The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. Adoption of the ASU did not have a significant effect on the Company’s consolidated financial statements.

FASB ASU No.

2016

-

06,

Derivatives and Hedging (Topic

815):

Contingent Put and Call Options in Debt Instruments

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

05,

Derivatives and Hedging (Topic

815):

Effect of Derivative Contract Novations and Existing Hedge Accounting Relationships

. The amendments apply to all reporting entities for which there is a change in the counterparty to a derivative instrument that has been designated as a hedging instrument.

The amendments clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is

one

of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks.

This standard will be effective for pubic business entities for fiscal year beginning after

December

15,

2016

including interim periods within those fiscal years. Nonpublic business entities should apply the amendments for fiscal years beginning after

December

15,

2017,

and interim periods within fiscal years beginning after

December

15,

2018.

Early application is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Adoption of the ASU did not have a significant effect on the Company’s consolidated financial statements.

FASB ASU No.

2016

-

02

– Leases (Topic

842)

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

02,

Leases

. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

●     

A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and

●     

A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic

606,

Revenue from Contracts with Customers

.

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

This standard will be effective for pubic business entities for fiscal year beginning after

December

15,

2018

including interim periods within those fiscal years. Nonpublic business entities should apply the amendments for fiscal years beginning after

December

15,

2019

and interim periods within fiscal years beginning after

December

15,

2020.

Early application is permitted for all public business entities and all nonpublic business entities upon issuance.

Lessees (for capital and operating leases) and lessors (for sales-type, direct financing and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.

The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors

may

not apply a full retrospective transition approach.

Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

FASB Accounting Standards Updates No.

2016

-

01,

Financial Instruments – Overall

(Subtopic

825

-

10):

Recognition and Measurement of Financial Assets and Financial Liabilities

The FASB has issued Accounting Standards Update (ASU) No.

2016

-

01,

Financial Instruments – Overall (Subtopic

825

-

10):

Recognition and Measurement of Financial Assets and Financial Liabilities.

The new guidance is intended to improve the recognition and measurement of financial instruments. The ASU affects public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities.

The new guidance makes targeted improvements to existing U.S. GAAP by:

● Requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income;

● Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;

● Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements;

● Eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities;

● Eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and

● Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.

The new guidance is effective for public companies for fiscal years beginning after

December

15,

2017,

including interim periods within those fiscal years. The new guidance permits early adoption of the own credit provision. In addition, the new guidance permits early adoption of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost. Adoption of the

ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

XML

Note 3 - Securities (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Held-to-maturity Securities [Table Text Block]

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to Maturity Securities:
March 31, 2017
Treasury bond	$	--	$	--	$	--	$	--
December 31, 2016
Treasury bond	$	499	$	1	$	--	$	500

XML

Note 4 - Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	March 31, 2017		December 31, 2016
Real Estate
One-to four-family	$	35,257	$	35,389
Home equity		3,269		4,031
Commercial mortgage loans
Commercial real estate		198,855		195,924
Multifamily		54,286		54,827
Land		11,351		11,547
Construction		12,428		13,475
Commercial non-mortgage		14,931		20,047
Consumer		1,084		1,074
Total loans		331,461		336,314
Less
Net deferred loan costs, premiums and discounts		553		563
Undisbursed portion of loan		6,228		5,819
Allowance for loan losses		8,734		9,326
Net Loans	$	315,946	$	320,606

Allowance for Credit Losses on Financing Receivables [Table Text Block]

Loan Class	1-4 Family			Home Equity			Commercial Real Estate		Multifamily			Land			Construction			Commercial Non-Mortgage			Consumer		Total
Year to date analysis as of March 31, 2017
Allowance for loan losses:
Balance, beginning of period	$	798		$	49		$	5,422	$	1,084		$	1,142		$	294		$	524		$	13	$	9,326
Provision (credit) charged to expense		(52	)		(9	)		448		(212	)		(602	)		(24	)		(149	)		-		(600	)
Losses charged off		-			-			-		-			-			-			-			-		-
Recoveries		7			-			-		-			-			-			-			1		8
Balance, end of period	$	753		$	40		$	5,870	$	872		$	540		$	270		$	375		$	14	$	8,734
Ending Balance: individually evaluated for impairment	$	19		$	-		$	478	$	-		$	250		$	-		$	203		$	-	$	950
Ending balance: collectively evaluated for impairment	$	734		$	40		$	5,392	$	872		$	290		$	270		$	172		$	14	$	7,784
Loans:
Ending Balance	$	35,257		$	3,269		$	198,855	$	54,286		$	11,351		$	12,428		$	14,931		$	1,084	$	331,461
Ending Balance: individually evaluated for impairment	$	1,607		$	-		$	8,164	$	6,240		$	677		$	-		$	2,527		$	-	$	19,215
Ending balance: collectively evaluated for impairment	$	33,650		$	3,269		$	190,691	$	48,046		$	10,674		$	12,428		$	12,404		$	1,084	$	312,246

Loan Class	1-4 Family			Home Equity			Commercial Real Estate			Multifamily			Land			Construction			Commercial Non-Mortgage		Consumer			Total
Year to date analysis as of December 31, 2016
Allowance for loan losses:
Balance, beginning of period	$	948		$	108		$	4,913		$	1,515		$	1,605		$	604		$	344	$	24		$	10,061
Provision (credit) charged to expense		(137	)		(59	)		555			(431	)		(544	)		(310	)		180		(14	)		(760	)
Losses charged off		(67	)		-			(85	)		-			-			-			-		(1	)		(153	)
Recoveries		54			-			39			-			81			-			-		4			178
Balance, end of period	$	798		$	49		$	5,422		$	1,084		$	1,142		$	294		$	524	$	13		$	9,326
Ending Balance: individually evaluated for impairment	$	-		$	-		$	235		$	-		$	550		$	-		$	-	$	-		$	785
Ending balance: collectively evaluated for impairment	$	798		$	49		$	5,187		$	1,084		$	592		$	294		$	524	$	13		$	8,541
Loans:
Ending Balance	$	35,389		$	4,031		$	195,924		$	54,827		$	11,547		$	13,475		$	20,047	$	1,074		$	336,314
Ending Balance: individually evaluated for impairment	$	1,500		$	-		$	8,103		$	6,311		$	1,061		$	-		$	-	$	-		$	16,975
Ending balance: collectively evaluated for impairment	$	33,889		$	4,031		$	187,821		$	48,516		$	10,486		$	13,475		$	20,047	$	1,074		$	319,339

Loan Class	1-4 Family			Home Equity			Commercial Real Estate			Multifamily			Land		Construction		Commercial Non-Mortgage		Consumer			Total
Year to date analysis as of March 31, 2016
Allowance for loan losses:
Balance, beginning of period	$	948		$	108		$	4,913		$	1,515		$	1,605	$	604	$	344	$	24		$	10,061
Provision (credit) charged to expense		23			(9	)		(115	)		(106	)		28		132		48		(1	)		-
Losses charged off		(66	)		-			-			-			-		-		-		-			(66	)
Recoveries		4			-			24			-			1		-		-		-			29
Balance, end of period	$	909		$	99		$	4,822		$	1,409		$	1,634	$	736	$	392	$	23		$	10,024
Ending Balance: individually evaluated for impairment	$	-		$	-		$	-		$	100		$	850	$	-	$	-	$	-		$	950
Ending balance: collectively evaluated for impairment	$	909		$	99		$	4,822		$	1,309		$	784	$	736	$	392	$	23		$	9,074
Loans:
Ending Balance	$	38,898		$	5,073		$	191,230		$	60,166		$	12,863	$	11,804	$	17,742	$	1,175		$	338,951
Ending Balance: individually evaluated for impairment	$	1,241		$	-		$	9,211		$	7,493		$	1,769	$	-	$	-	$	-		$	19,714
Ending balance: collectively evaluated for impairment	$	37,657		$	5,073		$	182,019		$	52,673		$	11,094	$	11,804	$	17,742	$	1,175		$	319,237

Financing Receivable Credit Quality Indicators [Table Text Block]

	1-4 Family				Home Equity				Commercial Real Estate
	2017		2016		2017		2016		2017		2016
Pass	$	33,665	$	33,787	$	3,269	$	4,031	$	177,012	$	173,375
Pass (Closely Monitored)		515		490		-		-		14,366		14,349
Special Mention		240		241		-		-		2,124		2,630
Substandard		837		871		-		-		5,353		5,570
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
	$	35,257	$	35,389	$	3,269	$	4,031	$	198,855	$	195,924

	Multifamily				Land				Construction
	2017		2016		2017		2016		2017		2016
Pass	$	51,084	$	48,241	$	9,791	$	9,631	$	12,428	$	13,475
Pass (Closely Monitored)		3,202		6,586		883		855		-		-
Special Mention		-		-		-		-		-		-
Substandard		-		-		677		1,061		-		-
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
	$	54,286	$	54,827	$	11,351	$	11,547	$	12,428	$	13,475

	Commercial Non-Mortgage				Consumer				Total
	2017		2016		2017		2016		2017		2016
Pass	$	11,741	$	16,500	$	1,084	$	1,074	$	300,074	$	300,114
Pass (Closely Monitored)		663		658		-		-		19,629		22,938
Special Mention		2,527		2,889		-		-		4,891		5,760
Substandard		-		-		-		-		6,867		7,502
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
	$	14,931	$	20,047	$	1,084	$	1,074	$	331,461	$	336,314

Past Due Financing Receivables [Table Text Block]

As of March 31, 2017	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans >90 Days & Accruing		Total Nonaccrual
1-4 Family	$	11	$	43	$	286	$	340	$	34,917	$	35,257	$	-	$	286
Home Equity		-		-		-		-		3,269		3,269		-		-
Commercial Real Estate		261		642		105		1,008		197,847		198,855		-		4,002
Multifamily		-		-		-		-		54,286		54,286		-		-
Land		-		-		677		677		10,674		11,351		-		677
Construction		-		-		-		-		12,428		12,428		-		-
Commercial Non-Mortgage		-		-		-		-		14,931		14,931		-		-
Consumer		-		-		-		-		1,084		1,084		-		-
Total	$	272	$	685	$	1,068	$	2,025	$	329,436	$	331,461	$	-	$	4,965

As of December 31, 2016	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans >90 Days & Accruing		Total Nonaccrual
1-4 Family	$	165	$	94	$	137	$	396	$	34,993	$	35,389	$	-	$	137
Home Equity		-		-		-		-		4,031		4,031		-		-
Commercial Real Estate		-		648		100		748		195,176		195,924		-		4,872
Multifamily		-		-		-		-		54,827		54,827		-		-
Land		-		-		1,061		1,061		10,486		11,547		-		1,061
Construction		-		-		-		-		13,475		13,475		-		-
Commercial Non-Mortgage		-		-		-		-		20,047		20,047		-		-
Consumer		-		-		-		-		1,074		1,074		-		-
Total	$	165	$	742	$	1,298	$	2,205	$	334,109	$	336,314	$	-	$	6,070

Impaired Financing Receivables [Table Text Block]

			Unpaid
	Recorded		Principal		Specific		YTD Average		YTD Interest
	Balance		Balance		Allowance		Balance		Income
Loans without a specific valuation allowance:
1-4 Family	$	1,367	$	1,489	$	-	$	1,208	$	10
Home Equity		-		-		-		-		-
Commercial real estate		6,076		8,181		-		6,654		39
Multi Family		6,240		7,055		-		6,276		75
Land		-		-		-		-		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
1-4 Family	$	240	$	240	$	19	$	120	$	2
Home Equity		-		-		-		-		-
Commercial real estate		2,088		2,179		478		1,349		8
Multi Family		-		-		-		-		-
Land		677		2,815		250		869		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		2,527		2,527		203		1,265		35
Consumer		-		-		-		-		-
Totals
1-4 Family	$	1,607	$	1,729	$	19	$	1,328	$	12
Home Equity		-		-		-		-		-
Commercial real estate		8,164		10,360		478		8,003		47
Multi Family		6,240		7,055		-		6,276		75
Land		677		2,815		250		869		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		2,527		2,527		203		1,265		35
Consumer		-		-		-		-		-
Total	$	19,215	$	24,486	$	950	$	17,741	$	169

			Unpaid
	Recorded		Principal		Specific		YTD Average		YTD Interest
	Balance		Balance		Allowance		Balance		Income
Loans without a specific valuation allowance:
1-4 Family	$	1,500	$	1,620	$	-	$	1,311	$	70
Home Equity		-		-		-		-		-
Commercial real estate		7,494		9,669		-		8,296		426
Multi Family		6,311		7,125		-		6,884		402
Land		-		-		-		24		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
1-4 Family	$	-	$	-	$	-	$	-	$	-
Home Equity		-		-		-		-		-
Commercial real estate		609		695		235		385		41
Multi Family		-		-		-		-		-
Land		1,061		3,158		550		1,832		123
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Totals
1-4 Family	$	1,500	$	1,620	$	-	$	1,311	$	70
Home Equity		-		-		-		-		-
Commercial real estate		8,103		10,364		235		8,681		467
Multi Family		6,311		7,125		-		6,884		402
Land		1,061		3,158		550		1,856		123
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Total	$	16,975	$	22,267	$	785	$	18,773	$	1,062

			Unpaid
	Recorded		Principal		Specific		YTD Average		YTD Interest
	Balance		Balance		Allowance		Balance		Income
Loans without a specific valuation allowance:
1-4 Family	$	1,241	$	1,369	$	-	$	1,342	$	9
Home Equity		-		-		-		-		-
Commercial real estate		9,211		11,177		-		9,561		47
Multi Family		6,516		7,330		-		6,551		76
Land		41		95		-		41		1
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		148		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
1-4 Family	$	-	$	-	$	-	$	30	$	-
Home Equity		-		-		-		-		-
Commercial real estate		-		-		-		1,184		-
Multi Family		977		997		100		1,134		17
Land		1,728		3,575		850		1,785		-
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		-		-
Consumer		-		-		-		-		-
Totals
1-4 Family	$	1,241	$	1,369	$	-	$	1,372	$	9
Home Equity		-		-		-		-		-
Commercial real estate		9,211		11,177		-		10,745		47
Multi Family		7,493		8,327		100		7,685		93
Land		1,769		3,670		850		1,826		1
Construction		-		-		-		-		-
Commercial Non-Mortgage		-		-		-		148		-
Consumer		-		-		-		-		-
Total	$	19,714	$	24,543	$	950	$	21,776	$	150

Schedule of Debtor Troubled Debt Restructuring, Current Period [Table Text Block]

	Three m onths e nded
	March 31, 2017
			Balance		Balance
			prior to		after
	Count		TDR		TDR
	(Dollars in thousands)
Total loans		--	$	--	$	--

	Three m onths e nded
	March 31, 2016
			Balance		Balance
			prior to		after
	Count		TDR		TDR
	(Dollars in thousands)
Commercial real estate		1		996		996
Total loans		1	$	996	$	996

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Note 5 - Disclosures About Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Fair Value Measurements, Nonrecurring [Table Text Block]

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2017
Collateral-dependent Impaired loans	$	3,828	$	--	$	--	$	3,828
December 31, 2016
Collateral-dependent Impaired loans	$	885	$	--	$	--	$	885

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

	Collateral-dependent Impaired Loans
	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
As of March 31, 2017
Collateral-dependent impaired loans	$	3,828	Market comparable properties	Marketability discount	0	-	17%	(16%)
December 31, 2016
Collateral-dependent impaired loans	$	885	Market comparable properties	Marketability discount	3	-	13%	(6%)

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

			Fair Value Measurements Using
As of March 31, 2017	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets
Cash and cash equivalents	$	54,249	$	54,249	$	-	$	-
Loans, net of allowance for loan losses		315,946		-		-		318,922
Federal Home Loan Bank stock		2,700		-		2,700		-
Interest receivable		839		-		839		-
Financial liabilities
Deposits	$	271,110	$	147,473	$	-	$	124,724
Federal Home Loan Bank advances		42,000		-		41,369		-
Interest payable		252		-		252		-

			Fair Value Measurements Using
As of December 31, 2016	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets
Cash and cash equivalents	$	103,634	$	103,634	$	-	$	-
Interest-earning time deposits		-		-		-		-
Held to maturity securities		499		-		500		-
Loans held for sale		238		-		239		-
Loans, net of allowance for loan losses		320,606		-		-		323,601
Federal Home Loan Bank stock		2,700		-		2,700		-
Interest receivable		846		-		846		-
Financial liabilities
Deposits	$	280,548	$	153,290	$	-	$	128,655
Federal Home Loan Bank advances		60,000		-		59,187		-
Federal funds purchased		27,000		-		27,000		-
Interest payable		249		-		249		-

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Note 6 - Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three month ended March 31,			Three month ended March 31,
	2017			2016
Net Income	$	1,332		$	967
Dividends and undistributed earnings allocated to participating securities		(13	)		(17	)
Income attributable to common shareholders		1,319			950
Weighted average shares outstanding (in thousands)		2,106			2,154
Less: average unearned ESOP and unvested restricted stock		(148	)		(177	)
Average Shares		1,958			1,977
Effect of dilutive based awards		54			32
Average common and common-equivalent shares for diluted EPS (in thousands)		2,012			2,009
Basic EPS	$	0.67		$	0.48
Diluted EPS	$	0.66		$	0.47

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Note 7 - Share-based Compensation (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Options		Weighted average exercise price		Remaining contractual life (years)		Aggregate intrinsic value
Options outstanding at January 1, 2017		181,585	$	20.76		7	$	1,956
Granted		--		--		--		--
Exercised		--		--		--		--
Forfeited		--		--		--		--
Expired		--		--		--		--
Options outstanding at March 31, 2017		181,585	$	20.76		7	$	2,146
Exercisable at March 31, 2017		92,748	$	17.44		5	$	1,404

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	Service-Based Restricted stock awards		Weighted average grant date fair value
Non-vested at January 1, 2017		26,572	$	22.38
Granted		-		-
Vested		-		-
Forfeited		-		-
Non-vested at March 31, 2017		26,572		22.38

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Note 3 - Securities (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Held-to-maturity Securities	$ 0		$ 499
Proceeds from Sale of Held-to-maturity Securities	$ 0	$ 0

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Note 3 - Securities - Summary of Amortized Cost and Approximate Fair Values of Held to Maturity Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Held-to-maturity Securities	$ 0	$ 499
Held to maturity securities, gross unrealized gains		1
Held to maturity securities, fair value		$ 500

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Note 4 - Loans and Allowance for Loan Losses (Details Textual) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)	Mar. 31, 2016
Percentage of Construction Loans for Commercial Real Estate of Loan to Completed Appraised Value, Ratio	75.00%
Charge Down to Net Realizable Value	120 days
Period for Discontinuation of Accrual of Interest on All Loan Classes	180 days
Minimum Realizable Period for New Loan into Accrual Status Under Performance With New Loan Terms	180 days
Minimum Period for Realizable of Troubled Debt Restructuring Loans into Nonaccrual Status or Default Loans	90 days
Financing Receivable, Modifications, Number of Contracts	0	1
Financing Receivable, Modifications, Subsequent Default, Recorded Investment	$ 0
Minimum [Member]
Period for Discontinuation of Accrual of Interest on All Loan Classes	180 days

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Note 4 - Loans and Allowance for Loan Losses - Summary of Loans by Categories of Loans Class (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Total loans	$ 331,461	$ 336,314	$ 338,951
Net deferred loan costs, premiums and discounts	553	563
Undisbursed portion of loan	6,228	5,819
Allowance for loan losses	8,734	9,326
Net Loans	315,946	320,606
Residential Portfolio Segment [Member] | One- to Four-family [Member]
Total loans	35,257	35,389	38,898
Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Total loans	3,269	4,031	5,073
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Total loans	198,855	195,924	191,230
Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Total loans	54,286	54,827	60,166
Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Total loans	11,351	11,547	12,863
Construction Portfolio Segment [Member]
Total loans	12,428	13,475	11,804
Commercial Portfolio Segment [Member]
Total loans	14,931	20,047	17,742
Consumer Portfolio Segment [Member]
Total loans	$ 1,084	$ 1,074	$ 1,175

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Note 4 - Loans and Allowance for Loan Losses - Financing Receivables and Allowance for Credit Losses on Financing Receivables (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Balance, beginning of period	$ 9,326	$ 10,061	$ 10,061
Provision (credit) charged to expense	(600)		(760)
Losses charged off		(66)	(153)
Recoveries	8	29	178
Balance, end of period	8,734	10,024	9,326
Ending Balance: individually evaluated for impairment				$ 950	$ 785	$ 950
Ending balance: collectively evaluated for impairment				7,784	8,541	9,074
Ending Balance	331,461	338,951	336,314
Ending Balance: individually evaluated for impairment				19,215	16,975	19,714
Ending balance: collectively evaluated for impairment				312,246	319,339	319,237
Provision (credit) charged to expense	(600)		(760)
Loans	331,461	338,951	336,314	331,461	336,314	338,951
Residential Portfolio Segment [Member] | One- to Four-family [Member]
Balance, beginning of period	798	948	948
Provision (credit) charged to expense	(52)	23	(137)
Losses charged off		(66)	(67)
Recoveries	7	4	54
Balance, end of period	753	909	798
Ending Balance: individually evaluated for impairment				19	0	0
Ending balance: collectively evaluated for impairment				734	798	909
Ending Balance	35,257	38,898	35,389
Ending Balance: individually evaluated for impairment				1,607	1,500	1,241
Ending balance: collectively evaluated for impairment				33,650	33,889	37,657
Provision (credit) charged to expense	(52)	23	(137)
Loans	35,257	38,898	35,389	35,257	35,389	38,898
Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Balance, beginning of period	49	108	108
Provision (credit) charged to expense	(9)	(9)	(59)
Losses charged off		0	0
Recoveries		0	0
Balance, end of period	40	99	49
Ending Balance: individually evaluated for impairment					0	0
Ending balance: collectively evaluated for impairment				40	49	99
Ending Balance	3,269	5,073	4,031
Ending Balance: individually evaluated for impairment						0
Ending balance: collectively evaluated for impairment				3,269	4,031	5,073
Provision (credit) charged to expense	(9)	(9)	(59)
Loans	3,269	5,073	4,031	3,269	4,031	5,073
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Balance, beginning of period	5,422	4,913	4,913
Provision (credit) charged to expense	448	(115)	555
Losses charged off			(85)
Recoveries		24	39
Balance, end of period	5,870	4,822	5,422
Ending Balance: individually evaluated for impairment				478	235
Ending balance: collectively evaluated for impairment				5,392	5,187	4,822
Ending Balance	198,855	191,230	195,924
Ending Balance: individually evaluated for impairment				8,164	8,103	9,211
Ending balance: collectively evaluated for impairment				190,691	187,821	182,019
Provision (credit) charged to expense	448	(115)	555
Loans	198,855	191,230	195,924	198,855	195,924	191,230
Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Balance, beginning of period	1,084	1,515	1,515
Provision (credit) charged to expense	(212)	(106)	(431)
Losses charged off		0	0
Recoveries		0	0
Balance, end of period	872	1,409	1,084
Ending Balance: individually evaluated for impairment						100
Ending balance: collectively evaluated for impairment				872	1,084	1,309
Ending Balance	54,286	60,166	54,827
Ending Balance: individually evaluated for impairment				6,240	6,311	7,493
Ending balance: collectively evaluated for impairment				48,046	48,516	52,673
Provision (credit) charged to expense	(212)	(106)	(431)
Loans	54,286	60,166	54,827	54,286	54,827	60,166
Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Balance, beginning of period	1,142	1,605	1,605
Provision (credit) charged to expense	(602)	28	(544)
Losses charged off		0	0
Recoveries		1	81
Balance, end of period	540	1,634	1,142
Ending Balance: individually evaluated for impairment				250	550	850
Ending balance: collectively evaluated for impairment				290	592	784
Ending Balance	11,351	12,863	11,547
Ending Balance: individually evaluated for impairment				677	1,061	1,769
Ending balance: collectively evaluated for impairment				10,674	10,486	11,094
Provision (credit) charged to expense	(602)	28	(544)
Loans	11,351	12,863	11,547	11,351	11,547	12,863
Construction Portfolio Segment [Member]
Balance, beginning of period	294	604	604
Provision (credit) charged to expense	(24)	132	(310)
Losses charged off		0
Recoveries		0	0
Balance, end of period	270	736	294
Ending Balance: individually evaluated for impairment					0	0
Ending balance: collectively evaluated for impairment				270	294	736
Ending Balance	12,428	11,804	13,475
Ending Balance: individually evaluated for impairment					0	0
Ending balance: collectively evaluated for impairment				12,428	13,475	11,804
Provision (credit) charged to expense	(24)	132	(310)
Loans	12,428	11,804	13,475	12,428	13,475	11,804
Commercial Portfolio Segment [Member]
Balance, beginning of period	524	344	344
Provision (credit) charged to expense	(149)	48	180
Losses charged off		0	0
Recoveries		0	0
Balance, end of period	375	392	524
Ending Balance: individually evaluated for impairment				203	0	0
Ending balance: collectively evaluated for impairment				172	524	392
Ending Balance	14,931	17,742	20,047
Ending Balance: individually evaluated for impairment				2,527		0
Ending balance: collectively evaluated for impairment				12,404	20,047	17,742
Provision (credit) charged to expense	(149)	48	180
Loans	14,931	17,742	20,047	14,931	20,047	17,742
Consumer Portfolio Segment [Member]
Balance, beginning of period	13	24	24
Provision (credit) charged to expense		(1)	(14)
Losses charged off			(1)
Recoveries	1		4
Balance, end of period	14	23	13
Ending Balance: individually evaluated for impairment					0	0
Ending balance: collectively evaluated for impairment				14	13	23
Ending Balance	1,084	1,175	1,074
Ending Balance: individually evaluated for impairment					0	0
Ending balance: collectively evaluated for impairment				1,084	1,074	1,175
Provision (credit) charged to expense		(1)	(14)
Loans	$ 1,084	$ 1,175	$ 1,074	$ 1,084	$ 1,074	$ 1,175

XML

Note 4 - Loans and Allowance for Loan Losses - Credit Risk Profile of Our Loan Portfolio Based on Rating Category and Payment Activity (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Total loans	$ 331,461	$ 336,314	$ 338,951
Residential Portfolio Segment [Member] | One- to Four-family [Member]
Total loans	35,257	35,389	38,898
Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Total loans	3,269	4,031	5,073
Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Total loans	54,286	54,827	60,166
Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Total loans	11,351	11,547	12,863
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Total loans	198,855	195,924	191,230
Commercial Portfolio Segment [Member]
Total loans	14,931	20,047	17,742
Consumer Portfolio Segment [Member]
Total loans	1,084	1,074	1,175
Construction Portfolio Segment [Member]
Total loans	12,428	13,475	$ 11,804
Pass [Member]
Total loans	300,074	300,114
Pass [Member] | Residential Portfolio Segment [Member] | One- to Four-family [Member]
Total loans	33,665	33,787
Pass [Member] | Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Total loans	3,269	4,031
Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Total loans	51,084	48,241
Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Total loans	9,791	9,631
Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Total loans	177,012	173,375
Pass [Member] | Commercial Portfolio Segment [Member]
Total loans	11,741	16,500
Pass [Member] | Consumer Portfolio Segment [Member]
Total loans	1,084	1,074
Pass [Member] | Construction Portfolio Segment [Member]
Total loans	12,428	13,475
Pass Closely Monitored [Member]
Total loans	19,629	22,938
Pass Closely Monitored [Member] | Residential Portfolio Segment [Member] | One- to Four-family [Member]
Total loans	515	490
Pass Closely Monitored [Member] | Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Total loans
Pass Closely Monitored [Member] | Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Total loans	3,202	6,586
Pass Closely Monitored [Member] | Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Total loans	883	855
Pass Closely Monitored [Member] | Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Total loans	14,366	14,349
Pass Closely Monitored [Member] | Commercial Portfolio Segment [Member]
Total loans	663	658
Pass Closely Monitored [Member] | Consumer Portfolio Segment [Member]
Total loans
Pass Closely Monitored [Member] | Construction Portfolio Segment [Member]
Total loans
Special Mention [Member]
Total loans	4,891	5,760
Special Mention [Member] | Residential Portfolio Segment [Member] | One- to Four-family [Member]
Total loans	240	241
Special Mention [Member] | Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Total loans	0	0
Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Total loans	0	0
Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Total loans	0	0
Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Total loans	2,124	2,630
Special Mention [Member] | Commercial Portfolio Segment [Member]
Total loans	2,527	2,889
Special Mention [Member] | Consumer Portfolio Segment [Member]
Total loans	0	0
Special Mention [Member] | Construction Portfolio Segment [Member]
Total loans		0
Substandard [Member]
Total loans	6,867	7,502
Substandard [Member] | Residential Portfolio Segment [Member] | One- to Four-family [Member]
Total loans	837	871
Substandard [Member] | Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Total loans
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Total loans
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Total loans	677	1,061
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Total loans	5,353	5,570
Substandard [Member] | Commercial Portfolio Segment [Member]
Total loans
Substandard [Member] | Consumer Portfolio Segment [Member]
Total loans	0	0
Substandard [Member] | Construction Portfolio Segment [Member]
Total loans	0
Doubtful [Member]
Total loans	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | One- to Four-family [Member]
Total loans	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Total loans	0	0
Doubtful [Member] | Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Total loans	0	0
Doubtful [Member] | Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Total loans	0	0
Doubtful [Member] | Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Total loans	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member]
Total loans	0	0
Doubtful [Member] | Consumer Portfolio Segment [Member]
Total loans	0	0
Doubtful [Member] | Construction Portfolio Segment [Member]
Total loans	0	0
Loss [Member]
Total loans	0	0
Loss [Member] | Residential Portfolio Segment [Member] | One- to Four-family [Member]
Total loans	0	0
Loss [Member] | Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Total loans	0	0
Loss [Member] | Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Total loans	0	0
Loss [Member] | Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Total loans	0	0
Loss [Member] | Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Total loans	0	0
Loss [Member] | Commercial Portfolio Segment [Member]
Total loans	0	0
Loss [Member] | Consumer Portfolio Segment [Member]
Total loans	0	0
Loss [Member] | Construction Portfolio Segment [Member]
Total loans	$ 0	$ 0

XML

Note 4 - Loans and Allowance for Loan Losses - Summary of Our Past Due and Non-accrual Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Financing Receivable, Past Due	$ 2,025	$ 2,205
Current	329,436	334,109
Total loans	331,461	336,314	$ 338,951
Total Loans > 90 Days & Accruing	0	0
Total Nonaccrual	4,965	6,070
Residential Portfolio Segment [Member] | One- to Four-family [Member]
Financing Receivable, Past Due	340	396
Current	34,917	34,993
Total loans	35,257	35,389	38,898
Total Loans > 90 Days & Accruing	0	0
Total Nonaccrual	286	137
Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Financing Receivable, Past Due	0	0
Current	3,269	4,031
Total loans	3,269	4,031	5,073
Total Loans > 90 Days & Accruing	0	0
Total Nonaccrual	0	0
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Financing Receivable, Past Due	1,008	748
Current	197,847	195,176
Total loans	198,855	195,924	191,230
Total Loans > 90 Days & Accruing	0	0
Total Nonaccrual	4,002	4,872
Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Financing Receivable, Past Due	0
Current	54,286	54,827
Total loans	54,286	54,827	60,166
Total Loans > 90 Days & Accruing	0	0
Total Nonaccrual	0	0
Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Financing Receivable, Past Due	677	1,061
Current	10,674	10,486
Total loans	11,351	11,547	12,863
Total Loans > 90 Days & Accruing	0	0
Total Nonaccrual	677	1,061
Construction Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Current	12,428	13,475
Total loans	12,428	13,475	11,804
Total Loans > 90 Days & Accruing	0	0
Total Nonaccrual	0	0
Commercial Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Current	14,931	20,047
Total loans	14,931	20,047	17,742
Total Loans > 90 Days & Accruing	0	0
Total Nonaccrual	0	0
Consumer Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Current	1,084	1,074
Total loans	1,084	1,074	$ 1,175
Total Loans > 90 Days & Accruing	0	0
Total Nonaccrual	0	0
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Past Due	272	165
Financing Receivables, 30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member] | One- to Four-family [Member]
Financing Receivable, Past Due	11	165
Financing Receivables, 30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Financing Receivable, Past Due	261
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Financing Receivable, Past Due	0
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 30 to 59 Days Past Due [Member] | Construction Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Past Due	685	742
Financing Receivables, 60 to 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | One- to Four-family [Member]
Financing Receivable, Past Due	43	94
Financing Receivables, 60 to 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Financing Receivable, Past Due	642	648
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 60 to 89 Days Past Due [Member] | Construction Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due	1,068	1,298
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member] | One- to Four-family [Member]
Financing Receivable, Past Due	286	137
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Financing Receivable, Past Due	105	100
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Financing Receivable, Past Due	677	1,061
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Construction Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Past Due	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member]
Financing Receivable, Past Due	$ 0	$ 0

XML

Note 4 - Loans and Allowance for Loan Losses - Summary of Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Specific allowance	$ 950	$ 950	$ 785
Recorded balance	19,215	19,714	16,975
Unpaid principal balance	24,486	24,543	22,267
Average balance	17,741	21,776	18,773
Interest income	169	150	1,062
Residential Portfolio Segment [Member] | One- to Four-family [Member]
Recorded balance, without valuation allowance	1,367	1,241	1,500
Unpaid principal balance, without valuation allowance	1,489	1,369	1,620
Average balance, without valuation allowance	1,208	1,342	1,311
Interest Income, without valuation allowance	10	9	70
Recorded balance, with valuation allowance	240	0	0
Unpaid principal balance, with valuation allowance	240	0	0
Specific allowance	19	0	0
Average balance, with valuation allowance	120	30	0
Interest Income, with valuation allowance	2	0	0
Recorded balance	1,607	1,241	1,500
Unpaid principal balance	1,729	1,369	1,620
Average balance	1,328	1,372	1,311
Interest income	12	9	70
Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Recorded balance, without valuation allowance	0	0	0
Unpaid principal balance, without valuation allowance	0	0	0
Average balance, without valuation allowance	0	0
Interest Income, without valuation allowance	0	0	0
Recorded balance, with valuation allowance	0	0	0
Unpaid principal balance, with valuation allowance	0	0	0
Specific allowance	0	0	0
Average balance, with valuation allowance	0	0	0
Interest Income, with valuation allowance	0	0	0
Recorded balance	0	0	0
Unpaid principal balance	0	0	0
Average balance	0	0
Interest income	0	0	0
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Recorded balance, without valuation allowance	6,076	9,211	7,494
Unpaid principal balance, without valuation allowance	8,181	11,177	9,669
Average balance, without valuation allowance	6,654	9,561	8,296
Interest Income, without valuation allowance	39	47	426
Recorded balance, with valuation allowance	2,088		609
Unpaid principal balance, with valuation allowance	2,179		695
Specific allowance	478		235
Average balance, with valuation allowance	1,349	1,184	385
Interest Income, with valuation allowance	8		41
Recorded balance	8,164	9,211	8,103
Unpaid principal balance	10,360	11,177	10,364
Average balance	8,003	10,745	8,681
Interest income	47	47	467
Commercial Real Estate Portfolio Segment [Member] | Multifamily Loan [Member]
Recorded balance, without valuation allowance	6,240	6,516	6,311
Unpaid principal balance, without valuation allowance	7,055	7,330	7,125
Average balance, without valuation allowance	6,276	6,551	6,884
Interest Income, without valuation allowance	75	76	402
Recorded balance, with valuation allowance	0	977
Unpaid principal balance, with valuation allowance	0	997
Specific allowance	0	100
Average balance, with valuation allowance	0	1,134
Interest Income, with valuation allowance	0	17
Recorded balance	6,240	7,493	6,311
Unpaid principal balance	7,055	8,327	7,125
Average balance	6,276	7,685	6,884
Interest income	75	93	402
Commercial Real Estate Portfolio Segment [Member] | Land Loan [Member]
Recorded balance, without valuation allowance	0	41
Unpaid principal balance, without valuation allowance	0	95
Average balance, without valuation allowance		41	24
Interest Income, without valuation allowance	0	1
Recorded balance, with valuation allowance	677	1,728	1,061
Unpaid principal balance, with valuation allowance	2,815	3,575	3,158
Specific allowance	250	850	550
Average balance, with valuation allowance	869	1,785	1,832
Interest Income, with valuation allowance			123
Recorded balance	677	1,769	1,061
Unpaid principal balance	2,815	3,670	3,158
Average balance	869	1,826	1,856
Interest income		1	123
Construction Portfolio Segment [Member]
Recorded balance, without valuation allowance	0	0	0
Unpaid principal balance, without valuation allowance	0	0	0
Average balance, without valuation allowance	0	0	0
Interest Income, without valuation allowance	0	0	0
Recorded balance, with valuation allowance	0	0	0
Unpaid principal balance, with valuation allowance	0	0	0
Specific allowance	0	0	0
Average balance, with valuation allowance	0	0	0
Interest Income, with valuation allowance	0	0	0
Recorded balance	0	0	0
Unpaid principal balance	0	0	0
Average balance	0	0
Interest income	0	0	0
Commercial Portfolio Segment [Member]
Recorded balance, without valuation allowance	0	0
Unpaid principal balance, without valuation allowance	0	0
Average balance, without valuation allowance	0	148
Interest Income, without valuation allowance	0	0
Recorded balance, with valuation allowance	2,527	0	0
Unpaid principal balance, with valuation allowance	2,527	0	0
Specific allowance	203	0	0
Average balance, with valuation allowance	1,265	0	0
Interest Income, with valuation allowance	35	0	0
Recorded balance	2,527	0
Unpaid principal balance	2,527	0
Average balance	1,265	148
Interest income	35	0
Consumer Portfolio Segment [Member]
Recorded balance, without valuation allowance	0	0	0
Unpaid principal balance, without valuation allowance	0	0	0
Average balance, without valuation allowance	0	0	0
Interest Income, without valuation allowance	0	0	0
Recorded balance, with valuation allowance	0	0	0
Unpaid principal balance, with valuation allowance	0	0	0
Specific allowance	0	0	0
Average balance, with valuation allowance	0	0	0
Interest Income, with valuation allowance	0	0	0
Recorded balance	0	0	0
Unpaid principal balance	0	0	0
Average balance	0	0	0
Interest income	$ 0	$ 0	$ 0

XML

Note 4 - Loans and Allowance for Loan Losses - Summary of Loans Restructured as TDRs (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)
Count	0	1
Balance prior to TDR		$ 996
Balance after TDR		$ 996
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Count		1
Balance prior to TDR		$ 996
Balance after TDR		$ 996

XML

Note 5 - Disclosures About Fair Value of Assets and Liabilities (Details Textual) $ in Thousands	Mar. 31, 2017 USD ($)
Assets, Fair Value Disclosure, Recurring	$ 0
Liabilities, Fair Value Disclosure, Recurring	0
Liabilities, Fair Value Disclosure, Nonrecurring	$ 0

XML

Note 5 - Disclosures About Fair Value of Assets and Liabilities - Summary of Fair Value Measurements of Assets and Liabilities on Nonrecurring Basis (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Collateral-dependent Impaired loans		$ 885
Estimate of Fair Value Measurement [Member]
Collateral-dependent Impaired loans	$ 3,828
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Collateral-dependent Impaired loans
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Collateral-dependent Impaired loans
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Collateral-dependent Impaired loans	$ 3,828	$ 885

XML

Note 5 - Disclosures About Fair Value of Assets and Liabilities - Summary of Quantitative Information About Unobservable Inputs (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Collateral-dependent Impaired loans		$ 885
Fair Value, Inputs, Level 3 [Member] | Market Approach Valuation Technique [Member]
Collateral-dependent Impaired loans	$ 3,828	$ 885
Range		3.00%
Fair Value, Inputs, Level 3 [Member] | Market Approach Valuation Technique [Member] | Minimum [Member]
Range	0.00%
Fair Value, Inputs, Level 3 [Member] | Market Approach Valuation Technique [Member] | Maximum [Member]
Range	17.00%	13.00%
Fair Value, Inputs, Level 3 [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Range	16.00%	6.00%

XML

Note 5 - Disclosures About Fair Value of Assets and Liabilities - Summary of Estimated Fair Values of Company's Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016
Held to maturity securities		$ 500
Federal funds purchased		27,000
Reported Value Measurement [Member]
Cash and cash equivalents	54,249	103,634
Loans, net of allowance for loan losses	315,946	320,606
Federal Home Loan Bank stock	2,700	2,700
Interest receivable	839	846
Deposits	271,110	280,548
Federal Home Loan Bank advances	42,000	60,000
Interest payable	252	249
Interest-earning time deposits
Held to maturity securities		499
Loans held for sale		238
Federal funds purchased		27,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	54,249	103,634
Loans, net of allowance for loan losses		0
Federal Home Loan Bank stock	0	0
Interest receivable	0	0
Deposits	147,473	153,290
Federal Home Loan Bank advances	0
Interest payable	0	0
Interest-earning time deposits
Held to maturity securities		0
Loans held for sale		0
Federal funds purchased		0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents	0	0
Loans, net of allowance for loan losses		0
Federal Home Loan Bank stock	2,700	2,700
Interest receivable	839	846
Deposits	0	0
Federal Home Loan Bank advances	41,369	59,187
Interest payable	252	249
Interest-earning time deposits		0
Held to maturity securities		500
Loans held for sale		239
Federal funds purchased		27,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents	0	0
Loans, net of allowance for loan losses	318,922	323,601
Federal Home Loan Bank stock	0	0
Interest receivable	0	0
Deposits	124,724	128,655
Federal Home Loan Bank advances	0	0
Interest payable	$ 0	0
Interest-earning time deposits		0
Held to maturity securities		0
Loans held for sale		0
Federal funds purchased		$ 0

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Note 6 - Earnings Per Share - Earnings Per Share Table (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Net income	$ 1,332	$ 967
Dividends and undistributed earnings allocated to participating securities	(13)	(17)
Income attributable to common shareholders	$ 1,319	$ 950
Weighted average shares outstanding (in thousands) (in shares)	2,106	2,154
Less: average unearned ESOP and unvested restricted stock (in shares)	(148)	(177)
Average Shares (in shares)	1,958	1,977
Effect of dilutive based awards (in shares)	54	32
Average common and common-equivalent shares for diluted EPS (in thousands) (in shares)	2,012	2,009
Basic EPS (in dollars per share)	$ 0.67	$ 0.48
Diluted EPS (in dollars per share)	$ 0.66	$ 0.47

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Note 7 - Share-based Compensation (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	351,050
Allocated Share-based Compensation Expense	$ 80	$ 87
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	156
Stock or Unit Option Plan Expense	$ 17	16
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Restricted Stock or Unit Expense	$ 63	$ 71
Restricted Stock [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 448

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Note 7 - Share-based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Options outstanding (in shares)	181,585
Options outstanding, Weighted average exercise price (in dollars per share)	$ 20.76
Options outstanding, Remaining contractual life (Year)	7 years	7 years
Options outstanding, Aggregate intrinsic value	$ 2,146	$ 1,956
Granted, Options (in shares)
Granted, Weighted average exercise price (in dollars per share)
Granted, Remaining contractual life (Year)
Exercised, Options (in shares)
Exercised, Weighted average exercise price (in dollars per share)
Forfeited, Options (in shares)
Forfeited, Weighted average exercise price (in dollars per share)
Expired, Options (in shares)
Expired, Weighted average exercise price (in dollars per share)
Options outstanding (in shares)	181,585	181,585
Options outstanding, Weighted average exercise price (in dollars per share)	$ 20.76	$ 20.76
Exercisable, Options (in shares)	92,748
Exercisable, Weighted average exercise price (in dollars per share)	$ 17.44
Exercisable, Remaining contractual life (Year)	5 years
Exercisable, Aggregate intrinsic value	$ 1,404

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Note 7 - Share-based Compensation - Summary of Restricted Stock Award Activity (Details) - Restricted Stock [Member]	3 Months Ended
	Mar. 31, 2017 $ / shares shares
Non-vested, Service-based restricted stock awards (in shares) | shares	26,572
Non-vested, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 22.38
Granted, Service-based restricted stock awards (in shares) | shares
Granted, Weighted average grant date fair value (in dollars per share) | $ / shares
Vested, Service-based restricted stock awards (in shares) | shares
Vested, Weighted average grant date fair value (in dollars per share) | $ / shares
Forfeited, Service-based restricted stock awards (in shares) | shares
Forfeited, Weighted average grant date fair value (in dollars per share) | $ / shares
Non-vested, Service-based restricted stock awards (in shares) | shares	26,572
Non-vested, Weighted average grant date fair value at March 31, 2017 (in dollars per share) | $ / shares	$ 22.38