10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑K

(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2017
☐	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. 001‑37489

EQUITABLE FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Maryland (State or other jurisdiction of incorporation or organization)	32‑0467709 (I.R.S. Employer Identification Number)
113 North Locust Street
Grand Island, NE (Address of principal executive offices)	68801 (Zip Code)

(308) 382‑3136

(Registrant’s telephone number, including area code)

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

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value	The NASDAQ Stock Market LLC

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒   No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☒

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

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

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

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

As of December 31, 2016, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $28,266,846

As of September 28, 2017, there were 3,368,932 shares issued and outstanding of the registrant’s common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Materials from the registrant’s proxy statement for the registrant’s Annual Meeting of Stockholders to be held on November 21. 2017 have been incorporated by reference into Part III of this Form 10‑K.

EQUITABLE FINANCIAL CORP.

FORM 10‑K

INDEX

		Page
	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	32
Item 1B.	Unresolved Staff Comments	32
Item 2.	Properties	33
Item 3.	Legal Proceedings	33
Item 4.	Mine Safety Disclosures	33
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	34
Item 6.	Selected Financial Data	35
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	46
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	87
Item 9A.	Controls and Procedures	87
Item 9B.	Other Information	88
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	89
Item 11.	Executive Compensation	89
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	89
Item 13.	Certain Relationships and Related Transactions, and Director Independence	89
Item 14.	Principal Accounting Fees and Services	89
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	90
Item 16	Form 10-K Summary	91
Signatures		94

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PART I

Item 1.  Business.

Forward‑Looking Statements

This Form 10‑K contains forward‑looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward‑looking statements include, but are not limited to:

· Statements of our goals, intentions and expectations;

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

· Statements regarding the quality of our loan and investment portfolios; and

· Estimates of our risks and future costs and benefits.

These forward‑looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward‑looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

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

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

· Competition among depository and other financial institutions;

· Inflation and changes in the interest rate environment that reduce our margins and yields or reduce the fair value of financial instruments;

· Our success in continuing to emphasize agricultural and commercial loans;

· Changes in consumer spending, borrowing and savings habits;

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

· Our ability to successfully integrate acquired branches or entities;

· 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;

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

· Changes in our organization, compensation and benefit plans;

· Our ability to retain key employees;

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· Changes in the level of government support for housing finance;

· Significant increases in our loan losses; and

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

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

Equitable Financial Corp.

Equitable Financial Corp., a Maryland corporation (the “Company”), was organized in February 2015. Upon completion of the mutual‑to‑stock conversion of Equitable Financial MHC in July 2015, the Company became the holding company of Equitable Bank and succeeded to all of the business and operations of Equitable Financial Corp., a federal corporation (“Old Equitable”), and each of Old Equitable and Equitable Financial MHC ceased to exist. Since the completion of the mutual‑to‑stock conversion, the Company has not engaged in any significant business activity other than owning the common stock of, and having deposits in, Equitable Bank. Our executive office is located at 113 North Locust Street, Grand Island, Nebraska, and our telephone number at that address is (308) 382‑3136.

Equitable Bank

Equitable Bank is a Nebraska‑based community bank that traces its roots to 1882, when Grand Island Building and Loan Association was chartered by the State of Nebraska as a mutual building and loan association. This building and loan association was converted to a federally chartered savings association in 1992. At that time, it adopted the name of “The Equitable Building and Loan Association of Grand Island, Nebraska, A Federal Savings Bank.” Our present name was adopted in 2005. We operate our business through our main office in Grand Island, Nebraska, one full‑service branch in each of Grand Island, North Platte and Omaha, Nebraska and one additional limited service branch in Grand Island. We believe our locations are strategically positioned within the State of Nebraska along the Interstate 80 corridor, from the eastern‑most point of that corridor in Omaha, through Nebraska’s fourth largest city in Grand Island, and to the largest city in the western part of that corridor in North Platte.

We are engaged primarily in the business of attracting deposits from the general public and using those funds to originate commercial loans, agricultural loans and one‑ to four‑family residential real estate loans. To a lesser extent, we also originate home equity loans, construction and land loans and consumer loans. We invest a portion of our assets in securities issued by the U.S. Government and its agencies, U.S. government‑sponsored enterprises and state and municipal governments. We also invest in mortgage‑backed securities primarily issued or guaranteed by U.S. government‑sponsored enterprises. Our principal sources of funds are deposits and principal and interest payments on loans and investments, as well as borrowings from the Federal Home Loan Bank (“FHLB”) of Topeka. Our principal source of income is from interest income received on loans and investment securities. Our principal expenses are interest paid on deposits and borrowings, employee compensation and benefits, data processing and facilities.

We also provide retail brokerage services in Grand Island and North Platte, under the name “Equitable Wealth Management.” In the fiscal year ended June 30, 2017, we had brokerage fee income of $723,000. At June 30, 2017, our brokerage business had approximately $151.6 million in assets under management.

Equitable Bank is subject to extensive regulation by the Office of the Comptroller of the Currency (“OCC”) and by the Federal Deposit Insurance Corporation (“FDIC”) and is a member of the FHLB System.

Equitable Bank’s main office is located at 113 North Locust Street, Grand Island, Nebraska and the telephone number at that address is (308) 382‑3136.

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Available Information

Our website is located at www.equitableonline.com, and our investor relations website is located at http://investors.equitableonline.com. The following filings are available through our investor relations website after we file them with the SEC: Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, and our Proxy Statements for our annual meetings of stockholders. In addition, our call reports and other regulatory filings are available through our investor relations website after we file them with the applicable regulators.

We provide notifications of news, financial highlights and announcements regarding our financial performance, including SEC filings, regulatory filings and press releases, as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts. Additional corporate governance information, including our board committee charters and code of conduct, also is available on our investor relations website under the heading “Governance Documents.” Information on our website is not incorporated by reference into this Annual Report on Form 10‑K or in any other report or document we file with the SEC.

Market Area

We are headquartered in Grand Island, Nebraska in Hall County. In addition to our main office, we also operate an additional full service facility and a limited service facility in Grand Island, Nebraska. We also provide retail brokerage services in Grand Island and North Platte, Nebraska under the company name of Equitable Wealth Management. In the beginning of 2005, our Board of Directors made the strategic decision to expand into other select markets in Nebraska. As a result, we now operate one full service location, which includes Equitable Wealth Management, in North Platte, and one full service location in Omaha. All of these cities are connected by Interstate 80, which runs across central Nebraska. The region in which our current offices are located was once dominated by agriculture, but now consists of a diverse blend of industries, urban centers and significant corporate investment.

Historically, we have considered Grand Island and the surrounding communities in Hall County as our primary market area. With the fourth largest population in Nebraska, Grand Island is a regional population and employment center for central Nebraska. Grand Island has a diverse employment base and serves as a center for agriculture, manufacturing, healthcare, tourism, retail and other related industries. The surrounding communities in Hall County are primarily rural and have an agriculture‑based economy.

Omaha is the leading urban market in Nebraska, located in eastern Nebraska. Omaha, which is Nebraska’s largest city, is a leader in the central United States in the insurance, telecommunications and transportation industries. North Platte, located in central‑western Nebraska, has an economy primarily based on agriculture and the transportation industry.

Competition

We face significant competition for the attraction of deposits and origination of loans. Our most direct competition for deposits has historically come from the several financial institutions operating in our market areas and, to a lesser extent, from other financial service companies such as brokerage firms, credit unions and insurance companies. We also face competition for investors’ funds from money market funds, mutual funds and other corporate and government securities. At June 30, 2017, which is the most recent date for which data is available from the FDIC, we held approximately 5.6% of the deposits in Hall County, which was the fifth largest market share out of the fifteen financial institutions with offices in Hall County. Banks owned by large bank holding companies also operate in our market areas. These institutions are significantly larger than us and, therefore, have significantly greater resources.

Our competition for loans comes primarily from financial institutions in our market areas, and, to a lesser extent, from other financial service providers such as mortgage companies and mortgage brokers. Competition for loans also comes from non‑depository financial service companies in the mortgage market, such as insurance companies, securities companies and specialty finance companies.

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We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered the barriers to market entry, allowed banks and other lenders to expand their geographic reach by providing services over the Internet and made it possible for non‑depository institutions to offer products and services that traditionally have been provided by banks. Changes in federal law permit affiliation among banks, securities firms and insurance companies, which promotes a competitive environment in the financial services industry. Competition for deposits and the origination of loans could limit our future growth.

Lending Activities

General.  Our principal lending activity is to originate commercial operating loans, commercial real estate loans, agricultural operating loans, agricultural real estate loans and one‑ to four‑family residential real estate loans. To a lesser extent, we also originate home equity loans, construction and land loans and consumer loans. As a long‑standing community lender, we believe that our knowledge of our communities allows us to compete effectively in commercial, agricultural and residential lending by emphasizing superior customer service and local underwriting, which we believe differentiates us from larger commercial banks in our market areas.

Loan Portfolio Composition.  The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated:

	At June 30,
	2017				2016				2015				2014				2013
	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)
Commercial:
Operating	$	20,139	8.4	%	$	15,356	7.7	%	$	14,967	8.3	%	$	18,138	11.4	%	$	16,968	13.1	%
Real estate		86,810	36.2	%		67,699	33.7	%		56,609	31.3	%		45,289	28.4	%		32,482	25.2	%
Agricultural:
Operating		26,739	11.2	%		22,943	11.4	%		27,230	15.1	%		24,884	15.6	%		18,420	14.3	%
Real estate		31,106	13.0	%		24,965	12.4	%		21,049	11.7	%		19,677	12.3	%		15,418	12.0	%
Residential real estate:
One- to four-family(1)		43,060	18.0	%		40,310	20.1	%		40,892	22.7	%		34,021	21.3	%		33,514	26.0	%
Home equity		11,748	4.9	%		12,645	6.3	%		10,761	6.0	%		9,669	6.1	%		6,667	5.2	%
Other loans:
Construction and land		16,176	6.8	%		13,210	6.6	%		5,844	3.2	%		5,044	3.2	%		2,437	1.9	%
Consumer		3,675	1.5	%		3,567	1.8	%		3,093	1.7	%		2,796	1.7	%		2,944	2.3	%
Total loans(2)		239,453	100.0	%		200,695	100.0	%		180,445	100.0	%		159,518	100.0	%		128,850	100.0	%
Other items:
Deferred loan origination costs, net		647				562				561				565				492
Allowance for loan losses		(3,555)				(2,947)				(2,583)				(2,574)				(2,293)
Loans, net	$	236,545			$	198,310			$	178,423			$	157,509			$	127,049

(1) At June 30, 2017, 2016, 2015, 2014, and 2013, this category of loans included $26.1million, $20.7 million, $18.6 million, $13.0 million, and $12.1 million, respectively, of loans collateralized by non‑owner occupied properties.

(2) There were no foreign loans for the periods presented.

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Loan Portfolio Maturities and Yields.  The following tables set forth certain information regarding the dollar amounts maturing and the interest rate sensitivity of our loan portfolio at June 30, 2017. Mortgages which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due.

Demand loans, loans having no stated repayment schedule or maturity and overdraft loans are reported as being due in one year or less. The schedule does not reflect the effects of possible prepayments or enforcement of due on sale clauses.

	At June 30, 2017
	Commercial—				Commercial—				Agricultural—
	Operating				Real Estate				Operating
			Weighted				Weighted				Weighted
			Average				Average				Average
	Amount		Rate		Amount		Rate		Amount		Rate
	(Dollars in thousands)
1 year or less	$	5,247	5.13	%	$	4,776	5.12	%	$	22,121	4.87	%
Greater than 1 to 3 years		3,324	4.66	%		14,885	4.38	%		993	4.93	%
Greater than 3 to 5 years		5,864	4.76	%		29,661	4.37	%		2,959	4.84	%
Greater than 5 to 10 years		3,347	5.11	%		23,036	4.34	%		666	4.76	%
Greater than 10 to 20 years		2,357	4.30	%		10,653	3.89	%		—	—	%
More than 20 years		—	—	%		3,799	4.12	%		—	—	%
Total	$	20,139	4.84	%	$	86,810	4.33	%	$	26,739	4.87	%

	At June 30, 2017
					Residential				Residential
	Agricultural—				Real Estate—				Real Estate—
	Real Estate				One- to Four-Family				Home Equity
			Weighted				Weighted				Weighted
			Average				Average				Average
	Amount		Rate		Amount		Rate		Amount		Rate
	(Dollars in thousands)
1 year or less	$	4,340	4.80	%	$	4,973	4.95	%	$	3,278	4.55	%
Greater than 1 to 3 years		874	4.39	%		5,695	4.48	%		2,830	4.67	%
Greater than 3 to 5 years		6,216	4.52	%		8,010	5.19	%		1,804	5.00	%
Greater than 5 to 10 years		13,051	4.55	%		11,237	4.33	%		470	5.10	%
Greater than 10 to 20 years		6,625	4.08	%		5,553	4.38	%		2,149	4.66	%
More than 20 years		—	—	%		7,592	4.58	%		1,217	4.34	%
Total	$	31,106	4.48	%	$	43,060	4.63	%	$	11,748	4.67	%

	At June 30, 2017
	Other—Construction
	and Land				Other—Consumer				Total
			Weighted				Weighted				Weighted
			Average				Average				Average
	Amount		Rate		Amount		Rate		Amount		Rate
	(Dollars in thousands)
1 year or less	$	7,614	4.65	%	$	204	4.53	%	$	52,553	4.87	%
Greater than 1 to 3 years		75	4.84	%		1,073	5.70	%		29,749	4.61	%
Greater than 3 to 5 years		1,354	4.29	%		2,140	5.52	%		58,008	4.62	%
Greater than 5 to 10 years		6,972	4.48	%		258	5.41	%		59,037	4.46	%
Greater than 10 to 20 years		161	4.50	%		—	—	%		27,498	4.13	%
More than 20 years		—	—	%		—	—	%		12,608	4.42	%
Total	$	16,176	4.54	%	$	3,675	5.51	%	$	239,453	4.57	%

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Fixed and Adjustable Rate Loan Schedule.  The following table sets forth at June 30, 2017, the dollar amount of all fixed‑rate and adjustable‑rate loans with a maturity date after June 30, 2018:

	At June 30, 2017 and
	Due after June 30, 2018
	Fixed		Adjustable		Total
	(Dollars in thousands)
Commercial:
Operating	$	10,620	$	4,272	$	14,892
Real estate		56,917		25,117		82,034
Agricultural:
Operating		4,221		397		4,618
Real estate		7,807		18,959		26,766
Residential real estate:
One- to four-family		18,092		19,995		38,087
Home equity		2,452		6,018		8,470
Other loans:
Construction and land		7,876		686		8,562
Consumer		3,375		96		3,471
Total loans	$	111,360	$	75,540	$	186,900

Commercial—Operating Loans.  At June 30, 2017, approximately $20.1 million, or 8.4% of our loan portfolio consisted of commercial operating loans, including commercial lines of credit and term loans. Our commercial lines of credit are generally used by our customers to finance short‑term working capital needs, like accounts receivable and inventory. Our commercial lines of credit generally are priced on an adjustable‑rate basis and may be secured or unsecured. We generally obtain personal guarantees with all commercial lines of credit. Business assets such as accounts receivable, inventory, equipment, furniture and fixtures may be used to secure lines of credit. Our lines of credit typically have a maximum term of 12 months. Our commercial term loans are generally used by our customers to fund longer‑term borrowing needs, such as purchasing equipment, property improvements or other fixed assets. We typically fix the maturity of a term loan to correspond to 80% of the useful life of any equipment purchased or 7 years, whichever is less. Term loans can be secured with a variety of collateral, including business assets such as equipment, furniture, fixtures or real estate.

At June 30, 2017, our largest lending relationship for commercial operating loans involved total loan balances of $996,000 and was secured by stock and business assets.  At June 30, 2017, the borrower in this relationship was performing in accordance with the required repayment terms.

Borrowers of commercial operating loans are required to supply current financial statements and tax returns. Additionally, some borrowers are required to produce cash flow projections which are updated on an annual basis. In addition, on larger loans, the loan officer responsible for the loan and/or our in‑house evaluator will perform an annual site visit, obtain financial statements and perform a financial review of the loan.

Unlike one‑ to four‑family residential real estate loans, which we generally originate 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, we typically originate commercial operating loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business or rental income produced by the property. As a result, the availability of funds for the repayment of commercial operating loans may be substantially dependent on the success of the business or rental property itself and the general economic environment. Therefore, commercial operating loans that we originate generally have greater credit risk than the one‑ to four‑family residential real estate loans that we originate or, generally, consumer loans. In addition, commercial loans often result in larger outstanding balances to single borrowers, or related groups of borrowers, and also generally require substantially greater evaluation and oversight efforts.

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Commercial—Real Estate Loans.  At June 30, 2017, approximately $86.8 million, or 36.2% of our loan portfolio consisted of commercial real estate loans. Our commercial real estate loans are secured primarily by office buildings, retail buildings, owner‑occupied offices, apartment buildings and developed lots. At June 30, 2017, our commercial real estate loans had an average loan balance of approximately $333,000. At June 30, 2017, our largest lending relationship for commercial real estate loans involved total loan balances of $4.9 million and was secured by commercial retail buildings.  At June 30, 2017, the borrower in this relationship was performing in accordance with the required repayment terms.

We offer both fixed‑rate and adjustable‑rate commercial real estate loans to our customers. At the present time, a large number of our customers are selecting a five‑year fixed‑rate loan product with a balloon payment due after five years. As a result, at June 30, 2017, 69.3% of our commercial real estate loans had fixed interest rates. The rates on our adjustable‑rate commercial real estate loans are generally tied to a variety of indices including the prime interest rate as reported in The Wall Street Journal. A portion of our commercial real estate loans represent permanent financing for borrowers who have completed real estate construction for which we previously provided construction financing.

In underwriting commercial real estate loans, we generally lend up to 70% of the property’s appraised value. We base our decisions to lend on the economic viability of the property and the creditworthiness of the borrower. In evaluating a proposed commercial real estate loan, we emphasize the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 1.25 times), computed after deduction for a vacancy factor and property expenses we deem appropriate. Personal guarantees are obtained from commercial real estate borrowers. We require title insurance insuring the priority of our lien, fire and extended coverage casualty insurance, and, if appropriate, flood insurance, in order to protect our security interest in the underlying property.

Commercial real estate loans generally carry higher interest rates and have shorter terms than one‑ to four‑family residential real estate loans. Commercial real estate loans, however, entail additional credit risks compared to one‑ to four‑family residential real estate loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income‑producing properties typically depends on the successful operation of the related real estate project, and thus may be subject to a greater extent to adverse conditions in the real estate market and in the general economy.

We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service). All commercial real estate loans are appraised by outside independent appraisers approved by the Board of Directors or by internal evaluations, where permitted by regulation. Personal guarantees generally are obtained from the principals of commercial real estate loans.

Agricultural—Operating Loans.  At June 30, 2017, approximately $26.7 million, or 11.2% of our loan portfolio, consisted of agricultural operating loans. These loans include seasonal crop operating loans that are used to fund the borrower’s crop production operating expenses; livestock operating and revolving loans used to purchase livestock for resale and related livestock production expense; and loans used to finance the purchase of machinery, equipment and breeding stock. Agricultural operating loans are originated at an adjustable‑ or fixed‑rate of interest and generally for a term of up to 12 months. In the case of agricultural operating loans secured by breeding livestock and/or farm equipment, such loans are originated at fixed rates of interest for a term of up to five years. At June 30, 2017, the average outstanding principal balance of our agricultural operating loans was approximately $107,000, excluding lines of credit with zero balances at this date.

At June 30, 2017, our largest lending relationship for agricultural operating loans involved total loan balances of $3.4 million and was secured by cattle. At June 30, 2017, the borrower in this relationship was performing in accordance with the required repayment terms.

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Borrowers of agricultural operating loans are required to supply current financial statements and tax returns. Additionally, some borrowers are required to produce cash flow projections which are updated on an annual basis. In addition, on larger loans, the loan officer responsible for the loan and/or our in‑house evaluator will perform an annual site visit, obtain financial statements and perform a financial review of the loan.

Unlike one‑ to four‑family residential real estate loans, which we generally originate 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, we typically originate agricultural operating loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s agricultural business. As a result, the availability of funds for the repayment of agricultural operating loans may be substantially dependent on the success of the business itself and the general economic environment. Therefore, agricultural operating loans that we originate generally have greater credit risk than the one‑ to four‑family residential real estate loans that we originate or, generally, consumer loans. In addition, agricultural operating loans often result in larger outstanding balances to single borrowers, or related groups of borrowers, and also generally require substantially greater evaluation and oversight efforts.

Our agricultural operating loans present an additional risk, as a significant number of our borrowers with these types of loans may qualify for relief under 11 U.S.C. Section 1201 et seq. of the United States Bankruptcy Code (generally known as Chapter 12‑Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income) (“Chapter 12”). Chapter 12, which was enacted by the United States Congress in response to the recession in agriculture in 1986, is designed specifically for the reorganization of financial obligations of family farmers.

Pursuant to Chapter 12, a family farmer may be permitted through an order of the Bankruptcy Court to modify a loan with Equitable Bank without the consent of Equitable Bank, including the following types of modifications: (1) the sale of a portion of the property that serves as collateral for a loan (typically grain or livestock) and the use of the cash proceeds for the borrower’s operating expenses (which reduces the overall value of the Bank’s collateral securing the loan); (2) non‑payment by the borrower of unsecured indebtedness; (3) a reduction in the amount of the loan to the current fair market value of secured property; (4) establishing a repayment schedule which extends the original repayment schedule for the loan; and (5) establishing a lower interest rate on the unpaid balance of the loan. Although we have had exposure to Chapter 12 since its enactment, we never have had a loan that we were required to modify involuntarily under Chapter 12.

Agricultural—Real Estate Loans.  At June 30, 2017, approximately $31.1 million, or 13.0% of our loan portfolio consisted of agricultural real estate loans, which are loans to finance the acquisition, development or refinancing of agricultural real estate. We consider a number of factors in originating agricultural real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the agricultural property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service).

We offer both fixed‑rate and adjustable‑rate agricultural real estate loans to our customers. At the present time, a large number of our customers are selecting a five‑year fixed‑rate loan product with a balloon payment due after five years. As a result, at June 30, 2017, 32.9% of our agricultural real estate loans had fixed rates of interest. Generally, our agricultural real estate loans amortize over periods not in excess of 20 years and have a loan‑to‑value ratio of 50%, although we will originate such loans with a maximum loan‑to‑value ratio of 65%. In recent years, with the price of the agricultural real estate in our market area, consistent with our conservative underwriting practices, the loan‑to‑value ratio on the majority of our agricultural real estate loans has not exceeded 50%.

We also originate agricultural real estate loans directly and through programs sponsored by the Farmers Home Administration, an agency of the United States Department of Agriculture (“FmHA”), which provides a partial guarantee on loans underwritten to FmHA standards.

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Agricultural real estate loans generally carry higher interest rates and have shorter terms than one‑to‑four‑family residential real estate loans. Agricultural real estate loans, however, entail additional credit risks compared to one‑ to four‑family residential real estate loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, payments on agricultural real estate loans are dependent on the successful operation or management of the farm property securing the loan. The success of the loan may also be affected by many factors outside the control of the borrower.

Weather presents one of the greatest risks to agricultural real estate lending as hail, drought, floods, or other conditions, can severely limit crop yields and thus impair loan repayments and the value of the underlying collateral. This risk can be reduced by the farmer with a variety of insurance coverages which can help to ensure loan repayment. For instance, we generally require farmers to obtain multi‑peril crop insurance coverage through a program partially subsidized by the Federal government. Grain and livestock prices also present a risk as prices may decline prior to sale resulting in a failure to cover production costs. These risks may be reduced by the farmer with the use of futures contracts or options to mitigate price risk. Another risk is the uncertainty of government programs and other regulations. During periods of low commodity prices, the income from government programs can be a significant source of cash to make loan payments and if these programs are discontinued or significantly changed, cash flow problems or defaults could result. Finally, many farms are dependent on a limited number of key individuals upon whose injury or death may result in an inability to successfully operate the farm.

At June 30, 2017 our largest lending relationship for agricultural real estate loans involved total loan balances of $3.8 million. At June 30, 2017, the borrower in this relationship was performing in accordance with the required repayment terms.

Like our agricultural operating loans, our agricultural real estate loans present the additional risks associated with Chapter 12 of the United States Bankruptcy Code. See “Agricultural—Operating Loans” above for additional information regarding Chapter 12.

Residential Real Estate—One‑ to Four‑Family Loans.  Historically, our primary lending consisted of originating one‑ to four‑family, owner‑occupied residential real estate loans, substantially all of which were secured by properties located in our market areas. Over the past several years, we have begun to shift our lending focus towards originating commercial and agricultural operating and real estate loans. Nevertheless, at June 30, 2017, approximately $43.1 million, or 18.0% of our loan portfolio, consisted of one‑ to four‑family residential real estate loans.

A portion of the housing stock in our market areas is comprised of two‑, three‑ and four‑unit properties, all of which are classified as one‑ to four‑family residential real estate loans. At June 30, 2017, of the $43.1 million of one‑ to four‑family residential real estate loans in our portfolio, $26.1 million, or 60.6% of this amount, were comprised of non‑owner occupied properties.

The average loan balance of one‑ to four‑family residential real estate loans held in our portfolio at June 30, 2017 was $79,000 and our largest outstanding balance at that date was $1.8 million which was secured by non-owner occupied residential properties located in Grand Island, Nebraska. At June 30, 2017, this loan was performing in accordance with it repayment terms.

We currently offer one‑ to four‑family residential real estate loans with terms up to 30 years that are generally underwritten according to Freddie Mac (“FHLMC”) guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed‑ and adjustable‑rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which as of June 30, 2017 was generally $424,100 for single‑family homes in our market area. We generally sell our one‑ to four‑family residential fixed‑rate real estate loans in the secondary market.

Our fixed‑rate one‑ to four‑family residential real estate loans include loans that generally amortize on a monthly basis over periods between 10 to 30 years. Fixed rate one‑ to four‑family residential real estate loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers have the right to

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refinance or prepay their loans. At June 30, 2017, 48.9% of the one‑ to four‑family residential real estate loans held in our portfolio (and not sold in the secondary market) were fixed‑rate loans.

Our adjustable‑rate one‑ to four‑family residential real estate loans generally consist of loans with initial interest rates fixed for one, three, or five years, and annual adjustments thereafter are indexed based on changes in the one‑year United States Treasury bill constant maturity rate. Our adjustable‑rate mortgage loans generally have an interest rate adjustment limit of 200 basis points per adjustment, with a maximum lifetime interest rate adjustment limit of 500 basis points. In the current low interest rate environment, we have not originated a significant dollar amount of adjustable‑rate mortgage loans.

Although adjustable‑rate one‑ to four‑family residential real estate loans may reduce, to an extent, our vulnerability to changes in market interest rates because they periodically re‑price, as interest rates increase, the required payments due from the borrower also increase (subject to rate caps), increasing the potential for default by the borrower. At the same time, the ability of the borrower to repay the loan and the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustments of the contractual interest rate are also limited by our maximum periodic and lifetime rate adjustments.

Regulations limit the amount we may lend relative to the appraised value of the real estate securing the loan, as determined by an appraisal of the property at the time the loan is originated. For borrowers who do not obtain private mortgage insurance (“PMI”), our lending policies limit the maximum loan‑to‑value ratio on both fixed‑rate and adjustable‑rate mortgage loans to 80% of the appraised value of the collateralized property, with the exception for a limited use product which allows for loans up to 90% with no PMI. For most one‑ to four‑family residential real estate loans with loan‑to‑value ratios of between 80% and 95%, we require the borrower to obtain PMI. For first mortgage loan products, we require the borrower to obtain title insurance. We also require homeowners’ insurance, fire and casualty, and, if necessary, flood insurance on properties securing real estate loans. We do not offer, and have never offered or invested in, one‑ to four‑family residential real estate loans specifically designed for borrowers with sub‑prime credit scores, including interest‑only, negative amortization or payment option adjustable‑rate mortgage loans.

Residential Real Estate—Home Equity Loans.  At June 30, 2017, home equity loans totaled approximately $11.7 million, or 4.9% of our loan portfolio, and are made up of lines of credit secured by owner‑occupied and non‑owner occupied one‑ to four‑family residences and second and third real estate mortgage loans. At June 30, 2017, the total unused commitments with respect to our home equity loans were $4.8 million. The average outstanding home equity loan balance at June 30, 2017 was $36,000 and our largest outstanding home equity loan balance at that date was $645,000, which was secured by residential property located in Grand Island, Nebraska. At June 30, 2017, this loan was performing in accordance with it repayment terms.

Home equity loans and home equity lines of credit are generally underwritten using the same criteria that we use to underwrite one‑ to four‑family residential real estate loans. We typically originate home equity loans and home equity lines of credit on the basis of the applicant’s credit history, an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan and the value of the collateral securing the loan. Home equity loans are offered with fixed and adjustable interest rates. Lines of credit also are offered with fixed and adjustable rates, which generally are indexed to the prime rate, and with a draw period up to five years. The loan‑to‑value ratio for our home equity loans is generally limited to 85% when combined with the first security lien, if applicable. The loan to value of our home equity lines of credit are generally limited to 85%, unless we hold the first mortgage. If we hold the first mortgage, we will permit a loan to value of up to 90% and adjust the interest rate and underwriting standards to compensate for the additional risk.

For all first lien position mortgage loans, we utilize outside independent appraisers. For second position mortgage loans where we also hold the existing first mortgage, we will use the lesser of the existing appraisal used in underwriting the first mortgage or assessed value. For all other second mortgage loans, we will use a third‑party service which gathers all data from real property tax offices and gives the property a low, middle and high value, together with similar properties for comparison. The middle value from the third‑party service will be the value used in underwriting. If the valuation method for the loan amount requested does not provide a value, or the value is not sufficient to support the loan request and it is determined that the borrower(s) is(are) credit worthy, a full appraisal will be ordered.

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Home equity loans have greater risk than one‑ to four‑family residential real estate loans secured by first‑position mortgages or deeds of trust. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure, after repayment of the senior mortgages, if applicable. When customers default on their loans, we attempt to work out the relationship in order to avoid foreclosure because 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. Moreover, decreases in real estate values could adversely affect our ability to fully recover the loan balance in the event of a default.

Other—Construction and Land Loans.  At June 30, 2017, construction and land loans totaled approximately $16.2 million, or 6.8% of our loan portfolio. We originate loans to individuals and, to a lesser extent, builders to finance the construction of residential dwellings. We also make construction loans for commercial development projects, including apartment buildings, restaurants, motels, shopping centers and owner‑occupied properties used for businesses. The average outstanding construction loan balance at June 30, 2017 was $330,000. Our largest lending relationship for construction loans at that date involved a $3.5 million commitment with nothing outstanding at June 30, 2017, which was secured by apartment buildings. At June 30, 2017, the borrower in this relationship was performing in accordance with the required repayment terms.

Our construction loans generally provide for the payment of interest only during the construction phase, which is usually 12 months for residential properties and 12 to 18 months for commercial properties. At the end of the construction phase, the loan generally converts to a permanent mortgage loan. Loans generally can be made with a maximum loan to value ratio of 80% on residential construction and 70% on commercial construction at the time the loan is originated. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser. We also will require an inspection of the property before disbursement of funds during the term of the construction loan.

Other—Consumer Loans.  We are authorized to make loans for a variety of personal and consumer purposes. As of June 30, 2017, consumer loans totaled approximately $3.7 million, or 1.5% of our loan portfolio, and consisted primarily of automobile, recreational vehicles and unsecured personal loans, as well as unsecured lines of credit and loans secured by deposit accounts. As of June 30, 2017, approximately $168,000 of our consumer loans were unsecured. The average outstanding consumer loan balance at June 30, 2017 was $6,000 and our largest outstanding consumer loan balance at that date was $65,000, which is secured by an automobile. At June 30, 2017, this loan was performing in accordance with it repayment terms.

Our procedure for underwriting consumer loans includes an assessment of the applicant’s credit history and ability to meet existing obligations and payments of the proposed loan, as well as an evaluation of the value of the collateral security, if any.

Consumer loans generally entail greater risk than one‑ to four‑family residential real estate loans, particularly in the case of loans that are unsecured or are secured by assets that tend to depreciate in value, such as automobiles. As a result, consumer loan collections are primarily 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. In these cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan, and the remaining value often does not warrant further substantial collection efforts against the borrower.

Loan Originations, Purchases, Sales and Servicing.  We benefit from a number of sources for our loan originations, including existing customers, borrowers, builders, real estate broker referrals, attorneys, and “walk‑in” customers. We also advertise in newspapers that are widely circulated in our market areas of Grand Island, North Platte and Omaha. Our loan origination activity may be affected adversely by a rising interest rate environment which may result in decreased loan demand. Other factors, such as the overall health of the local economy and competition from other financial institutions, can also impact our loan originations. Although we originate both fixed‑rate and adjustable‑rate loans, our ability to generate each type of loan depends upon borrower demand, market interest rates, borrower preference for fixed‑versus adjustable‑rate loans, and the interest rates offered on each type of loan by other lenders in our market area. These lenders include commercial banks, savings institutions, credit unions, and mortgage

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banking companies that also actively compete for local real estate loans. Accordingly, the volume of loan originations may vary from period to period.

The majority of the fixed rate residential loans that are originated each year meet the underwriting guidelines established by FHLMC. We sell the majority of originations of residential real estate loans into the secondary market. We continue to service them once they are sold. We sold 187 and 190 one‑ to four‑family residential real estate loans during the fiscal years ended June 30, 2017 and 2016, respectively.

From time to time, we also purchase loan participations in which we are not the lead lender. In these circumstances, we follow our customary loan underwriting and approval policies. At June 30, 2017, we had 9 purchased loan participations for which we were not the lead lender, which totaled $9.5 million. All purchased loan participations were performing in accordance with their terms at June 30, 2017. 

From time to time, we also sell loan participations in which we remain the lead lender. Participations are sold primarily when the total loan amount exceeds our legal lending limit or concentration limit. At June 30, 2017, we had 14 sold loan participations for which we remained the lead lender. The participated loans totaled $30.0 million, of which $8.0 million was retained by us and $22.0 million was sold to other financial institutions.

The following table shows our loan origination, purchase and repayment activities for the periods indicated.

	For the Year Ended
	June 30,
	2017		2016
	(in thousands)
Loans receivable at beginning of period	$	200,695	$	180,445
Originations by type:
Commercial:
Operating		30,909		16,626
Real estate		58,568		45,557
Agricultural:
Operating		48,951		46,389
Real estate		16,483		16,270
Residential real estate:
One- to four-family		53,347		38,016
Home equity		9,726		11,887
Other loans:
Construction and land		14,254		21,038
Consumer		3,428		3,633
Total loans originated		235,666		199,416
Loans purchased		6,928		3,038
Transfer to foreclosed assets		—		(239)
Loans sold		(33,721)		(27,977)
Charge-offs		(67)		(16)
Principal repayments		(170,048)		(153,972)
Loans receivable at end of period	$	239,453	$	200,695

Loan Approval Procedures and Authority.  Equitable Bank’s lending activities follow written, non‑discriminatory underwriting standards and loan origination policies established by management and the Board of Directors. Our policies are designed to provide loan officers with guidelines on acceptable levels of risk, given a broad range of factors. The loan approval process is intended to assess the borrower’s ability to repay the loan, the viability of the loan and the adequacy of the value of the property that will secure the loan, if applicable.

The Board of Directors grants loan officers individual lending authority to approve extensions of credit. The level of authority for loan officers varies based upon the loan type, total relationship, form of collateral and risk rating of

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the borrower. Each loan officer is charged with the responsibility of achieving high credit standards. Individual lending authority can be increased, suspended or removed by the Board of Directors, as recommended by the President or Chief Lending Officer.

If a loan relationship is in excess of any individual loan officer’s lending authority, the extension of credit must be referred to the Branch Loan Committee for each market, which consists of all loan officers of that branch. Each Branch Loan Committee can approve loan relationships up to $500,000. Loan relationships over $500,000 are referred to our Senior Loan Committee, which consists of all Market Presidents and our Chief Executive Officer. The Senior Loan Committee has the authority to approve loan relationships up to $750,000. Loan relationships above $750,000 are referred to the Executive Committee of the Board of Directors or the entire Board of Directors. The Executive Committee or the entire Board of Directors must approve all loans over the limits described above. In addition, the Executive Committee ratifies all consumer loan relationships over $100,000 and all commercial loan relationships over $500,000.

In some instances for all loan types, it may be appropriate to originate or purchase loans that are exceptions to the guidelines and limits established within the lending policy described above and below. In general, exceptions to the lending policy do not significantly deviate from the guidelines and limits established within the lending policy and, if there are exceptions, they are clearly noted as such and specifically identified in loan approval documents.

Loans to One Borrower.  Federal savings banks are subject to the same loans‑to‑one‑borrower limits as those applicable to national banks, which restrict loans to one borrower to an amount equal to 15% of unimpaired capital and unimpaired surplus on an unsecured basis, and an additional amount equal to 10% of unimpaired capital and unimpaired surplus if the loan is secured by readily marketable collateral (generally, financial instruments and bullion, but not real estate). At June 30, 2017, our lending limit was $4.6 million and $7.7 million for loans secured by readily marketable collateral. At June 30, 2017, our largest lending relationship to one borrower totaled $4.6 million, which was secured by commercial retail buildings and performing in accordance with its repayment terms as of June 30, 2017. Our second largest lending relationship at June 30, 2017 was $4.4 million and is secured by commercial real estate. This lending relationship also was performing in accordance with its terms at June 30, 2017.

Asset Quality

Loan Delinquencies and Collection Procedures.  When a loan becomes delinquent, we make attempts to contact the borrower to determine the cause of the delayed payments and seek a reasonable solution to permit the loan to be brought current within a reasonable period of time. The outcome can vary with each individual borrower. In the case of mortgage loans and consumer loans, a late notice is sent 15 days after an account becomes delinquent. If delinquency persists, notices are sent at the 30 day delinquency mark, the 45 day delinquency mark and the 60 day delinquency mark. After 15 days, we attempt to establish telephone contact with the borrower. In the case of mortgage loans, included in every late notice is a letter that includes information regarding home‑ownership counseling. As part of a workout agreement, we will accept partial payments during the month in order to bring the account current. If attempts to reach an agreement are unsuccessful and the customer is unable to comply with the terms of the workout agreement, we will review the account to determine if foreclosure is warranted, in which case, consistent with Nebraska law, we send a 90 day notice of foreclosure and then a 30 day notice before legal proceedings are commenced. A consumer final demand letter is sent in the case of a consumer loan. In the case of commercial loans and commercial mortgage loans, we follow a similar notification practice with the exception of the previously mentioned information on home‑ownership counseling. In addition, commercial loans do not require 90 day notices of foreclosure. Generally, commercial borrowers only receive 10 day notices before legal proceedings can be commenced. Commercial loans may experience longer workout times which may trigger a need for a loan modification that could meet the requirements of a troubled debt restructured loan.

Impaired and Non‑Performing Loans.  A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement.

A loan is non‑performing when it is greater than 90 days past due. Some loans may be included in both categories, whereas other loans may only be included in one category. Specific allocations are made for loans that are determined to

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be impaired. Our policy requires that all non‑homogeneous loans past due greater than 90 days be classified as impaired and non‑performing. However, loans past due less than 90 days may also be classified as impaired when management does not expect to collect all amounts due according to the contractual terms of the loan agreement. Impairment is measured by determining the present value of expected future cash flows or, for collateral‑dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses as compared to the loan carrying value.

As of June 30, 2017, our total non‑accrual loans were $2.4 million, or 1.00% of total loans, compared to $1.8 million, or 0.90% of total loans, at June 30, 2016. At June 30, 2017, our largest non‑accrual loan was a commercial real estate loan with an outstanding balance of $641,000.

Troubled Debt Restructurings.  Troubled debt restructurings are loan restructurings in which we, for economic or legal reasons related to an existing borrower’s financial difficulties, grant a concession to the debtor that we would not otherwise consider. Typically, a troubled debt restructuring involves a modification of terms of a debt, such as reduction of the stated interest rate for the remaining original life of the debt or extension of the maturity date. We consider modifications only after analyzing the borrower’s current repayment capacity, evaluating the strength of any guarantors based on documented current financial information, and assessing the current value of any collateral pledged. These modifications are made only when there is a reasonable and attainable workout plan that has been agreed to by the borrower and that is in our best interests. No additional loan commitments were outstanding to our troubled debt restructured borrowers at June 30, 2017.

The following table sets forth our troubled debt restructurings by concession type and amount at the dates indicated:

	At June 30,
	2017			2016			2015			2014			2013
	(in thousands)
Extension of maturity	$	2,875	(1)	$	2,688	(3)	$	2,619	(5)	$	2,243	(7)	$	5,263	(9)
Reduced rate below market		1,690	(2)		1,787	(4)		1,890	(6)		2,740	(8)		2,991	(10)
Total troubled debt restructurings	$	4,565		$	4,475		$	4,509		$	4,983		$	8,254

(1) $2.1 million of the troubled debt restructurings of this concession type were non‑accruing.

(2) $55,000 of the troubled debt restructurings of this concession type were non‑accruing.

(3) $1.4 million of the troubled debt restructurings of this concession type were non‑accruing.

(4) $66,000 of the troubled debt restructurings of this concession type were non‑accruing.

(5) $1.0 million of the troubled debt restructurings of this concession type were non‑accruing.

(6) $76,000 of the troubled debt restructurings of this concession type were non‑accruing.

(7) $326,000 of the troubled debt restructurings of this concession type were non‑accruing.

(8) $726,000 of the troubled debt restructurings of this concession type were non‑accruing.

(9) $3.9 million of the troubled debt restructurings of this concession type were non‑accruing.

(10) $509,000 of the troubled debt restructurings of this concession type were non‑accruing.

Loans on non‑accrual status at the date of modification are initially classified as non‑accrual troubled debt restructurings. At June 30, 2017, we had $2.1 million in non‑accruing troubled debt restructurings. Our policy provides that troubled debt restructured loans are returned to accrual status after a period of satisfactory and reasonable future payment performance under the terms of the restructuring. Satisfactory payment performance is generally no less than six consecutive months of timely payments and demonstrated ability to continue to repay. At June 30, 2017 and 2016, we had $2.5 million and $3.1 million in accruing troubled debt restructurings, respectively. As of June 30, 2017, no loans that were modified as troubled debt restructurings within the previous twelve months defaulted after their restructure.

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Non‑Performing Assets.  The following table sets forth the amounts and categories of our non‑performing assets in our loan portfolio at the dates indicated:

	At June 30,
	2017			2016			2015			2014			2013
	(in thousands)
Non-accrual loans:
Commercial:
Operating	$	13		$	—		$	20		$	110		$	163
Real estate		—			38			38			39			—
Agricultural:
Operating		7			7			11			—			—
Real estate		157			178			242			—			27
Residential real estate:
One- to four-family		7			92			40			50			232
Home equity		54			12			—			22			—
Other loans:
Construction and land		—			—			—			—			—
Consumer		24			4			—			—			—
Total non-accrual loans		262			331			351			221			422
Non-accruing troubled debt restructured loans:
Commercial:
Operating		141			97			279			441			172
Real estate		641			54			183			200			—
Agricultural:
Operating		—			—			—			—			—
Real estate		701			701			230			—			—
Residential real estate:
One- to four-family		621			596			402			402			1,787
Home equity		16			18			20			—			23
Other loans:
Construction and land		—			—			—			—			2,440
Consumer		—			3			6			9			13
Total non-accruing troubled debt restructured loans		2,120			1,469			1,120			1,052			4,435
Total non-performing loans		2,382			1,800			1,471			1,273			4,857
Foreclosed assets:
Foreclosed commercial real estate loans		223			462			336			336			1,557
Foreclosed agricultural real estate loans		—			—			—			—			—
Foreclosed residential real estate loans		—			—			—			—			—
Foreclosed other assets		—			—			14			77			—
Total foreclosed assets		223			462			350			413			1,557
Total non-performing assets	$	2,605		$	2,262		$	1,821		$	1,686		$	6,414
Accruing troubled debt restructured loans:
Commercial:
Operating	$	75		$	71		$	30		$	44		$	434
Real estate		—			35			—			2,168			2,103
Agricultural:
Operating		—			1			—			—			—
Real estate		—			—			—			—			—
Residential real estate:
One- to four-family		2,362			2,840			3,294			1,716			1,206
Home equity		8			59			63			—			71
Other loans:
Construction and land		—			—			—			—			—
Consumer		—			—			2			3			5
Total accruing troubled debt restructured loans	$	2,445		$	3,006		$	3,389		$	3,931		$	3,819
Ratios:
Non-performing loans to total loans		0.99	%		0.90	%		0.82	%		0.80	%		3.77	%
Non-performing assets to total assets		1.03	%		1.00	%		0.85	%		0.93	%		3.85	%

For the fiscal year ended June 30, 2017, gross interest income which would have been recorded had the non‑performing loans been current in accordance with their original terms amounted to $122,000. We recognized $45,000 of interest income on such loans during the fiscal year ended June 30, 2017.

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Foreclosed assets.  Foreclosed assets consist of property acquired through formal foreclosure, in‑substance foreclosure or by deed in lieu of foreclosure, and are recorded at fair value less estimated costs to sell, establishing a new cost basis. Write‑downs to fair value, which are required at the time of foreclosure, are charged to the allowance for loan losses. After transfer, adjustments to the carrying value of the properties that result from subsequent declines in value are charged to operations in the period in which the declines occur. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the initial cost basis. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as, changes in absorption rates and market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition. Either change could result in adjustment to lower the property value estimates indicated in the appraisals.

For the year ended June 30, 2017, no loans were transferred into foreclosed assets. For the year ended June 30, 2016, one loan was transferred to foreclosed assets in the amount of $239,000.  We had $223,000 and $462,000 in foreclosed assets at June 30, 2017 and 2016, respectively.

Delinquent Loans.  At June 30, 2017, we had one loan for $31 past due 61 days or more and accruing which is unsecured.  At June 30, 2016 we had one loan for $24,000 past due 61 days or more and accruing.  This loan was secured by residential property.  At June 30, 2015, 2014, 2013 we had no loans 61 days or more past due and still accruing.

Classified Assets.  Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the OCC to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific allowance for loan losses is not warranted. Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.

When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover losses that were both probable and reasonable to estimate. General allowances represent allowances which have been established to cover accrued losses associated with lending activities that were both probable and reasonable to estimate, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge‑off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific allowances.

In connection with the filing of our periodic regulatory reports and in accordance with our classification of assets policy, we continuously assess the quality of our loan portfolio and we regularly review the problem loans in our loan portfolio to determine whether any loans require classification in accordance with applicable regulations. Loans are listed on the “watch list” initially because of emerging financial weaknesses even though the loan is currently performing as agreed, or delinquency status, or if the loan possesses weaknesses although currently performing. Management reviews the status of our loan portfolio delinquencies, by product types, with the full Board of Directors on a monthly basis. Individual classified loan relationships are discussed as warranted. If a loan deteriorates in asset quality, the classification is changed to “special mention,” “substandard,” “doubtful” or “loss” depending on the circumstances and the evaluation. Generally, loans 90 days or more past due are placed on nonaccrual status and classified “substandard.”

We also employ a risk grading system for our loans to help assure that we are not taking unnecessary and/or unmanageable risk. The primary objective of the loan risk grading system is to establish a method of assessing credit risk to further enable management to measure loan portfolio quality and the adequacy of the allowance for loan losses.

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The following table sets forth our amounts of classified loans and loans designated as special mention as of June 30, 2017 and 2016. The classified loans totaled $4.4 million at June 30, 2017 and included $2.4 million of nonperforming loans.

	At June 30,
	2017		2016
	(in thousands)
Classification of loans:
Substandard	$	5,719	$	3,041
Doubtful		—		—
Loss		—		—
Total classified loans	$	5,719	$	3,041
Special Mention	$	2,351	$	830

Allowance for Loan Losses.  The following table sets forth information regarding our allowance for loan losses and other ratios at or for the dates indicated.

	For the Year ended June 30,
	2017			2016			2015			2014			2013
	(Dollars in thousands)
Balance at beginning of period	$	2,947		$	2,583		$	2,574		$	2,293		$	2,286
Charge-offs:
Commercial:
Operating		—			—			(406)			(65)			(9)
Real estate		(55)			—			—			—			—
Agricultural:
Operating		—			—			—			—			—
Real estate		—			—			—			—			—
Residential real estate:
One- to four-family		—			—			—			(11)			(53)
Home equity		—			—			—			—			—
Other loans:
Construction and land		—			—			—			—			(33)
Consumer		(11)			(13)			(10)			(14)			(2)
Total charge-offs		(66)			(13)			(416)			(90)			(97)
Recoveries:
Commercial:
Operating		23			66			36			367			74
Real estate		1			29			—			—			—
Agricultural:
Operating		—			—			—			—			—
Real estate		—			—			—			—			—
Residential real estate:
One- to four-family		3			2			14			2			18
Home equity		—			—			—			—			—
Other loans:
Construction and land		—			—			931			678			104
Consumer		3			5			2			5			5
Total recoveries		30			102			983			1,052			201
Net recoveries (charge-offs)		(36)			89			567			962			104
Provision for loan losses		644			275			(558)			(681)			(97)
Balance at end of period	$	3,555		$	2,947		$	2,583		$	2,574		$	2,293
Ratios:
Net recoveries (charge-offs) during the period to average loans outstanding during the period		(0.0)	%		0.0	%		0.3	%		0.7	%		0.1	%
Net recoveries (charge-offs) during the period to non-performing loans at end of period		(1.5)	%		4.9	%		38.5	%		75.6	%		2.1	%
Allowance for loan losses to non-performing loans at end of period		149.2	%		163.7	%		175.6	%		202.2	%		47.2	%
Allowance for loan losses to total loans at end of period		1.5	%		1.5	%		1.4	%		1.6	%		1.8	%

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is

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increased by the provision for loan losses, and decreased by charge‑offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Non‑residential consumer loans are generally charged off no later than 120 days past due on a contractual basis, unless productive collection efforts are providing results. Consumer loans may be charged off earlier in the event of bankruptcy, or if there is an amount that is deemed uncollectible. No portion of the allowance for loan losses is restricted to any individual loan product and the entire allowance is available to absorb any and all loan losses.

The allowance is based on two components, which are: (i) specific reserves for impaired loans; and (ii) a general valuation allowance for the remainder of the loan portfolio.

The first component is the specific reserves that relate to loans that are classified as impaired. For these loans, an allowance is established when the discounted cash flows or collateral value of the impaired loan are lower than the carrying value of that loan. A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Impairment is measured by either the present value of the expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral if the loan is collateral dependent. The majority of our loans utilize the fair value of the underlying collateral. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and shortfalls on a case‑by case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and reason for the delay, the borrower’s prior payment record and the amount of shortfall in relation to what is owed. One‑ to four‑family residential real estate loans and consumer installment loans are considered to be homogeneous and, therefore, are not separately evaluated for impairment unless they are considered troubled debt restructurings. A loan is considered to be a troubled debt restructuring when, to maximize the recovery of the loan we modify the borrower’s existing loan terms and conditions in response to financial difficulties experienced by the borrower.

The second component of the allowance for loan losses is the general valuation allowance. The general valuation allowance is determined by historical loss experience and consideration of a variety of current factors including, but not limited to; levels of and trends in delinquencies and impaired loans; levels of and trends in charge‑offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision based on new information as it becomes known. 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.

In addition, the OCC, as an integral part of its examination process, periodically reviews our allowance for loan losses and may require us to recognize additions to the allowance based on their judgments about information available at the time of the examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, we believe the current level of the allowance for loan losses is adequate.

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Allocation of the Allowance for Loan Losses.  The following table presents our allocation of the allowance for loan losses by loan category and the percentage of loans in each category to total loans at the periods indicated. Management believes that the allowance can be allocated by category only on an approximate basis. The allocation of the allowance by category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category.

	At June 30,
	2017						2016						2015						2014						2013
					Percent of						Percent of						Percent of						Percent of						Percent of
					Loans in						Loans in						Loans in						Loans in						Loans in
			Loan		Each				Loan		Each				Loan		Each				Loan		Each				Loan		Each
	Allowance		Amounts		Category		Allowance		Amounts		Category		Allowance		Amounts		Category		Allowance		Amounts		Category		Allowance		Amounts		Category
	for Loan		by		to Total		for Loan		by		to Total		for Loan		by		to Total		for Loan		by		to Total		for Loan		by		to Total
	Losses		Category		Loans		Losses		Category		Loans		Losses		Category		Loans		Losses		Category		Loans		Losses		Category		Loans
	(Dollars in thousands)
Commercial:
Operating	$	333	$	20,139	8.4	%	$	255	$	15,356	7.7	%	$	272	$	14,967	8.3	%	$	489	$	18,138	11.4	%	$	375	$	16,968	13.1	%
Real estate		1,370		86,810	36.2	%		1,082		67,699	33.7	%		852		56,609	31.3	%		748		45,289	28.4	%		635		32,482	25.2	%
Agricultural:
Operating		422		26,739	11.2	%		362		22,943	11.4	%		403		27,230	15.1	%		359		24,884	15.6	%		251		18,420	14.3	%
Real estate		496		31,106	13.0	%		376		24,965	12.4	%		294		21,049	11.7	%		287		19,677	12.3	%		200		15,418	12.0	%
Residential real estate:
One- to four-family		506		43,060	18.0	%		486		40,310	20.1	%		480		40,892	22.7	%		432		34,021	21.3	%		606		33,514	26.0	%
Home equity		150		11,748	4.9	%		169		12,645	6.3	%		164		10,761	6.0	%		154		9,669	6.1	%		112		6,667	5.2	%
Other loans:
Construction and land		222		16,176	6.8	%		164		13,210	6.6	%		73		5,844	3.2	%		68		5,044	3.2	%		80		2,437	1.9	%
Consumer		56		3,675	1.5	%		53		3,567	1.8	%		45		3,093	1.7	%		37		2,796	1.7	%		34		2,944	2.3	%
Total loans	$	3,555	$	239,453	100.0	%	$	2,947	$	200,695	100.0	%	$	2,583	$	180,445	100.0	%	$	2,574	$	159,518	100.0	%	$	2,293	$	128,850	100.0	%

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Investment Activities

General.  We are permitted under federal law to invest in various types of liquid assets, including U.S. Government obligations, securities of various federal agencies and of state and municipal governments, deposits at the FHLB of Topeka, certificates of deposit at federally insured institutions, certain bankers’ acceptances and federal funds. Within certain regulatory limits, we also may invest a portion of our assets in commercial paper and corporate debt securities. We are also required to maintain an investment in stock of the FHLB of Topeka.

Securities are categorized as “held to maturity,” “trading” or “available for sale,” based on management’s intent as to the ultimate disposition of each security. Debt securities are classified as “held to maturity” and reported in financial statements at amortized cost only if we have the positive intent and ability to hold these securities to maturity. Securities that might be sold in response to changes in market interest rates, changes in the security’s prepayment risk, increases in loan demand, or other similar factors cannot be classified as “held to maturity.”

Trading securities are carried at fair value with unrealized gains and losses recorded through earnings. We typically do not use a trading account with the intent to purchase and sell securities. Debt and equity securities not classified as “held to maturity” or “trading” are classified as “available for sale.” These securities are reported at fair value, and unrealized gains and losses on the securities are excluded from earnings and reported, net of deferred taxes, as a separate component of equity. None of our securities are classified as trading securities.

All of our securities carry market risk insofar as increases in market rates of interest may cause a decrease in their fair value. Investments in securities are made based on certain considerations, which include the interest rate, tax considerations, yield, settlement date and maturity of the security, our liquidity position, and anticipated cash needs and sources. The effect that the proposed security would have on our credit and interest rate risk and risk‑based capital is also considered. We purchase securities to provide necessary liquidity for day‑to‑day operations, and when investable funds exceed loan demand.

Generally, our investment policy is to invest funds in various categories of securities and maturities based upon our liquidity needs, asset/liability management policies, investment quality, marketability and performance objectives. The Board of Directors reviews our securities portfolio on a monthly basis.

Securities classified as held to maturity totaled $736,000 at June 30, 2017; $136,000 of this amount was mortgage‑backed securities.  At June 30, 2017, we had securities classified as available for sale of $1.4 million at amortized cost, of which $440,000 were mortgage‑backed securities. Mortgage‑backed securities are discussed below. 

We also have a $453,000 investment in FHLB of Topeka stock at June 30, 2017, which is classified separately from securities due to the restrictions on sale or transfer. For further information regarding our securities portfolio, see Note 2 to the consolidated financial statements.

Municipal Obligations.  At June 30, 2017, our municipal securities portfolio totaled $600,000 and was comprised of taxable bonds issued by cities and other political subdivisions in Nebraska. At June 30, 2017, all of our municipal securities were classified as held to maturity. At this date, none of these securities had maturities of more than 10 years.

Mortgage‑Backed Securities.  Mortgage‑backed securities represent a participation interest in a pool of one‑ to four‑family or multi‑family mortgages. The mortgage originators use intermediaries (generally U.S. government agencies and government‑sponsored enterprises) to pool and repackage the participation interests in the form of securities, with investors such as Equitable Bank receiving the principal and interest payments on the mortgages. Such U.S. government agencies and government sponsored enterprises guarantee the payment of principal and interest to investors.

Mortgage‑backed securities are typically issued with stated principal amounts, and the securities are backed by pools of mortgages that have loans with interest rates that are within a specific range and have varying maturities. The characteristics of the underlying pool of mortgages, i.e., fixed‑rate or adjustable‑rate, as well as prepayment risk, are

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passed on to the certificate holder. The life of a mortgage‑backed pass‑through security thus approximates the life of the underlying mortgages. Our mortgage‑backed securities consist of Ginnie Mae securities.

At June 30, 2017, mortgage‑backed securities represented 0.2% of our total assets, of which $442,000 were available for sale and $136,000 were held to maturity. At June 30, 2017, $578,000, or 100% of our mortgage‑backed securities had fixed rates of interest. During the fiscal year ended June 30, 2017 there was no purchases of mortgage-back securities.  During the fiscal year ended June 30, 2016 one mortgage-back security was purchased for approximately $469,000.

Mortgage‑backed securities generally yield less than the mortgage loans underlying such securities because of their payment guarantees or credit enhancements, which offer nominal credit risk to the security holder. In addition, mortgage‑backed securities are more liquid than individual mortgage loans and we may use them to collateralize borrowings or other obligations of Equitable Bank.

U.S. Government-sponsored agency. At June 30, 2017, the carrying value of our portfolio of United States Government-sponsored agency  securities totaled $969,000 and were all classified as available-for-sale.  While these securities generally provide lower yields than other investments in our securities portfolio, we maintain these investments, to the extent appropriate for liquidity purposes, for pledging for public funds deposits.

Amortized Cost and Estimated Fair Value of Securities.  The following table sets forth certain information regarding the amortized cost and estimated fair values of our securities as of the dates indicated.

	At June 30,
	2017				2016				2015
	Amortized		Estimated		Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(Dollars in thousands)
Investment securities held to maturity:
Municipal obligations	$	600	$	600	$	602	$	606	$	3,017	$	3,021
Ginnie Mae		136		146		180		195		260		278
Total investment securities held to maturity		736		746		782		801		3,277		3,299
Investment securities available for sale:
U.S. Government-sponsored agency		987		969		—		—		—		—
Ginnie Mae		440		442		658		665		426		420
Total investment securities available for sale		1,427		1,411		658		665		426		420
Total investment securities	$	2,163	$	2,157	$	1,440	$	1,466	$	3,703	$	3,719

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Carrying Values, Yields and Maturities.  The following tables set forth certain information regarding the carrying value, weighted average yields and contractual maturities of our securities portfolio as of June 30, 2017. Adjustable‑rate mortgage‑backed securities are included in the period in which interest rates are next scheduled to adjust.

	At June 30, 2017
					More than One Year
	One Year or Less				Through Five Years
			Weighted				Weighted
	Amortized		Average		Amortized		Average
	Cost		Yield		Cost		Yield
	(Dollars in thousands)
Investment securities held to maturity:
Municipal obligations(1)	$	—	—	%	$	600	3.20	%
Ginnie Mae		—	—	%		—	—	%
Total investment securities held to maturity		—	—	%		600	3.20	%
Investment securities available for sale:
U.S. Government-sponsored agency		—	—	%		—	—	%
Ginnie Mae		—	—	%		—	—	%
Total investment securities available for sale		—	—	%		—	—	%
Total investment securities	$	—	—	%	$	600	3.20	%

(1) Yield is stated on a pre‑tax basis.

	At June 30, 2017
	More than Five Years
	Through Ten Years				More than Ten Years
			Weighted				Weighted
	Amortized		Average		Amortized		Average
	Cost		Yield		Cost		Yield
	(Dollars in thousands)
Investment securities held to maturity:
Municipal obligations	$	—	—	%	$	—	—	%
Ginnie Mae		—	—	%		136	4.62	%
Total investment securities held to maturity		—	—	%		136	4.62	%
Investment securities available for sale:
U.S. Government-sponsored agency		987	1.70	%		—	—
Ginnie Mae		—	—	%		440	3.23	%
Total investment securities available for sale		987	1.70	%		440	3.23	%
Total investment securities	$	987	1.70	%	$	576	3.56	%

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	At June 30, 2017
	Total Securities
					Weighted
	Amortized		Estimated		Average
	Cost		Fair Value		Yield
Investment securities held to maturity:
Municipal obligations	$	600	$	600	3.20	%
Ginnie Mae		136		146	4.62	%
Total investment securities held to maturity		736		746	3.46	%
Investment securities available for sale:
U.S. Government-sponsored agency		987		969	1.70	%
Ginnie Mae		440		442	3.23	%
Total investment securities available for sale		1,427		1,411	2.17	%
Total investment securities	$	2,163	$	2,157	2.61	%

Sources of Funds

General.  Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also rely on advances from the FHLB of Topeka and Promontory Products as a form of brokered deposits. In addition to deposits and borrowings, we derive funds from scheduled loan payments, investment maturities, loan prepayments, retained earnings and income on interest earning assets. While scheduled loan payments and income on interest earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing market interest rates, economic conditions and competition from other financial institutions.

Deposits.  A majority of our depositors are persons or businesses who work or reside or operate in Hall, Lincoln and Douglas Counties in Nebraska. We offer a selection of deposit products, including checking, savings, money market deposit accounts, and certificates of deposit. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. We establish interest rates, maturity terms, service fees and withdrawal penalties on a periodic basis. Management determines the rates and terms based on rates paid by competitors, our need for funds or liquidity, overall growth goals and federal and state regulations. The flow of deposits is influenced significantly by general economic conditions, changes in interest rates and competition. The variety of deposit accounts that we offer allows us to be competitive in generating deposits and to respond with flexibility to changes in our customers’ demands. We believe that deposits are a stable source of funds, but our ability to attract and maintain deposits at favorable rates will be affected by market conditions, including competition and prevailing interest rates.

The Promontory network is a form of brokered deposit program. In addition to offering depositors enhanced FDIC insurance coverage, being a participant in the Promontory network allows us to fund our balance sheet through CDARS’ One‑Way Buy program. This program uses a competitive bid process for available deposits at specified terms. These deposits work well for us because of their weekly availability, coupled with their short term, which allows us to more closely mirror our funding needs. We believe this arrangement is a viable source of funding provided that we maintain our “well‑capitalized” status. Brokered deposit holdings are limited to 10% of reported total assets or $25.4 million as of June 30, 2017. At June 30, 2017, brokered deposits totaled $6.4 million (all of which are in products with the Promontory network). At June 30, 2017, we had $46.1 million in total time deposits.

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Deposit Accounts.  The following tables set forth the dollar amount of savings deposits in the various types of deposit programs we offered as of and for the dates indicated:

	At or for the Year ended June 30,
	2017								2016
	Average						Weighted		Average						Weighted
							Average								Average
	Balance		Amount		Percent		Rate		Balance		Amount		Percent		Rate
	(Dollars in thousands)
Deposit type:
Interest-bearing NOW	$	46,188	$	49,253	23.5	%	0.41	%	$	43,122	$	42,734	22.8	%	0.38	%
Money market		62,755		67,039	32.1	%	0.77	%		58,471		60,352	32.3	%	0.69	%
Savings		15,705		17,104	8.2	%	0.22	%		14,305		14,870	8.0	%	0.23	%
Certificates of deposit		45,893		46,116	22.1	%	1.14	%		45,669		44,710	23.9	%	0.96	%
Noninterest-bearing demand		26,383		29,546	14.1	%	—	%		23,220		24,296	13.0	%	—	%
Total deposits	$	196,924	$	209,058	100.0	%	0.61	%	$	184,787	$	186,962	100.0	%	0.56	%

	At or for the Year ended June 30, 2015
	Average						Weighted
	Balance		Amount		Percent		Average Rate
	(Dollars in thousands)
Deposit type:
Interest-bearing NOW	$	39,699	$	41,227	23.5	%	0.39	%
Money market		44,206		51,319	29.4	%	0.66	%
Savings		12,826		13,076	7.5	%	0.24	%
Certificates of deposit		47,538		47,368	27.1	%	0.95	%
Noninterest-bearing demand		22,426		21,779	12.5	%	—	%
Total deposits	$	166,695	$	174,769	100.0	%	0.56	%

Maturities of Certificates of Deposit Accounts.  The following table sets forth the amount and maturities of certificates of deposit accounts at the dates indicated:

	At June 30, 2017
					Over One
	Less than		Six Months		Year to		Over				Percent of
	Six Months		to One Year		Three Years		Three Years		Total		Total
	(Dollars in thousands)
Interest Rate:
0.50% and below	$	3,791	$	4,792	$	1,162	$	1,107	$	10,852	23.5	%
0.51% to 1.00%		1,392		1,772		6,775		578		10,517	22.8	%
1.01% to 2.00%		3,977		5,095		11,291		2,749		23,112	50.1	%
2.01% to 3.00%		—		1,179		200		256		1,635	3.6	%
Total	$	9,160	$	12,838	$	19,428	$	4,690	$	46,116	100.0	%

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As of June 30, 2017, the aggregate amount of outstanding certificates of deposit at Equitable Bank in amounts greater than or equal to $100,000 was approximately $22.2 million. The following table presents the maturity of these certificates of deposit at such date.

	At June 30,
Maturity Period	2017
	(in thousands)
Less than three months	$	970
Three to six months		2,916
Six months to one year		5,610
Over one year to three years		10,995
Over three years		1,711
Total	$	22,202

The following table sets forth certificates of deposit classified by interest rate as of the dates indicated.

	At June 30,
	2017		2016
	(in thousands)
Interest Rate:
0.50% and below	$	10,852	$	14,882
0.51% to 1.00%		10,517		10,654
1.01% to 2.00%		23,112		18,985
2.01% to 3.00%		1,635		189
Total	$	46,116	$	44,710

Borrowings.  We may obtain advances from the FHLB of Topeka upon the security of the common stock we own in the FHLB of Topeka and our qualifying residential real estate loans and mortgage‑backed securities, provided certain standards related to creditworthiness are met. These advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. FHLB advances are generally available to meet seasonal and other withdrawals of deposit accounts and to permit increased lending. The following table sets forth information with respect to our FHLB advances, which were our only outstanding borrowings for the periods indicated.

	At or for the Year Ended June 30,
	2017			2016			2015
	(in thousands)
Federal Home Loan Bank Advances:
Maximum outstanding at any month end	$	10,045		$	—		$	12,229
Balance at the end of period		6,745			—			—
Average balance during period		3,717			—			6,556
Weighted average interest rate at the end of period		1.24	%		—	%		—	%
Weighted average interest rate during period		0.98	%		—	%		3.67	%

Personnel

As of June 30, 2017, we had 65 full‑time employees and 7 part‑time employees, none of whom is represented by a collective bargaining unit. We believe our relationship with our employees is good.

Subsidiaries

The Company’s only direct subsidiary is Equitable Bank. Equitable Bank has no subsidiaries.

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Supervision and Regulation

General

Equitable Bank, as a federal savings association, is currently subject to extensive regulation, examination and supervision by the OCC, as its primary federal regulator, and by the FDIC as the insurer of its deposits. Equitable Bank is a member of the FHLB System and its deposit accounts are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Equitable Bank must file reports with the OCC concerning its activities and financial condition in addition to obtaining regulatory approvals before entering into certain transactions such as mergers with, or acquisitions of, other financial institutions. There are periodic examinations by the OCC to evaluate Equitable Bank’s safety and soundness and compliance with various regulatory requirements. This regulatory structure is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of an adequate allowance for loan losses for regulatory purposes. Any change in such policies, whether by the OCC, the FDIC or Congress, could have a material adverse impact on the Company and Equitable Bank and their operations.

The Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd‑Frank Act”) made extensive changes to the regulation of Equitable Bank. Under the Dodd‑Frank Act, the Office of Thrift Supervision was eliminated and responsibility for the supervision and regulation of federal savings associations such as Equitable Bank was transferred to the OCC on July 21, 2011. The OCC is the agency that is primarily responsible for the regulation and supervision of national banks. Additionally, the Dodd‑Frank Act created a new Consumer Financial Protection Bureau as an independent bureau of the Federal Reserve Board. The Consumer Financial Protection Bureau assumed responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements. However, institutions of less than $10 billion in assets, such as Equitable Bank, will continue to be examined for compliance with consumer protection and fair lending laws and regulations by, and be subject to the enforcement authority of, their prudential regulators.

Certain of the regulatory requirements that are applicable to Equitable Bank and the Company are described below. This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on Equitable Bank and the Company.

Federal Banking Regulation

Business Activities.  The activities of federal savings banks, such as Equitable Bank, are governed by federal laws and regulations. Those laws and regulations delineate the nature and extent of the business activities in which federal savings banks may engage. In particular, certain lending authority for federal savings banks, e.g., commercial, non‑residential real property loans and consumer loans, is limited to a specified percentage of the institution’s capital or assets.

Capital Requirements.  On July 9, 2013, the OCC approved rules that amended the regulatory capital rules applicable to Equitable Bank.  The rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act.  Various provisions of the Dodd-Frank Act increase the capital requirements of financial institutions.  The rules include new minimum risk-based capital and leverage ratios, which became effective January 1, 2015, and refine the definition of what constitutes “capital” for purposes of calculating those ratios. 

The new minimum capital level requirements applicable to Equitable Bank are:  (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital to risk-weighted assets ratio of 6% (increased from 4%); (iii) a total capital to risk-weighted assets ratio of 8% (unchanged from prior rules); and (iv) a Tier 1 leverage ratio of 4%.  The rules also established a “capital conservation buffer” of 2.5% above the new regulatory minimum capital ratios resulting in the following ratios:  (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital to risk-weighted assets ratio of 8.5%; (iii) a total capital to risk-weighted assets ratio of 10.5%; and, a Tier 1 leverage ratio unchanged at 4%.  The phase-in period for the capital conservation buffer requirement started January 1, 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019.  An institution is subject to further limitations on

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paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that can be utilized for such actions.

Prompt Corrective Regulatory Action.  Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. The OCC is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s degree of undercapitalization. In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. The OCC could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. Significantly and critically undercapitalized institutions are subject to additional mandatory and discretionary measures.

Insurance of Deposit Accounts.  Equitable Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Deposit insurance per account owner is currently $250,000. Under the FDIC’s risk‑based assessment system, insured institutions are assigned a risk category based on supervisory evaluations, regulatory capital levels and certain other factors. An institution’s assessment rate depends upon the category to which it is assigned, and certain adjustments specified by FDIC regulations. Institutions deemed less risky pay lower assessments. The FDIC may adjust the scale uniformly, except that no adjustment can deviate more than two basis points from the base scale without notice and comment. No institution may pay a dividend if in default of the federal deposit insurance assessment.

The Dodd‑Frank Act required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits. The FDIC finalized a rule, effective April 1, 2011, that set the assessment range at 2.5 to 45 basis points of total assets less tangible equity.

The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of Equitable Bank. Management cannot predict what insurance assessment rates will be in the future.

Loans to One Borrower.  Federal law provides that savings associations are generally subject to the limits on loans to one borrower applicable to national banks. Generally, subject to certain exceptions, a savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily‑marketable collateral.

Qualified Thrift Lender Test.  Federal law requires savings associations to meet a qualified thrift lender test. Under the test, a savings association is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential real estate loans and related investments, including certain mortgage‑backed securities but also including education, credit card and small business loans) in at least nine months out of each twelve‑month period.

A  savings association that fails the qualified thrift lender test is subject to certain operating restrictions and the Dodd‑Frank Act also specifies that failing the qualified thrift lender test is a violation of law that could result in an enforcement action and dividend limitations. As of June 30, 2017, Equitable Bank maintained 78.7% of its portfolio assets in qualified thrift investments and, therefore, met the qualified thrift lender test.

In the future, if our business strategy leads to continued growth in our commercial loan portfolio, we may consider converting Equitable Bank’s charter from that of a savings association to that of a commercial bank. Doing so could allow us to avoid operating restrictions and penalties that can be applied to savings associations which fail to satisfy the qualified thrift lender test.

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Limitation on Capital Distributions.  Federal regulations impose limitations upon all capital distributions by a savings association, including cash dividends, payments to repurchase its shares and payments to stockholders of another institution in a cash‑out merger. Under the regulations, an application to and the prior approval of the OCC is required before any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under OCC regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the OCC. If an application is not required, the institution must still provide 30 days prior written notice to, and receive the nonobjection of, the Federal Reserve Board of the capital distribution if, like Equitable Bank, it is a subsidiary of a holding company, as well as an informational notice filing to the OCC. If Equitable Bank’s capital ever fell below its regulatory requirements or the OCC notified it that it was in need of increased supervision, its ability to make capital distributions could be restricted. In addition, the OCC could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OCC determines that such distribution would constitute an unsafe or unsound practice.

Community Reinvestment Act.  All federal savings associations have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low‑ and moderate‑income neighborhoods. An institution’s failure to satisfactorily comply with the provisions of the Community Reinvestment Act could result in denials of regulatory applications. Responsibility for administering the Community Reinvestment Act, unlike other fair lending laws, is not being transferred to the Consumer Financial Protection Bureau. Equitable Bank received a “satisfactory” Community Reinvestment Act rating in its most recently completed examination.

Transactions with Related Parties.  Federal law limits Equitable Bank’s authority to engage in transactions with “affiliates” (e.g., any entity that controls or is under common control with Equitable Bank, including the Company and any of its other subsidiaries). The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the savings association. The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings association’s capital and surplus. Certain transactions with affiliates are required to be secured by collateral in an amount and of a type specified by federal law. The purchase of low quality assets from affiliates is generally prohibited. Transactions with affiliates must generally be on terms and under circumstances that are at least as favorable to the institution as those prevailing at the time for comparable transactions with non‑affiliated companies. In addition, savings associations are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings association may purchase the securities of any affiliate other than a subsidiary.

The Sarbanes‑Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and directors. However, the law contains a specific exception for loans by a depository institution to its executive officers and directors in compliance with federal banking laws. Under such laws, Equitable Bank’s authority to extend credit to executive officers, directors and 10% stockholders (“insiders”), as well as entities such persons control, is limited. The laws limit both the individual and aggregate amount of loans that Equitable Bank may make to insiders based, in part, on Equitable Bank’s capital level and requires that certain board approval procedures be followed. Such loans are required to be made on terms substantially the same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment. There is an exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees. Loans to executive officers are subject to additional limitations based on the type of loan involved.

Enforcement.  The OCC currently has primary enforcement responsibility over savings associations and has authority to bring actions against the institution and all institution‑affiliated parties, including stockholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful actions likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors to institution of receivership, conservatorship or termination of deposit insurance. Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1.0 million per day in especially egregious cases. The FDIC has the authority to recommend to the OCC that enforcement action be taken with respect to a particular savings association. If action is not taken by the OCC, the FDIC

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has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations.

Federal Home Loan Bank System.  Equitable Bank is a member of the FHLB System, which consists of twelve regional Federal Home Loan Banks. The FHLB provides a central credit facility primarily for member institutions. Equitable Bank, as a member of the FHLB of Topeka, is required to acquire and hold shares of capital stock in that FHLB of Topeka. Equitable Bank was in compliance with this requirement with an investment in FHLB stock at June 30, 2017 of $453,400.

Federal Reserve System.  The Federal Reserve Board regulations require savings associations to maintain non‑interest earning reserves against their transaction accounts (primarily Negotiable Order of Withdrawal (NOW) and regular checking accounts). The regulations provided that reserves be maintained against aggregate transaction accounts as follows: a 3% reserve ratio is assessed on net transaction accounts up to and including $115.1 million; a 10% reserve ratio is applied above $115.1 million. The first $15.5 million of otherwise reservable balances (subject to adjustments by the Federal Reserve Board) are exempted from the reserve requirements. The amounts are adjusted annually.  In October 2008, the Federal Reserve Board began paying interest on certain reserve balances.

Other Regulations

Equitable Bank’s operations are also subject to federal laws applicable to credit transactions, including the:

· Truth‑In‑Lending Act, governing disclosures of credit terms to consumer borrowers;

· Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

· Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

· Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

· Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

· Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of Equitable Bank also are subject to laws such as the:

· Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

· Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and

· Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check.

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Holding Company Regulation

General.  As a savings and loan holding company, the Company is subject to Federal Reserve Board regulations, examinations, supervision, reporting requirements and regulations regarding its activities. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to Equitable Bank.

Pursuant to federal law and regulations and policy, a savings and loan holding company such as the Company may generally engage in the activities permitted for financial holding companies under Section 4(k) of the Bank Holding Company Act and certain other activities that have been authorized for savings and loan holding companies by regulation.

Federal law prohibits a savings and loan holding company from, directly or indirectly or through one or more subsidiaries, acquiring more than 5% of the voting stock of another savings association, or savings and loan holding company thereof, without prior written approval of the Federal Reserve Board or from acquiring or retaining, with certain exceptions, more than 5% of a non‑subsidiary holding company or savings association. A savings and loan holding company is also prohibited from acquiring more than 5% of a company engaged in activities other than those authorized by federal law or acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating applications by holding companies to acquire savings associations, the Federal Reserve Board must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

The Federal Reserve Board is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings associations in more than one state, except: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies; and (ii) the acquisition of a savings association in another state if the laws of the state of the target savings association specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Capital Requirements.  Savings and loan holding companies historically have not been subject to consolidated regulatory capital requirements. However, in July 2013, the Federal Reserve Board approved a new rule that implements the “Basel III” regulatory capital reforms and changes required by the Dodd‑Frank Act. The final rule established consolidated capital requirements for many savings and loan holding companies, including the Company.  In May 2015, the Federal Reserve Board approved a final rule which exempts certain savings and loan holding companies that have total consolidated assets of less than $1 billion from the consolidated capital requirements.  The Company qualifies for this exemption.

Source of Strength.  The Dodd‑Frank Act also extends the “source of strength” doctrine to savings and loan holding companies. The regulatory agencies must promulgate regulations implementing the “source of strength” policy that holding companies act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

Dividends and Stock Repurchases.  The Federal Reserve Board has the power to prohibit dividends by savings and loan holding companies if their actions constitute unsafe or unsound practices. The Federal Reserve Board has issued a policy statement on the payment of cash dividends by bank holding companies, which also applies to savings and loan holding companies and which expresses the Federal Reserve Board’s view that a holding company should pay cash dividends only to the extent that the company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the company’s capital needs, asset quality and overall financial condition. The Federal Reserve Board also indicated that it would be inappropriate for a holding company experiencing serious financial problems to borrow funds to pay dividends. Under the prompt corrective action regulations, the Federal Reserve Board may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.”

Federal Reserve Board policy also provides that a holding company should inform the Federal Reserve Board supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, as of the end of a

30

quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.

Acquisition of the Company.  Under the federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company or savings association. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the outstanding voting stock of the company or institution, unless the Federal Reserve Board has found that the acquisition will not result in a change of control. Under the Change in Control Act, the Federal Reserve Board generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti‑trust effects of the acquisition. Any company that acquires control would then be subject to regulation as a savings and loan holding company.

Emerging Growth Company Status.  The Jumpstart Our Business Startups Act (the “JOBS Act”), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.0 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as an emerging growth company under the JOBS Act.

An “emerging growth company” may choose not to hold stockholder votes to approve annual executive compensation (more frequently referred to as “say‑on‑pay” votes) or executive compensation payable in connection with a merger (more frequently referred to as “say‑on‑golden parachute” votes). An emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and can provide scaled disclosure regarding executive compensation; however, the Company will also not be subject to the auditor attestation requirement or additional executive compensation disclosure so long as it remains a “smaller reporting company” under Securities and Exchange Commission regulations (generally less than $75 million of voting and non‑voting equity held by non‑affiliates). Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company. The Company has elected to comply with new or amended accounting pronouncements in the same manner as a private company.

A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.0 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three‑year period, issued more than $1.0 billion in non‑convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non‑voting equity held by non‑affiliates).

Federal Taxation

General.  The Company and Equitable Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to the Company or Equitable Bank.

Method of Accounting.  For federal income tax purposes, the Company reports its income and expenses on the accrual method of accounting and uses a tax year ending June 30 for filing its federal and state income tax returns.

Bad Debt Reserves.  Prior to 1996, Equitable Bank was permitted to establish a reserve for bad debts and to make annual additions to the reserve. These additions could, within specified formula limits, be deducted in arriving at our taxable income. As a result of tax law changes in 1996, Equitable Bank was required to use the specific charge‑off method in computing its bad debt deduction beginning with its 1996 federal tax return. Savings institutions were required to recapture any excess reserves over those established as of December 31, 1987 (base year reserve).

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At June 30, 2017, Equitable Bank had approximately $1.7 million in reserves subject to recapture in excess of its base year reserves.

The Company is required to use the specific charge‑off method to account for bad debt tax deductions.

Taxable Distributions and Recapture.  Prior to 1996, bad debt reserves created prior to 1988 were subject to recapture into taxable income if Equitable Bank failed to meet certain thrift asset and definitional tests or made certain distributions. Tax law changes in 1996 eliminated thrift‑related recapture rules. However, under current law, pre‑1988 tax bad debt reserves remain subject to recapture if Equitable Bank makes certain non‑dividend distributions, repurchases any of its common stock, pays dividends in excess of earnings and profits, or fails to qualify as a “bank” for tax purposes. At June 30, 2017, our total federal pre‑base year bad debt reserve was approximately $2.1 million.

Alternative Minimum Tax.  The Internal Revenue Code imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, less any available exemption. The alternative minimum tax is imposed to the extent it exceeds the regular income tax. Net operating losses can offset no more than 90% of alternative taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. At June 30, 2017, the Company had approximately $174,000 in available credits for carryover.

Net Operating Loss Carryovers.  A financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. A 2009 federal tax law change allows for a one‑time carry back of either 2008 or 2009 taxable losses for up to five years.

Corporate Dividends‑Received Deduction.  The Company may exclude from its federal taxable income 100% of dividends received from Equitable Bank as a wholly‑owned subsidiary by filing consolidated tax returns. The corporate dividends‑received deduction is 80% when the corporation receiving the dividend owns at least 20% of the stock of the distributing corporation. The dividends‑received deduction is 70% when the corporation receiving the dividend owns less than 20% of the distributing corporation.

State Taxation

Nebraska Taxation.  Under Nebraska law, Equitable Bank pays a franchise tax in lieu of a corporate income tax. The franchise tax is the lesser of two amounts computed based on our average deposits and net financial income, respectively. Presently, the tax is $0.47 per $1,000 of average deposits but not to exceed an amount determined by applying 3.81% to our net financial income. Net financial income is our income as reported to the OCC after ordinary and necessary expenses but before income taxes. In addition, the Company is required to file a Nebraska income tax return because we do business in Nebraska. For Nebraska tax purposes, corporations are presently taxed at a rate equal to 5.58% of the first $50,000 of taxable income and 7.81% of taxable income in excess of $50,000. For this purpose, “taxable income” generally means federal taxable income, subject to certain adjustments (including addition of interest income on non‑Nebraska municipal obligations and excluding interest income from qualified U.S. governmental obligations).

Item 1A.  Risk Factors.

This item is not applicable because we are a smaller reporting company.

Item 1B.  Unresolved Staff Comments.

Not applicable.

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Item 2.  Properties.

The following table sets forth certain information relating to our properties as of June 30, 2017.

				Net Book
	Year	Owned/	Date of Lease	Value as of
Location	Opened	Leased	Expiration	June 30, 2017
				(in thousands)
Main Office:
113 North Locust Street	1959	Owned	Not applicable	$	1,484
Grand Island, Nebraska
Full Service Branches:
619 North Diers Avenue	2000	Owned	Not applicable	$	1,187
Grand Island, Nebraska
920 South Jeffers Street	2005	Owned	Not applicable	$	1,775
North Platte, Nebraska
10855 West Dodge Road, Suite	2006	Leased	2022		Not applicable
110 Omaha, Nebraska
Limited Service Branch:
3012 South Locust Street	2005	Owned	Not applicable	$	516
Grand Island, Nebraska

We believe that our facilities are adequate for the business conducted.

Item 3.  Legal Proceedings.

At June 30, 2017, there were no material legal proceedings to which the Company is a party or of which any of its property is subject. From time to time, the Company is a party to various legal proceedings incident to its business.

Item 4.  Mine Safety Disclosures.

Not applicable.

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PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Common Stock

On March 2, 2015, the Boards of Directors of Equitable Financial MHC and old Equitable adopted a Plan of Conversion and Reorganization (the “Plan”). Pursuant to the Plan, the Company, was organized and Equitable Financial MHC converted from the mutual holding company form of organization to the fully public form on July 8, 2015. As part of the conversion, Equitable Financial MHC’s ownership interest of the Company was offered for sale in a public offering. The existing publicly held shares of Old Equitable were exchanged for 1.0911 new shares of common stock of the Company. The exchange ratio ensured that immediately after the conversion and public offering, the public stockholders of Old Equitable owned the same aggregate percentage of the Company’s common stock that they owned immediately prior to that time (excluding shares purchased in the stock offering and cash received in lieu of fractional shares). When the conversion and public offering was completed, the Company became the holding company of Equitable Bank and succeeded to all of the business and operations of Old Equitable and each of Old Equitable and Equitable Financial MHC ceased to exist.

Shares of the Company’s common stock commenced trading on the NASDAQ Capital Market on July 9, 2015 under the symbol “EQFN” following the completion of the conversion and offering. Prior to that date, trades in the common stock of Old Equitable had been quoted on the OTC Pink Marketplace operated by the OTC Markets Group Inc. under the symbol “EQFC.”

The following table sets forth the high and low trading prices for the Company’s and Old Equitable’s common stock for each quarter during the last two fiscal years, as obtained from NASDAQ and the OTC Bulletin Board and the OTC Pink Marketplace operated by OTC Markets Group Inc., and the dividends paid during those periods. We have adjusted the share prices to reflect the 1.0911 exchange ratio in the conversion.

	Price Per Share				Dividends
	High		Low		Paid
Year Ending June 30, 2017
Fourth quarter	$	10.60	$	9.90	$	—
Third quarter	$	10.31	$	9.70	$	—
Second quarter	$	9.90	$	8.45	$	—
First quarter	$	8.99	$	8.31	$	—
Year Ending June 30, 2016
Fourth quarter	$	8.44	$	8.16	$	—
Third quarter	$	9.09	$	8.15	$	—
Second quarter	$	9.09	$	7.95	$	—
First quarter	$	9.15	$	7.65	$	—

On September 28, 2017, the Company had 275 stockholders of record, not including those who hold shares in “street name.”

Dividends

Our Board of Directors has the authority to declare dividends on shares of its common stock, subject to statutory and regulatory requirements. However, no decision has been made with respect to the payment of dividends in the future. Any determination to pay dividends on our common stock will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our Board of Directors considers relevant.

The Company is subject to the Federal Reserve Board’s policy that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the company appears consistent with its capital needs, asset quality and overall financial condition. In addition, the Company is subject to Maryland law, which generally permits a corporation to pay dividends on its common stock unless, after giving effect to the dividend, the corporation would be unable to pay its debts as they become due in the usual course of its business or the total assets of the corporation would be less than its total liabilities. Further, the Company is not permitted to pay dividends on its common

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stock if its stockholders’ equity would be reduced below the amount of the liquidation account established by the Company in connection with the conversion.

The Company’s ability to pay dividends may depend, in part, on its receipt of dividends from Equitable Bank. The OCC and Federal Reserve Board regulations limit dividends and other distributions from Equitable Bank to us. No insured depository institution may make a capital distribution if, after making the distribution, the institution would be undercapitalized or if the proposed distribution raises safety and soundness concerns. Further, Equitable Bank is not permitted to pay dividends on its common stock to the Company, its sole stockholder, if its stockholders’ equity would be reduced below the amount of the liquidation account established in connection with the conversion. In addition, any payment of dividends by Equitable Bank to the Company that would be deemed to be drawn out of Equitable Bank’s bad debt reserves would require the payment of federal income taxes by Equitable Bank at the then current income tax rate on the amount deemed distributed.

Under OCC regulations, an application to and the prior approval of the OCC is required prior to any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under applicable regulations (i.e., generally examination ratings in the top two categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the OCC. If an application is not required, an institution must still provide prior notice to the Federal Reserve Board of the distribution if it is a subsidiary of a holding company. In such circumstances, notice must also be provided to the OCC.

Stock Repurchases

Since the Company completed its initial public offering in July, 2015, the Company’s Board of Directors has authorized a stock repurchase program for a total of 173,857 shares.  The repurchase program has been publicly announced.  As of June 30, 2017, the Company had repurchased 168,086 shares under this program.

Under the repurchase program, repurchases were or will be conducted through open market purchases, which may include purchases under a trading plan adopted pursuant to SEC Rule 10b5-1, or through privately negotiated transactions.  Repurchases will be made from time to time, depending on market conditions and other factors.  There is no guarantee as to the exact number of shares to be repurchased by the Company.

The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock during the fiscal quarter ended June 30, 2017.

				Total Number of
				Shares Purchased	Maximum Number of
			Weighted	as Part of Publicly	Shares that May Yet Be
	Total Number of	Average Price		Announced Plans	Purchased Under the
Period	Shares Purchased	Paid Per Share		or Programs	Plans or Programs
04/1/17 - 04/30/17	5,000		10.25	113,655	60,202
05/1/17 - 05/31/17	49,000		10.25	162,655	11,202
06/1/17 - 06/30/17	5,431		10.17	168,086	5,771
Total	168,086	$	9.72

Item 6.  Selected Financial Data.

This item is not applicable because we are a smaller reporting company.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis of financial condition and results of operations at June 30, 2017 and 2016 and for the fiscal years ended June 30, 2017 and 2016 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with

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the audited consolidated financial statements and the notes thereto, appearing in Part II, Item 8 of this report. All references herein to the “Company”, “we”, “us”, or similar terms refer to Equitable Financial Corp. and its subsidiary.

Overview

We are a Nebraska‑based community bank headquartered in Grand Island, Nebraska, with full‑service branch offices in Grand Island, Omaha and North Platte, Nebraska. For most of our history as a community bank, which dates back to 1882, we have operated as a traditional thrift institution, focusing on the origination of one‑ to four‑family residential real estate loans. In the past 10 years, however, we have expanded our lending focus and now offer a wide range of loans to commercial businesses, agricultural borrowers and consumers—in addition to our traditional residential loan products. We also invest in securities, primarily U.S. government agency securities, municipal bonds and mortgage‑backed securities. In addition, we offer insurance and investment products and services from locations in Grand Island, North Platte, and Omaha.

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest‑earning assets and the interest we pay on our interest‑bearing liabilities. Our results of operations also are affected by our provisions for loan losses, non‑interest income and non‑interest expense. Non‑interest income currently consists primarily of service fees, rental income, gain on sales of loans and other income. Non‑interest expense currently consists primarily of expenses related to compensation and employee benefits, occupancy, data processing, advertising and promotion, professional and regulatory, federal deposit insurance premiums, net loss on other real estate owned, write‑downs, sales and other operating expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

Business Strategy

Our business strategy is to operate and grow a well‑capitalized, profitable, community‑oriented financial institution dedicated to providing quality customer service. Highlights of our business strategy are as follows:

· Continuing to grow and diversify our loan portfolio in our existing market areas.  We have been successful in growing and diversifying our loan portfolio over the past 10 years. At June 30, 2017, we had total loans of $239.5 million. Of this amount, $43.1 million, or 18.0%, consisted of one‑ to four‑family residential real estate loans, $106.9 million, or 44.6%, consisted of commercial operating or real estate loans, and $57.8 million, or 24.2%, consisted of agricultural operating or real estate loans. Our strategy is to continue to focus on maintaining this type of diversified loan mix, which we believe will provide us with expanded lending opportunities in our existing market areas.

· Applying disciplined underwriting practices to maintain the quality of our loan portfolio.  We believe that strong asset quality is a key to long‑term financial success. We have sought to grow and diversify our loan portfolio, while maintaining a high level of asset quality with moderate credit risk. We seek to accomplish this by applying underwriting standards that we believe are conservative and by pursuing diligent monitoring and collection efforts. As we have increased the amount of commercial and agricultural loans in our portfolio in recent years, we have sought to manage the larger loan exposures though our conservative approach to lending. At June 30, 2017, our nonperforming loans (loans which are 90 or more days delinquent and loans which are less than 90 days delinquent but classified as nonaccrual) were less than 1.0% of our total loan portfolio.

· Continuing to grow our core deposits.  Over the past five years, we have been successful in growing our deposit base overall and in increasing the share of our deposit base that consists of core deposits. At June 30, 2017, our total deposits were $209.1 million, and core deposits were approximately 96.8% of total deposits. We believe core deposits have favorable cost and interest rate change resistance. In addition, we believe core deposits allow us greater opportunity to connect with our customers and offer them other financial services and products. Our strategy is to continue to focus on growing our deposit base as a source of funding for our loans and to continue our efforts to maintain core deposits as a high percentage of total deposits.

· Growing our business by expanding our branch network.  As opportunities arise and conditions permit, we will consider opportunities to expand our branch network through whole‑bank or branch acquisitions,

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de novo branching or both. Although we do not currently have any agreements or understandings regarding specific acquisitions or de novo branching opportunities, our strategy is to grow our business within our consolidating market environment.

· Remaining a community‑oriented institution.  We were established in 1882 and have been operating continuously since that time. We have been, and we continue to be, committed to understanding and meeting the financial needs of the communities in which we operate. Further, we strive to be a good corporate citizen within those communities. In 2005, we established and funded the Equitable Bank Charitable Foundation as a private charitable foundation based in Grand Island. Each year since 2005, our foundation has made grants and donations to non‑profit organizations, community groups and community projects located within our market areas. We believe that our community orientation is attractive to customers and distinguishes us from some of our larger competitors.

· Providing quality customer service.  We emphasize quality customer service. We strive to meet the financial needs of our customer base by offering a full complement of loan and deposit products and by providing individualized customer service. As part of this strategy, we seek to offer our customers a competitive package of on‑line and mobile banking services. We believe we have a competitive advantage over some of our larger competitors based on our familiarity with our customers’ needs and our ability to make decisions, such as approving loans, more quickly through local decision‑makers. Our customers enjoy, and will continue to enjoy, access to senior officers at Equitable Bank and the flexibility it brings to their businesses.

In the future, if our business strategy leads to continued growth in our commercial loan portfolio, we may consider converting Equitable Bank’s charter from that of a savings association to that of a commercial bank. Doing so could allow us to avoid operating restrictions and penalties that can be applied to savings associations which fail to satisfy the “qualified thrift lender” test.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. By their nature, changes in these assumptions and estimates could significantly affect our financial position or results of operations. Actual results could differ from those estimates.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

Discussed below are selected critical accounting policies that are of particular significance to us:

Allowance for Loan Losses.  The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings. An allowance for loan losses is maintained at a level considered necessary to provide for loan losses based upon an evaluation of known and inherent losses in the loan portfolio. In determining the allowance for loan losses, we consider the losses inherent in the loan portfolio and changes in the nature and volume of the loan activities, along with the local economic and real estate market conditions. We utilize a two‑tier approach: (1) establishment of specific reserves for impaired loans, and (2) establishment of a general valuation allowance for the remainder of the loan portfolio. We maintain a loan review system which allows for a periodic review of the loan portfolio and the early identification of impaired loans. One‑ to four‑family residential real estate loans and consumer installment loans are considered to be homogeneous and, therefore, are not separately evaluated for impairment unless they are considered troubled debt restructurings. A loan is considered to be a troubled debt restructuring when, to maximize the recovery of the loan we modify the borrower’s existing loan terms and conditions in response to financial difficulties experienced by the borrower.

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In establishing specific reserves for impaired loans, we take into consideration, among other things, payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and shortfalls on a case‑by case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and reason for the delay, the borrower’s prior payment record and the amount of shortfall in relation to what is owed. A loan is deemed to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts when due according to the contractual terms of the loan agreement. All loans identified as impaired are evaluated individually. We do not aggregate such loans for evaluation purposes. Loan impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. Payments received on impaired loans are generally applied first to principal and then to interest.

The general valuation allowance is based upon a combination of factors including, but not limited to, actual loan loss rates, composition of the loan portfolio, current economic conditions and management’s judgment. Regardless of the extent of the analysis of customer performance, portfolio evaluations, trends or risk management processes established, certain inherent, but undetected losses are probable within the loan portfolio. This is due to several factors including inherent delays in obtaining information regarding a customer’s financial condition or changes in their financial condition, the judgmental nature of individual loan evaluations, collateral assessments and the interpretation of economic trends, and the sensitivity of assumptions utilized to establish allocated allowances for homogeneous groups of loans among other factors. These other risk factors are continually reviewed and revised by management using relevant information available at the time of the evaluation.

Although we believe that we use the best information available to recognize losses on loans and establish the allowance for loan losses, future additions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. In addition, the OCC, as an integral part of its examination process, periodically reviews the adequacy of our allowance for loan losses. That agency may require us to recognize additions to the allowance based on its judgments about information available to it at the time of its examination.

Deferred Income Taxes.  We use the asset and liability method of accounting for income taxes. Under this method, 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. If currently available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. 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. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect earnings. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize the deferred tax assets.

Fair Value Measurements.  We use our best judgment in estimating fair value measurements of the Bank’s financial instruments; however, there are inherent weaknesses in any estimation technique. We utilize various assumptions and valuation techniques to determine fair value, including, but not limited to cash flows, discount rates, rate of return, adjustments for nonperformance and liquidity, quoted market prices, and appraisals. The fair value estimates are not necessarily indicative of the actual amounts that could have been realized in a sale transaction on the dates indicated. The estimated fair value amounts have not been re‑evaluated or updated subsequent to the respective reporting dates. As such, the estimated fair values subsequent to the respective dates may be different than the amounts reported.

Comparison of Financial Condition at June 30, 2017 and June 30, 2016

Assets.  Total assets as of June 30, 2017 were $253.8 million, an increase of $28.7 million, or 12.7%, from $225.1 million at June 30, 2016.  This increase was primarily due to increases in securities available-for-sale and net

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loans offset by a decrease in interest-earning deposits. Securities available-for-sale increased $746,000, or 112.2%, to $1.4 million at June 30, 2017 from $665,000 at June 30, 2016.  This increase is attributable to the purchase of one security classified as available-for-sale.  Net loans increased $38.2 million, or 19.3% to $236.5 million at June 30, 2017 from $198.3 million at June 30, 2016.  This increase is attributable to loan growth in all markets of the Company.  Offsetting the increases was a decrease in interest-earning deposits to zero at June 30, 2017 from $12.4 million at June 30, 2016.  These deposits were used to fund the loan growth that was realized.

Non‑performing Assets and Allowance for Loan Losses.  We had non-performing assets of $2.6 million, or 1.0% of total assets as of June 30, 2017, and $2.3 million, or 1.0% of total assets as of June 30, 2016.  The increase in the amount of non-performing assets was related to a commercial real estate relationship and a one-to-four family relationship.  Offsetting these increases was a decrease of foreclosed assets.  The allowance for loan losses totaled $3.6 million at June 30, 2017 and $2.9 million at June 30, 2016.  This represents a ratio of the allowance for loan losses to gross loans receivable of 1.5% at June 30, 2017 and 1.5% at June 30, 2016.  The allowance for loan losses to non-performing loans was 149.3% at June 30, 2017 and 163.7% at June 30, 2016. 

Deposits. Total deposits increased $22.1 million, or 11.8%, to $209.1 million at June 30, 2017 from $187.0 million at June 30, 2016.  The increase in deposits occurred as a result of increases in all deposit types.  Noninterest-bearing demand accounts increased $5.2 million, or 21.4%, to $29.5 million at June 30, 2017 from $24.3 million at June 30, 2016.  Interest-bearing NOW accounts increased $6.6 million, or 15.5%, to $49.3 million at June 30, 2017 from $42.7 million at June 30, 2016.  Money market accounts increased $6.6 million, or 10.9%, to $67.0 million at June 30, 2017 from $60.4 million at June 30, 2016.  Savings accounts increased $2.2 million, or 14.8%, to $17.1 million at June 30, 2017 from $14.9 million at June 30, 2016.  Time deposits increased $1.4 million, or 3.1%, to $46.1 million at June 30, 2017 from $44.7 million at June 30, 2016.  We attribute these changes in deposits to more aggressive marketing and continued development of commercial accounts related to our effort to provide full-service banking to our commercial loan customers.  Commercial deposit accounts carry larger average balances than retail deposit accounts. 

Borrowings.  During the fiscal year ended June 30, 2017 we borrowed funds from FHLB of Topeka and Midwest Independent Bank on a short-term basis in order to support the loan growth.  FHLB borrowings at June 30, 2017 was $6.7 million and MIB federal funds purchased was $399,000.

Stockholders’ Equity.  Total stockholders’ equity decreased $400,000, or 1.1%, to $35.6 million at June 30, 2017 compared to $36.0 million at June 30, 2016.  This decrease was a result of the stock buyback plan totaling $1.6 million.  Offsetting this decrease was an increase of $1.2 million from net income.

Comparison of Operating Results for the Years ended June 30, 2017 and June 30, 2016

General.  We achieved net income of $1.2 million for the year ended June 30, 2017.  This represented an increase of $180,000, or 17.1%, for the fiscal year ended June 30, 2017 compared to $1.1 million for the fiscal year ended June 30, 2016.

Interest Income.  Total interest income increased $900,000, or 10.9%, to $9.3 million for the fiscal year ended June 30, 2017 from $8.4 million for the fiscal year ended June 30, 2016.  This increase was primarily attributable to increased loan volume.

Interest income from loans increased by $1.0 million, or 12.2%, to $9.2 million for the fiscal year ended June 30, 2017 from $8.2 million for the fiscal year ended June 30, 2016.  This increase is attributable to $38.2 million in loan growth.  Average loan balances were $216.1 million for the fiscal year ended June 30, 2017 compared to average loan balances of $188.4 million during the fiscal year ended June 30, 2016.  The increase in our average loan balance was primarily due to increased loan demand, primarily attributable to improved economic conditions in our market areas.  The average yield on loans decreased 10 basis points to 4.27% for the fiscal year ended June 30, 2017 from 4.37% for the fiscal year ended June 30, 2016.

Interest income from securities decreased $33,000, or 41.3%, to $47,000 for the fiscal year ended June 30, 2017 from $80,000 for the fiscal year ended June 30, 2016.  This decrease was due to a decrease in average balances and average yields.  Average securities balances were $1.9 million for the fiscal year ended June 30, 2017 compared to $2.3 million for the fiscal year ended June 30, 2016.  The average yield on securities decreased 101 basis points to 2.29% for the fiscal year ended June 30, 2017 from 3.30% for the fiscal year ended June 30, 2016. 

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Other interest income decreased $49,000, or 68.1%, to $23,000 for the fiscal year ended June 30, 2017 from $72,000 for the fiscal year ended June 30, 2016.  This decrease is attributable to a decrease in average balances.  Average balances of interest-earning deposits decreased $14.6 million for the fiscal year end June 30, 2017.  However, the yield on interest-earning deposits increased for the fiscal year ended June 30, 2017 to 75 basis points compared to 41 basis points during the fiscal year ended June 30, 2016.

Interest Expense. Interest expense increased $95,000, or 9.1%, to $1.1 million for the fiscal year ended June 30, 2017 from $1.0 million for the fiscal year ended June 30, 2016.  This increase is attributable to increases in deposits interest expense, FHLB borrowings interest expense and other interest expense.  Deposits interest expense increased $81,000, or 7.8%, to $1.1 million for the fiscal year ended June 30, 2017 from $1.0 million for the fiscal year ended June 30, 2016.  This increase was primarily a result of increased average balances of deposit accounts as well as a slight increase in cost of funding deposit accounts.  Average balances for deposit accounts was $168.6 million for fiscal year ended June 30, 2017 compared to $161.6 million for the fiscal year ended June 30, 2016.  Cost of funding deposit accounts increased 2 basis points to 67 basis points for the fiscal year ended June 30, 2017 compared to 65 basis points for the fiscal year ended June 30, 2016.  FHLB borrowings interest expense was $11,000 for the fiscal year ended June 30, 2017 compared to zero for the fiscal year ended June 30, 2016.  Other interest expense increased $3,000, or 300%, to $4,000 for the fiscal year ended June 30, 2017 from $1,000 for the fiscal year ended June 30, 2016.  This increase was attributable to the borrowings of federal funds purchased to supply loan demand.

Net Interest Income.  Net interest income increased $821,000, or 11.2%, to $8.2 million for the fiscal year ended June 30, 2017 from $7.3 million for the fiscal year ended June 30, 2016.  Average interest-earning assets were $221.3 million for the fiscal year ended June 30, 2017 compared to $208.6 million for the fiscal year ended June 30, 2016.  The average yield on assets for the fiscal year ended June 30, 2017 was 4.20% compared to 4.02% for the fiscal year ended June 30, 2016.  Our net interest rate spread increased 17 basis points to 3.54% for the fiscal year ended June 30, 2017 from 3.37% for the fiscal year ended June 30, 2016.  Our net interest margin also increased 17 basis points to 3.69% for the fiscal year ended June 30, 2017 from 3.52% from the fiscal year ended June 30, 2016.  The ratio of average interest-earning assets to average interest-bearing liabilities increased to 129.9% for the fiscal year ended June 30, 2017 from 129.1% for the fiscal year ended June 30, 2016.

Provision for Loan Losses.  We establish provisions for loan losses, which are charged to operations, at a level management believes is appropriate to absorb probable incurred credit losses in the loan portfolio.  In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of underlying collateral, and prevailing economic conditions.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change.  Based on our evaluation of these factors, we recorded provisions  of $644,000 and $275,000 for the fiscal years ended June 30, 2017 and 2016, respectively.  This increase in provision expense is attributable to loan growth of $38.2 million for the fiscal year ended June 30, 2017 compared to $19.9 million for fiscal year ended June 30, 2016.  The allowance for loan losses was $3.6 million, or 1.5% of loans outstanding at June 30, 2017, compared to $2.9 million, or 1.5%, at June 30, 2016.  The non-performing assets to total assets ratio at June 30, 2017 and 2016 was 1.0%.  The level of allowance is based on estimates and the ultimate losses may vary from the estimates.

Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance.  While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in economic conditions.  In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to recognize additional provisions based on their judgment of information available to them at the time of their examination.  The allowance for loan losses as of June 30, 2017 was maintained at a level that represents management’s best estimate of inherent losses in the loan portfolio, and such losses were both probable and reasonable estimable.

Non‑Interest Income.  Non-interest income increased $261,000, or 10.9%, to $2.6 million for the fiscal year ended June 30, 2017 from $2.4 million for the fiscal year ended June 30, 2016.  All categories of noninterest income experienced increases for the fiscal year ended June 30, 2017.  Service charges on deposit accounts increased $37,000, or 6.2%, to $632,000 for the fiscal year ended June 30, 2017 from $595,000 for the fiscal year ended June 30, 2016.  Brokerage fee income increased $90,000, or 14.2%, to $723,000 for the fiscal year ended June 30, 2017 from $633,000 for the fiscal year ended June 30, 2016.  Gain on sale of loans increased $106,000, or 14.1%, to $856,000 for the fiscal year ended June 30, 2017 from $750,000 for the fiscal year ended June 30, 2016.  Other loan fees increased $18,000, or

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6.8%, to $283,000 for the fiscal year ended June 30, 2017 from $265,000 for the fiscal year ended June 30, 2016.  Other income increased $11,000, or 7.8%, to $152,000 for the fiscal year ended June 30, 2017 from $141,000 for the fiscal year ended June 30, 2016.

Non‑Interest Expense.  Non-interest expense increased $343,000, or 4.3%, to $8.2 million for the fiscal year ended June 30, 2017 from $7.9 million for the fiscal year ended June 30, 2016.  Contributing to this increase were increases in salaries and employee benefits, occupancy and equipment, and advertising and public relations.  Salaries and employee benefits increased $294,000, or 6.6%, to $4.8 million for the fiscal year ended June 30, 2017 from $4.5 million for the fiscal year ended June 30, 2016.  Occupancy and equipment increased $81,000, or 9.1%, to $967,000 for the fiscal year ended June 30, 2017 from $886,000 for the fiscal year ended June 30, 2016.  Advertising and public relations increased $24,000, or 11.1%, to $240,000 for the fiscal year ended June 30, 2017 from $216,000 for the fiscal year ended June 30, 2016.  Offsetting these increases were decreases in regulatory fees and deposit insurance premiums and professional fees.  Regulatory fees and deposit insurance premiums decreased $37,000, or 17.9%, to $170,000 for the fiscal year ended June 30, 2017 from $207,000 for the fiscal year ended June 30, 2016.   Professional fees decreased $69,000, or 15.4%, to $379,000 for the fiscal year ended June 30, 2017 from $448,000 for the fiscal year ended June 30, 2016.

Income Tax Expense.  For the fiscal year ended June 30, 2017, we reported income tax expense of $681,000 compared to $491,000 for the fiscal year ended June 30, 2016.  The primary reason for the increase was an increase of $370,000 of pretax operating income.  Also contributing to the increase was the fact that, in June 30, 2016, a valuation allowance for $79,000 was reversed.  Our effective tax rate was 35.5% for the fiscal year ended June 30, 2017 and 31.8% for the fiscal year ended June 30, 2016.  See note 10 to the consolidated financial statements for the reconciliation of the statutory tax rate to the effective tax rate.

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Average Balances and Yields

The following table sets forth average balance sheets, average yields and costs and certain other information for the periods indicated. No tax equivalent adjustments were made. All average balances are monthly average balances. Non‑accruing loans have been included in the table as loans carrying a zero yield.

	For the Year ended June 30,
	2017						2016						2015
	Average		Interest				Average		Interest				Average		Interest
	Outstanding		Earned/				Outstanding		Earned/				Outstanding		Earned/
	Balance		Paid		Yield/Cost		Balance		Paid		Yield/Cost		Balance		Paid		Yield/Cost
	(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits in other financial institutions	$	3,053	$	23	0.75	%	$	17,704	$	72	0.41	%	$	11,539	$	31	0.27	%
Securities(1)		1,922		44	2.29	%		2,304		76	3.30	%		4,086		164	4.01	%
Loans receivable		216,058		9,225	4.27	%		188,387		8,227	4.37	%		164,937		7,222	4.38	%
FHLB common stock		249		4	1.61	%		228		4	1.75	%		415		17	4.10	%
Total interest-earning assets		221,282		9,296	4.20	%		208,623		8,379	4.02	%		180,977		7,434	4.11	%
Total noninterest-earning assets		13,876						13,808						13,968
Total assets	$	235,158					$	222,431					$	194,945
Interest-bearing liabilities:
Savings accounts	$	15,812	$	39	0.25	%	$	14,305	$	34	0.24	%	$	12,826	$	32	0.25	%
NOW accounts		45,746		187	0.41	%		43,122		169	0.39	%		39,699		155	0.39	%
Money market accounts		64,492		477	0.74	%		58,471		404	0.69	%		44,206		266	0.60	%
Certificates of deposit		42,562		422	0.99	%		45,669		437	0.96	%		47,538		481	1.01	%
Total deposits		168,612		1,125	0.67	%		161,567		1,044	0.65	%		144,269		934	0.65	%
Federal funds purchased and securities sold under repurchase agreements		465		4	0.86	%		—		—	—	%		173		1	0.58	%
FHLB advances		1,293		11	0.85	%		—		—	—	%		6,556		240	3.66	%
Total interest-bearing liabilities		170,370		1,140	0.67	%		161,567		1,044	0.65	%		150,998		1,175	0.78	%
Noninterest-bearing demand deposits
—checking accounts		26,937						23,220						20,980
Other liabilities		1,798						4,446						2,705
Total liabilities		199,105						189,233						174,683
Stockholders’ equity		36,053						33,198						20,262
Total liabilities and stockholders’ equity	$	235,158					$	222,431					$	194,945
Net interest income			$	8,156					$	7,335					$	6,259
Net interest rate spread(2)					3.53	%					3.37	%					3.33	%
Net interest-earning assets(3)	$	50,912					$	47,056					$	29,979
Net interest margin(4)					3.69	%					3.52	%					3.46	%
Average interest-earning assets to average interest-bearing liabilities					129.88	%					129.12	%					119.85	%

(1) Yield is stated on a pre‑tax basis.

(2) Net interest rate spread represents the difference between the weighted average yield on interest‑earning assets and the weighted average rate of interest‑bearing liabilities.

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

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

Rate/Volume Analysis

The following table presents the dollar amount of changes in interest income and interest expense for major components of interest‑earning assets and interest‑bearing liabilities. It distinguishes between the changes related to outstanding balances and those due to the changes in interest rates. For each category of interest‑earning assets and interest‑bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of

42

this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

	Year Ended						Year Ended
	June 30, 2017 vs 2016						June 30, 2016 vs 2015
	Increase						Increase
	(Decrease)				Total		(Decrease)				Total
	Due to				Increase		Due to				Increase
	Volume		Rate		(Decrease)		Volume		Rate		(Decrease)
	(Dollars in thousands)						(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits in other financial institutions	$	(85)	$	36	$	(49)	$	22	$	19	$	41
Securities		(11)		(21)		(32)		(63)		(25)		(88)
Loans receivable		1,189		(191)		998		1,022		(17)		1,005
FHLB Stock		—		—		—		(6)		(7)		(13)
Total interest-earning assets		1,093		(176)		917		975		(30)		945
Interest-bearing liabilities:
Savings accounts		3		2		5		6		(4)		2
NOW accounts		10		8		18		14		—		14
Money market accounts		43		30		73		94		44		138
Certificates of deposit		(33)		18		(15)		(19)		(25)		(44)
Federal funds purchased and securities sold under repurchase agreements		4		—		4		(1)		—		(1)
FHLB advances		11		—		11		(240)		—		(240)
Total interest-bearing liabilities		38		58		96		(146)		15		(131)
Change in net interest income	$	1,055	$	(234)	$	821	$	1,121	$	(45)	$	1,076

Management of Interest Rate Risk

General.  Our earnings and the market value of our assets and liabilities are subject to fluctuations caused by changes in the level of interest rates. We manage the interest rate sensitivity of our interest‑bearing liabilities and interest‑earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes originating balloon loans or loans with adjustable interest rates and core deposit products.

We have an Asset/Liability Management Committee to coordinate all aspects involving asset/liability management. The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

43

Economic Value of Equity Analysis.  We analyze the sensitivity of our financial condition to changes in interest rates through an economic value of equity model provided by an outside consulting firm. This analysis measures the difference between predicted changes in the present value of our assets and predicted changes in the present value of our liabilities assuming various changes in current interest rates. The following table presents the changes in the economic value of equity of Equitable Bank at June 30, 2017 that would occur in the event of the scenarios referenced in the table, with no effect given to any steps that we might take to counteract that change.

	June 30, 2017
							EVE as % of
	Economic Value of Equity (“EVE”)						Economic Value of
	(Dollars in thousands)						Assets
Basis Point (“bp”)	Estimated								Change
Change in Interest Rates(1)	EVE		$ Change		% Change		EVE Ratio		(bp)
400 bp	$	25,602		2,948	13.0	%	11.31	%	210
300		24,956		2,302	10.2	%	10.76	%	155
200		23,801		1,147	5.1	%	10.05	%	84
100		23,708		1,054	4.7	%	9.79	%	58
0		22,654		—	—		9.21	%	—
−100		21,660		(994)	(4.4)	%	8.65	%	(56)

(1) Assumes instantaneous parallel changes in interest rates.

As with any method of measuring interest rate risk, certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in the economic value of equity requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in interest rates, and certain assets, such as adjustable‑rate mortgage loans, have features that restrict changes in interest rates on a short‑term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table. Furthermore, although the table above provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income. Finally, the above table does not take into account the changes in the credit risk of our assets which can occur in connection with changes in interest rates.

Liquidity and Capital Resources

We maintain liquid assets at levels we consider adequate to meet our liquidity needs. Liquid assets, which include cash and cash equivalents and securities available for sale, totaled $6.3 million, or 2.5% of total assets at June 30, 2017, compared to $15.6 million, or 6.9% of total assets, at June 30, 2016. We adjust our liquidity levels to fund deposit outflows, pay real estate taxes on mortgage loans, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.

Our primary sources of liquidity are deposits, amortization and prepayment of loans and mortgage‑backed securities, maturities of investment securities and other short‑term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans and mortgage‑backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short‑term interest‑earning investments and other assets, which provide liquidity to meet lending requirements. Short‑term interest‑earning deposits with the Midwest Independent Bank amounted to $12.4 million at June 30, 2016.  However, at June 30, 2017 we did not have any excess funds to invest.

A significant portion of our liquidity consists of securities classified as available‑for‑sale and cash and cash equivalents, which are a product of our operating, investing and financing activities. Our primary sources of cash are net income, principal repayments on loans and mortgage‑backed securities, and increases in deposit accounts, along with advances from the FHLB of Topeka.

Liquidity management is both a daily and long‑term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB of Topeka which provides an

44

additional source of funds. At June 30, 2017, we had borrowed $6.7 million of funds from FHLB of Topeka.  At June 30, 2016 we had no borrowings with FHLB of Topeka.

Our cash flows are comprised of three classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $2.8 million and $3.3 million for the fiscal years ended June 30, 2017 and 2016, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from the sales, calls, and maturities of securities and proceeds from the pay downs on mortgage‑backed securities, was $40.5 million and $18.5 million for the fiscal years ended June 30, 2017 and 2016, respectively. Net cash provided by financing activities, was $27.6 million and $8.7 million for the fiscal years June 30, 2017 and 2016, respectively.  Cash provided by financing activities is mainly from deposit account activity and advances from FHLB of Topeka.

At June 30, 2017, we had outstanding commitments of $4.1 million to originate loans. This amount does not include the unfunded portion of loans in process. At June 30, 2017, certificates of deposit scheduled to mature in less than one year totaled $22.0 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In addition, the cost of such deposits may be significantly higher upon renewal in a rising interest rate environment.

At June 30, 2017, we exceeded all our regulatory capital requirements with a Tier 1 leverage capital level of $28.0 million, or 11.4% of adjusted total assets, which is above our individual minimum capital required level of $9.8 million, or 4.0%; a common equity Tier 1 capital level of $28.0 million, or 11.9% of risk‑weighted assets, which is above our individual minimum capital required level of $10.5 million, or 4.5%; a Tier 1 risk‑based capital level of $28.0 million, or 11.9% of risk‑weighted assets, which is above our individual minimum capital required level of $14.1 million, or 6.0%; and a total risk‑based capital level of $30.9 million, or 13.2% of risk‑weighted assets, which is above our individual minimum capital required level of $18.7 million, or 8.0%. Accordingly, Equitable Bank was classified as well‑capitalized at June 30, 2017.

Off‑Balance‑Sheet Arrangements.  In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, unused lines of credit and standby letters of credit. For information about our loan commitments, letters of credit and unused lines of credit, see Note 13 of the notes to the Company’s audited consolidated financial statements.

For the year ended June 30, 2017, we did not engage in any off‑balance‑sheet transactions other than loan origination commitments, unused lines of credit and standby letters of credit in the normal course of our lending activities.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements that are applicable to the Company, please see Note 1 of the notes to the Company’s consolidated financial statements, beginning on page 54.

Effect of Inflation and Changing Prices

The audited consolidated financial statements and related data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the Company’s assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company’s performance than does the effect of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, because such prices are affected by inflation to a larger extent than interest rates.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

This item is not applicable because we are a smaller reporting company.

45

Item 8.  Financial Statements and Supplementary Data.

Description
Report of Independent Registered Public Accounting Firm	47
Consolidated Balance Sheets as of June 30, 2017 and 2016	48
Consolidated Statements of Income for the Years ended June 30, 2017 and 2016	49
Consolidated Statements of Comprehensive Income for the Years ended June 30, 2017 and 2016	50
Consolidated Statements of Changes in Stockholders’ Equity for the Years ended June 30, 2017 and 2016	51
Consolidated Statements of Cash Flows for the Years ended June 30, 2017 and 2016	52
Notes to Consolidated Financial Statements	54

46

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders
Equitable Financial Corp.
Grand Island, Nebraska

We have audited the accompanying consolidated balance sheets of Equitable Financial Corp. (Company) as of June 30, 2017 and 2016, and the related consolidated statements of income, comprehensive income, change in stockholders’ equity and cash flows for the years then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits also included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Equitable Financial Corp. as of June 30, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Lincoln, Nebraska
September 28, 2017

47

Equitable Financial Corp. and Subsidiary

Consolidated Balance Sheets

June 30, 2017 and 2016

	2017		2016
Assets
Cash and due from financial institutions	$	4,881,007	$	2,567,296
Interest-earning deposits		—		12,380,000
		4,881,007		14,947,296
Securities available-for-sale		1,410,955		664,755
Securities held-to-maturity		735,978		781,740
Federal Home Loan Bank stock, at cost		453,400		229,900
Loans, net of allowance for loan losses of $3,555,000 and $2,947,000, respectively		236,545,125		198,309,920
Premises and equipment, net		5,424,855		5,274,461
Foreclosed assets, net		223,200		461,847
Accrued interest receivable		1,297,908		1,147,467
Deferred taxes, net		862,009		1,416,093
Other assets		2,008,051		1,853,698
Total assets	$	253,842,488	$	225,087,177
Liabilities and Stockholders’ Equity
Liabilities:
Noninterest-bearing deposits	$	29,546,051	$	24,296,166
Interest-bearing deposits		179,512,265		162,666,186
		209,058,316		186,962,352
Federal funds purchased		399,000		—
Federal Home Loan Bank Borrowings		6,745,400		—
Advance payments from borrowers for taxes and insurance		432,960		387,166
Accrued interest payable and other liabilities		820,229		1,198,850
Total liabilities		217,455,905		188,548,368
Common stock in ESOP subject to contingent repurchase obligation		815,280		564,723
Stockholders’ equity:
Common stock, $0.01 par value, 25,000,000 shares authorized 3,372,532 and 3,477,157 issued and outstanding at June 30, 2017 and June 30, 2016, respectively		33,725		34,771
Additional paid-in capital		25,794,124		26,844,426
Retained earnings		12,474,958		11,239,913
Unearned ESOP shares		(1,107,692)		(1,246,045)
Shares reserved for stock compensation		(797,950)		(338,332)
Accumulated other comprehensive gain/(loss), net of tax		(10,582)		4,076
Reclassification of ESOP shares		(815,280)		(564,723)
Total stockholders’ equity		35,571,303		35,974,086
Total liabilities and stockholders’ equity	$	253,842,488	$	225,087,177

See Notes to Consolidated Financial Statements.

48

Equitable Financial Corp. and Subsidiary

Consolidated Statements of Income

Years Ended June 30, 2017 and 2016

	2017		2016
Interest income:
Loans	$	9,225,388	$	8,228,373
Securities		47,078		79,639
Other		23,111		71,502
Total interest income		9,295,577		8,379,514
Interest expense:
Deposits		1,125,318		1,043,895
Federal Home Loan Bank borrowings		10,970		—
Other		3,786		792
Total interest expense		1,140,074		1,044,687
Net interest income		8,155,503		7,334,827
Provision for loan losses		644,029		275,024
Net interest income after provision for loan losses		7,511,474		7,059,803
Noninterest income:
Service charges on deposit accounts		631,673		594,624
Brokerage fee income		722,640		633,215
Gain on sale of loans		856,222		750,353
Other loan fees		283,310		264,626
Other income		151,503		141,385
Total noninterest income		2,645,348		2,384,203
Noninterest expense:
Salaries and employee benefits		4,773,321		4,479,207
Director and committee fees		166,000		160,150
Data processing fees		552,608		539,077
Occupancy and equipment		967,055		886,280
Regulatory fees and deposit insurance premium		170,262		206,756
Advertising and public relations		239,677		215,681
Insurance and surety bond premiums		96,529		98,978
Professional fees		379,076		448,289
Supplies, telephone and postage		275,065		265,254
Other expenses		621,360		598,770
Total noninterest expense		8,240,953		7,898,442
Income before income taxes		1,915,869		1,545,564
Income tax expense		(680,824)		(490,806)
Net income	$	1,235,045	$	1,054,758
Basic earnings per share	$	0.37	$	0.32
Diluted earnings per share	$	0.35	$	0.32

See Notes to Consolidated Financial Statements.

49

Equitable Financial Corp. and Subsidiary

Consolidated Statements of Comprehensive Income

For the Years Ended June 30, 2017 and 2016

	2017		2016
Net income	$	1,235,045	$	1,054,758
Other comprehensive income:
Unrealized gain (loss) on securities available-for-sale, net of tax		(14,658)		8,131
Comprehensive income	$	1,220,387	$	1,062,889

See Notes to Consolidated Financial Statements.

50

Equitable Financial Corp. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

For the years ended June 30, 2017 and 2016

									Shares				Accumulated		Amount
									Reserved for				Other		Reclassified
	Common		Additional		Retained		Unearned		Stock		Treasury		Comprehensive		on ESOP
	Stock		Paid-in Capital		Earnings		ESOP Shares		Compensation		Stock		Gain/(Loss)		Shares		Total
Balance, June 30, 2015	$	32,975	$	13,086,447	$	10,185,155	$	(408,750)	$	(465,080)	$	(978,682)	$	(4,055)	$	(516,800)	$	20,931,210
Net income		—		—		1,054,758		—		—		—		—		—		1,054,758
Other comprehensive income		—		—		—		—		—		—		8,131		—		8,131
Stock Offering Proceeds		1,796		13,820,592		—		(951,912)		—		978,682		—		—		13,849,158
Release of 12,888 unearned ESOP shares		—		(8,972)		—		114,617		—		—		—		—		105,645
Stock compensation expense		—		(53,641)		—		—		126,748		—		—		—		73,107
Reclassification due to release and changes in fair value of common stock in ESOP subject to contingent repurchase obligation of ESOP shares		—		—		—		—		—		—		—		(47,923)		(47,923)
Balance, June 30, 2016		34,771		26,844,426		11,239,913		(1,246,045)		(338,332)		—		4,076		(564,723)		35,974,086
Net Income		—		—		1,235,045		—		—		—		—		—		1,235,045
Other comprehensive loss		—		—		—		—		—		—		(14,658)		—		(14,658)
Release of 15,857 unearned ESOP shares		—		13,751		—		138,353		—		—		—		—		152,104
Stock compensation expense		—		(54,403)		—		—		168,646		—		—		—		114,243
Equity Incentive Plan stock issued		635		627,629		—		—		(628,264)		—		—		—		—
Stock buyback		(1,681)		(1,637,279)		—		—		—		—		—		—		(1,638,960)
Reclassification due to release and changes in fair value of common stock in ESOP subject to contingent repurchase obligation of ESOP shares		—		—		—		—		—		—		—		(250,557)		(250,557)
Balance, June 30, 2017	$	33,725	$	25,794,124	$	12,474,958	$	(1,107,692)	$	(797,950)	$	—	$	(10,582)	$	(815,280)	$	35,571,303

See Notes to Consolidated Financial Statements.

51

Equitable Financial Corp. and Subsidiary

Consolidated Statements of Cash Flows

Years Ended June 30, 2017 and 2016

	2017		2016
Cash Flows from Operating Activities:
Net income	$	1,235,045	$	1,054,758
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		342,875		343,651
Federal Home Loan Bank stock dividends		(3,100)		(3,100)
ESOP expense		152,104		105,645
Stock compensation expense		114,243		73,107
Amortization of deferred loan origination costs, net		508,623		480,453
Amortization of premiums and discounts		9,693		16,214
Gain on sale of loans		(856,222)		(750,353)
(Gain)/Loss on sale of foreclosed assets		(4,579)		11,008
Loss on disposal of premises and equipment		—		58,153
Provision for loan losses		644,029		275,024
Deferred taxes		561,635		344,906
Loans originated for sale		(33,226,181)		(27,572,874)
Proceeds from sale of loans		33,721,173		28,507,437
Loss on investment from low income housing		4,859		28,087
Changes in:
Accrued interest receivable		(150,441)		(103,196)
Other assets		105,164		301,223
Accrued interest payable and other liabilities		(363,621)		138,984
Net cash provided by operating activities		2,795,299		3,309,127
Cash Flows from Investing Activities:
Net change in loans		(39,306,004)		(21,281,161)
Proceeds from sale of foreclosed assets, net		243,226		115,500
Proceeds from maturity of time deposits with financial institutions		—		500,000
Securities available-for-sale:
Proceeds from calls and principal repayments		209,200		223,292
Purchases		(985,400)		(469,253)
Securities held-to-maturity:
Proceeds from calls and principal repayments		43,861		2,492,571
Purchases of Federal Home Loan Bank stock		(220,400)		—
Purchase of premises and equipment		(493,269)		(124,475)
Net cash used in investing activities		(40,508,786)		(18,543,526)

(Continued)

52

Equitable Financial Corp. and Subsidiary

Consolidated Statements of Cash Flows (Continued)

Years Ended June 30, 2017 and 2016

	2017		2016
Cash Flows from Financing Activities:
Net change in deposits	$	22,095,964	$	12,193,431
Net change in federal funds purchased		399,000		—
Proceeds from Federal Home Loan Bank borrowings		17,140,400		—
Repayments of Federal Home Loan Bank borrowings		(10,395,000)		—
Net change in advance payments from borrowers for taxes and insurance		45,794		(17,301)
Stock Buyback		(1,638,960)		—
Purchase of ESOP Shares		—		(951,912)
Expenses and return of proceeds in advance of offering		—		(2,555,176)
Net cash provided by financing activities		27,647,198		8,669,042
Decrease in cash and cash equivalents		(10,066,289)		(6,565,357)
Cash and Cash Equivalents:
Beginning		14,947,296		21,512,653
Ending	$	4,881,007	$	14,947,296
Supplemental Cash Flow Information:
Interest paid on deposits and borrowings	$	1,131,966	$	1,041,293
Income taxes paid	$	162,879	$	137,765
Supplemental Noncash Disclosure:
Transfer of loans to foreclosed assets	$	—	$	238,647

See Notes to Consolidated Financial Statements.

53

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 1.Nature of Business and Significant Accounting Policies

Principles of consolidation:  The accompanying consolidated financial statements include the accounts of Equitable Financial Corp. (the “Company”) and its wholly owned subsidiary, Equitable Bank (the “Bank”).  All significant intercompany transactions and balances are eliminated in consolidation.

Stock Conversion:On July 8, 2015, Equitable Financial, MHC, the Company’s former federally chartered mutual holding company, consummated its “second step” mutual-to-stock conversion, and the Company consummated its initial stock offering.  In the offering, the Company sold 1,983,160 shares of its common stock, par value $0.01 per share, at $8.00 per share in a subscription offering and community offering, including 118,989 shares, equal to 6.0% of the shares sold in the offering, to the Equitable Bank employee stock ownership plan. 

In accordance with applicable federal conversion regulations, at the time of the completion of our mutual-to-stock conversion, we established a liquidation account in an amount equal to the Company’s total equity as of the latest balance sheet date in the final prospectus used in the Conversion.  Each eligible account holder or supplemental account holder is entitled to a proportionate share of this liquidation account in the event of a complete liquidation of the Bank, and only in such event.  This share will be reduced if the eligible account holder’s or supplemental account holder’s deposit balance falls below the amounts on the date of record as of any June 30 and will cease to exist if the account is closed.  The liquidation account will never be increased despite any increase after Conversion in the related deposit balance.

Following completion of the Conversion, the Bank may not declare, pay a dividend on, or repurchase any of its capital stock of the Bank, if the effect thereof would cause retained earnings to be reduced below the liquidation account amount or regulatory capital requirements.

Nature of business:  The primary business of the Company is the ownership of the Bank.  Through the Bank, the Company is engaged in the business of retail banking, with operations conducted through its main office and branches, which are located in Grand Island, North Platte and Omaha, Nebraska.  The Bank’s primary services include accepting deposits, making loans and investing in securities.

Use of estimates:  In preparing the accompanying consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses for the reporting period.  Estimates significant to the consolidated financial statement include the allowance for loan losses,   deferred tax valuation allowances, fair values of financial instruments and foreclosed assets.  Actual results could differ from those estimates.  The allowance for loan losses is inherently subjective as it requires material estimates that are susceptible to significant change.  The fair value disclosure of investments and other financial instruments is an estimate that can be computed within a range.

Risks and uncertainties:  Changes in economic conditions in the United States, and more specifically Nebraska, could impact the credit worthiness of the Company’s borrowers and the borrowers’ ability to service their outstanding loans with the Company.  Additionally, the Company is subject to interest rate risk in which changes in the interest rate environment could negatively impact the Company’s net interest margin.

Cash flows:  Cash and cash equivalents include cash, deposits with other financial institutions with maturities under 90 days when purchased, and federal funds sold.  Net cash flows are reported for customer loan and deposit transactions, and advance payments from borrowers for taxes and insurance.  Excess cash is held in a fully secured excess balance account with Midwest Independent Bank.  The balance at Midwest Independent Bank at June 30, 2017 and 2016 was zero and $12.4 million, respectively. 

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Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Securities:  Securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity.  Securities are classified as available-for-sale when they might be sold before maturity.  Securities classified as available-for-sale are carried at fair value with unrealized holding gains and losses reported in other comprehensive income or loss, net of tax.

Interest income is recognized under the interest method and includes amortization of purchase premium and discount.  Gains and losses on sales are recorded on the trade date based on the amortized cost of the security sold and determined using the specific identification method.

Declines in the fair value of securities available-for-sale below their amortized cost are evaluated to determine whether the loss is temporary or other-than-temporary.  If the Company (a) has the intent to sell a debt security or (b) more-likely-than-not will be required to sell the debt security before its anticipated recovery, then the Company recognizes the entire unrealized loss in earnings as an other-than-temporary loss.  If neither of these conditions are met, the Company evaluates whether a credit loss exists.  The impairment is separated into (a) the amount of the total impairment related to the credit loss and (b) the amount of total impairment related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings and the amount related to all other factors is recognized in other comprehensive income (loss).

Federal Home Loan Bank stock: The Bank is a member of the Federal Home Loan Bank (FHLB) system.  Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts.  The stock does not have a readily determinable fair value and as such is classified as restricted stock, carried at cost and evaluated for impairment.  In accordance with the applicable accounting guidance, the stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time this situation has persisted (b) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance (c) the impact of legislative and regulatory changes on the customer base of the FHLB and (d) the liquidity position of the FHLB.  With consideration given to the previous criteria, management concluded that the stock was not impaired at June 30, 2017 and June 30, 2016.

Loans, net:  Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at their outstanding unpaid principal balances, less an allowance for loan losses, premiums and discounts on loans purchased, and net deferred loan fees/costs.  Interest income on loans is recognized over the term of the loan and is calculated using the simple interest method on principal amounts outstanding.  Direct loan origination fees and costs are generally being deferred and the net amounts amortized as an adjustment of the related loan’s yield. The Company generally amortizes these amounts over the contractual life.  Direct loan origination fees and costs related to loans sold to unrelated third parties are recognized as income or expense in the current consolidated statement of income.

The Company’s portfolio segments are as follows:

· Commercial

· Agricultural

· Residential real estate

· Other

The Company’s classes of loans are as follows:

· Commercial – operating

· Commercial – real estate

· Agricultural – operating

· Agricultural – real estate

· Residential real estate – 1-4 family

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Notes to Consolidated Financial Statements

· Residential real estate – home equity

· Other – construction and land

· Other – consumer

Generally, for all classes of loans, loans are considered past due when contractual payments are delinquent for 31 days or greater.

For all classes of loans, loans will generally be placed on nonaccrual status when the loan has become greater than 90 days past due; or when management believes, after considering collection efforts and other factors, that the borrower’s financial condition is such that collection of interest is doubtful.

When a loan is placed on nonaccrual status, payments received will be applied to the principal balance. However, interest may be taken on a cash basis in the event the loan is fully secured and the risk of loss is minimal.  Previously recorded but uncollected interest on a loan placed in nonaccrual status is accounted for as follows:  if the previously accrued but uncollected interest and the principal amount of the loan is protected by sound collateral value based upon a current, independent qualified appraisal, such interest may remain on the Company’s books. If such interest is not so protected, it is considered a loss with the amount thereof recorded in the current year being reversed against current interest income, and the amount recorded in the prior year being charged against the allowance for possible loan losses.

For all classes of loans, nonaccrual loans may be restored to accrual status provided the following criteria are met:

· The loan is current, and all principal and interest amounts contractually due have been made,

· The loan is well secured and in the process of collection, and

· Future principal and interest payments are not in doubt.

Troubled debt restructures: Troubled debt restructuring exists when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession (either imposed by court order, law, or agreement between the borrower and the Company) to the borrower that it would not otherwise consider. These concessions could include forgiveness of principal, extension of maturity dates, and reduction of stated interest rates or accrued interest. The Company is attempting to maximize its recovery of the balances of the loans through these various concessionary restructurings. See Note 3 for disclosure of the Company’s troubled debt restructurings.

Allowance for loan losses:  For all portfolio segments, the allowance for loan losses is maintained at the level considered adequate by management of the Company to provide for losses that are probable. The allowance is increased by provisions charged to operating expense and reduced by net charge-offs. Subsequent recoveries, if any, are credited to the allowance.  In determining the adequacy of the allowance balance, the Company makes continuous evaluations of the loan portfolio and related off-balance sheet commitments, considers current economic conditions, historical loan loss experience, review of specific problem loans and other factors.

A discussion of the risk characteristics and the allowance for loan losses by each portfolio segment follows:

For commercial loans, the Company focuses on small and mid-sized businesses in their geographical footprint. The Company provides a wide range of commercial loans, including lines of credit for working capital and operational purposes, and term loans for the acquisition of real estate, facilities, equipment and other purposes. Approval is generally based on the following factors:

· Sufficient cash flow to support debt repayment;

· Ability and stability of current management of the borrower;

· Positive earnings and financial trends;

· Earnings projections based on reasonable assumptions;

· Financial strength of the industry and business;

· Value and marketability of collateral.

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Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Collateral for commercial loans generally includes accounts receivable, inventory, equipment and real estate. The lending policy specifies approved collateral types and corresponding maximum advance percentages. The value of collateral pledged on loans typically exceeds the loan amount by a margin sufficient to absorb potential erosion of its value in the event of foreclosure and cover the loan amount plus costs incurred to convert it to cash.

The lending policy specifies maximum term limits for commercial loans. For term loans, the typical maximum term is 10 years. The lending policy includes guidelines for real estate appraisals, including minimum appraisal standards based on certain transactions. Where the purpose of the loan is to finance depreciable equipment, the term loan generally does not exceed the estimated useful life of the asset. For lines of credit, the typical maximum term is 1 year. However, longer maturities may be approved if the loan is secured by readily marketable collateral.

In addition, the Company often takes personal guarantees to help assure repayment. Loans may be made on an unsecured basis if warranted by the overall financial condition of the borrower.

 

Agricultural loans are subject to underwriting standards and processes similar to commercial loans. The Company provides a wide range of agriculture loans, including lines of credit for working capital and operational purposes, and term loans for the acquisition of real estate, facilities, equipment and other purposes. Approval is generally based on the following factors:

· Sufficient cash flow to support debt repayment;

· Ability and stability of current management of the borrower;

· Positive earnings and financial trends;

· Earnings projections based on reasonable assumptions;

· Financial strength of the industry and business; and

· Value and marketability of collateral.

Collateral for agricultural loans generally includes accounts receivable, inventory (typically grain or livestock), equipment and real estate. The lending policy specifies approved collateral types and corresponding maximum advance percentages. The value of collateral pledged on loans typically exceeds the loan amount by a margin sufficient to absorb potential erosion of its value in the event of foreclosure and cover the loan amount plus costs incurred to convert it to cash.

The lending policy specifies maximum term limits for agricultural loans. For term loans, the typical maximum term is 10 years. The lending policy includes guidelines for real estate appraisals, including minimum appraisal standards based on certain transactions. Where the purpose of the loan is to finance depreciable equipment, the term loan generally does not exceed the estimated useful life of the asset. For lines of credit, the typical maximum term is 1 year. However, longer maturities may be approved if the loan is secured by readily marketable collateral.

In addition, the Company often takes personal guarantees to help assure repayment. Loans may be made on an unsecured basis if warranted by the overall financial condition of the borrower.

In some instances for all loans, it may be appropriate to originate or purchase loans that are exceptions to the guidelines and limits established within the lending policy described above and below. In general, exceptions to the lending policy do not significantly deviate from the guidelines and limits established within the lending policy and, if there are exceptions, they are clearly noted as such and specifically identified in loan approval documents.

For commercial loans and agricultural loans, the allowance for estimated losses on loans consists of specific and general components.

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Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

The specific component relates to loans that are classified as impaired, as defined below. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

For commercial loans and agricultural loans, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a case-by-case basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

The general component consists of quantitative and qualitative factors and covers non-impaired loans. The quantitative factors are based on historical charge-off experience. The qualitative factors are determined based on an assessment of internal and/or external influences on credit quality that are not fully reflected in the historical loss data. The Company’s credit quality indicator for all loans excluding commercial loans is past due or performance status.  The Company’s credit quality indicator for commercial loans is internal risk ratings.

For commercial and agriculture loans, the Company utilizes the following internal risk rating scale:

1. Highest Quality – Loans represent a credit extension of the highest quality.  Excellent liquidity, management and character in an industry with favorable conditions.  High quality financial information, history of strong cash flows and superior collateral including readily marketable assets, prime real estate, U.S. government securities, U.S. government agencies, highly rated municipal bonds, insured savings accounts, and insured certificates of deposit drawn on high-quality financial institutions.

2. Good Quality – Loans which have a sound primary and secondary source of repayment.  Strong to good liquidity, management and character in an industry with favorable conditions.  Good quality financial information and margins of cash flow coverage is consistently good. Loans may be unsecured, secured by quality (but less readily marketable) assets, high quality real estate or traded stocks, lower grade municipal bonds (which must still be investment grade), and uninsured certificates of deposit on other financial institutions may also be included in this grade.

3. Acceptable Quality – Loans where the borrower is a reasonable credit risk and demonstrates the ability to repay the debt from normal business operations.  Good liquidity, management and character in an industry that is more sensitive to external factors.  Alternative sources of refinancing may be less available in periods of uncertain economic conditions.  Term debt is moderate but cash flow margins fall within bank policy guidelines.  Quality of financial information is adequate but is not as detailed and sophisticated as information found on higher-grade loans.  Secured by business assets that conform to usual lending parameters for margin and eligibility or real estate that is deemed to be of satisfactory quality in an area that may not be prime but still within viable economic centers.

4. Fair Quality – Loans where the borrower is a reasonable credit risk but shows a more erratic earnings history (a loss may have been realized in the past four years).  Liquidity is limited and primary repayment is susceptible to unfavorable external factors.  Industry characteristics are generally stable.  Borrower is more highly leveraged with increased levels of term debt.  Cash flow margins remain adequate but may not fall within the policy guidelines.  Quality of financial information is adequate and interim reporting may be

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Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

required.  Secured by business assets with an adequate collateral margin or real estate that is of fair quality and location.  Property may have limited alternative uses and may be considered a “special use” facility.

5. Special Mention – Loans in this category have the potential for developing weaknesses that deserve extra attention from the account manager and other management personnel. If the developing weakness is not corrected or mitigated, the ability of the borrower to repay the Company’s debt in the future may deteriorate. This grade should not be assigned to loans that bear certain peculiar risks normally associated with the type of financing involved, unless circumstances have caused the risk to increase to a level higher than would have been acceptable when the credit was originally approved. If a loan’s actual, not potential, weakness or problems are clearly evident and significant it should generally be graded in one of the following grade categories.

6. Substandard – Loans and other credit extensions are considered to be inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. These loans, even if apparently protected by collateral value, have a well-defined weakness or weaknesses that jeopardize the liquidation of debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.

7. Doubtful – Loans and other credit extensions have all the weaknesses inherent in those graded “6” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include: proposed merger, acquisition, or liquidation actions; capital injection; perfecting liens on collateral and refinancing plans. Loans in this classification should be placed in non-accrual status, with collections applied to principal.

8. Loss – Loans are considered uncollectible and cannot be justified as a viable asset of the Bank. This classification does not mean the loan has absolutely no recovery value. However, it is not prudent to delay writing off this loan even though partial recovery may be obtained in the future.

For commercial and agricultural loans or credit relationships with aggregate exposure greater than $250,000, a loan review is required within 12 months of the most recent credit review.  The reviews are completed in enough detail to, at a minimum, validate the risk rating. Additionally, the reviews shall determine whether any documentation exceptions exist, appropriate written analysis is included in the loan file, and whether credit policies have been properly adhered to.

Many of the residential real estate loans underwritten by the Company conform to the underwriting requirements of Freddie Mac or other secondary market aggregators to allow the Company to resell loans in the secondary market. Servicing rights are retained on many, but not all, of the residential real estate loans sold in the secondary market. The lending policy establishes minimum appraisal and other credit guidelines.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or market, as determined by outstanding commitments from investors.  As of June 30, 2017 and June 30, 2016, loans held for sale were immaterial to the consolidated financial statements.

Periodically, the Company originates first mortgage loans for other investors.  Generally, the Company receives fees equivalent to a stated percentage of the loan amount.  This fee is recognized as income at the time of closing.  From time to time, the Company also originates loans for sale in the secondary market.  Gain on sale of loans in the secondary market is included in noninterest income.

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Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

The Company provides many types of consumer and other loans, including motor vehicle, home improvement, home equity, signature loans and small personal credit lines. The lending policy addresses specific credit guidelines by consumer loan type.

For residential real estate loans and consumer and other loans, these large groups of smaller balance homogenous loans are collectively evaluated for impairment. In estimating the allowance for loan losses for these loans, the Company applies quantitative and qualitative factors on a portfolio segment basis. Quantitative factors are based on historical charge-off experience and qualitative factors are based on an assessment of internal and/or external influences on credit quality that are not fully reflected in the historical loss data. Accordingly, the Company generally does not separately identify individual residential real estate loans and/or consumer and other loans for impairment disclosures, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Troubled debt restructures are considered impaired loans and are subject to the same allowance methodology as described above for impaired loans by portfolio segment.

Mortgage servicing rights: Mortgage servicing rights are recognized separately when rights are acquired through purchase or through sale of financial assets.  The Company subsequently measures each class of servicing assets on the amortization method.  Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income.  The amortized assets are assessed for impairment based on fair value of each reporting date.

Transfers of financial assets:  Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Company; (2) the transferee has the right to pledge or exchange the assets it received, and no condition both constrains the transferee from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor; and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.  

Premises and equipment:  Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation.  Depreciation is included in noninterest expense and is computed on 25 to 40 years for buildings and improvements that extend the life of the original building, 10 to 20 years for routine building improvements, 5 to 15 years for furniture and equipment, 5 years for vehicles, and 2 to 5 years for computer equipment.  The cost of maintenance and repairs is charged to expense as incurred.

Long-term assets:  Premises and equipment and other long-term assets are reviewed for impairment when events indicate that their carrying amount may not be recoverable from future undiscounted cash flows.  If impaired, the assets are recorded at fair value.  No impairment has been recognized by the Company for the years ended June 30, 2017 and 2016.

Foreclosed assets:  Assets acquired through foreclosure are initially recorded at fair value, less estimated costs to sell, establishing a new cost basis.  If the fair value less costs to sell is less than the respective loan balance, a charge against the allowance for loan losses is recorded upon property acquisition.  Declines in property value subsequent to acquisition are charged to operations.  Holding costs are expensed as incurred.

Brokerage fee income:  Acting as an agent, the Company earns brokerage income by buying and selling securities on behalf of its customers through independent third parties and earning fees on the transactions.  These fees are recorded on the settlement date, which is not materially different than the trade date.

Income taxes:  Income tax expense or benefit is the sum of the current year income tax due or refundable and the change in the deferred tax assets and liabilities.  Deferred tax assets and liabilities are the expected future tax consequence of temporary differences between the carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates.  A valuation allowance reduces deferred tax assets to the amount expected to be realized.

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Notes to Consolidated Financial Statements

The Company follows the guidance on accounting for uncertainty in income taxes which allows the Company to recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.  The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods.  When applicable, the Company recognizes interest and penalties on income taxes as a component of income tax (benefit) expense. 

Employee Stock Ownership Plan:  The cost of shares issued to the Employee Stock Ownership Plan (“ESOP”) but not yet allocated to participants is presented in the consolidated balance sheet as a reduction of stockholders’ equity.  Compensation expense is recorded based on the market price of the shares as the shares are committed to be released for allocation to participant accounts.  Because participants may require the Company to purchase their ESOP shares upon termination of their employment, the appraised fair value of all earned and allocated ESOP shares is reclassified from stockholders’ equity.

Stock based compensation: Compensation cost for stock based compensation is recognized based on the fair value of these awards at the date of the grant over the requisite service period, usually the vesting period.  The Company uses a Black-Scholes pricing model and related assumption for estimating the fair value of stock options and a five-year vesting period for stock options and restricted stock awards.

Loan commitments and related financial instruments:  Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer-financing needs.  The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.  Such financial instruments are recorded when they are funded.

Fair value of financial instruments:  Fair values of financial instruments are estimated using relevant market value information and other assumptions, as more fully disclosed in Note 14.  Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.  Changes in assumptions or in market conditions could significantly affect the estimates.

Earnings per share:  Basic earnings per share is based on net income divided by the weighted average number of shares outstanding during the period, including allocated and committed to be released ESOP shares.  Diluted earnings per share shows the dilutive effect, if any, of additional common shares issuable under stock options or awards.

Loss contingencies:  Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  Management does not believe that there are such matters that will have a material effect on the consolidated financial statements.

Comprehensive income (loss):  Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss).  Other comprehensive income (loss) includes unrealized gains (losses) on securities available-for-sale, net of tax.

Recent accounting pronouncements:  In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers.  The ASU is effective for the Company with the fiscal year ending June 30, 2019.  FASB issued this ASU to clarify the principles for recognizing revenue and to develop a common revenue standard.  The Company believes this will have a minimal impact on its financial statements.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.  The amendments in this Update address certain aspects of recognition, measurement, presentation, and

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disclosure of financial instruments.  The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  This ASU is not expected to have a material impact on the Company’s consolidated financial statements.

On February 25, 2016, the FASB issued ASU 2016-02, intended to improve financial reporting about leasing transactions. The ASU is effective for the Company with the interim period beginning January 1, 2019. We are currently evaluating the effect of this proposal to our financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The purpose of this Update is to simplify the accounting for share-based payment award transactions. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. This ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The purpose of this Update 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. The Update replaces the current incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU will be effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods.  This ASU is expected to have an impact on the Company’s consolidated financial statements. The Company is currently evaluating the effect this will have on its financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows; Classification of Certain Cash Receipts and Cash Payments.  The purpose of this Update is to address existing diversity in practice related to specific cash flow issues.  This Update will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory.  The purpose of this Update is to improve the accounting for income tax consequences of intra-entity transfers of assets other than inventory.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other.  The purposes of this Update is to simplify how an entity is required to test goodwill for impairment.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05 Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets.  The purpose of this Update is to clarify the scope for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers and add guidance for partial sales of nonfinancing assets.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08 Receivables – Nonrefundable Fees and Other Costs.  The purpose of this Update is to shorten the amortization period of certain callable debt securities held at a premium.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09 Compensation – Stock Compensation.  The purpose of this Update is to provide clarity and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

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Notes to Consolidated Financial Statements

Note 2.Securities

The fair value of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2017	Cost		Gains		Losses		Fair Value
U.S. Government-sponsored agencies securities	$	986,919	$	—	$	(17,974)	$	968,945
Residential mortgage-backed securities		440,070		1,973		(33)		442,010
	$	1,426,989	$	1,973	$	(18,007)	$	1,410,955

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2016	Cost		Gains		Losses		Fair Value
Residential mortgage-backed securities	$	658,579	$	6,176	$	—	$	664,755

The carrying amount, unrecognized gross gains and losses, and fair value of securities held-to-maturity are as follows:

			Gross			Gross
	Amortized		Unrealized			Unrealized
June 30, 2017	Cost		Gains			Losses		Fair Value
Residential mortgage-backed securities	$	135,978		$	10,279	$	—	$	146,257
Municipal securities		600,000			—		(384)		599,616
	$	735,978		$	10,279	$	(384)	$	745,873

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2016	Cost		Gains		Losses		Fair Value
Residential mortgage-backed securities	$	180,035	$	15,281	$	—	$	195,316
Municipal securities		601,705		4,093		—		605,798
	$	781,740	$	19,374	$	—	$	801,114

Securities available-for-sale and held-to-maturity consist of investments in bonds securitized by the Government National Mortgage Association, U.S. Government-sponsored agencies, and local municipal securities.  Interest income from U.S. Government-sponsored agencies approximated $12,000 and $0 for the years ended June 30, 2017 and 2016, respectively.  Interest income from municipal securities approximated $17,000 and $58,000 for the years ended June 30, 2017 and 2016, respectively.

The contractual maturities of the residential mortgage-backed securities at June 30, 2017 are not disclosed because the securities are not due at a single maturity date.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Approximately $969,000 of U.S. Government-sponsored agency securities will mature in the year ending June 30, 2023.  Approximately $400,000 in municipal securities will mature in the year ending June 30, 2019 with the remaining balance maturing in the year ending June 30, 2020.

There were no sales of securities for the years ended June 30, 2017 and 2016.

The duration of gross unrealized losses is not disclosed as such amounts are immaterial to the consolidated financial statements. The Company has not recognized other-than-temporary impairment on any securities for the years ended June 30, 2017 and 2016.

The following table shows the amount of securities pledged at June 30, 2017 and 2016:

63

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

	June 30, 2017		June 30, 2016
Securities available-for-sale, at fair value	$	1,410,955	$	664,755
Securities held-to-maturity, at amortized cost		643,978		746,084

Note 3.Loans

Loans at June 30 are as follows:

	2017		2016
Commercial:
Operating	$	20,139,045	$	15,355,676
Real estate		86,809,938		67,698,929
Agricultural:
Operating		26,739,407		22,942,560
Real estate		31,105,790		24,965,541
Residential real estate:
1-4 family		43,060,013		40,309,797
Home equity		11,748,363		12,644,624
Other:
Construction and land		16,175,698		13,210,393
Consumer		3,674,674		3,566,917
Total loans		239,452,928		200,694,437
Deferred loan origination costs, net		647,197		562,483
Allowance for loan losses		(3,555,000)		(2,947,000)
		(2,907,803)		(2,384,517)
Loans, net	$	236,545,125	$	198,309,920

Changes in the allowance for loan losses, by portfolio segment, during the years ended June 30, 2017 and 2016 are summarized as follows:

					Residential
	Commercial		Agricultural		Real Estate		Other		Total
	2017
Balance, beginning	$	1,337,000	$	738,000	$	655,000	$	217,000	$	2,947,000
Provision charged to expense		396,291		180,000		(1,432)		69,170		644,029
Recoveries		24,511		—		2,620		3,208		30,339
Loans charged off		(54,802)		—		(188)		(11,378)		(66,368)
Balance, ending	$	1,703,000	$	918,000	$	656,000	$	278,000	$	3,555,000

					Residential
	Commercial		Agricultural		Real Estate		Other		Total
	2016
Balance, beginning	$	1,124,000	$	697,000	$	644,000	$	118,000	$	2,583,000
Provision charged to expense		118,418		41,000		9,416		106,190		275,024
Recoveries		94,582		—		1,584		5,551		101,717
Loans charged off		—		—		—		(12,741)		(12,741)
Balance, ending	$	1,337,000	$	738,000	$	655,000	$	217,000	$	2,947,000

64

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

The allowance for loan losses, by impairment evaluation and portfolio segment, as of June 30, 2017 and 2016, is summarized as follows:

							Residential
	Commercial			Agricultural			Real Estate			Other			Total
	2017
Allowance for loans individually evaluated for impairment	$	6,487		$	17,973		$	29,271		$	1,949		$	55,680
Allowance for loans collectively evaluated for impairment		1,696,513			900,027			626,729			276,051			3,499,320
	$	1,703,000		$	918,000		$	656,000		$	278,000		$	3,555,000
Loans individually evaluated for impairment	$	870,377		$	864,357		$	3,142,020		$	20,408		$	4,897,162
Loans collectively evaluated for impairment		106,078,606			56,980,840			51,666,356			19,829,964			234,555,766
	$	106,948,983		$	57,845,197		$	54,808,376		$	19,850,372		$	239,452,928
Allowance as a percentage of loans individually evaluated for impairment		0.75	%		2.08	%		0.93	%		9.55	%		1.14	%
Allowance as a percentage of loans collectively evaluated for impairment		1.60	%		1.58	%		1.21	%		1.39	%		1.49	%
Allowance as a percentage of total loans evaluated for impairment		1.59	%		1.59	%		1.20	%		1.40	%		1.48	%

							Residential
	Commercial			Agricultural			Real Estate			Other			Total
	2016
Allowance for loans individually evaluated for impairment	$	34,975		$	—		$	17,828		$	—		$	52,803
Allowance for loans collectively evaluated for impairment		1,302,025			738,000			637,172			217,000			2,894,197
	$	1,337,000		$	738,000		$	655,000		$	217,000		$	2,947,000
Loans individually evaluated for impairment	$	227,824		$	885,757		$	3,726,602		$	3,194		$	4,843,377
Loans collectively evaluated for impairment		82,826,781			47,022,344			49,227,819			16,774,116			195,851,060
	$	83,054,605		$	47,908,101		$	52,954,421		$	16,777,310		$	200,694,437
Allowance as a percentage of loans individually evaluated for impairment		15.35	%		—	%		0.48	%		—	%		1.09	%
Allowance as a percentage of loans collectively evaluated for impairment		1.57	%		1.57	%		1.29	%		1.29	%		1.48	%
Allowance as a percentage of total loans evaluated for impairment		1.61	%		1.54	%		1.24	%		1.29	%		1.47	%

65

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

The aging in terms of unpaid principal balance of the loan portfolio, by classes of loans, as of June 30, 2017 and 2016, is summarized as follows:

										> 90 days
				31-60 days			61-90 days			Past Due						Non accrual
	Current			Past Due			Past Due			(Nonaccrual)			Total			Loans
	2017
Classes of loans:
Commercial:
Operating	$	20,072,350		$	33,060		$	13,240		$	20,395		$	20,139,045		$	154,671
Real estate		86,809,938			—			—			—			86,809,938			640,881
Agricultural:
Operating		26,699,805			32,754			—			6,848			26,739,407			6,848
Real estate		30,263,281			47,900			—			794,609			31,105,790			857,509
Residential real estate:
1-4 family		42,722,767			164,549			—			172,697			43,060,013			675,197
Home equity		11,748,363			—			—			—			11,748,363			22,649
Other:
Construction and land		16,175,698			—			—			—			16,175,698			—
Consumer		3,670,927			—			3,747			—			3,674,674			24,124
	$	238,163,129		$	278,263		$	16,987		$	994,549		$	239,452,928		$	2,381,879
As a percentage of total loan portfolio		99.45	%		0.12	%		0.01	%		0.42	%		100.00	%		0.99	%

										> 90 days
				31-60 days			61-90 days			Past Due						Non accrual
	Current			Past Due			Past Due			(Nonaccrual)			Total			Loans
	2016
Classes of loans:
Commercial:
Operating	$	15,256,328		$	99,348		$	—		$	—		$	15,355,676		$	97,294
Real estate		67,606,842			—			—			92,087			67,698,929			92,087
Agricultural:
Operating		22,318,246			624,314			—			—			22,942,560			6,848
Real estate		24,965,541			—			—			—			24,965,541			877,909
Residential real estate:
1-4 family		38,428,793			1,823,353			23,736			33,915			40,309,797			688,454
Home equity		12,644,624			—			—			—			12,644,624			29,807
Other:
Construction and land		13,210,393			—			—			—			13,210,393			—
Consumer		3,563,221			1,294			—			2,402			3,566,917			7,248
	$	197,993,988		$	2,548,309		$	23,736		$	2,402		$	200,694,437		$	1,799,647
As a percentage of total loan portfolio		98.66	%		1.27	%		0.01	%		0.06	%		100.00	%		0.90	%

66

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

For each class of loans, the following summarizes the unpaid principal balance by credit quality indicator as of June 30, 2017 and 2016:

									Other —
	Commercial —		Commercial —		Agricultural —		Agricultural —		Construction
	Operating		Real Estate		Operating		Real Estate		and Land		Total
	2017
Internally assigned risk rating:
Highest Quality (rating 1)	$	—	$	—	$	324,038	$	326,045	$	—	$	650,083
Good Quality (rating 2)		177,795		6,638,998		5,185,147		3,541,630		2,868,632		18,412,202
Acceptable Quality (rating 3)		8,470,283		44,240,531		9,271,425		12,354,765		10,426,245		84,763,249
Fair Quality (rating 4)		11,313,276		31,603,455		11,489,750		13,116,352		2,880,821		70,403,654
Special Mention (rating 5)		—		1,948,017		403,234		—		—		2,351,251
Substandard (rating 6)		177,691		2,378,937		65,813		1,766,998		—		4,389,439
Doubtful (rating 7)		—		—		—		—		—		—
Loss (rating 8)		—		—		—		—		—		—
	$	20,139,045	$	86,809,938	$	26,739,407	$	31,105,790	$	16,175,698	$	180,969,878

									Other —
	Commercial —		Commercial —		Agricultural —		Agricultural —		Construction
	Operating		Real Estate		Operating		Real Estate		and Land		Total
	2016
Internally assigned risk rating:
Highest Quality (rating 1)	$	—	$	—	$	484,813	$	348,011	$	—	$	832,824
Good Quality (rating 2)		213,824		4,923,002		5,510,208		6,173,479		1,987,892		18,808,405
Acceptable Quality (rating 3)		7,732,341		33,606,696		5,992,063		9,729,301		6,675,761		63,736,162
Fair Quality (rating 4)		7,294,630		28,578,771		9,604,176		7,836,841		4,546,740		57,861,158
Special Mention (rating 5)		—		—		829,738		—		—		829,738
Substandard (rating 6)		114,881		590,460		521,562		877,909		—		2,104,812
Doubtful (rating 7)		—		—		—		—		—		—
Loss (rating 8)		—		—		—		—		—		—
	$	15,355,676	$	67,698,929	$	22,942,560	$	24,965,541	$	13,210,393	$	144,173,099

	Residential RE —		Residential RE —		Other —
	1-4 Family		Home Equity		Consumer		Total
	2017
Delinquency status*:
Performing	$	42,220,268	$	11,725,714	$	3,650,519	$	57,596,501
Nonperforming		839,745		22,649		24,155		886,549
	$	43,060,013	$	11,748,363	$	3,674,674	$	58,483,050

	Residential RE —		Residential RE —		Other —
	1-4 Family		Home Equity		Consumer		Total
	2016
Delinquency status*:
Performing	$	37,832,838	$	12,614,817	$	3,558,375	$	54,006,030
Nonperforming		2,476,959		29,807		8,542		2,515,308
	$	40,309,797	$	12,644,624	$	3,566,917	$	56,521,338

*     Performing loans are those which are accruing and less than 31 days past due. Nonperforming loans are those on nonaccrual and accruing loans that are greater than or equal to 31 days past due.

At June 30, 2017 and June 30, 2016 there were no loans 90 days past due and still accruing.

For commercial loans and agricultural loans, the Company’s credit quality indicator is internally assigned risk ratings. Each commercial loan is assigned a risk rating upon origination. The risk rating is reviewed every 12 months, at a minimum, and on as needed basis depending on the specific circumstances of the loan.

67

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

For residential real estate and other loans, the Company’s credit quality indicator is performance determined by delinquency status. Delinquency status is updated daily by the Company’s loan system.

Loans, by classes of loans, considered to be impaired as of June 30, 2017 and 2016 are summarized as follows:

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
	2017
Classes of loans:
Impaired loans with no specific allowance recorded:
Commercial:
Operating	$	164,823	$	164,128	$	—	$	163,276	$	10,709
Real estate		643,226		640,881		—		321,613		14,232
Agricultural:
Operating		7,503		6,848		—		7,256		—
Real estate		432,468		371,452		—		437,100		—
Residential real estate:
1-4 family		2,448,574		2,439,137		—		2,523,171		142,377
Home equity		7,880		7,868		—		8,712		584
		3,704,474		3,630,314		—		3,461,128		167,902
Impaired loans with specific allowance recorded:
Commercial:
Operating		65,701		65,369		6,487		40,279		3,037
Agricultural:
Real estate		525,068		486,056		17,973		511,830		951
Residential real estate:
1-4 family		695,327		679,474		28,857		699,391		18,137
Home equity		15,553		15,541		414		16,717		1,240
Other:
Consumer		20,433		20,408		1,949		23,116		1,213
		1,322,082		1,266,848		55,680		1,291,333		24,578
Total impaired loans:
Commercial:
Operating		230,524		229,497		6,487		203,555		13,746
Real estate		643,226		640,881		—		321,613		14,232
Agricultural:
Operating		7,503		6,848		—		7,256		—
Real estate		957,536		857,508		17,973		948,930		951
Residential real estate:
1-4 family		3,143,901		3,118,611		28,857		3,222,562		160,514
Home equity		23,433		23,409		414		25,429		1,824
Other:
Consumer		20,433		20,408		1,949		23,116		1,213
	$	5,026,556	$	4,897,162	$	55,680	$	4,752,461	$	192,480

68

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
	2016
Classes of loans:
Impaired loans with no specific allowance recorded:
Commercial:
Operating	$	88,902	$	87,497	$	—	$	57,873	$	4,560
Agricultural:
Operating		8,009		7,848		—		117,809		21,178
Real estate		925,288		877,909		—		834,054		15,344
Residential real estate:
1-4 family		3,330,310		3,320,028		—		3,382,528		185,997
Home equity		59,336		59,123		—		61,455		3,962
Other:
Consumer		3,756		3,194		—		5,158		254
		4,415,601		4,355,599		—		4,458,877		231,295
Impaired loans with specific allowance recorded:
Commercial:
Operating		48,302		48,240		4,824		52,274		2,266
Real estate		114,837		92,087		30,151		171,863		—
Residential real estate:
1-4 family		330,997		329,623		16,913		336,629		19,949
Home equity		17,882		17,828		915		18,971		1,405
		512,018		487,778		52,803		579,737		23,620
Total impaired loans:
Commercial:
Operating		137,204		135,737		4,824		110,147		6,826
Real estate		114,837		92,087		30,151		171,863		—
Agricultural:
Operating		8,009		7,848		—		117,809		21,178
Real estate		925,288		877,909		—		834,054		15,344
Residential real estate:
1-4 family		3,661,307		3,649,651		16,913		3,719,157		205,946
Home equity		77,218		76,951		915		80,426		5,367
Other:
Consumer		3,756		3,194		—		5,158		254
	$	4,927,619	$	4,843,377	$	52,803	$	5,038,614	$	254,915

Impaired loans, for which no allowance has been provided as of June 30, 2017 and 2016, have adequate collateral, based on management’s current estimates.

69

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

The following summarizes the number and recorded investment of troubled debt restructurings (“TDRs”) as of June 30, 2017 and 2016:

	June 30, 2017
	Number	Recorded
	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	10	$	177,272
Real estate	1		643,226
Agricultural:
Real estate	7		775,731
Residential real estate:
1-4 family	28		1,370,885
Home equity	2		7,881
	48	$	2,974,995
Concession — Reduction of interest rate below market:
Commercial:
Operating	1	$	39,836
Residential real estate:
1-4 family	48		1,637,621
Home equity	1		15,553
	50	$	1,693,010
Total:
Commercial:
Operating	11	$	217,108
Real estate	1		643,226
Agricultural:
Real estate	7		775,731
Residential real estate:
1-4 family	76		3,008,506
Home equity	3		23,434
	98	$	4,668,005

70

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

	June 30, 2016
	Number	Recorded
	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	5	$	76,088
Real estate	2		103,462
Agricultural:
Operating	1		1,000
Real estate	7		732,633
Residential real estate:
1-4 family	36		1,769,362
Home equity	4		59,336
Other:
Consumer	1		3,756
	56	$	2,745,637
Concession — Reduction of interest rate below market:
Commercial:
Operating	1	$	48,302
Residential real estate:
1-4 family	48		1,722,564
Home equity	1		17,882
	50	$	1,788,748
Total:
Commercial:
Operating	6	$	124,390
Real estate	2		103,462
Agricultural:
Operating	1		1,000
Real estate	7		732,633
Residential real estate:
1-4 family	84		3,491,926
Home equity	5		77,218
Other:
Consumer	1		3,756
	106	$	4,534,385

71

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

The following summarizes the number and investment in TDRs, by type of concession, that were restructured during the years ended June 30, 2017 and 2016:

	Number	Recorded
For the year ended June 30, 2017	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	3	$	77,919
Real estate	1		643,226
Residential real estate:
1-4 family	1		128,075
	5	$	849,220
Total:
Commercial:
Operating	3	$	77,919
Real estate	1		643,226
Residential real estate:
1-4 family	1		128,075
	5	$	849,220

	Number	Recorded
For the year ended June 30, 2016	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	2	$	65,085
Agricultural:
Operating	1		1,000
Real estate	6	$	483,556
Residential real estate:
1-4 family	3	$	268,490
	12	$	818,131
Total:
Commercial:
Operating	2	$	65,085
Agricultural:
Operating	1		1,000
Real estate	6	$	483,556
Residential real estate:
1-4 family	3	$	268,490
	12	$	818,131

Note 4.Loan Servicing

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets.  The unpaid principal balances of these loans were approximately $112,128,000 and $100,745,000 at June 30, 2017 and 2016, respectively.  Included in other assets are approximately $853,000 and $701,000 of mortgage servicing rights at June 30, 2017 and 2016, respectively.

72

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

During the years ended June 30, 2017 and 2016, the Company sold approximately $33,721,000 and $28,507,000, respectively, of fixed-rate loans secured by one-to-four family residential real estate, which resulted in a pre-tax gain on the sale of approximately $856,000 and $750,000 for years ended June 30, 2017 and 2016, respectively.

The Company entered into an agreement with the FHLB to originate mortgage loans on behalf of the FHLB and to sell closed loans to the FHLB under the FHLB Mortgage Partnership Finance (“MPF”) program.  Under the terms of the agreement, the Company retains a portion of the credit risk associated with each conventional loan pool under a risk-sharing agreement.  The Company’s credit losses are capped by the credit enhancement amount established for each pool of loans.  Losses beyond that cap are absorbed by the FHLB.  At June 30, 2017 and 2016, the amount of conventional loans outstanding that were originated and sold to the FHLB in the MPF was $26,882,089 and $20,078,590, respectively, with possible credit enhancement losses capped at $583,203 and $1,035,414 at June 30, 2017 and 2016, respectively.  The Company has no history of losses and no losses were accrued in the Company’s consolidated financial statements at June 30, 2017 and 2016.

Note 5.Accrued Interest Receivable

Accrued interest receivable at June 30 is summarized as follows:

	2017		2016
Securities	$	5,373	$	3,259
Loans		1,292,535		1,144,208
	$	1,297,908	$	1,147,467

Note 6.Premises and Equipment, Net

Premises and equipment, net at June 30 are as follows:

	2017		2016
Land and land improvements	$	1,485,458	$	1,337,723
Buildings and improvements		7,038,547		6,923,640
Furniture and equipment		1,282,315		1,252,015
Computer equipment		471,979		492,766
Vehicles		57,016		57,016
		10,335,315		10,063,160
Less accumulated depreciation		(4,910,460)		(4,788,699)
	$	5,424,855	$	5,274,461

73

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Note 7.Deposits

Deposits as of June 30 are as follows:

	2017		2016
Noninterest-bearing demand	$	29,546,051	$	24,296,166
Interest-bearing NOW		49,252,671		42,734,473
Money market		67,039,151		60,352,403
Savings		17,104,400		14,869,638
Certificates of deposit		46,116,043		44,709,672
	$	209,058,316	$	186,962,352

Certificates of deposit of $250,000 or more were approximately $4,737,000 and $3,866,000 at June 30, 2017 and 2016, respectively.

At June 30, 2017, the scheduled maturities of certificates of deposit are as follows:

Year Ending June 30,
2018	$	21,990,649
2019		13,386,469
2020		6,041,736
2021		1,445,231
2022 and beyond		3,251,958
	$	46,116,043

Interest expense on deposit accounts is summarized as follows for the years ended June 30:

	2017		2016
Interest-bearing NOW	$	186,561	$	169,242
Money market		477,148		403,825
Savings		38,922		33,941
Certificates of deposit		422,687		436,887
	$	1,125,318	$	1,043,895

Note 8.Borrowings

The Company has a line of credit with the FHLB of Topeka which expires July 6, 2018.  The line of credit accrues interest at a variable rate (1.24% at June 30, 2017).  At June 30, 2017 the balance in the line of credit was $6,745,400.  At June 30, 2016 there was no balance in the line of credit with FHLB of Topeka.  The Company maintains a collateral pledge agreement covering secured advances whereby the Company has agreed to pledge certain real estate loans to secure advances from the FHLB of Topeka.  All stock in the FHLB of Topeka is pledged as additional collateral for these advances.  At June 30, 2017 and 2016, approximately $61.8 million and $49.5 million, respectively, of real estate loans collateralized the advances.  At June 30, 2017, the Company had the ability to borrow an additional $35.3 million in FHLB advances.

The Company has an unsecured line with Midwest Independent Bank,  Pacific Cost Bankers Bank and Zions Bank.  At June 30, 2017 the Company had an outstanding balance of $399,000 with Midwest Independent Bank.  At June 30, 2016 there was no outstanding balances on these line of credits.  At June 30, 2017, the Company had the ability to borrow $4.6 

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million from Midwest Independent Bank, $4.0 million from Pacific Coast Bankers Bank, and $6.0 million with Zions Bank

Note 9.Regulatory Matters

The Bank is subject to regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank’s capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If only adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.  Management believes, as of June 30, 2017, that the Bank meets all capital adequacy requirements to which it is subject and is classified as well capitalized.

Actual capital levels and minimum required levels for the Bank were:

									Minimum
									Required to Be
									Well Capitalized
					Minimum Required for				Under Prompt
					Capital Adequacy				Corrective Action
					Purposes				Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2017
Total capital (to risk-weighted assets)	$	30,893	13.2	%	$	18,740	8.0	%	$	23,425	10.0	%
Common equity Tier 1 capital (to risk-weighted assets)		27,956	11.9	%		10,541	4.5	%		15,226	6.5	%
Tier 1 (core) capital (to risk-weighted assets)		27,956	11.9	%		14,055	6.0	%		18,740	8.0	%
Tier 1 (core) capital (to adjusted total assets)		27,956	11.4	%		9,806	4.0	%		12,257	5.0	%
June 30, 2016
Total capital (to risk-weighted assets)	$	28,977	14.7	%	$	15,805	8.0	%	$	19,757	10.0	%
Common equity Tier 1 capital (to risk-weighted		26,500	13.4	%		8,891	4.5	%		12,842	6.5	%
Tier 1 (core) capital (to risk-weighted assets)		26,500	13.4	%		11,854	6.0	%		15,805	8.0	%
Tier 1 (core) capital (to adjusted total assets)		26,500	11.6	%		9,114	4.0	%		11,393	5.0	%

Federal regulations require the Bank to comply with a Qualified Thrift Lender (“QTL”) test, which requires that 65% of assets be maintained in housing-related finance and other specified assets.  If the QTL test is not met, limits are placed on growth, branching, new investment, FHLB advances, and dividends or the institution must convert to a commercial bank charter.  Management believes the QTL test has been met.

In July 2013, the Federal Reserve Board and the Federal Deposit Insurance Corporation issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes. The rules revised minimum capital requirements and adjusted prompt corrective action thresholds. The final rules revised the regulatory capital elements, added a new common equity Tier 1 capital ratio, increased the minimum Tier 1 capital ratio requirement, and implemented a new capital conservation buffer.  The rules also permitted certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income.  Management chose the one-time election to retain the existing treatment.  The final rules took effect for community banks on January 1, 2015, subject to a transition period for certain parts of the rules.    The new minimum

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capital level requirements applicable to Equitable Bank are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital to risk-weighted assets ratio of 6% (increased from 4%); (iii) a total capital to risk-weighted assets ratio of 8% (unchanged from prior rules); and (iv) a Tier 1 leverage ratio of 4%.  The rules also establish a “capital conservation buffer” of 2.5% above the new regulatory minimum capital ratios resulting in the following ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital to risk-weighted assets ratio of 8.5%; (iii) a total capital to risk-weighted assets ratio of 10.5%; and a tier 1 leverage ratio unchanged at 4%.  The phase-in period for the capital conservation buffer requirement started January 1, 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019. An institution is subject to further limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses of its capital level falls below the buffer amount.  These limitations establish a maximum percentage of eligible retained income that can be utilized for such actions.  The minimum requirements do not include the capital conservation buffer.

Note 10. Income Taxes

Income tax expense for the year ended June 30 is as follows:

	2017		2016
Current:
Federal	$	(35,227)	$	(73,021)
State		(83,962)		(72,879)
Deferred:
Federal		(561,635)		(344,906)
	$	(680,824)	$	(490,806)

A reconciliation of the provision for income taxes computed at the statutory federal corporate tax rate of 34% to the income tax expense in the statements of income for the year ended June 30 is as follows:

	2017		2016
Provision computed at the statutory federal tax rate	$	(651,395)	$	(525,492)
State income taxes, net of federal tax		(55,045)		(48,100)
Valuation allowance adjustment		—		79,000
Return-to-provision, net		24,562		(32,837)
Other		1,054		36,623
Total income tax expense	$	(680,824)	$	(490,806)

Retained earnings at June 30, 2017 and 2016 include certain historical additions to bad debt reserves of approximately $2,132,000 for which no deferred federal income tax liability has been recorded.  This amount represents an allocation of income to bad debt deductions for tax purposes alone.  If, in the future, this portion of retained earnings is used for any purpose other than to absorb bad debt losses, federal taxes would be imposed at the then-applicable rates.

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Notes to Consolidated Financial Statements

The net deferred tax asset at June 30 is as follows:

	2017		2016
Gross deferred tax assets:
Allowance for loan losses	$	1,208,020	$	1,001,980
Net operating loss carryover		—		530,899
General business credits		324,364		324,364
Foreclosed asset writedowns		50,592		50,592
Unrealized loss on securities		6,393		—
Other		50,760		245,290
		1,640,129		2,153,125
Gross deferred tax liabilities:
Additions in excess of base year loan reserve		(572,404)		(585,334)
Depreciation		(73,623)		(68,425)
FHLB stock dividends		(74,630)		(77,656)
Unrealized gain on securities		—		(2,100)
Other		(57,463)		(3,517)
		(778,120)		(737,032)
Net deferred tax asset	$	862,009	$	1,416,093

No significant income tax uncertainties were identified.  Therefore, the Company recognized no adjustment for unrecognized income tax benefits during the years ended June 30, 2017 and 2016.  Corporate tax returns for the 2014 through 2016 years remain open to examination by taxing authorities.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in noninterest expenses.  During the years ended June 30, 2017 and 2016, there were no interest and penalties recognized, nor were any balances for the payment of interest and penalties accrued at June 30, 2017 and 2016.

Note 11.Employee Benefit Plans

The Company has a 401(k) and profit sharing plan (the “Plans”) covering substantially all employees.  Annual contributions to the Plans are made at the discretion of and determined by the Board of Directors.  Participant interests are vested over a period from one to five years of service.  Contributions were made of approximately $121,000 and $100,000 for the years ended June 30, 2017 and 2016, respectively.

On November 8, 2005, the Company adopted an employee stock ownership plan (the “ESOP”) for the benefit of substantially all employees.  The ESOP borrowed $1,292,620 from the Company and used those funds to acquire 129,262 shares of the Company’s stock in connection with the reorganization at a price of $10.00 per share.

On July 8, 2015, the ESOP borrowed $951,912 from the Company and used the funds to acquire 118,989 shares of the Company’s stock in connection with the stock offering at a price of $8.00 per share.

Shares purchased by the ESOP with the loan proceeds are held in a suspense account and are allocated to ESOP participants on a pro rata basis as principal and interest payments are made by the ESOP to the Company.  The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Company’s discretionary contributions to the ESOP and earnings on ESOP assets.  Annual principal and interest payments for the note dated November 8, 2005 are made by the ESOP prior to the calendar year December 31.  Annual principal and interest payments from the note dated November 8, 2005 are approximately $145,000 until maturity at December 31, 2019. Annual principal and interest payments from the note dated July 8, 2015 are approximately $65,000 until maturity at July 8, 2035. 

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Notes to Consolidated Financial Statements

As shares are released from collateral, the Company will report compensation expense equal to the current market price of the shares and the shares will become outstanding for earnings-per-share computations.  Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce accrued interest.  Because participants may require the Company to purchase their ESOP shares upon termination of their employment, the fair value of all earned and allocated ESOP shares may become a liability.

The ESOP has a plan year-end of December 31.  The Company has recorded compensation expense of $152,104 and $105,645 for shares that were released and committed to be released for the years ended June 30, 2017 and 2016, respectively. 

Shares held by the ESOP at June 30 were as follows:

	2017		2016
Allocated shares		86,104		71,803
Shares allocated to be released		7,929		7,932
Unearned ESOP shares		134,843		150,700
Total ESOP shares		228,876		230,435
Fair value of unearned ESOP shares	$	1,348,430	$	1,252,317
Fair value of allocated shares subject to repurchase obligation	$	815,280	$	564,723

The Company approved the Equitable Financial Corp. 2006 Equity Incentive Plan (“2006 Plan”) in November 2006 and the Equitable Financial Corp. 2016 Equity Incentive Plan (“2016 Plan”) in November 2016.  Both plans provide for awards of stock options and restricted stock to officers, employees and directors.  The cost of the plan is based on the fair value of the awards at the grant date.  The fair value of stock is based on the closing price of the Company’s stock on the grant date.  The cost of the awards are being recognized over five-year vesting periods during which participants are required to provide services in exchange for the awards.  As of December 31, 2016 the 2006 plan has been terminated.

The maximum number of shares authorized under the 2016 Plan is 198,316 stock options and 79,326 shares of restricted stock to employees and directors.   As of June 30, 2017 158,653 stock options and 63,461 stock awards were awarded.  These options and awards were all granted in February 2017 at an exercise price of $9.90 per share.

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

			Weighted		Remaining
			Average		Contractual
	Awards		Exercise Price		Life (Years)
Options outstanding at July 1, 2016		—	$	—		—
Granted		158,653		9.90		9.70
Options outstanding at June 30, 2017		158,653	$	9.90		9.70

The cost of the stock options will be amortized in monthly installments over the noted five-year vesting period, with the first vesting date of February 21, 2018.  Stock option expense for the year ended June 30, 2017 was $14,067. 

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Notes to Consolidated Financial Statements

The fair value of the Company’s stock options was determined using the Black-Schols option pricing formula.  The following assumptions were used in the formula:

Expected Volatility		9.54	%
Risk-free interest rate		1.90	%
Expected dividend yield		—
Expected life (in years)		5.00
Exercise price for the stock options	$	9.90

Expected volatility – Based on the historical volatility of share price of the Company.

Risk-free interest rate – Based on the U.S. Treasury yield curve and expected life of the options at the time of grant.

Dividend yield – The Company had not paid any dividends at the time of valuation.

Expected life – Based on five-year vesting period.

Exercise price for the stock options – Based on the closing price of the Company’s stock on the date of grant.

Restricted stock awards are accounted for as fixed grants using the fair value of the Company’s stock at the time of the 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 represents the restricted stock award activity for the period shown:

	Service-Based		Weighted
	Stock		Grant Date
	Awards		Fair Value
Non-vested at July 1, 2015		43,094		4.02
Conversion for stock offering		3,907		—
Granted		4,900		8.53
Vested		(12,620)		4.02
Non-vested at June 30, 2016		39,281		4.32
Non-vested at July 1, 2016		39,281		4.32
Granted		63,461		9.90
Vested		(13,617)		4.32
Non-vested at June 30, 2016		89,125		6.97

As of June 30, 2017, there was $670,319 of total unrecognized compensation costs related to non-vested restricted stock awards.  The cost is expected to be recognized over a weighted-average period of 4.3 years.  Compensation expense attributable to the restricted stock awards totaled $100,176 and $105,645 for the years ended June 30, 2017 and 2016, respectively.

AS of June

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Notes to Consolidated Financial Statements

Note 12.Earnings per Share

Amounts reported in earnings per share reflect earnings available to common stockholders for the period divided by the weighted average number of shares of common stock outstanding during the year.  Diluted earnings per share is calculated by dividing earnings available to common stockholders for the period by the sum of the weighted average common shares outstanding and the weighted average dilutive shares.

The following table presents a reconciliation of the components used to compute basic earnings per share for the years ended June 30:

	2017		2016
Weighted average common shares outstanding		3,299,269		3,264,979
Net income available to common stockholders	$	1,235,045	$	1,054,758
Basic earnings per share	$	0.37	$	0.32

The following table presents a reconciliation of the components used to compute diluted earnings per share for the years ended June 30:

	2017		2016
Weighted average common shares outstanding		3,299,269		3,264,979
Dilutive effect of net additional shares from restricted stock awards and stock options		200,289		26,538
Weighted average number of shares outstanding		3,499,558		3,291,517
Net income available to common stockholders	$	1,235,045	$	1,054,758
Diluted earnings per share	$	0.35	$	0.32

Note 13.Loan Commitments and Other Related Activities

The Company is party to various financial instruments with off-balance-sheet risk.  The Company uses these financial instruments in the normal course of business to meet the financing needs of customers and to effectively manage exposure to interest rate risk.  These financial instruments include commitments to extend credit, standby letters of credit, and unused lines of credit.  When viewed in terms of the maximum exposure, these instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.  Credit risk is the possibility that a counterparty to a financial instrument will be unable to perform its contractual obligations.  Interest rate risk is the possibility that, due to changes in economic conditions, the Company’s net interest income will be adversely affected.

The following is a summary of the contractual or notional amount of each significant class of off-balance-sheet financial instruments outstanding.  The Company’s exposure to credit loss in the event of nonperformance by the counterparty for commitments to extend credit, standby letters of credit, and unused lines of credit is represented by the contractual or notional amount of these instruments.

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Notes to Consolidated Financial Statements

The contractual or notional amounts as of June 30 are as follows:

	2017		2016
Financial instruments wherein contractual amounts represent credit risk:
Commitments to extend credit	$	19,271,000	$	12,486,000
Standby letters of credit		200,000		310,000
Unused lines of credit		33,227,000		32,370,000

At June 30, 2017, fixed-rate commitments were approximately $24,745,000.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if it is deemed necessary, by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty.  The collateral held varies but primarily consists of single-family residential real estate.

The Company is party to an operating lease for a branch facility, with expiration in June 2022.  Future commitments under the operating lease approximate the following:

Year Ending June 30,
2018	$	110,000
2019		110,000
2020		110,000
2021		110,000
2022		110,000

Rental expense, included in occupancy and equipment expense in the consolidated statements of income, totaled approximately $81,000 and $89,000 for the years ended June 30, 2017 and 2016, respectively.

Note 14.Fair Value Measurements

The Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification defines fair value, establishes a framework for measuring fair value and requires disclosure of fair value measurements.  The fair value hierarchy set forth in the Topic is as follows:

Level 1:  Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:  Significant other 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.

Level 3:  Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

There were no transfers between levels during the years ended June 30, 2017 and 2016, nor were there any changes in valuation techniques used for assets or liabilities measured at fair value at June 30, 2017 and 2016.

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Notes to Consolidated Financial Statements

Assets and liabilities recorded at fair value on a recurring basis: A description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below:

Securities Available-for-Sale — Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

The following tables summarize assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 and 2016, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Fair Value Measurement at June 30, 2017 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3
Assets
Securities available-for-sale	$	1,410,955	$	—	$	1,410,955	$	—

	Fair Value Measurement at June 30, 2016 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3
Assets
Securities available-for-sale	$	664,755	$	—	$	664,755	$	—

Assets and liabilities recorded at fair value on a nonrecurring basis:  A description of the valuation methodologies used for assets and liabilities measured at fair value on a nonrecurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Impaired Loans — From time to time, a loan is considered impaired and an allowance for credit losses is established.  The specific reserves for collateral dependent impaired loans are based on the fair value of the collateral less estimated costs to sell.  The fair value of collateral was determined based on appraisals.  In some cases, adjustments were made to the appraised values due to various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral.  When significant adjustments were based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement.

Foreclosed Assets — Foreclosed assets are carried at estimated fair value of the property, less disposal costs.  The fair value of the property is determined based upon appraisals.  As with impaired loans, if significant adjustments are made to the appraised value, based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement.

At June 30, 2017 and 2016 the fair value of impaired loans and foreclosed assets were immaterial.

The Financial Instruments Topic of the FASB Accounting Standards Codification requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.  Fair value is determined under the framework discussed above.  The Topic excludes all nonfinancial instruments from its disclosure requirements.  Accordingly, the aggregate fair value amounts presented do not represent

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Notes to Consolidated Financial Statements

the underlying value of the Company.  The following methods and assumptions used in estimating fair value disclosure for financial instruments are described below:

Cash and due from financial institutions — For cash and due from financial institutions, the current carrying amount is a reasonable estimate of fair value.

Interest-earning deposits — For interest-earning deposits, the current carrying amount is a reasonable estimate of fair value.

Time deposits with financial institutions — The fair value of fixed rate time deposits is estimated by discounting the future cash flows using the current rates for the same remaining maturities.  The fair value of variable rate time deposits approximates carrying value.

Securities — The fair value of securities is determined using quoted prices, when available in an active market.  If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or a discounted cash flows model.

Federal Home Loan Bank stock — For restricted equity securities, the carrying value approximates fair value.

Loans, net — The fair value of fixed rate 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.  The fair value of variable rate loans approximates carrying value.

Mortgage servicing rights — The fair value is based on a discounted cash flow analysis calculated using a proprietary valuation model from a third party.

Deposits — The carrying value of noninterest-bearing deposits approximates fair value.  The fair value of fixed rate deposits is estimated by discounting the future cash flows using the current rates for the same remaining maturities.

Federal Home Loan Bank borrowings — The estimated fair value of fixed rate advances from the FHLB is determined by discounting the future cash flows of existing advances using rates currently available on advances from the FHLB having similar characteristics.  Adjustable rate advances’ carrying value approximates fair value.

Accrued interest — The carrying amounts of accrued interest approximate fair value.

Off-balance sheet items — The fair value of off-balance-sheet items is based on current fees or cost that would be charged to enter into or terminate such arrangements.  These were not considered material and are not presented in the below tables.

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The estimated fair value of financial instruments is as follows:

	Fair Value	Carrying		Estimated
June 30, 2017	Hierarchy Level	Amount		Fair Value
Financial assets:
Cash and due from financial institutions	Level 1	$	4,881,007	$	4,881,000
Securities available-for-sale	See previous table		1,410,955		1,411,000
Securities held-to-maturity	Level 2		735,978		746,000
Federal Home Loan Bank stock	Level 1		453,400		453,000
Loans, net	Level 2		236,545,125		232,931,000
Mortgage servicing rights	Level 2		852,715		1,089,000
Accrued interest receivable	Level 1		1,297,908		1,298,000
Financial liabilities:
Noninterest-bearing deposits	Level 2		29,546,051		29,546,000
Interest-bearing deposits	Level 2		179,512,265		185,040,000
Federal Home Loan Bank borrowings	Level 2		6,745,400		6,745,000
Accrued interest payable and other liabilities	Level 1		820,229		820,000

	Fair Value	Carrying		Estimated
June 30, 2016	Hierarchy Level	Amount		Fair Value
Financial assets:
Cash and due from financial institutions	Level 1	$	14,947,296	$	14,947,000
Securities available-for-sale	See previous table		664,755		665,000
Securities held-to-maturity	Level 2		781,740		801,000
Federal Home Loan Bank stock	Level 1		229,900		230,000
Loans, net	Level 2		198,309,920		198,000,000
Mortgage servicing rights	Level 2		701,293		841,000
Accrued interest receivable	Level 1		1,147,467		1,147,000
Financial liabilities:
Noninterest-bearing deposits	Level 2		24,296,166		24,296,000
Interest-bearing deposits	Level 2		162,666,186		170,276,000
Accrued interest payable and other liabilities	Level 1		1,198,850		1,199,000

Note 15.Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) components at June 30 were as follows:

	2017		2016
Unrealized holding gains (losses) on securities available-for-sale	$	(16,034)	$	6,176
Tax benefit		5,452		(2,100)
	$	(10,582)	$	4,076

Note 16.Transactions with Related Parties

In the ordinary course of business, the Company granted loans to principal officers, directors, and their affiliates.  Annual activity consisted of the following for the year ended June 30:

	2017		2016
Beginning balance	$	2,723,398	$	1,310,605
New loans or transfers in		4,133,252		1,552,533
Repayments or transfers out		(1,120,301)		(139,740)
Ending balance	$	5,736,349	$	2,723,398

84

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Deposits from principal officers, directors, and their affiliates at June 30, 2017 and 2016 approximated $1,047,000 and $364,000, respectively.

Note 17. Condensed Financial Information (Holding Company Only)

Condensed Balance Sheets

	June 30,
	2017		2016
Assets
Cash and due from financial institutions	$	5,046,023	$	6,816,101
Investment in Bank		28,547,549		27,153,439
Other assets		2,007,731		2,026,340
Total assets	$	35,601,303	$	35,995,880
Liabilities and Stockholders’ Equity
Other liabilities	$	30,000	$	21,794
Stockholders' equity		35,571,303		35,974,086
Total liabilities and stockholders’ equity	$	35,601,303	$	35,995,880

Condensed Statements of Income

	Year Ended June 30,
	2017		2016
Interest income	$	82,092	$	78,342
Professional fees and other expenses		355,237		445,625
Loss before income tax and equity in undistributed net income of subsidiary		(273,145)		(367,283)
Income tax benefit		115,212		124,876
Loss before equity in undistributed net income of subsidiary		(157,933)		(242,407)
Equity in undistributed net income of subsidiary		1,392,978		1,297,165
Net income	$	1,235,045	$	1,054,758
Comprehensive income	$	1,220,387	$	1,062,889

85

Equitable Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Condensed Statements of Cash Flows

	Year Ended June 30,
	2017		2016
Cash Flows from Operating Activities:
Net income	$	1,235,045	$	1,054,758
Items not providing cash		(1,366,163)		(1,168,812)
Net cash used by operating activities		(131,118)		(114,054)
Cash Flows from Investing Activities:
Downstream capital to Bank	$	—	$	(6,930,000)
Net cash used by investing activities		—		(6,930,000)
Cash Flows from Financing Activities:
ESOP Loan Finance	$	—	$	(951,912)
Stock buyback		(1,638,960)		—
Proceeds in advance of offering		—		(2,555,176)
Net cash used by financing activities		(1,638,960)		(3,507,088)
Decrease in cash and cash equivalents		(1,770,078)		(10,551,142)
Cash and Cash Equivalents
Beginning		6,816,101		17,367,243
Ending	$	5,046,023	$	6,816,101

Note 18. Stock Buyback

The Company announced a stock repurchase plan on October 7, 2016 whereby the Company could repurchase up to 173,857 shares of its common stock, or approximately 5% of the then current outstanding shares.  There were 168,086 shares of the Company’s common stock repurchased by the Company during the year ended June 30, 2017, and there were 5,771 yet to be repurchased under the plan as of June 30, 2017.

The following table provides information regarding the Company’s purchase of its common stock during the year ended June 30, 2017:

				Total Number of
				Shares Purchased	Maximum Number of
			Weighted	as Part of Publicly	Shares that May Yet Be
	Total Number of	Average Price		Announced Plans	Purchased Under the
Period	Shares Purchased	Paid Per Share		or Programs	Plans or Programs
10/1/16 - 10/31/16	—	$	—	—	173,857
11/1/16 - 11/30/16	60,000		9.07	60,000	113,857
12/1/16 - 12/31/16	26,455		9.57	86,455	87,402
01/1/17 - 01/31/17	—		—	86,455	87,402
02/1/17 - 02/28/17	—		—	86,455	87,402
03/1/17 - 03/31/17	22,200		10.25	108,655	65,202
04/1/17 - 04/30/17	5,000		10.25	113,655	60,202
05/1/17 - 05/31/17	49,000		10.25	162,655	11,202
06/1/17 - 06/30/17	5,431		10.17	168,086	5,771
Total	168,086	$	9.72

86

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A.  Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a‑15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of June 30, 2017. Based on that evaluation, the Company’s management, including the Company’s principal executive officer and principal financial officer, concluded that the Company’s disclosure controls and procedures were effective.

(b) Management’s Report on Internal Control over Financial Reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including the principal executive officer and principal financial officer, assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2017, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal Control-Integrated Framework (2013).”  Based on such assessment, management believes that, as of June 30, 2017, the Company’s internal control over financial reporting is effective, based on those criteria.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s reportwas not subject to attestation by the Company’s independent registered public accounting firm pursuant to provisions of the Dodd-Frank Act that permit the Company to provide only management’s report in this annual report.

(c) Changes in internal controls.

There were no significant changes made in our internal control over financial reporting during the Company’s fourth quarter of the fiscal year ended June 30, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

87

Item 9B.  Other Information.

Not applicable.

88

PART III

Item 10.  Directors, Executive Officers and Corporate Governance.

We incorporate by reference the information contained under the heading “Proposal I—Election of Directors” from our definitive proxy statement to be delivered to our stockholders in connection with the 2017 Annual Meeting of Stockholders to be held November 21, 2017.

Item 11.  Executive Compensation.

We incorporate by reference the information contained under the heading “Proposal I—Election of Directors” from our definitive proxy statement to be delivered to our stockholders in connection with the 2017 Annual Meeting of Stockholders to be held November 21, 2017.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.

We incorporate by reference the information contained under the heading “Voting Securities and Principal Holders Thereof” from our definitive proxy statement to be delivered to our stockholders in connection with the 2017 Annual Meeting of Stockholders to be held November 21, 2017.

Item 13.  Certain Relationships and Related Transactions, and Director Independence.

We incorporate by reference the information contained under the heading “Proposal I—Election of Directors—Transactions with Certain Related Persons” from our definitive proxy statement to be delivered to our stockholders in connection with the 2017 Annual Meeting of Stockholders to be held November 21, 2017.

Item 14.  Principal Accounting Fees and Services.

We incorporate by reference the information contained under the heading “Proposal III—Ratification of Appointment of Independent Registered Public Accounting Firm” from our definitive proxy statement to be delivered to our stockholders in connection with the 2017 Annual Meeting of Stockholders to be held November 21, 2017.

89

PART IV

Item 15.  Exhibits, Financial Statement Schedules.

(a)(1)Financial Statements.

The following documents are filed as part of this report on Form 10‑K at pages 46 through 84 above:

Report of Independent Registered Public Accounting Firm	47
Consolidated Balance Sheets as of June 30, 2017 and 2016	48
Consolidated Statements of Income for the Years ended June 30, 2017 and 2016	49
Consolidated Statements of Comprehensive Income for the Years ended June 30, 2017 and 2016	50
Consolidated Statements of Changes in Stockholders’ Equity for the Years ended June 30, 2017 and 2016	51
Consolidated Statements of Cash Flows for the Years ended June 30, 2017 and 2016	52
Notes to Consolidated Financial Statements	54

(a)(2)Financial Statement Schedules.

All schedules are omitted because they are not required, are not applicable or the information is included in the consolidated financial statements or the notes thereto.

(a)(3)Exhibits.

The following exhibits are filed with this Form 10‑K or incorporated herein by reference to the document identified for such exhibit in the list below:

2.1	Plan of Conversion and Reorganization (Incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S‑1, file no. 333‑202707, originally filed on March 12, 2015, as amended)
3.1	Articles of Incorporation of Equitable Financial Corp. (Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015, file no. 001-37489 filed on September 23, 2015)
3.2	Bylaws of Equitable Financial Corp. (Incorporated to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015, file no. 001-37489 filed on September 23, 2015)
4	Form of Common Stock Certificate (Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S‑1, file no. 333‑202707, originally filed on March 12, 2015, as amended)
10.1	Equitable Financial Corp. 2006 Equity Incentive Plan (Incorporated by reference to Appendix C to Equitable Financial Corp.’s definitive proxy statement on Schedule 14A for the Equitable Financial Corp. Annual Meeting of Stockholders, file no. 000‑51514, originally filed on October 2, 2006)
10.2	Equitable Financial Corp. Employment Agreement with Thomas E. Gdowski (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S‑1, file no. 333‑202707, originally filed on March 12, 2015, as amended)
10.3	Equitable Financial Corp. 2016 Equity Incentive Plan (Incorporated by reference to Appendix A to the Company’s definitive proxy statement on Schedule 14A  for the Company’s Annual Meeting of Stockholders, file no. 001-37489, filed on October 7, 2016)
10.4	Form of Restricted Stock Award Agreement (Employee) (Incorporated by reference to Exhibit 10.4 for the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, file no. 001-37489,filed on May 12, 2017)
10.5	Form of Restricted Stock Award Agreement (Outside Director) (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the fiscal year ended March 31, 2017, file no. 001-37489, filed on May 12, 2017)
10.6	Form of Stock Option Award Agreement (Employee) (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, file no. 001-37489 filed on May 12, 2017)
10.7	Form of Stock Option Award Agreement (Outside Director) (Incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, file no. 001-37489 filed on May 12, 2017)

90

21	Subsidiaries of Registrant (Incorporated by reference to Exhibit 21 to the Company’s Registration Statement on Form S‑1, file no. 333‑202707, originally filed on March 12, 2015, as amended)
23.1	Consent of BKD, LLP
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
101	The following materials from the Company’s Annual Report on Form 10‑K for the fiscal year ended June 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.

Item 16. Form 10-K Summary

None.

91

EXHIBIT INDEX

Exhibit Number	Description
2.1	Plan of Conversion and Reorganization (Incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S‑1, file no. 333‑202707, originally filed on March 12, 2015, as amended)
3.1	Articles of Incorporation of Equitable Financial Corp. (Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015, file no. 001-37489 filed on September 23, 2015)
3.2	Bylaws of Equitable Financial Corp. (Incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015, file no. 001-37489 filed on September 23, 2015)
4	Form of Common Stock Certificate (Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S‑1, file no. 333‑202707, originally filed on March 12, 2015, as amended)
10.1	Equitable Financial Corp. 2006 Equity Incentive Plan (Incorporated by reference to Appendix C to Equitable Financial Corp.’s definitive proxy statement on Schedule 14A for the Equitable Financial Corp. Annual Meeting of Stockholders, file no. 000‑51514, originally filed on October 2, 2006)
10.2	Equitable Financial Corp. Employment Agreement with Thomas E. Gdowski (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S‑1, file no. 333‑202707, originally filed on March 12, 2015, as amended)
10.3	Equitable Financial Corp. 2016 Equity Incentive Plan (Incorporated by reference to Appendix A to the Company’s definitive proxy statement on Schedule 14A  for the Company’s Annual Meeting of Stockholders, file no. 001-37489, filed on October 7, 2016)
10.4	Form of Restricted Stock Award Agreement (Employee) (Incorporated by reference to Exhibit 10.4 for the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, file no. 001-37489,filed on May 12, 2017)
10.5	Form of Restricted Stock Award Agreement (Outside Director) (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the fiscal year ended March 31, 2017, file no. 001-37489, filed on May 12, 2017)
10.6	Form of Stock Option Award Agreement (Employee) (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, file no. 001-37489 filed on May 12, 2017)
10.7	Form of Stock Option Award Agreement (Outside Director) (Incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, file no. 001-37489 filed on May 12, 2017)
21	Subsidiaries of Registrant (Incorporated by reference to Exhibit 21 to the Company’s Registration Statement on Form S‑1, file no. 333‑202707, originally filed on March 12, 2015, as amended)
23.1	Consent of BKD, LLP
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002

92

31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
101	The following materials from the Company’s Annual Report on Form 10‑K for the fiscal year ended June 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.

93

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.

	EQUITABLE FINANCIAL CORP.
Dated: September 28, 2017
	By:	/s/ Thomas E. Gdowski Thomas E. Gdowski President and CEO

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	Signatures		Title		Date
/s/ Thomas E. Gdowski Thomas E. Gdowski		President, CEO and Director (Principal Executive Officer)		September 28, 2017
/s/ Darcy M. Ray Darcy M. Ray		CFO (Principal Accounting and Financial Officer)		September 28, 2017
/s/ Vincent J. Dugan Vincent J. Dugan		Director		September 28, 2017
/s/ LEVI D. FISHER Levi D. Fisher		Director		September 28, 2017
/s/ Gary L. Hedman Gary L. Hedman		Director		September 28, 2017
/s/ Pamela L. Price Pamela L. Price		Director		September 28, 2017
/s/ Jack E. Rasmussen Jack E. Rasmussen		Director		September 28, 2017
/s/ Douglas J. Redman Douglas J. Redman		Director		September 28, 2017
/s/ David L. Richardson David L. Richardson		Director		September 28, 2017
/s/ Benedict P. Wassinger, Jr. Benedict P. Wassinger, Jr.		Director		September 28, 2017

94

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement Form S-8, File No. 333-202707, of our report dated September 28, 2017, on the consolidated financial statements of Equitable Financial Corp. as of and for the years ended June 30, 2017 and 2016,  which report is included in this Annual Report on Form 10-K of Equitable Financial Corp. for the year ended June 30, 2017.

Lincoln, Nebraska

September 28, 2017

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Thomas E. Gdowski, certify that:

1.I have reviewed this Annual Report on Form 10-K of Equitable Financial Corp.;

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 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 15d-15(e)) 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 subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.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

c.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.The registrant’s other certifying officer and I have disclosed, based on our 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 (or persons performing the equivalent functions):

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.

Dated: September 28, 2017	/s/ Thomas E. Gdowski
	Thomas E. Gdowski
	President and CEO
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Darcy M. Ray, certify that:

1.I have reviewed this Annual Report on Form 10-K of Equitable Financial Corp.;

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 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 15d-15(e)) 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 subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.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

c.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.The registrant’s other certifying officer and I have disclosed, based on our 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 (or persons performing the equivalent functions):

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.

2
Dated: September 28, 2017	/s/ Darcy M. Ray
	Darcy M. Ray
	CFO
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Equitable Financial Corp. (the “Company”) on Form 10-K for the year ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas E. Gdowski, President and CEO of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

2
Dated: September 28, 2017	/s/ Thomas E. Gdowski
	Thomas E. Gdowski
	President and CEO
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Equitable Financial Corp. (the “Company”) on Form 10-K for the year ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Darcy M. Ray, CFO of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

2
Dated: September 28, 2017	/s/ Darcy M. Ray
	Darcy M. Ray
	CFO
	(Principal Financial Officer)

XML

Document and Entity Information - USD ($)	12 Months Ended
	Jun. 30, 2017	Sep. 28, 2017	Dec. 31, 2016
Document and Entity Information
Entity Registrant Name	Equitable Financial Corp.
Entity Central Index Key	0001635626
Document Type	10-K
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 28,266,846
Entity Common Stock, Shares Outstanding		3,368,932
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY

XML

Consolidated Balance Sheets - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Assets
Cash and due from financial institutions	$ 4,881,007	$ 2,567,296
Interest-earning deposits		12,380,000
Total cash and due from financial institutions and interest-earning deposits	4,881,007	14,947,296
Securities available-for-sale	1,410,955	664,755
Securities held-to-maturity	735,978	781,740
Federal Home Loan Bank stock, at cost	453,400	229,900
Loans, net of allowance for loan losses of $3,555,000 and $2,947,000, respectively	236,545,125	198,309,920
Premises and equipment, net	5,424,855	5,274,461
Foreclosed assets, net	223,200	461,847
Accrued interest receivable	1,297,908	1,147,467
Deferred taxes, net	862,009	1,416,093
Other assets	2,008,051	1,853,698
Total assets	253,842,488	225,087,177
Liabilities:
Noninterest-bearing deposits	29,546,051	24,296,166
Interest-bearing deposits	179,512,265	162,666,186
Total deposits	209,058,316	186,962,352
Federal funds purchased	399,000
Federal Home Loan Bank borrowings	6,745,400
Advance payments from borrowers for taxes and insurance	432,960	387,166
Accrued interest payable and other liabilities	820,229	1,198,850
Total liabilities	217,455,905	188,548,368
Common stock in ESOP subject to contingent repurchase obligation	815,280	564,723
Stockholders’ equity:
Common stock, $0.01 par value, 25,000,000 shares authorized 3,372,532 and 3,477,157 issued and outstanding at June 30, 2017 and June 30, 2016, respectively	33,725	34,771
Additional paid-in capital	25,794,124	26,844,426
Retained earnings	12,474,958	11,239,913
Unearned ESOP Shares	(1,107,692)	(1,246,045)
Shares reserved for stock compensation	(797,950)	(338,332)
Accumulated other comprehensive gain/(loss), net of tax	(10,582)	4,076
Reclassification of ESOP shares	(815,280)	(564,723)
Total stockholders' equity	35,571,303	35,974,086
Total liabilities and stockholders' equity	$ 253,842,488	$ 225,087,177

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Condensed Consolidated Statements of Financial Condition
Allowance for loan losses	$ 3,555,000	$ 2,947,000
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, shares authorized	25,000,000	25,000,000
Common Stock, shares issued	3,372,532	3,477,157
Common Stock, shares outstanding	3,372,532	3,477,157

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Consolidated Statements of Income - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Interest income:
Loans	$ 9,225,388	$ 8,228,373
Securities	47,078	79,639
Other	23,111	71,502
Total interest income	9,295,577	8,379,514
Interest expense:
Deposits	1,125,318	1,043,895
Federal Home Loan Bank borrowings	10,970
Other	3,786	792
Total interest expense	1,140,074	1,044,687
Net interest income	8,155,503	7,334,827
Provision for loan losses	644,029	275,024
Net interest income after provision for loan losses	7,511,474	7,059,803
Noninterest income:
Service charges on deposit accounts	631,673	594,624
Brokerage fee income	722,640	633,215
Gain on sale of loans	856,222	750,353
Other loan fees	283,310	264,626
Other income	151,503	141,385
Total noninterest income	2,645,348	2,384,203
Noninterest expense:
Salaries and employee benefits	4,773,321	4,479,207
Director and committee fees	166,000	160,150
Data processing fees	552,608	539,077
Occupancy and equipment	967,055	886,280
Regulatory fees and deposit insurance premium	170,262	206,756
Advertising and public relations	239,677	215,681
Insurance and bond premiums	96,529	98,978
Professional fees	379,076	448,289
Supplies, telephone and postage	275,065	265,254
Other expenses	621,360	598,770
Total noninterest expense	8,240,953	7,898,442
Income before income taxes	1,915,869	1,545,564
Income tax expense	(680,824)	(490,806)
Net income	$ 1,235,045	$ 1,054,758
Basic earnings per share (in dollars per share)	$ 0.37	$ 0.32
Diluted earnings per share (in dollars per share)	$ 0.35	$ 0.32

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Consolidated Statements of Comprehensive Income - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Condensed Consolidated Statements of Comprehensive Income
Net income	$ 1,235,045	$ 1,054,758
Other comprehensive income:
Unrealized gain (loss) on securities available-for-sale, net of tax	(14,658)	8,131
Comprehensive income	$ 1,220,387	$ 1,062,889

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Consolidated Statement of Changes in Stockholders' Equity - USD ($)	Common Equity	Additional Paid In Capital	Retained Earnings	Unearned ESOP Shares	Shares Reserved for Stock Compensation	Treasury Stock	Accumulated Other Comprehensive Gain/(Loss)	Amount Reclassified on ESOP Shares	Total
BALANCE at Jun. 30, 2015	$ 32,975	$ 13,086,447	$ 10,185,155	$ (408,750)	$ (465,080)	$ (978,682)	$ (4,055)	$ (516,800)	$ 20,931,210
Increase (Decrease) in Stockholders' Equity
Net Income			1,054,758						1,054,758
Other comprehensive income (loss)							8,131		8,131
Stock Offering Proceeds	1,796	13,820,592		(951,912)		$ 978,682			13,849,158
Release of unearned ESOP shares		(8,972)		114,617					105,645
Stock compensation expense		(53,641)			126,748				73,107
Reclassification due to release and changes in fair value of common stock in ESOP subject to contingent repurchase obligation of ESOP shares								(47,923)	(47,923)
BALANCE at Jun. 30, 2016	34,771	26,844,426	11,239,913	(1,246,045)	(338,332)		4,076	(564,723)	35,974,086
Increase (Decrease) in Stockholders' Equity
Net Income			1,235,045						1,235,045
Other comprehensive income (loss)							(14,658)		(14,658)
Equity Incentive Plan stock issued	635	627,629			(628,264)
Release of unearned ESOP shares		13,751		138,353					152,104
Stock compensation expense		(54,403)			168,646				114,243
Stock Buyback	(1,681)	(1,637,279)							(1,638,960)
Reclassification due to release and changes in fair value of common stock in ESOP subject to contingent repurchase obligation of ESOP shares								(250,557)	(250,557)
BALANCE at Jun. 30, 2017	$ 33,725	$ 25,794,124	$ 12,474,958	$ (1,107,692)	$ (797,950)		$ (10,582)	$ (815,280)	$ 35,571,303

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Consolidated Statement of Changes in Stockholders' Equity (Parenthetical) - shares	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Condensed Consolidated Statements of Changes in Stockholders' Equity
Release of unearned ESOP shares (in shares)	15,857	12,888

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash Flows from Operating Activities:
Net income	$ 1,235,045	$ 1,054,758
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	342,875	343,651
Federal Home Loan Bank stock dividends	(3,100)	(3,100)
ESOP expense	152,104	105,645
Stock compensation expense	114,243	73,107
Amortization of deferred loan origination costs, net	508,623	480,453
Amortization of premiums and discounts	9,693	16,214
Gain on sale of loans	(856,222)	(750,353)
(Gain)/Loss on sale of foreclosed assets	(4,579)	11,008
Loss on disposal of premises and equipment		58,153
Provision for loan losses	644,029	275,024
Deferred taxes	561,635	344,906
Loans originated for sale	(33,226,181)	(27,572,874)
Proceeds from sale of loans	33,721,173	28,507,437
Loss on investment from low income housing	4,859	28,087
Changes in:
Accrued interest receivable	(150,441)	(103,196)
Other assets	105,164	301,223
Accrued interest payable and other liabilities	(363,621)	138,984
Net cash provided by operating activities	2,795,299	3,309,127
Cash Flows from Investing Activities:
Net change in loans	(39,306,004)	(21,281,161)
Proceeds from sale of foreclosed assets, net	243,226	115,500
Proceeds from maturity of time deposits with financial institutions		500,000
Securities available-for-sale:
Proceeds from calls and principal repayments	209,200	223,292
Purchases	(985,400)	(469,253)
Securities held-to-maturity:
Proceeds from calls and principal repayments	43,861	2,492,571
Purchases	(220,400)
Purchase of premises and equipment	(493,269)	(124,475)
Net cash used in investing activities	(40,508,786)	(18,543,526)
Cash Flows from Financing Activities:
Net change in deposits	22,095,964	12,193,431
Net change in federal funds purchased	399,000
Proceeds from Federal Home Loan Bank borrowings	17,140,400
Repayments of Federal Home Loan Bank borrowings	(10,395,000)
Net change in advance payments from borrowers for taxes and insurance	45,794	(17,301)
Stock Buyback	(1,638,960)
Purchase of ESOP Shares		(951,912)
Expenses and return of proceeds in advance of offering		(2,555,176)
Net cash provided by financing activities	27,647,198	8,669,042
Decrease in cash and cash equivalents	(10,066,289)	(6,565,357)
Cash and Cash Equivalents:
Beginning	14,947,296	21,512,653
Ending	4,881,007	14,947,296
Supplemental Cash Flow Information:
Interest paid on deposits and borrowings	1,131,966	1,041,293
Income taxes paid	$ 162,879	137,765
Supplemental Noncash Disclosure:
Transfer of loans to foreclosed assets		$ 238,647

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Nature of Business and Significant Accounting Policies

12 Months Ended

Jun. 30, 2017

Nature of Business and Significant Accounting Policies

Nature of Business and Significant Accounting Policies

Note 1.Nature of Business and Significant Accounting Policies

Principles of consolidation:  The accompanying consolidated financial statements include the accounts of Equitable Financial Corp. (the “Company”) and its wholly owned subsidiary, Equitable Bank (the “Bank”).  All significant intercompany transactions and balances are eliminated in consolidation.

Stock Conversion:On July 8, 2015, Equitable Financial, MHC, the Company’s former federally chartered mutual holding company, consummated its “second step” mutual-to-stock conversion, and the Company consummated its initial stock offering.  In the offering, the Company sold 1,983,160 shares of its common stock, par value $0.01 per share, at $8.00 per share in a subscription offering and community offering, including 118,989 shares, equal to 6.0% of the shares sold in the offering, to the Equitable Bank employee stock ownership plan. 

In accordance with applicable federal conversion regulations, at the time of the completion of our mutual-to-stock conversion, we established a liquidation account in an amount equal to the Company’s total equity as of the latest balance sheet date in the final prospectus used in the Conversion.  Each eligible account holder or supplemental account holder is entitled to a proportionate share of this liquidation account in the event of a complete liquidation of the Bank, and only in such event.  This share will be reduced if the eligible account holder’s or supplemental account holder’s deposit balance falls below the amounts on the date of record as of any June 30 and will cease to exist if the account is closed.  The liquidation account will never be increased despite any increase after Conversion in the related deposit balance.

Following completion of the Conversion, the Bank may not declare, pay a dividend on, or repurchase any of its capital stock of the Bank, if the effect thereof would cause retained earnings to be reduced below the liquidation account amount or regulatory capital requirements.

Nature of business:  The primary business of the Company is the ownership of the Bank.  Through the Bank, the Company is engaged in the business of retail banking, with operations conducted through its main office and branches, which are located in Grand Island, North Platte and Omaha, Nebraska.  The Bank’s primary services include accepting deposits, making loans and investing in securities.

Use of estimates:  In preparing the accompanying consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses for the reporting period.  Estimates significant to the consolidated financial statement include the allowance for loan losses,   deferred tax valuation allowances, fair values of financial instruments and foreclosed assets.  Actual results could differ from those estimates.  The allowance for loan losses is inherently subjective as it requires material estimates that are susceptible to significant change.  The fair value disclosure of investments and other financial instruments is an estimate that can be computed within a range.

Risks and uncertainties:  Changes in economic conditions in the United States, and more specifically Nebraska, could impact the credit worthiness of the Company’s borrowers and the borrowers’ ability to service their outstanding loans with the Company.  Additionally, the Company is subject to interest rate risk in which changes in the interest rate environment could negatively impact the Company’s net interest margin.

Cash flows:  Cash and cash equivalents include cash, deposits with other financial institutions with maturities under 90 days when purchased, and federal funds sold.  Net cash flows are reported for customer loan and deposit transactions, and advance payments from borrowers for taxes and insurance.  Excess cash is held in a fully secured excess balance account with Midwest Independent Bank.  The balance at Midwest Independent Bank at June 30, 2017 and 2016 was zero and $12.4 million, respectively. 

Securities:  Securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity.  Securities are classified as available-for-sale when they might be sold before maturity.  Securities classified as available-for-sale are carried at fair value with unrealized holding gains and losses reported in other comprehensive income or loss, net of tax.

Interest income is recognized under the interest method and includes amortization of purchase premium and discount.  Gains and losses on sales are recorded on the trade date based on the amortized cost of the security sold and determined using the specific identification method.

Declines in the fair value of securities available-for-sale below their amortized cost are evaluated to determine whether the loss is temporary or other-than-temporary.  If the Company (a) has the intent to sell a debt security or (b) more-likely-than-not will be required to sell the debt security before its anticipated recovery, then the Company recognizes the entire unrealized loss in earnings as an other-than-temporary loss.  If neither of these conditions are met, the Company evaluates whether a credit loss exists.  The impairment is separated into (a) the amount of the total impairment related to the credit loss and (b) the amount of total impairment related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings and the amount related to all other factors is recognized in other comprehensive income (loss).

Federal Home Loan Bank stock: The Bank is a member of the Federal Home Loan Bank (FHLB) system.  Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts.  The stock does not have a readily determinable fair value and as such is classified as restricted stock, carried at cost and evaluated for impairment.  In accordance with the applicable accounting guidance, the stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time this situation has persisted (b) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance (c) the impact of legislative and regulatory changes on the customer base of the FHLB and (d) the liquidity position of the FHLB.  With consideration given to the previous criteria, management concluded that the stock was not impaired at June 30, 2017 and June 30, 2016.

Loans, net:  Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at their outstanding unpaid principal balances, less an allowance for loan losses, premiums and discounts on loans purchased, and net deferred loan fees/costs.  Interest income on loans is recognized over the term of the loan and is calculated using the simple interest method on principal amounts outstanding.  Direct loan origination fees and costs are generally being deferred and the net amounts amortized as an adjustment of the related loan’s yield. The Company generally amortizes these amounts over the contractual life.  Direct loan origination fees and costs related to loans sold to unrelated third parties are recognized as income or expense in the current consolidated statement of income.

The Company’s portfolio segments are as follows:

· Commercial

· Agricultural

· Residential real estate

· Other

The Company’s classes of loans are as follows:

· Commercial – operating

· Commercial – real estate

· Agricultural – operating

· Agricultural – real estate

· Residential real estate – 1-4 family

· Residential real estate – home equity

· Other – construction and land

· Other – consumer

Generally, for all classes of loans, loans are considered past due when contractual payments are delinquent for 31 days or greater.

For all classes of loans, loans will generally be placed on nonaccrual status when the loan has become greater than 90 days past due; or when management believes, after considering collection efforts and other factors, that the borrower’s financial condition is such that collection of interest is doubtful.

When a loan is placed on nonaccrual status, payments received will be applied to the principal balance. However, interest may be taken on a cash basis in the event the loan is fully secured and the risk of loss is minimal.  Previously recorded but uncollected interest on a loan placed in nonaccrual status is accounted for as follows:  if the previously accrued but uncollected interest and the principal amount of the loan is protected by sound collateral value based upon a current, independent qualified appraisal, such interest may remain on the Company’s books. If such interest is not so protected, it is considered a loss with the amount thereof recorded in the current year being reversed against current interest income, and the amount recorded in the prior year being charged against the allowance for possible loan losses.

For all classes of loans, nonaccrual loans may be restored to accrual status provided the following criteria are met:

· The loan is current, and all principal and interest amounts contractually due have been made,

· The loan is well secured and in the process of collection, and

· Future principal and interest payments are not in doubt.

Troubled debt restructures: Troubled debt restructuring exists when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession (either imposed by court order, law, or agreement between the borrower and the Company) to the borrower that it would not otherwise consider. These concessions could include forgiveness of principal, extension of maturity dates, and reduction of stated interest rates or accrued interest. The Company is attempting to maximize its recovery of the balances of the loans through these various concessionary restructurings. See Note 3 for disclosure of the Company’s troubled debt restructurings.

Allowance for loan losses:  For all portfolio segments, the allowance for loan losses is maintained at the level considered adequate by management of the Company to provide for losses that are probable. The allowance is increased by provisions charged to operating expense and reduced by net charge-offs. Subsequent recoveries, if any, are credited to the allowance.  In determining the adequacy of the allowance balance, the Company makes continuous evaluations of the loan portfolio and related off-balance sheet commitments, considers current economic conditions, historical loan loss experience, review of specific problem loans and other factors.

A discussion of the risk characteristics and the allowance for loan losses by each portfolio segment follows:

For commercial loans, the Company focuses on small and mid-sized businesses in their geographical footprint. The Company provides a wide range of commercial loans, including lines of credit for working capital and operational purposes, and term loans for the acquisition of real estate, facilities, equipment and other purposes. Approval is generally based on the following factors:

· Sufficient cash flow to support debt repayment;

· Ability and stability of current management of the borrower;

· Positive earnings and financial trends;

· Earnings projections based on reasonable assumptions;

· Financial strength of the industry and business;

· Value and marketability of collateral.

Collateral for commercial loans generally includes accounts receivable, inventory, equipment and real estate. The lending policy specifies approved collateral types and corresponding maximum advance percentages. The value of collateral pledged on loans typically exceeds the loan amount by a margin sufficient to absorb potential erosion of its value in the event of foreclosure and cover the loan amount plus costs incurred to convert it to cash.

The lending policy specifies maximum term limits for commercial loans. For term loans, the typical maximum term is 10 years. The lending policy includes guidelines for real estate appraisals, including minimum appraisal standards based on certain transactions. Where the purpose of the loan is to finance depreciable equipment, the term loan generally does not exceed the estimated useful life of the asset. For lines of credit, the typical maximum term is 1 year. However, longer maturities may be approved if the loan is secured by readily marketable collateral.

In addition, the Company often takes personal guarantees to help assure repayment. Loans may be made on an unsecured basis if warranted by the overall financial condition of the borrower.

 

Agricultural loans are subject to underwriting standards and processes similar to commercial loans. The Company provides a wide range of agriculture loans, including lines of credit for working capital and operational purposes, and term loans for the acquisition of real estate, facilities, equipment and other purposes. Approval is generally based on the following factors:

· Sufficient cash flow to support debt repayment;

· Ability and stability of current management of the borrower;

· Positive earnings and financial trends;

· Earnings projections based on reasonable assumptions;

· Financial strength of the industry and business; and

· Value and marketability of collateral.

Collateral for agricultural loans generally includes accounts receivable, inventory (typically grain or livestock), equipment and real estate. The lending policy specifies approved collateral types and corresponding maximum advance percentages. The value of collateral pledged on loans typically exceeds the loan amount by a margin sufficient to absorb potential erosion of its value in the event of foreclosure and cover the loan amount plus costs incurred to convert it to cash.

The lending policy specifies maximum term limits for agricultural loans. For term loans, the typical maximum term is 10 years. The lending policy includes guidelines for real estate appraisals, including minimum appraisal standards based on certain transactions. Where the purpose of the loan is to finance depreciable equipment, the term loan generally does not exceed the estimated useful life of the asset. For lines of credit, the typical maximum term is 1 year. However, longer maturities may be approved if the loan is secured by readily marketable collateral.

In addition, the Company often takes personal guarantees to help assure repayment. Loans may be made on an unsecured basis if warranted by the overall financial condition of the borrower.

In some instances for all loans, it may be appropriate to originate or purchase loans that are exceptions to the guidelines and limits established within the lending policy described above and below. In general, exceptions to the lending policy do not significantly deviate from the guidelines and limits established within the lending policy and, if there are exceptions, they are clearly noted as such and specifically identified in loan approval documents.

For commercial loans and agricultural loans, the allowance for estimated losses on loans consists of specific and general components.

The specific component relates to loans that are classified as impaired, as defined below. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

For commercial loans and agricultural loans, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a case-by-case basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

The general component consists of quantitative and qualitative factors and covers non-impaired loans. The quantitative factors are based on historical charge-off experience. The qualitative factors are determined based on an assessment of internal and/or external influences on credit quality that are not fully reflected in the historical loss data. The Company’s credit quality indicator for all loans excluding commercial loans is past due or performance status.  The Company’s credit quality indicator for commercial loans is internal risk ratings.

For commercial and agriculture loans, the Company utilizes the following internal risk rating scale:

1. Highest Quality – Loans represent a credit extension of the highest quality.  Excellent liquidity, management and character in an industry with favorable conditions.  High quality financial information, history of strong cash flows and superior collateral including readily marketable assets, prime real estate, U.S. government securities, U.S. government agencies, highly rated municipal bonds, insured savings accounts, and insured certificates of deposit drawn on high-quality financial institutions.

2. Good Quality – Loans which have a sound primary and secondary source of repayment.  Strong to good liquidity, management and character in an industry with favorable conditions.  Good quality financial information and margins of cash flow coverage is consistently good. Loans may be unsecured, secured by quality (but less readily marketable) assets, high quality real estate or traded stocks, lower grade municipal bonds (which must still be investment grade), and uninsured certificates of deposit on other financial institutions may also be included in this grade.

3. Acceptable Quality – Loans where the borrower is a reasonable credit risk and demonstrates the ability to repay the debt from normal business operations.  Good liquidity, management and character in an industry that is more sensitive to external factors.  Alternative sources of refinancing may be less available in periods of uncertain economic conditions.  Term debt is moderate but cash flow margins fall within bank policy guidelines.  Quality of financial information is adequate but is not as detailed and sophisticated as information found on higher-grade loans.  Secured by business assets that conform to usual lending parameters for margin and eligibility or real estate that is deemed to be of satisfactory quality in an area that may not be prime but still within viable economic centers.

4. Fair Quality – Loans where the borrower is a reasonable credit risk but shows a more erratic earnings history (a loss may have been realized in the past four years).  Liquidity is limited and primary repayment is susceptible to unfavorable external factors.  Industry characteristics are generally stable.  Borrower is more highly leveraged with increased levels of term debt.  Cash flow margins remain adequate but may not fall within the policy guidelines.  Quality of financial information is adequate and interim reporting may be required.  Secured by business assets with an adequate collateral margin or real estate that is of fair quality and location.  Property may have limited alternative uses and may be considered a “special use” facility.

5. Special Mention – Loans in this category have the potential for developing weaknesses that deserve extra attention from the account manager and other management personnel. If the developing weakness is not corrected or mitigated, the ability of the borrower to repay the Company’s debt in the future may deteriorate. This grade should not be assigned to loans that bear certain peculiar risks normally associated with the type of financing involved, unless circumstances have caused the risk to increase to a level higher than would have been acceptable when the credit was originally approved. If a loan’s actual, not potential, weakness or problems are clearly evident and significant it should generally be graded in one of the following grade categories.

6. Substandard – Loans and other credit extensions are considered to be inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. These loans, even if apparently protected by collateral value, have a well-defined weakness or weaknesses that jeopardize the liquidation of debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.

7. Doubtful – Loans and other credit extensions have all the weaknesses inherent in those graded “6” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include: proposed merger, acquisition, or liquidation actions; capital injection; perfecting liens on collateral and refinancing plans. Loans in this classification should be placed in non-accrual status, with collections applied to principal.

8. Loss – Loans are considered uncollectible and cannot be justified as a viable asset of the Bank. This classification does not mean the loan has absolutely no recovery value. However, it is not prudent to delay writing off this loan even though partial recovery may be obtained in the future.

For commercial and agricultural loans or credit relationships with aggregate exposure greater than $250,000, a loan review is required within 12 months of the most recent credit review.  The reviews are completed in enough detail to, at a minimum, validate the risk rating. Additionally, the reviews shall determine whether any documentation exceptions exist, appropriate written analysis is included in the loan file, and whether credit policies have been properly adhered to.

Many of the residential real estate loans underwritten by the Company conform to the underwriting requirements of Freddie Mac or other secondary market aggregators to allow the Company to resell loans in the secondary market. Servicing rights are retained on many, but not all, of the residential real estate loans sold in the secondary market. The lending policy establishes minimum appraisal and other credit guidelines.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or market, as determined by outstanding commitments from investors.  As of June 30, 2017 and June 30, 2016, loans held for sale were immaterial to the consolidated financial statements.

Periodically, the Company originates first mortgage loans for other investors.  Generally, the Company receives fees equivalent to a stated percentage of the loan amount.  This fee is recognized as income at the time of closing.  From time to time, the Company also originates loans for sale in the secondary market.  Gain on sale of loans in the secondary market is included in noninterest income.

The Company provides many types of consumer and other loans, including motor vehicle, home improvement, home equity, signature loans and small personal credit lines. The lending policy addresses specific credit guidelines by consumer loan type.

For residential real estate loans and consumer and other loans, these large groups of smaller balance homogenous loans are collectively evaluated for impairment. In estimating the allowance for loan losses for these loans, the Company applies quantitative and qualitative factors on a portfolio segment basis. Quantitative factors are based on historical charge-off experience and qualitative factors are based on an assessment of internal and/or external influences on credit quality that are not fully reflected in the historical loss data. Accordingly, the Company generally does not separately identify individual residential real estate loans and/or consumer and other loans for impairment disclosures, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Troubled debt restructures are considered impaired loans and are subject to the same allowance methodology as described above for impaired loans by portfolio segment.

Mortgage servicing rights: Mortgage servicing rights are recognized separately when rights are acquired through purchase or through sale of financial assets.  The Company subsequently measures each class of servicing assets on the amortization method.  Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income.  The amortized assets are assessed for impairment based on fair value of each reporting date.

Transfers of financial assets:  Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Company; (2) the transferee has the right to pledge or exchange the assets it received, and no condition both constrains the transferee from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor; and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.  

Premises and equipment:  Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation.  Depreciation is included in noninterest expense and is computed on 25 to 40 years for buildings and improvements that extend the life of the original building, 10 to 20 years for routine building improvements, 5 to 15 years for furniture and equipment, 5 years for vehicles, and 2 to 5 years for computer equipment.  The cost of maintenance and repairs is charged to expense as incurred.

Long-term assets:  Premises and equipment and other long-term assets are reviewed for impairment when events indicate that their carrying amount may not be recoverable from future undiscounted cash flows.  If impaired, the assets are recorded at fair value.  No impairment has been recognized by the Company for the years ended June 30, 2017 and 2016.

Foreclosed assets:  Assets acquired through foreclosure are initially recorded at fair value, less estimated costs to sell, establishing a new cost basis.  If the fair value less costs to sell is less than the respective loan balance, a charge against the allowance for loan losses is recorded upon property acquisition.  Declines in property value subsequent to acquisition are charged to operations.  Holding costs are expensed as incurred.

Brokerage fee income:  Acting as an agent, the Company earns brokerage income by buying and selling securities on behalf of its customers through independent third parties and earning fees on the transactions.  These fees are recorded on the settlement date, which is not materially different than the trade date.

Income taxes:  Income tax expense or benefit is the sum of the current year income tax due or refundable and the change in the deferred tax assets and liabilities.  Deferred tax assets and liabilities are the expected future tax consequence of temporary differences between the carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates.  A valuation allowance reduces deferred tax assets to the amount expected to be realized.

The Company follows the guidance on accounting for uncertainty in income taxes which allows the Company to recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.  The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods.  When applicable, the Company recognizes interest and penalties on income taxes as a component of income tax (benefit) expense.    

Employee Stock Ownership Plan:  The cost of shares issued to the Employee Stock Ownership Plan (“ESOP”) but not yet allocated to participants is presented in the consolidated balance sheet as a reduction of stockholders’ equity.  Compensation expense is recorded based on the market price of the shares as the shares are committed to be released for allocation to participant accounts.  Because participants may require the Company to purchase their ESOP shares upon termination of their employment, the appraised fair value of all earned and allocated ESOP shares is reclassified from stockholders’ equity.

Stock based compensation: Compensation cost for stock based compensation is recognized based on the fair value of these awards at the date of the grant over the requisite service period, usually the vesting period.  The Company uses a Black-Scholes pricing model and related assumption for estimating the fair value of stock options and a five-year vesting period for stock options and restricted stock awards.

Loan commitments and related financial instruments:  Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer-financing needs.  The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.  Such financial instruments are recorded when they are funded. 

Fair value of financial instruments:  Fair values of financial instruments are estimated using relevant market value information and other assumptions, as more fully disclosed in Note 14.  Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.  Changes in assumptions or in market conditions could significantly affect the estimates.

Earnings per share:  Basic earnings per share is based on net income divided by the weighted average number of shares outstanding during the period, including allocated and committed to be released ESOP shares.  Diluted earnings per share shows the dilutive effect, if any, of additional common shares issuable under stock options or awards.

Loss contingencies:  Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  Management does not believe that there are such matters that will have a material effect on the consolidated financial statements.

Comprehensive income (loss):  Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss).  Other comprehensive income (loss) includes unrealized gains (losses) on securities available-for-sale, net of tax.

Recent accounting pronouncements:  In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers.  The ASU is effective for the Company with the fiscal year ending June 30, 2019.  FASB issued this ASU to clarify the principles for recognizing revenue and to develop a common revenue standard.  The Company believes this will have a minimal impact on its financial statements.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.  The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  This ASU is not expected to have a material impact on the Company’s consolidated financial statements.

On February 25, 2016, the FASB issued ASU 2016-02, intended to improve financial reporting about leasing transactions. The ASU is effective for the Company with the interim period beginning January 1, 2019. We are currently evaluating the effect of this proposal to our financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The purpose of this Update is to simplify the accounting for share-based payment award transactions. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. This ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The purpose of this Update 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. The Update replaces the current incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU will be effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods.  This ASU is expected to have an impact on the Company’s consolidated financial statements. The Company is currently evaluating the effect this will have on its financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows; Classification of Certain Cash Receipts and Cash Payments.  The purpose of this Update is to address existing diversity in practice related to specific cash flow issues.  This Update will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory.  The purpose of this Update is to improve the accounting for income tax consequences of intra-entity transfers of assets other than inventory.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other.  The purposes of this Update is to simplify how an entity is required to test goodwill for impairment.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05 Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets.  The purpose of this Update is to clarify the scope for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers and add guidance for partial sales of nonfinancing assets.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08 Receivables – Nonrefundable Fees and Other Costs.  The purpose of this Update is to shorten the amortization period of certain callable debt securities held at a premium.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09 Compensation – Stock Compensation.  The purpose of this Update is to provide clarity and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

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Securities

12 Months Ended

Jun. 30, 2017

Securities

Securities

Note 2.Securities

The fair value of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2017	Cost		Gains		Losses		Fair Value
U.S. Government-sponsored agencies securities	$	986,919	$	—	$	(17,974)	$	968,945
Residential mortgage-backed securities		440,070		1,973		(33)		442,010
	$	1,426,989	$	1,973	$	(18,007)	$	1,410,955

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2016	Cost		Gains		Losses		Fair Value
Residential mortgage-backed securities	$	658,579	$	6,176	$	—	$	664,755

The carrying amount, unrecognized gross gains and losses, and fair value of securities held-to-maturity are as follows:

			Gross			Gross
	Amortized		Unrealized			Unrealized
June 30, 2017	Cost		Gains			Losses		Fair Value
Residential mortgage-backed securities	$	135,978		$	10,279	$	—	$	146,257
Municipal securities		600,000			—		(384)		599,616
	$	735,978		$	10,279	$	(384)	$	745,873

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2016	Cost		Gains		Losses		Fair Value
Residential mortgage-backed securities	$	180,035	$	15,281	$	—	$	195,316
Municipal securities		601,705		4,093		—		605,798
	$	781,740	$	19,374	$	—	$	801,114

Securities available-for-sale and held-to-maturity consist of investments in bonds securitized by the Government National Mortgage Association, U.S. Government-sponsored agencies, and local municipal securities.  Interest income from U.S. Government-sponsored agencies approximated $12,000 and $0 for the years ended June 30, 2017 and 2016, respectively.  Interest income from municipal securities approximated $17,000 and $58,000 for the years ended June 30, 2017 and 2016, respectively.

The contractual maturities of the residential mortgage-backed securities at June 30, 2017 are not disclosed because the securities are not due at a single maturity date.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Approximately $969,000 of U.S. Government-sponsored agency securities will mature in the year ending June 30, 2023.  Approximately $400,000 in municipal securities will mature in the year ending June 30, 2019 with the remaining balance maturing in the year ending June 30, 2020.

There were no sales of securities for the years ended June 30, 2017 and 2016.

The duration of gross unrealized losses is not disclosed as such amounts are immaterial to the consolidated financial statements. The Company has not recognized other-than-temporary impairment on any securities for the years ended June 30, 2017 and 2016.

The following table shows the amount of securities pledged at June 30, 2017 and 2016:

	June 30, 2017		June 30, 2016
Securities available-for-sale, at fair value	$	1,410,955	$	664,755
Securities held-to-maturity, at amortized cost		643,978		746,084

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Loans

12 Months Ended

Jun. 30, 2017

Loans

Loans

Note 3.Loans

Loans at June 30 are as follows:

	2017		2016
Commercial:
Operating	$	20,139,045	$	15,355,676
Real estate		86,809,938		67,698,929
Agricultural:
Operating		26,739,407		22,942,560
Real estate		31,105,790		24,965,541
Residential real estate:
1-4 family		43,060,013		40,309,797
Home equity		11,748,363		12,644,624
Other:
Construction and land		16,175,698		13,210,393
Consumer		3,674,674		3,566,917
Total loans		239,452,928		200,694,437
Deferred loan origination costs, net		647,197		562,483
Allowance for loan losses		(3,555,000)		(2,947,000)
		(2,907,803)		(2,384,517)
Loans, net	$	236,545,125	$	198,309,920

Changes in the allowance for loan losses, by portfolio segment, during the years ended June 30, 2017 and 2016 are summarized as follows:

					Residential
	Commercial		Agricultural		Real Estate		Other		Total
	2017
Balance, beginning	$	1,337,000	$	738,000	$	655,000	$	217,000	$	2,947,000
Provision charged to expense		396,291		180,000		(1,432)		69,170		644,029
Recoveries		24,511		—		2,620		3,208		30,339
Loans charged off		(54,802)		—		(188)		(11,378)		(66,368)
Balance, ending	$	1,703,000	$	918,000	$	656,000	$	278,000	$	3,555,000

					Residential
	Commercial		Agricultural		Real Estate		Other		Total
	2016
Balance, beginning	$	1,124,000	$	697,000	$	644,000	$	118,000	$	2,583,000
Provision charged to expense		118,418		41,000		9,416		106,190		275,024
Recoveries		94,582		—		1,584		5,551		101,717
Loans charged off		—		—		—		(12,741)		(12,741)
Balance, ending	$	1,337,000	$	738,000	$	655,000	$	217,000	$	2,947,000

The allowance for loan losses, by impairment evaluation and portfolio segment, as of June 30, 2017 and 2016, is summarized as follows:

							Residential
	Commercial			Agricultural			Real Estate			Other			Total
	2017
Allowance for loans individually evaluated for impairment	$	6,487		$	17,973		$	29,271		$	1,949		$	55,680
Allowance for loans collectively evaluated for impairment		1,696,513			900,027			626,729			276,051			3,499,320
	$	1,703,000		$	918,000		$	656,000		$	278,000		$	3,555,000
Loans individually evaluated for impairment	$	870,377		$	864,357		$	3,142,020		$	20,408		$	4,897,162
Loans collectively evaluated for impairment		106,078,606			56,980,840			51,666,356			19,829,964			234,555,766
	$	106,948,983		$	57,845,197		$	54,808,376		$	19,850,372		$	239,452,928
Allowance as a percentage of loans individually evaluated for impairment		0.75	%		2.08	%		0.93	%		9.55	%		1.14	%
Allowance as a percentage of loans collectively evaluated for impairment		1.60	%		1.58	%		1.21	%		1.39	%		1.49	%
Allowance as a percentage of total loans evaluated for impairment		1.59	%		1.59	%		1.20	%		1.40	%		1.48	%

							Residential
	Commercial			Agricultural			Real Estate			Other			Total
	2016
Allowance for loans individually evaluated for impairment	$	34,975		$	—		$	17,828		$	—		$	52,803
Allowance for loans collectively evaluated for impairment		1,302,025			738,000			637,172			217,000			2,894,197
	$	1,337,000		$	738,000		$	655,000		$	217,000		$	2,947,000
Loans individually evaluated for impairment	$	227,824		$	885,757		$	3,726,602		$	3,194		$	4,843,377
Loans collectively evaluated for impairment		82,826,781			47,022,344			49,227,819			16,774,116			195,851,060
	$	83,054,605		$	47,908,101		$	52,954,421		$	16,777,310		$	200,694,437
Allowance as a percentage of loans individually evaluated for impairment		15.35	%		—	%		0.48	%		—	%		1.09	%
Allowance as a percentage of loans collectively evaluated for impairment		1.57	%		1.57	%		1.29	%		1.29	%		1.48	%
Allowance as a percentage of total loans evaluated for impairment		1.61	%		1.54	%		1.24	%		1.29	%		1.47	%

The aging in terms of unpaid principal balance of the loan portfolio, by classes of loans, as of June 30, 2017 and 2016, is summarized as follows:

										> 90 days
				31-60 days			61-90 days			Past Due						Non accrual
	Current			Past Due			Past Due			(Nonaccrual)			Total			Loans
	2017
Classes of loans:
Commercial:
Operating	$	20,072,350		$	33,060		$	13,240		$	20,395		$	20,139,045		$	154,671
Real estate		86,809,938			—			—			—			86,809,938			640,881
Agricultural:
Operating		26,699,805			32,754			—			6,848			26,739,407			6,848
Real estate		30,263,281			47,900			—			794,609			31,105,790			857,509
Residential real estate:
1-4 family		42,722,767			164,549			—			172,697			43,060,013			675,197
Home equity		11,748,363			—			—			—			11,748,363			22,649
Other:
Construction and land		16,175,698			—			—			—			16,175,698			—
Consumer		3,670,927			—			3,747			—			3,674,674			24,124
	$	238,163,129		$	278,263		$	16,987		$	994,549		$	239,452,928		$	2,381,879
As a percentage of total loan portfolio		99.45	%		0.12	%		0.01	%		0.42	%		100.00	%		0.99	%

										> 90 days
				31-60 days			61-90 days			Past Due						Non accrual
	Current			Past Due			Past Due			(Nonaccrual)			Total			Loans
	2016
Classes of loans:
Commercial:
Operating	$	15,256,328		$	99,348		$	—		$	—		$	15,355,676		$	97,294
Real estate		67,606,842			—			—			92,087			67,698,929			92,087
Agricultural:
Operating		22,318,246			624,314			—			—			22,942,560			6,848
Real estate		24,965,541			—			—			—			24,965,541			877,909
Residential real estate:
1-4 family		38,428,793			1,823,353			23,736			33,915			40,309,797			688,454
Home equity		12,644,624			—			—			—			12,644,624			29,807
Other:
Construction and land		13,210,393			—			—			—			13,210,393			—
Consumer		3,563,221			1,294			—			2,402			3,566,917			7,248
	$	197,993,988		$	2,548,309		$	23,736		$	2,402		$	200,694,437		$	1,799,647
As a percentage of total loan portfolio		98.66	%		1.27	%		0.01	%		0.06	%		100.00	%		0.90	%

For each class of loans, the following summarizes the unpaid principal balance by credit quality indicator as of June 30, 2017 and 2016:

									Other —
	Commercial —		Commercial —		Agricultural —		Agricultural —		Construction
	Operating		Real Estate		Operating		Real Estate		and Land		Total
	2017
Internally assigned risk rating:
Highest Quality (rating 1)	$	—	$	—	$	324,038	$	326,045	$	—	$	650,083
Good Quality (rating 2)		177,795		6,638,998		5,185,147		3,541,630		2,868,632		18,412,202
Acceptable Quality (rating 3)		8,470,283		44,240,531		9,271,425		12,354,765		10,426,245		84,763,249
Fair Quality (rating 4)		11,313,276		31,603,455		11,489,750		13,116,352		2,880,821		70,403,654
Special Mention (rating 5)		—		1,948,017		403,234		—		—		2,351,251
Substandard (rating 6)		177,691		2,378,937		65,813		1,766,998		—		4,389,439
Doubtful (rating 7)		—		—		—		—		—		—
Loss (rating 8)		—		—		—		—		—		—
	$	20,139,045	$	86,809,938	$	26,739,407	$	31,105,790	$	16,175,698	$	180,969,878

									Other —
	Commercial —		Commercial —		Agricultural —		Agricultural —		Construction
	Operating		Real Estate		Operating		Real Estate		and Land		Total
	2016
Internally assigned risk rating:
Highest Quality (rating 1)	$	—	$	—	$	484,813	$	348,011	$	—	$	832,824
Good Quality (rating 2)		213,824		4,923,002		5,510,208		6,173,479		1,987,892		18,808,405
Acceptable Quality (rating 3)		7,732,341		33,606,696		5,992,063		9,729,301		6,675,761		63,736,162
Fair Quality (rating 4)		7,294,630		28,578,771		9,604,176		7,836,841		4,546,740		57,861,158
Special Mention (rating 5)		—		—		829,738		—		—		829,738
Substandard (rating 6)		114,881		590,460		521,562		877,909		—		2,104,812
Doubtful (rating 7)		—		—		—		—		—		—
Loss (rating 8)		—		—		—		—		—		—
	$	15,355,676	$	67,698,929	$	22,942,560	$	24,965,541	$	13,210,393	$	144,173,099

	Residential RE —		Residential RE —		Other —
	1-4 Family		Home Equity		Consumer		Total
	2017
Delinquency status*:
Performing	$	42,220,268	$	11,725,714	$	3,650,519	$	57,596,501
Nonperforming		839,745		22,649		24,155		886,549
	$	43,060,013	$	11,748,363	$	3,674,674	$	58,483,050

	Residential RE —		Residential RE —		Other —
	1-4 Family		Home Equity		Consumer		Total
	2016
Delinquency status*:
Performing	$	37,832,838	$	12,614,817	$	3,558,375	$	54,006,030
Nonperforming		2,476,959		29,807		8,542		2,515,308
	$	40,309,797	$	12,644,624	$	3,566,917	$	56,521,338

*     Performing loans are those which are accruing and less than 31 days past due. Nonperforming loans are those on nonaccrual and accruing loans that are greater than or equal to 31 days past due.

At June 30, 2017 and June 30, 2016 there were no loans 90 days past due and still accruing.

For commercial loans and agricultural loans, the Company’s credit quality indicator is internally assigned risk ratings. Each commercial loan is assigned a risk rating upon origination. The risk rating is reviewed every 12 months, at a minimum, and on as needed basis depending on the specific circumstances of the loan.

For residential real estate and other loans, the Company’s credit quality indicator is performance determined by delinquency status. Delinquency status is updated daily by the Company’s loan system.

Loans, by classes of loans, considered to be impaired as of June 30, 2017 and 2016 are summarized as follows:

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
	2017
Classes of loans:
Impaired loans with no specific allowance recorded:
Commercial:
Operating	$	164,823	$	164,128	$	—	$	163,276	$	10,709
Real estate		643,226		640,881		—		321,613		14,232
Agricultural:
Operating		7,503		6,848		—		7,256		—
Real estate		432,468		371,452		—		437,100		—
Residential real estate:
1-4 family		2,448,574		2,439,137		—		2,523,171		142,377
Home equity		7,880		7,868		—		8,712		584
		3,704,474		3,630,314		—		3,461,128		167,902
Impaired loans with specific allowance recorded:
Commercial:
Operating		65,701		65,369		6,487		40,279		3,037
Agricultural:
Real estate		525,068		486,056		17,973		511,830		951
Residential real estate:
1-4 family		695,327		679,474		28,857		699,391		18,137
Home equity		15,553		15,541		414		16,717		1,240
Other:
Consumer		20,433		20,408		1,949		23,116		1,213
		1,322,082		1,266,848		55,680		1,291,333		24,578
Total impaired loans:
Commercial:
Operating		230,524		229,497		6,487		203,555		13,746
Real estate		643,226		640,881		—		321,613		14,232
Agricultural:
Operating		7,503		6,848		—		7,256		—
Real estate		957,536		857,508		17,973		948,930		951
Residential real estate:
1-4 family		3,143,901		3,118,611		28,857		3,222,562		160,514
Home equity		23,433		23,409		414		25,429		1,824
Other:
Consumer		20,433		20,408		1,949		23,116		1,213
	$	5,026,556	$	4,897,162	$	55,680	$	4,752,461	$	192,480

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
	2016
Classes of loans:
Impaired loans with no specific allowance recorded:
Commercial:
Operating	$	88,902	$	87,497	$	—	$	57,873	$	4,560
Agricultural:
Operating		8,009		7,848		—		117,809		21,178
Real estate		925,288		877,909		—		834,054		15,344
Residential real estate:
1-4 family		3,330,310		3,320,028		—		3,382,528		185,997
Home equity		59,336		59,123		—		61,455		3,962
Other:
Consumer		3,756		3,194		—		5,158		254
		4,415,601		4,355,599		—		4,458,877		231,295
Impaired loans with specific allowance recorded:
Commercial:
Operating		48,302		48,240		4,824		52,274		2,266
Real estate		114,837		92,087		30,151		171,863		—
Residential real estate:
1-4 family		330,997		329,623		16,913		336,629		19,949
Home equity		17,882		17,828		915		18,971		1,405
		512,018		487,778		52,803		579,737		23,620
Total impaired loans:
Commercial:
Operating		137,204		135,737		4,824		110,147		6,826
Real estate		114,837		92,087		30,151		171,863		—
Agricultural:
Operating		8,009		7,848		—		117,809		21,178
Real estate		925,288		877,909		—		834,054		15,344
Residential real estate:
1-4 family		3,661,307		3,649,651		16,913		3,719,157		205,946
Home equity		77,218		76,951		915		80,426		5,367
Other:
Consumer		3,756		3,194		—		5,158		254
	$	4,927,619	$	4,843,377	$	52,803	$	5,038,614	$	254,915

Impaired loans, for which no allowance has been provided as of June 30, 2017 and 2016, have adequate collateral, based on management’s current estimates.

The following summarizes the number and recorded investment of troubled debt restructurings (“TDRs”) as of June 30, 2017 and 2016:

	June 30, 2017
	Number	Recorded
	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	10	$	177,272
Real estate	1		643,226
Agricultural:
Real estate	7		775,731
Residential real estate:
1-4 family	28		1,370,885
Home equity	2		7,881
	48	$	2,974,995
Concession — Reduction of interest rate below market:
Commercial:
Operating	1	$	39,836
Residential real estate:
1-4 family	48		1,637,621
Home equity	1		15,553
	50	$	1,693,010
Total:
Commercial:
Operating	11	$	217,108
Real estate	1		643,226
Agricultural:
Real estate	7		775,731
Residential real estate:
1-4 family	76		3,008,506
Home equity	3		23,434
	98	$	4,668,005

	June 30, 2016
	Number	Recorded
	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	5	$	76,088
Real estate	2		103,462
Agricultural:
Operating	1		1,000
Real estate	7		732,633
Residential real estate:
1-4 family	36		1,769,362
Home equity	4		59,336
Other:
Consumer	1		3,756
	56	$	2,745,637
Concession — Reduction of interest rate below market:
Commercial:
Operating	1	$	48,302
Residential real estate:
1-4 family	48		1,722,564
Home equity	1		17,882
	50	$	1,788,748
Total:
Commercial:
Operating	6	$	124,390
Real estate	2		103,462
Agricultural:
Operating	1		1,000
Real estate	7		732,633
Residential real estate:
1-4 family	84		3,491,926
Home equity	5		77,218
Other:
Consumer	1		3,756
	106	$	4,534,385

The following summarizes the number and investment in TDRs, by type of concession, that were restructured during the years ended June 30, 2017 and 2016:

	Number	Recorded
For the year ended June 30, 2017	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	3	$	77,919
Real estate	1		643,226
Residential real estate:
1-4 family	1		128,075
	5	$	849,220
Total:
Commercial:
Operating	3	$	77,919
Real estate	1		643,226
Residential real estate:
1-4 family	1		128,075
	5	$	849,220

	Number	Recorded
For the year ended June 30, 2016	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	2	$	65,085
Agricultural:
Operating	1		1,000
Real estate	6	$	483,556
Residential real estate:
1-4 family	3	$	268,490
	12	$	818,131
Total:
Commercial:
Operating	2	$	65,085
Agricultural:
Operating	1		1,000
Real estate	6	$	483,556
Residential real estate:
1-4 family	3	$	268,490
	12	$	818,131

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Loan Servicing

12 Months Ended

Jun. 30, 2017

Loan Servicing

Loan Servicing

Note 4.Loan Servicing

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets.  The unpaid principal balances of these loans were approximately $112,128,000 and $100,745,000 at June 30, 2017 and 2016, respectively.  Included in other assets are approximately $853,000 and $701,000 of mortgage servicing rights at June 30, 2017 and 2016, respectively.

During the years ended June 30, 2017 and 2016, the Company sold approximately $33,721,000 and $28,507,000, respectively, of fixed-rate loans secured by one-to-four family residential real estate, which resulted in a pre-tax gain on the sale of approximately $856,000 and $750,000 for years ended June 30, 2017 and 2016, respectively.

The Company entered into an agreement with the FHLB to originate mortgage loans on behalf of the FHLB and to sell closed loans to the FHLB under the FHLB Mortgage Partnership Finance (“MPF”) program.  Under the terms of the agreement, the Company retains a portion of the credit risk associated with each conventional loan pool under a risk-sharing agreement.  The Company’s credit losses are capped by the credit enhancement amount established for each pool of loans.  Losses beyond that cap are absorbed by the FHLB.  At June 30, 2017 and 2016, the amount of conventional loans outstanding that were originated and sold to the FHLB in the MPF was $26,882,089 and $20,078,590, respectively, with possible credit enhancement losses capped at $583,203 and $1,035,414 at June 30, 2017 and 2016, respectively.  The Company has no history of losses and no losses were accrued in the Company’s consolidated financial statements at June 30, 2017 and 2016.

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Accrued Interest Receivable

12 Months Ended

Jun. 30, 2017

Accrued Interest Receivable

Accrued Interest Receivable

Note 5.Accrued Interest Receivable

Accrued interest receivable at June 30 is summarized as follows:

	2017		2016
Securities	$	5,373	$	3,259
Loans		1,292,535		1,144,208
	$	1,297,908	$	1,147,467

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Premises and Equipment, Net

12 Months Ended

Jun. 30, 2017

Premises and Equipment, Net

Premises and Equipment, Net

Note 6.Premises and Equipment, Net

Premises and equipment, net at June 30 are as follows:

	2017		2016
Land and land improvements	$	1,485,458	$	1,337,723
Buildings and improvements		7,038,547		6,923,640
Furniture and equipment		1,282,315		1,252,015
Computer equipment		471,979		492,766
Vehicles		57,016		57,016
		10,335,315		10,063,160
Less accumulated depreciation		(4,910,460)		(4,788,699)
	$	5,424,855	$	5,274,461

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Deposits

12 Months Ended

Jun. 30, 2017

Deposits

Deposits

Note 7.Deposits

Deposits as of June 30 are as follows:

	2017		2016
Noninterest-bearing demand	$	29,546,051	$	24,296,166
Interest-bearing NOW		49,252,671		42,734,473
Money market		67,039,151		60,352,403
Savings		17,104,400		14,869,638
Certificates of deposit		46,116,043		44,709,672
	$	209,058,316	$	186,962,352

Certificates of deposit of $250,000 or more were approximately $4,737,000 and $3,866,000 at June 30, 2017 and 2016, respectively.

At June 30, 2017, the scheduled maturities of certificates of deposit are as follows:

Year Ending June 30,
2018	$	21,990,649
2019		13,386,469
2020		6,041,736
2021		1,445,231
2022 and beyond		3,251,958
	$	46,116,043

Interest expense on deposit accounts is summarized as follows for the years ended June 30:

	2017		2016
Interest-bearing NOW	$	186,561	$	169,242
Money market		477,148		403,825
Savings		38,922		33,941
Certificates of deposit		422,687		436,887
	$	1,125,318	$	1,043,895

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Borrowings

12 Months Ended

Jun. 30, 2017

Borrowings

Borrowings

Note 8.Borrowings

The Company has a line of credit with the FHLB of Topeka which expires July 6, 2018.  The line of credit accrues interest at a variable rate (1.24% at June 30, 2017).  At June 30, 2017 the balance in the line of credit was $6,745,400.  At June 30, 2016 there was no balance in the line of credit with FHLB of Topeka.  The Company maintains a collateral pledge agreement covering secured advances whereby the Company has agreed to pledge certain real estate loans to secure advances from the FHLB of Topeka.  All stock in the FHLB of Topeka is pledged as additional collateral for these advances.  At June 30, 2017 and 2016, approximately $61.8 million and $49.5 million, respectively, of real estate loans collateralized the advances.  At June 30, 2017, the Company had the ability to borrow an additional $35.3 million in FHLB advances.

The Company has an unsecured line with Midwest Independent Bank, Pacific Cost Bankers Bank and Zions Bank.  At June 30, 2017 the Company had an outstanding balance of $399,000 with Midwest Independent Bank.  At June 30, 2016 there was no outstanding balances on these line of credits.  At June 30, 2017, the Company had the ability to borrow $4.6 million from Midwest Independent Bank, $4.0 million from Pacific Coast Bankers Bank, and $6.0 million with Zions Bank

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Regulatory Matters

12 Months Ended

Jun. 30, 2017

Regulatory Matters

Regulatory Matters

Note 9.Regulatory Matters

The Bank is subject to regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank’s capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If only adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.  Management believes, as of June 30, 2017, that the Bank meets all capital adequacy requirements to which it is subject and is classified as well capitalized.

Actual capital levels and minimum required levels for the Bank were:

									Minimum
									Required to Be
									Well Capitalized
					Minimum Required for				Under Prompt
					Capital Adequacy				Corrective Action
					Purposes				Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2017
Total capital (to risk-weighted assets)	$	30,893	13.2	%	$	18,740	8.0	%	$	23,425	10.0	%
Common equity Tier 1 capital (to risk-weighted assets)		27,956	11.9	%		10,541	4.5	%		15,226	6.5	%
Tier 1 (core) capital (to risk-weighted assets)		27,956	11.9	%		14,055	6.0	%		18,740	8.0	%
Tier 1 (core) capital (to adjusted total assets)		27,956	11.4	%		9,806	4.0	%		12,257	5.0	%
June 30, 2016
Total capital (to risk-weighted assets)	$	28,977	14.7	%	$	15,805	8.0	%	$	19,757	10.0	%
Common equity Tier 1 capital (to risk-weighted		26,500	13.4	%		8,891	4.5	%		12,842	6.5	%
Tier 1 (core) capital (to risk-weighted assets)		26,500	13.4	%		11,854	6.0	%		15,805	8.0	%
Tier 1 (core) capital (to adjusted total assets)		26,500	11.6	%		9,114	4.0	%		11,393	5.0	%

Federal regulations require the Bank to comply with a Qualified Thrift Lender (“QTL”) test, which requires that 65% of assets be maintained in housing-related finance and other specified assets.  If the QTL test is not met, limits are placed on growth, branching, new investment, FHLB advances, and dividends or the institution must convert to a commercial bank charter.  Management believes the QTL test has been met.

In July 2013, the Federal Reserve Board and the Federal Deposit Insurance Corporation issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes. The rules revised minimum capital requirements and adjusted prompt corrective action thresholds. The final rules revised the regulatory capital elements, added a new common equity Tier 1 capital ratio, increased the minimum Tier 1 capital ratio requirement, and implemented a new capital conservation buffer.  The rules also permitted certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income.  Management chose the one-time election to retain the existing treatment.  The final rules took effect for community banks on January 1, 2015, subject to a transition period for certain parts of the rules.  The new minimum capital level requirements applicable to Equitable Bank are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital to risk-weighted assets ratio of 6% (increased from 4%); (iii) a total capital to risk-weighted assets ratio of 8% (unchanged from prior rules); and (iv) a Tier 1 leverage ratio of 4%.  The rules also establish a “capital conservation buffer” of 2.5% above the new regulatory minimum capital ratios resulting in the following ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital to risk-weighted assets ratio of 8.5%; (iii) a total capital to risk-weighted assets ratio of 10.5%; and a tier 1 leverage ratio unchanged at 4%.  The phase-in period for the capital conservation buffer requirement started January 1, 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019. An institution is subject to further limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses of its capital level falls below the buffer amount.  These limitations establish a maximum percentage of eligible retained income that can be utilized for such actions.  The minimum requirements do not include the capital conservation buffer.

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Income Taxes

12 Months Ended

Jun. 30, 2017

Income Taxes

Income Taxes

Note 10. Income Taxes

Income tax expense for the year ended June 30 is as follows:

	2017		2016
Current:
Federal	$	(35,227)	$	(73,021)
State		(83,962)		(72,879)
Deferred:
Federal		(561,635)		(344,906)
	$	(680,824)	$	(490,806)

A reconciliation of the provision for income taxes computed at the statutory federal corporate tax rate of 34% to the income tax expense in the statements of income for the year ended June 30 is as follows:

	2017		2016
Provision computed at the statutory federal tax rate	$	(651,395)	$	(525,492)
State income taxes, net of federal tax		(55,045)		(48,100)
Valuation allowance adjustment		—		79,000
Return-to-provision, net		24,562		(32,837)
Other		1,054		36,623
Total income tax expense	$	(680,824)	$	(490,806)

Retained earnings at June 30, 2017 and 2016 include certain historical additions to bad debt reserves of approximately $2,132,000 for which no deferred federal income tax liability has been recorded.  This amount represents an allocation of income to bad debt deductions for tax purposes alone.  If, in the future, this portion of retained earnings is used for any purpose other than to absorb bad debt losses, federal taxes would be imposed at the then-applicable rates.

The net deferred tax asset at June 30 is as follows:

	2017		2016
Gross deferred tax assets:
Allowance for loan losses	$	1,208,020	$	1,001,980
Net operating loss carryover		—		530,899
General business credits		324,364		324,364
Foreclosed asset writedowns		50,592		50,592
Unrealized loss on securities		6,393		—
Other		50,760		245,290
		1,640,129		2,153,125
Gross deferred tax liabilities:
Additions in excess of base year loan reserve		(572,404)		(585,334)
Depreciation		(73,623)		(68,425)
FHLB stock dividends		(74,630)		(77,656)
Unrealized gain on securities		—		(2,100)
Other		(57,463)		(3,517)
		(778,120)		(737,032)
Net deferred tax asset	$	862,009	$	1,416,093

No significant income tax uncertainties were identified.  Therefore, the Company recognized no adjustment for unrecognized income tax benefits during the years ended June 30, 2017 and 2016.  Corporate tax returns for the 2014 through 2016 years remain open to examination by taxing authorities.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in noninterest expenses.  During the years ended June 30, 2017 and 2016, there were no interest and penalties recognized, nor were any balances for the payment of interest and penalties accrued at June 30, 2017 and 2016.

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Employee Benefit Plans

12 Months Ended

Jun. 30, 2017

Employee Benefit Plans

Employee Benefit Plans

Note 11.Employee Benefit Plans

The Company has a 401(k) and profit sharing plan (the “Plans”) covering substantially all employees.  Annual contributions to the Plans are made at the discretion of and determined by the Board of Directors.  Participant interests are vested over a period from one to five years of service.  Contributions were made of approximately $121,000 and $100,000 for the years ended June 30, 2017 and 2016, respectively.

On November 8, 2005, the Company adopted an employee stock ownership plan (the “ESOP”) for the benefit of substantially all employees.  The ESOP borrowed $1,292,620 from the Company and used those funds to acquire 129,262 shares of the Company’s stock in connection with the reorganization at a price of $10.00 per share.

On July 8, 2015, the ESOP borrowed $951,912 from the Company and used the funds to acquire 118,989 shares of the Company’s stock in connection with the stock offering at a price of $8.00 per share.

Shares purchased by the ESOP with the loan proceeds are held in a suspense account and are allocated to ESOP participants on a pro rata basis as principal and interest payments are made by the ESOP to the Company.  The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Company’s discretionary contributions to the ESOP and earnings on ESOP assets.  Annual principal and interest payments for the note dated November 8, 2005 are made by the ESOP prior to the calendar year December 31.  Annual principal and interest payments from the note dated November 8, 2005 are approximately $145,000 until maturity at December 31, 2019. Annual principal and interest payments from the note dated July 8, 2015 are approximately $65,000 until maturity at July 8, 2035. 

As shares are released from collateral, the Company will report compensation expense equal to the current market price of the shares and the shares will become outstanding for earnings-per-share computations.  Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce accrued interest.  Because participants may require the Company to purchase their ESOP shares upon termination of their employment, the fair value of all earned and allocated ESOP shares may become a liability.

The ESOP has a plan year-end of December 31.  The Company has recorded compensation expense of $152,104 and $105,645 for shares that were released and committed to be released for the years ended June 30, 2017 and 2016, respectively. 

Shares held by the ESOP at June 30 were as follows:

	2017		2016
Allocated shares		86,104		71,803
Shares allocated to be released		7,929		7,932
Unearned ESOP shares		134,843		150,700
Total ESOP shares		228,876		230,435
Fair value of unearned ESOP shares	$	1,348,430	$	1,252,317
Fair value of allocated shares subject to repurchase obligation	$	815,280	$	564,723

The Company approved the Equitable Financial Corp. 2006 Equity Incentive Plan (“2006 Plan”) in November 2006 and the Equitable Financial Corp. 2016 Equity Incentive Plan (“2016 Plan”) in November 2016.  Both plans provide for awards of stock options and restricted stock to officers, employees and directors.  The cost of the plan is based on the fair value of the awards at the grant date.  The fair value of stock is based on the closing price of the Company’s stock on the grant date.  The cost of the awards are being recognized over five-year vesting periods during which participants are required to provide services in exchange for the awards.  As of December 31, 2016 the 2006 plan has been terminated.

The maximum number of shares authorized under the 2016 Plan is 198,316 stock options and 79,326 shares of restricted stock to employees and directors.   As of June 30, 2017 158,653 stock options and 63,461 stock awards were awarded.  These options and awards were all granted in February 2017 at an exercise price of $9.90 per share.

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

			Weighted		Remaining
			Average		Contractual
	Awards		Exercise Price		Life (Years)
Options outstanding at July 1, 2016		—	$	—		—
Granted		158,653		9.90		9.70
Options outstanding at June 30, 2017		158,653	$	9.90		9.70

The cost of the stock options will be amortized in monthly installments over the noted five-year vesting period, with the first vesting date of February 21, 2018.  Stock option expense for the year ended June 30, 2017 was $14,067. 

The fair value of the Company’s stock options was determined using the Black-Schols option pricing formula.  The following assumptions were used in the formula:

Expected Volatility		9.54	%
Risk-free interest rate		1.90	%
Expected dividend yield		—
Expected life (in years)		5.00
Exercise price for the stock options	$	9.90

Expected volatility – Based on the historical volatility of share price of the Company.

Risk-free interest rate – Based on the U.S. Treasury yield curve and expected life of the options at the time of grant.

Dividend yield – The Company had not paid any dividends at the time of valuation.

Expected life – Based on five-year vesting period.

Exercise price for the stock options – Based on the closing price of the Company’s stock on the date of grant.

Restricted stock awards are accounted for as fixed grants using the fair value of the Company’s stock at the time of the 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 represents the restricted stock award activity for the period shown:

	Service-Based		Weighted
	Stock		Grant Date
	Awards		Fair Value
Non-vested at July 1, 2015		43,094		4.02
Conversion for stock offering		3,907		—
Granted		4,900		8.53
Vested		(12,620)		4.02
Non-vested at June 30, 2016		39,281		4.32
Non-vested at July 1, 2016		39,281		4.32
Granted		63,461		9.90
Vested		(13,617)		4.32
Non-vested at June 30, 2016		89,125		6.97

As of June 30, 2017, there was $670,319 of total unrecognized compensation costs related to non-vested restricted stock awards.  The cost is expected to be recognized over a weighted-average period of 4.3 years.  Compensation expense attributable to the restricted stock awards totaled $100,176 and $105,645 for the years ended June 30, 2017 and 2016, respectively.

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Earnings per Share

12 Months Ended

Jun. 30, 2017

Earnings per Share

Earnings per Share

Note 12.Earnings per Share

Amounts reported in earnings per share reflect earnings available to common stockholders for the period divided by the weighted average number of shares of common stock outstanding during the year.  Diluted earnings per share is calculated by dividing earnings available to common stockholders for the period by the sum of the weighted average common shares outstanding and the weighted average dilutive shares.

The following table presents a reconciliation of the components used to compute basic earnings per share for the years ended June 30:

	2017		2016
Weighted average common shares outstanding		3,299,269		3,264,979
Net income available to common stockholders	$	1,235,045	$	1,054,758
Basic earnings per share	$	0.37	$	0.32

The following table presents a reconciliation of the components used to compute diluted earnings per share for the years ended June 30:

	2017		2016
Weighted average common shares outstanding		3,299,269		3,264,979
Dilutive effect of net additional shares from restricted stock awards and stock options		200,289		26,538
Weighted average number of shares outstanding		3,499,558		3,291,517
Net income available to common stockholders	$	1,235,045	$	1,054,758
Diluted earnings per share	$	0.35	$	0.32

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Loan Commitments and Other Related Activities

12 Months Ended

Jun. 30, 2017

Loan Commitments and Other Related Activities

Loan Commitments and Other Related Activities

Note 13.Loan Commitments and Other Related Activities

The Company is party to various financial instruments with off-balance-sheet risk.  The Company uses these financial instruments in the normal course of business to meet the financing needs of customers and to effectively manage exposure to interest rate risk.  These financial instruments include commitments to extend credit, standby letters of credit, and unused lines of credit.  When viewed in terms of the maximum exposure, these instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.  Credit risk is the possibility that a counterparty to a financial instrument will be unable to perform its contractual obligations.  Interest rate risk is the possibility that, due to changes in economic conditions, the Company’s net interest income will be adversely affected.

The following is a summary of the contractual or notional amount of each significant class of off-balance-sheet financial instruments outstanding.  The Company’s exposure to credit loss in the event of nonperformance by the counterparty for commitments to extend credit, standby letters of credit, and unused lines of credit is represented by the contractual or notional amount of these instruments.

The contractual or notional amounts as of June 30 are as follows:

	2017		2016
Financial instruments wherein contractual amounts represent credit risk:
Commitments to extend credit	$	19,271,000	$	12,486,000
Standby letters of credit		200,000		310,000
Unused lines of credit		33,227,000		32,370,000

At June 30, 2017, fixed-rate commitments were approximately $24,745,000.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if it is deemed necessary, by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty.  The collateral held varies but primarily consists of single-family residential real estate.

The Company is party to an operating lease for a branch facility, with expiration in June 2022.  Future commitments under the operating lease approximate the following:

Year Ending June 30,
2018	$	110,000
2019		110,000
2020		110,000
2021		110,000
2022		110,000

Rental expense, included in occupancy and equipment expense in the consolidated statements of income, totaled approximately $81,000 and $89,000 for the years ended June 30, 2017 and 2016, respectively.

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Fair Value Measurements

12 Months Ended

Jun. 30, 2017

Fair Value Measurements

Fair Value Measurements

Note 14.Fair Value Measurements

The Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification defines fair value, establishes a framework for measuring fair value and requires disclosure of fair value measurements.  The fair value hierarchy set forth in the Topic is as follows:

Level 1:  Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:  Significant other 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.

Level 3:  Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

There were no transfers between levels during the years ended June 30, 2017 and 2016, nor were there any changes in valuation techniques used for assets or liabilities measured at fair value at June 30, 2017 and 2016.

Assets and liabilities recorded at fair value on a recurring basis: A description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below:

Securities Available-for-Sale — Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

The following tables summarize assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 and 2016, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Fair Value Measurement at June 30, 2017 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3
Assets
Securities available-for-sale	$	1,410,955	$	—	$	1,410,955	$	—

	Fair Value Measurement at June 30, 2016 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3
Assets
Securities available-for-sale	$	664,755	$	—	$	664,755	$	—

Assets and liabilities recorded at fair value on a nonrecurring basis:  A description of the valuation methodologies used for assets and liabilities measured at fair value on a nonrecurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Impaired Loans — From time to time, a loan is considered impaired and an allowance for credit losses is established.  The specific reserves for collateral dependent impaired loans are based on the fair value of the collateral less estimated costs to sell.  The fair value of collateral was determined based on appraisals.  In some cases, adjustments were made to the appraised values due to various factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in the collateral.  When significant adjustments were based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement.

Foreclosed Assets — Foreclosed assets are carried at estimated fair value of the property, less disposal costs.  The fair value of the property is determined based upon appraisals.  As with impaired loans, if significant adjustments are made to the appraised value, based on unobservable inputs, the resulting fair value measurement has been categorized as a Level 3 measurement.

At June 30, 2017 and 2016 the fair value of impaired loans and foreclosed assets were immaterial.

The Financial Instruments Topic of the FASB Accounting Standards Codification requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.  Fair value is determined under the framework discussed above.  The Topic excludes all nonfinancial instruments from its disclosure requirements.  Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.  The following methods and assumptions used in estimating fair value disclosure for financial instruments are described below:

Cash and due from financial institutions — For cash and due from financial institutions, the current carrying amount is a reasonable estimate of fair value.

Interest-earning deposits — For interest-earning deposits, the current carrying amount is a reasonable estimate of fair value.

Time deposits with financial institutions — The fair value of fixed rate time deposits is estimated by discounting the future cash flows using the current rates for the same remaining maturities.  The fair value of variable rate time deposits approximates carrying value.

Securities — The fair value of securities is determined using quoted prices, when available in an active market.  If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or a discounted cash flows model.

Federal Home Loan Bank stock — For restricted equity securities, the carrying value approximates fair value.

Loans, net — The fair value of fixed rate 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.  The fair value of variable rate loans approximates carrying value.

Mortgage servicing rights — The fair value is based on a discounted cash flow analysis calculated using a proprietary valuation model from a third party.

Deposits — The carrying value of noninterest-bearing deposits approximates fair value.  The fair value of fixed rate deposits is estimated by discounting the future cash flows using the current rates for the same remaining maturities.

Federal Home Loan Bank borrowings — The estimated fair value of fixed rate advances from the FHLB is determined by discounting the future cash flows of existing advances using rates currently available on advances from the FHLB having similar characteristics.  Adjustable rate advances’ carrying value approximates fair value.

Accrued interest — The carrying amounts of accrued interest approximate fair value.

Off-balance sheet items — The fair value of off-balance-sheet items is based on current fees or cost that would be charged to enter into or terminate such arrangements.  These were not considered material and are not presented in the below tables.

The estimated fair value of financial instruments is as follows:

	Fair Value	Carrying		Estimated
June 30, 2017	Hierarchy Level	Amount		Fair Value
Financial assets:
Cash and due from financial institutions	Level 1	$	4,881,007	$	4,881,000
Securities available-for-sale	See previous table		1,410,955		1,411,000
Securities held-to-maturity	Level 2		735,978		746,000
Federal Home Loan Bank stock	Level 1		453,400		453,000
Loans, net	Level 2		236,545,125		232,931,000
Mortgage servicing rights	Level 2		852,715		1,089,000
Accrued interest receivable	Level 1		1,297,908		1,298,000
Financial liabilities:
Noninterest-bearing deposits	Level 2		29,546,051		29,546,000
Interest-bearing deposits	Level 2		179,512,265		185,040,000
Federal Home Loan Bank borrowings	Level 2		6,745,400		6,745,000
Accrued interest payable and other liabilities	Level 1		820,229		820,000

	Fair Value	Carrying		Estimated
June 30, 2016	Hierarchy Level	Amount		Fair Value
Financial assets:
Cash and due from financial institutions	Level 1	$	14,947,296	$	14,947,000
Securities available-for-sale	See previous table		664,755		665,000
Securities held-to-maturity	Level 2		781,740		801,000
Federal Home Loan Bank stock	Level 1		229,900		230,000
Loans, net	Level 2		198,309,920		198,000,000
Mortgage servicing rights	Level 2		701,293		841,000
Accrued interest receivable	Level 1		1,147,467		1,147,000
Financial liabilities:
Noninterest-bearing deposits	Level 2		24,296,166		24,296,000
Interest-bearing deposits	Level 2		162,666,186		170,276,000
Accrued interest payable and other liabilities	Level 1		1,198,850		1,199,000

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Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Jun. 30, 2017

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

Note 15.Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) components at June 30 were as follows:

	2017		2016
Unrealized holding gains (losses) on securities available-for-sale	$	(16,034)	$	6,176
Tax benefit		5,452		(2,100)
	$	(10,582)	$	4,076

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Transactions with Related Parties

12 Months Ended

Jun. 30, 2017

Transactions with Related Parties

Transactions with Related Parties

Note 16.Transactions with Related Parties

In the ordinary course of business, the Company granted loans to principal officers, directors, and their affiliates.  Annual activity consisted of the following for the year ended June 30:

	2017		2016
Beginning balance	$	2,723,398	$	1,310,605
New loans or transfers in		4,133,252		1,552,533
Repayments or transfers out		(1,120,301)		(139,740)
Ending balance	$	5,736,349	$	2,723,398

Deposits from principal officers, directors, and their affiliates at June 30, 2017 and 2016 approximated $1,047,000 and $364,000, respectively.

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Condensed Financial Information (Holding Company Only)

12 Months Ended

Jun. 30, 2017

Condensed Financial Information (Holding Company Only)

Condensed Financial Information (Holding Company Only)

Note 17. Condensed Financial Information (Holding Company Only)

Condensed Balance Sheets

	June 30,
	2017		2016
Assets
Cash and due from financial institutions	$	5,046,023	$	6,816,101
Investment in Bank		28,547,549		27,153,439
Other assets		2,007,731		2,026,340
Total assets	$	35,601,303	$	35,995,880
Liabilities and Stockholders’ Equity
Other liabilities	$	30,000	$	21,794
Stockholders' equity		35,571,303		35,974,086
Total liabilities and stockholders’ equity	$	35,601,303	$	35,995,880

Condensed Statements of Income

	Year Ended June 30,
	2017		2016
Interest income	$	82,092	$	78,342
Professional fees and other expenses		355,237		445,625
Loss before income tax and equity in undistributed net income of subsidiary		(273,145)		(367,283)
Income tax benefit		115,212		124,876
Loss before equity in undistributed net income of subsidiary		(157,933)		(242,407)
Equity in undistributed net income of subsidiary		1,392,978		1,297,165
Net income	$	1,235,045	$	1,054,758
Comprehensive income	$	1,220,387	$	1,062,889

Condensed Statements of Cash Flows

	Year Ended June 30,
	2017		2016
Cash Flows from Operating Activities:
Net income	$	1,235,045	$	1,054,758
Items not providing cash		(1,366,163)		(1,168,812)
Net cash used by operating activities		(131,118)		(114,054)
Cash Flows from Investing Activities:
Downstream capital to Bank	$	—	$	(6,930,000)
Net cash used by investing activities		—		(6,930,000)
Cash Flows from Financing Activities:
ESOP Loan Finance	$	—	$	(951,912)
Stock buyback		(1,638,960)		—
Proceeds in advance of offering		—		(2,555,176)
Net cash used by financing activities		(1,638,960)		(3,507,088)
Decrease in cash and cash equivalents		(1,770,078)		(10,551,142)
Cash and Cash Equivalents
Beginning		6,816,101		17,367,243
Ending	$	5,046,023	$	6,816,101

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Stock Buyback

12 Months Ended

Jun. 30, 2017

Stock Buyback

Stock Buyback

Note 18. Stock Buyback

The Company announced a stock repurchase plan on October 7, 2016 whereby the Company could repurchase up to 173,857 shares of its common stock, or approximately 5% of the then current outstanding shares.  There were 168,086 shares of the Company’s common stock repurchased by the Company during the year ended June 30, 2017, and there were 5,771 yet to be repurchased under the plan as of June 30, 2017.

The following table provides information regarding the Company’s purchase of its common stock during the year ended June 30, 2017:

				Total Number of
				Shares Purchased	Maximum Number of
			Weighted	as Part of Publicly	Shares that May Yet Be
	Total Number of	Average Price		Announced Plans	Purchased Under the
Period	Shares Purchased	Paid Per Share		or Programs	Plans or Programs
10/1/16 - 10/31/16	—	$	—	—	173,857
11/1/16 - 11/30/16	60,000		9.07	60,000	113,857
12/1/16 - 12/31/16	26,455		9.57	86,455	87,402
01/1/17 - 01/31/17	—		—	86,455	87,402
02/1/17 - 02/28/17	—		—	86,455	87,402
03/1/17 - 03/31/17	22,200		10.25	108,655	65,202
04/1/17 - 04/30/17	5,000		10.25	113,655	60,202
05/1/17 - 05/31/17	49,000		10.25	162,655	11,202
06/1/17 - 06/30/17	5,431		10.17	168,086	5,771
Total	168,086	$	9.72

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Nature of Business and Significant Accounting Policies (Policies)

12 Months Ended

Jun. 30, 2017

Nature of Business and Significant Accounting Policies

Principles of consolidation

Principles of consolidation:  The accompanying consolidated financial statements include the accounts of Equitable Financial Corp. (the “Company”) and its wholly owned subsidiary, Equitable Bank (the “Bank”).  All significant intercompany transactions and balances are eliminated in consolidation.

Stock Conversion

Stock Conversion:On July 8, 2015, Equitable Financial, MHC, the Company’s former federally chartered mutual holding company, consummated its “second step” mutual-to-stock conversion, and the Company consummated its initial stock offering.  In the offering, the Company sold 1,983,160 shares of its common stock, par value $0.01 per share, at $8.00 per share in a subscription offering and community offering, including 118,989 shares, equal to 6.0% of the shares sold in the offering, to the Equitable Bank employee stock ownership plan. 

In accordance with applicable federal conversion regulations, at the time of the completion of our mutual-to-stock conversion, we established a liquidation account in an amount equal to the Company’s total equity as of the latest balance sheet date in the final prospectus used in the Conversion.  Each eligible account holder or supplemental account holder is entitled to a proportionate share of this liquidation account in the event of a complete liquidation of the Bank, and only in such event.  This share will be reduced if the eligible account holder’s or supplemental account holder’s deposit balance falls below the amounts on the date of record as of any June 30 and will cease to exist if the account is closed.  The liquidation account will never be increased despite any increase after Conversion in the related deposit balance.

Following completion of the Conversion, the Bank may not declare, pay a dividend on, or repurchase any of its capital stock of the Bank, if the effect thereof would cause retained earnings to be reduced below the liquidation account amount or regulatory capital requirements.

Nature of business

Nature of business:  The primary business of the Company is the ownership of the Bank.  Through the Bank, the Company is engaged in the business of retail banking, with operations conducted through its main office and branches, which are located in Grand Island, North Platte and Omaha, Nebraska.  The Bank’s primary services include accepting deposits, making loans and investing in securities.

Use of estimates

Use of estimates:  In preparing the accompanying consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses for the reporting period.  Estimates significant to the consolidated financial statement include the allowance for loan losses,   deferred tax valuation allowances, fair values of financial instruments and foreclosed assets.  Actual results could differ from those estimates.  The allowance for loan losses is inherently subjective as it requires material estimates that are susceptible to significant change.  The fair value disclosure of investments and other financial instruments is an estimate that can be computed within a range.

Risks and uncertainties

Risks and uncertainties:  Changes in economic conditions in the United States, and more specifically Nebraska, could impact the credit worthiness of the Company’s borrowers and the borrowers’ ability to service their outstanding loans with the Company.  Additionally, the Company is subject to interest rate risk in which changes in the interest rate environment could negatively impact the Company’s net interest margin.

Cash flows

Cash flows:  Cash and cash equivalents include cash, deposits with other financial institutions with maturities under 90 days when purchased, and federal funds sold.  Net cash flows are reported for customer loan and deposit transactions, and advance payments from borrowers for taxes and insurance.  Excess cash is held in a fully secured excess balance account with Midwest Independent Bank.  The balance at Midwest Independent Bank at June 30, 2017 and 2016 was zero and $12.4 million, respectively.

Securities

Securities:  Securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity.  Securities are classified as available-for-sale when they might be sold before maturity.  Securities classified as available-for-sale are carried at fair value with unrealized holding gains and losses reported in other comprehensive income or loss, net of tax.

Interest income is recognized under the interest method and includes amortization of purchase premium and discount.  Gains and losses on sales are recorded on the trade date based on the amortized cost of the security sold and determined using the specific identification method.

Declines in the fair value of securities available-for-sale below their amortized cost are evaluated to determine whether the loss is temporary or other-than-temporary.  If the Company (a) has the intent to sell a debt security or (b) more-likely-than-not will be required to sell the debt security before its anticipated recovery, then the Company recognizes the entire unrealized loss in earnings as an other-than-temporary loss.  If neither of these conditions are met, the Company evaluates whether a credit loss exists.  The impairment is separated into (a) the amount of the total impairment related to the credit loss and (b) the amount of total impairment related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings and the amount related to all other factors is recognized in other comprehensive income (loss).

Federal Home Loan Bank stock

Federal Home Loan Bank stock: The Bank is a member of the Federal Home Loan Bank (FHLB) system.  Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts.  The stock does not have a readily determinable fair value and as such is classified as restricted stock, carried at cost and evaluated for impairment.  In accordance with the applicable accounting guidance, the stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time this situation has persisted (b) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance (c) the impact of legislative and regulatory changes on the customer base of the FHLB and (d) the liquidity position of the FHLB.  With consideration given to the previous criteria, management concluded that the stock was not impaired at June 30, 2017 and June 30, 2016.

Loans, net

Loans, net:  Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at their outstanding unpaid principal balances, less an allowance for loan losses, premiums and discounts on loans purchased, and net deferred loan fees/costs.  Interest income on loans is recognized over the term of the loan and is calculated using the simple interest method on principal amounts outstanding.  Direct loan origination fees and costs are generally being deferred and the net amounts amortized as an adjustment of the related loan’s yield. The Company generally amortizes these amounts over the contractual life.  Direct loan origination fees and costs related to loans sold to unrelated third parties are recognized as income or expense in the current consolidated statement of income.

The Company’s portfolio segments are as follows:

· Commercial

· Agricultural

· Residential real estate

· Other

The Company’s classes of loans are as follows:

· Commercial – operating

· Commercial – real estate

· Agricultural – operating

· Agricultural – real estate

· Residential real estate – 1-4 family

· Residential real estate – home equity

· Other – construction and land

· Other – consumer

Generally, for all classes of loans, loans are considered past due when contractual payments are delinquent for 31 days or greater.

For all classes of loans, loans will generally be placed on nonaccrual status when the loan has become greater than 90 days past due; or when management believes, after considering collection efforts and other factors, that the borrower’s financial condition is such that collection of interest is doubtful.

When a loan is placed on nonaccrual status, payments received will be applied to the principal balance. However, interest may be taken on a cash basis in the event the loan is fully secured and the risk of loss is minimal.  Previously recorded but uncollected interest on a loan placed in nonaccrual status is accounted for as follows:  if the previously accrued but uncollected interest and the principal amount of the loan is protected by sound collateral value based upon a current, independent qualified appraisal, such interest may remain on the Company’s books. If such interest is not so protected, it is considered a loss with the amount thereof recorded in the current year being reversed against current interest income, and the amount recorded in the prior year being charged against the allowance for possible loan losses.

For all classes of loans, nonaccrual loans may be restored to accrual status provided the following criteria are met:

· The loan is current, and all principal and interest amounts contractually due have been made,

· The loan is well secured and in the process of collection, and

Future principal and interest payments are not in doubt.

Troubled debt restructures

Troubled debt restructures: Troubled debt restructuring exists when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession (either imposed by court order, law, or agreement between the borrower and the Company) to the borrower that it would not otherwise consider. These concessions could include forgiveness of principal, extension of maturity dates, and reduction of stated interest rates or accrued interest. The Company is attempting to maximize its recovery of the balances of the loans through these various concessionary restructurings. See Note 3 for disclosure of the Company’s troubled debt restructurings.

Allowance for loan losses

Allowance for loan losses:  For all portfolio segments, the allowance for loan losses is maintained at the level considered adequate by management of the Company to provide for losses that are probable. The allowance is increased by provisions charged to operating expense and reduced by net charge-offs. Subsequent recoveries, if any, are credited to the allowance.  In determining the adequacy of the allowance balance, the Company makes continuous evaluations of the loan portfolio and related off-balance sheet commitments, considers current economic conditions, historical loan loss experience, review of specific problem loans and other factors.

A discussion of the risk characteristics and the allowance for loan losses by each portfolio segment follows:

For commercial loans, the Company focuses on small and mid-sized businesses in their geographical footprint. The Company provides a wide range of commercial loans, including lines of credit for working capital and operational purposes, and term loans for the acquisition of real estate, facilities, equipment and other purposes. Approval is generally based on the following factors:

· Sufficient cash flow to support debt repayment;

· Ability and stability of current management of the borrower;

· Positive earnings and financial trends;

· Earnings projections based on reasonable assumptions;

· Financial strength of the industry and business;

· Value and marketability of collateral.

Collateral for commercial loans generally includes accounts receivable, inventory, equipment and real estate. The lending policy specifies approved collateral types and corresponding maximum advance percentages. The value of collateral pledged on loans typically exceeds the loan amount by a margin sufficient to absorb potential erosion of its value in the event of foreclosure and cover the loan amount plus costs incurred to convert it to cash.

The lending policy specifies maximum term limits for commercial loans. For term loans, the typical maximum term is 10 years. The lending policy includes guidelines for real estate appraisals, including minimum appraisal standards based on certain transactions. Where the purpose of the loan is to finance depreciable equipment, the term loan generally does not exceed the estimated useful life of the asset. For lines of credit, the typical maximum term is 1 year. However, longer maturities may be approved if the loan is secured by readily marketable collateral.

In addition, the Company often takes personal guarantees to help assure repayment. Loans may be made on an unsecured basis if warranted by the overall financial condition of the borrower.

 

Agricultural loans are subject to underwriting standards and processes similar to commercial loans. The Company provides a wide range of agriculture loans, including lines of credit for working capital and operational purposes, and term loans for the acquisition of real estate, facilities, equipment and other purposes. Approval is generally based on the following factors:

· Sufficient cash flow to support debt repayment;

· Ability and stability of current management of the borrower;

· Positive earnings and financial trends;

· Earnings projections based on reasonable assumptions;

· Financial strength of the industry and business; and

· Value and marketability of collateral.

Collateral for agricultural loans generally includes accounts receivable, inventory (typically grain or livestock), equipment and real estate. The lending policy specifies approved collateral types and corresponding maximum advance percentages. The value of collateral pledged on loans typically exceeds the loan amount by a margin sufficient to absorb potential erosion of its value in the event of foreclosure and cover the loan amount plus costs incurred to convert it to cash.

The lending policy specifies maximum term limits for agricultural loans. For term loans, the typical maximum term is 10 years. The lending policy includes guidelines for real estate appraisals, including minimum appraisal standards based on certain transactions. Where the purpose of the loan is to finance depreciable equipment, the term loan generally does not exceed the estimated useful life of the asset. For lines of credit, the typical maximum term is 1 year. However, longer maturities may be approved if the loan is secured by readily marketable collateral.

In addition, the Company often takes personal guarantees to help assure repayment. Loans may be made on an unsecured basis if warranted by the overall financial condition of the borrower.

In some instances for all loans, it may be appropriate to originate or purchase loans that are exceptions to the guidelines and limits established within the lending policy described above and below. In general, exceptions to the lending policy do not significantly deviate from the guidelines and limits established within the lending policy and, if there are exceptions, they are clearly noted as such and specifically identified in loan approval documents.

For commercial loans and agricultural loans, the allowance for estimated losses on loans consists of specific and general components.

The specific component relates to loans that are classified as impaired, as defined below. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

For commercial loans and agricultural loans, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a case-by-case basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

The general component consists of quantitative and qualitative factors and covers non-impaired loans. The quantitative factors are based on historical charge-off experience. The qualitative factors are determined based on an assessment of internal and/or external influences on credit quality that are not fully reflected in the historical loss data. The Company’s credit quality indicator for all loans excluding commercial loans is past due or performance status.  The Company’s credit quality indicator for commercial loans is internal risk ratings.

For commercial and agriculture loans, the Company utilizes the following internal risk rating scale:

1. Highest Quality – Loans represent a credit extension of the highest quality.  Excellent liquidity, management and character in an industry with favorable conditions.  High quality financial information, history of strong cash flows and superior collateral including readily marketable assets, prime real estate, U.S. government securities, U.S. government agencies, highly rated municipal bonds, insured savings accounts, and insured certificates of deposit drawn on high-quality financial institutions.

2. Good Quality – Loans which have a sound primary and secondary source of repayment.  Strong to good liquidity, management and character in an industry with favorable conditions.  Good quality financial information and margins of cash flow coverage is consistently good. Loans may be unsecured, secured by quality (but less readily marketable) assets, high quality real estate or traded stocks, lower grade municipal bonds (which must still be investment grade), and uninsured certificates of deposit on other financial institutions may also be included in this grade.

3. Acceptable Quality – Loans where the borrower is a reasonable credit risk and demonstrates the ability to repay the debt from normal business operations.  Good liquidity, management and character in an industry that is more sensitive to external factors.  Alternative sources of refinancing may be less available in periods of uncertain economic conditions.  Term debt is moderate but cash flow margins fall within bank policy guidelines.  Quality of financial information is adequate but is not as detailed and sophisticated as information found on higher-grade loans.  Secured by business assets that conform to usual lending parameters for margin and eligibility or real estate that is deemed to be of satisfactory quality in an area that may not be prime but still within viable economic centers.

4. Fair Quality – Loans where the borrower is a reasonable credit risk but shows a more erratic earnings history (a loss may have been realized in the past four years).  Liquidity is limited and primary repayment is susceptible to unfavorable external factors.  Industry characteristics are generally stable.  Borrower is more highly leveraged with increased levels of term debt.  Cash flow margins remain adequate but may not fall within the policy guidelines.  Quality of financial information is adequate and interim reporting may be required.  Secured by business assets with an adequate collateral margin or real estate that is of fair quality and location.  Property may have limited alternative uses and may be considered a “special use” facility.

5. Special Mention – Loans in this category have the potential for developing weaknesses that deserve extra attention from the account manager and other management personnel. If the developing weakness is not corrected or mitigated, the ability of the borrower to repay the Company’s debt in the future may deteriorate. This grade should not be assigned to loans that bear certain peculiar risks normally associated with the type of financing involved, unless circumstances have caused the risk to increase to a level higher than would have been acceptable when the credit was originally approved. If a loan’s actual, not potential, weakness or problems are clearly evident and significant it should generally be graded in one of the following grade categories.

6. Substandard – Loans and other credit extensions are considered to be inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. These loans, even if apparently protected by collateral value, have a well-defined weakness or weaknesses that jeopardize the liquidation of debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.

7. Doubtful – Loans and other credit extensions have all the weaknesses inherent in those graded “6” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include: proposed merger, acquisition, or liquidation actions; capital injection; perfecting liens on collateral and refinancing plans. Loans in this classification should be placed in non-accrual status, with collections applied to principal.

8. Loss – Loans are considered uncollectible and cannot be justified as a viable asset of the Bank. This classification does not mean the loan has absolutely no recovery value. However, it is not prudent to delay writing off this loan even though partial recovery may be obtained in the future.

For commercial and agricultural loans or credit relationships with aggregate exposure greater than $250,000, a loan review is required within 12 months of the most recent credit review.  The reviews are completed in enough detail to, at a minimum, validate the risk rating. Additionally, the reviews shall determine whether any documentation exceptions exist, appropriate written analysis is included in the loan file, and whether credit policies have been properly adhered to.

Many of the residential real estate loans underwritten by the Company conform to the underwriting requirements of Freddie Mac or other secondary market aggregators to allow the Company to resell loans in the secondary market. Servicing rights are retained on many, but not all, of the residential real estate loans sold in the secondary market. The lending policy establishes minimum appraisal and other credit guidelines.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or market, as determined by outstanding commitments from investors.  As of June 30, 2017 and June 30, 2016, loans held for sale were immaterial to the consolidated financial statements.

Periodically, the Company originates first mortgage loans for other investors.  Generally, the Company receives fees equivalent to a stated percentage of the loan amount.  This fee is recognized as income at the time of closing.  From time to time, the Company also originates loans for sale in the secondary market.  Gain on sale of loans in the secondary market is included in noninterest income.

The Company provides many types of consumer and other loans, including motor vehicle, home improvement, home equity, signature loans and small personal credit lines. The lending policy addresses specific credit guidelines by consumer loan type.

For residential real estate loans and consumer and other loans, these large groups of smaller balance homogenous loans are collectively evaluated for impairment. In estimating the allowance for loan losses for these loans, the Company applies quantitative and qualitative factors on a portfolio segment basis. Quantitative factors are based on historical charge-off experience and qualitative factors are based on an assessment of internal and/or external influences on credit quality that are not fully reflected in the historical loss data. Accordingly, the Company generally does not separately identify individual residential real estate loans and/or consumer and other loans for impairment disclosures, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Troubled debt restructures are considered impaired loans and are subject to the same allowance methodology as described above for impaired loans by portfolio segment.

Mortgage servicing rights

Mortgage servicing rights: Mortgage servicing rights are recognized separately when rights are acquired through purchase or through sale of financial assets.  The Company subsequently measures each class of servicing assets on the amortization method.  Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income.  The amortized assets are assessed for impairment based on fair value of each reporting date.

Transfers of financial assets

Transfers of financial assets:  Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Company; (2) the transferee has the right to pledge or exchange the assets it received, and no condition both constrains the transferee from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor; and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Premises and equipment

Premises and equipment:  Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation.  Depreciation is included in noninterest expense and is computed on 25 to 40 years for buildings and improvements that extend the life of the original building, 10 to 20 years for routine building improvements, 5 to 15 years for furniture and equipment, 5 years for vehicles, and 2 to 5 years for computer equipment.  The cost of maintenance and repairs is charged to expense as incurred.

Long-term assets

Long-term assets:  Premises and equipment and other long-term assets are reviewed for impairment when events indicate that their carrying amount may not be recoverable from future undiscounted cash flows.  If impaired, the assets are recorded at fair value.  No impairment has been recognized by the Company for the years ended June 30, 2017 and 2016.

Foreclosed assets

Foreclosed assets:  Assets acquired through foreclosure are initially recorded at fair value, less estimated costs to sell, establishing a new cost basis.  If the fair value less costs to sell is less than the respective loan balance, a charge against the allowance for loan losses is recorded upon property acquisition.  Declines in property value subsequent to acquisition are charged to operations.  Holding costs are expensed as incurred.

Brokerage fee income

Brokerage fee income:  Acting as an agent, the Company earns brokerage income by buying and selling securities on behalf of its customers through independent third parties and earning fees on the transactions.  These fees are recorded on the settlement date, which is not materially different than the trade date.

Income taxes

Income taxes:  Income tax expense or benefit is the sum of the current year income tax due or refundable and the change in the deferred tax assets and liabilities.  Deferred tax assets and liabilities are the expected future tax consequence of temporary differences between the carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates.  A valuation allowance reduces deferred tax assets to the amount expected to be realized.

The Company follows the guidance on accounting for uncertainty in income taxes which allows the Company to recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.  The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods.  When applicable, the Company recognizes interest and penalties on income taxes as a component of income tax (benefit) expense.

Employee Stock Ownership Plan

Employee Stock Ownership Plan:  The cost of shares issued to the Employee Stock Ownership Plan (“ESOP”) but not yet allocated to participants is presented in the consolidated balance sheet as a reduction of stockholders’ equity.  Compensation expense is recorded based on the market price of the shares as the shares are committed to be released for allocation to participant accounts.  Because participants may require the Company to purchase their ESOP shares upon termination of their employment, the appraised fair value of all earned and allocated ESOP shares is reclassified from stockholders’ equity.

Stock based compensation

Stock based compensation: Compensation cost for stock based compensation is recognized based on the fair value of these awards at the date of the grant over the requisite service period, usually the vesting period.  The Company uses a Black-Scholes pricing model and related assumption for estimating the fair value of stock options and a five-year vesting period for stock options and restricted stock awards.

Loan commitments and related financial instruments

Loan commitments and related financial instruments:  Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer-financing needs.  The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.  Such financial instruments are recorded when they are funded.

Fair value of financial instruments

Fair value of financial instruments:  Fair values of financial instruments are estimated using relevant market value information and other assumptions, as more fully disclosed in Note 14.  Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.  Changes in assumptions or in market conditions could significantly affect the estimates.

Earnings per share

Earnings per share:  Basic earnings per share is based on net income divided by the weighted average number of shares outstanding during the period, including allocated and committed to be released ESOP shares.  Diluted earnings per share shows the dilutive effect, if any, of additional common shares issuable under stock options or awards.

Loss contingencies

Loss contingencies:  Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  Management does not believe that there are such matters that will have a material effect on the consolidated financial statements.

Comprehensive income (loss)

Comprehensive income (loss):  Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss).  Other comprehensive income (loss) includes unrealized gains (losses) on securities available-for-sale, net of tax.

Recent accounting pronouncements

Recent accounting pronouncements:  In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers.  The ASU is effective for the Company with the fiscal year ending June 30, 2019.  FASB issued this ASU to clarify the principles for recognizing revenue and to develop a common revenue standard.  The Company believes this will have a minimal impact on its financial statements.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.  The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  The amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  This ASU is not expected to have a material impact on the Company’s consolidated financial statements.

On February 25, 2016, the FASB issued ASU 2016-02, intended to improve financial reporting about leasing transactions. The ASU is effective for the Company with the interim period beginning January 1, 2019. We are currently evaluating the effect of this proposal to our financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The purpose of this Update is to simplify the accounting for share-based payment award transactions. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. This ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The purpose of this Update 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. The Update replaces the current incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU will be effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods.  This ASU is expected to have an impact on the Company’s consolidated financial statements. The Company is currently evaluating the effect this will have on its financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows; Classification of Certain Cash Receipts and Cash Payments.  The purpose of this Update is to address existing diversity in practice related to specific cash flow issues.  This Update will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory.  The purpose of this Update is to improve the accounting for income tax consequences of intra-entity transfers of assets other than inventory.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other.  The purposes of this Update is to simplify how an entity is required to test goodwill for impairment.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05 Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets.  The purpose of this Update is to clarify the scope for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers and add guidance for partial sales of nonfinancing assets.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08 Receivables – Nonrefundable Fees and Other Costs.  The purpose of this Update is to shorten the amortization period of certain callable debt securities held at a premium.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09 Compensation – Stock Compensation.  The purpose of this Update is to provide clarity and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award.  The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.

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Securities (Tables)

12 Months Ended

Jun. 30, 2017

Securities

Schedule of securities available-for-sale

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2017	Cost		Gains		Losses		Fair Value
U.S. Government-sponsored agencies securities	$	986,919	$	—	$	(17,974)	$	968,945
Residential mortgage-backed securities		440,070		1,973		(33)		442,010
	$	1,426,989	$	1,973	$	(18,007)	$	1,410,955

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2016	Cost		Gains		Losses		Fair Value
Residential mortgage-backed securities	$	658,579	$	6,176	$	—	$	664,755

Schedule of securities held-to-maturity

			Gross			Gross
	Amortized		Unrealized			Unrealized
June 30, 2017	Cost		Gains			Losses		Fair Value
Residential mortgage-backed securities	$	135,978		$	10,279	$	—	$	146,257
Municipal securities		600,000			—		(384)		599,616
	$	735,978		$	10,279	$	(384)	$	745,873

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2016	Cost		Gains		Losses		Fair Value
Residential mortgage-backed securities	$	180,035	$	15,281	$	—	$	195,316
Municipal securities		601,705		4,093		—		605,798
	$	781,740	$	19,374	$	—	$	801,114

Schedule of amount of securities pledged

	June 30, 2017		June 30, 2016
Securities available-for-sale, at fair value	$	1,410,955	$	664,755
Securities held-to-maturity, at amortized cost		643,978		746,084

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Loans (Tables)

12 Months Ended

Jun. 30, 2017

Loans

Summary of loans

	2017		2016
Commercial:
Operating	$	20,139,045	$	15,355,676
Real estate		86,809,938		67,698,929
Agricultural:
Operating		26,739,407		22,942,560
Real estate		31,105,790		24,965,541
Residential real estate:
1-4 family		43,060,013		40,309,797
Home equity		11,748,363		12,644,624
Other:
Construction and land		16,175,698		13,210,393
Consumer		3,674,674		3,566,917
Total loans		239,452,928		200,694,437
Deferred loan origination costs, net		647,197		562,483
Allowance for loan losses		(3,555,000)		(2,947,000)
		(2,907,803)		(2,384,517)
Loans, net	$	236,545,125	$	198,309,920

Summary of changes in the allowance for loan losses by portfolio segment

					Residential
	Commercial		Agricultural		Real Estate		Other		Total
	2017
Balance, beginning	$	1,337,000	$	738,000	$	655,000	$	217,000	$	2,947,000
Provision charged to expense		396,291		180,000		(1,432)		69,170		644,029
Recoveries		24,511		—		2,620		3,208		30,339
Loans charged off		(54,802)		—		(188)		(11,378)		(66,368)
Balance, ending	$	1,703,000	$	918,000	$	656,000	$	278,000	$	3,555,000

					Residential
	Commercial		Agricultural		Real Estate		Other		Total
	2016
Balance, beginning	$	1,124,000	$	697,000	$	644,000	$	118,000	$	2,583,000
Provision charged to expense		118,418		41,000		9,416		106,190		275,024
Recoveries		94,582		—		1,584		5,551		101,717
Loans charged off		—		—		—		(12,741)		(12,741)
Balance, ending	$	1,337,000	$	738,000	$	655,000	$	217,000	$	2,947,000

Summary of allowance for loan losses by impairment evaluation and portfolio segment

							Residential
	Commercial			Agricultural			Real Estate			Other			Total
	2017
Allowance for loans individually evaluated for impairment	$	6,487		$	17,973		$	29,271		$	1,949		$	55,680
Allowance for loans collectively evaluated for impairment		1,696,513			900,027			626,729			276,051			3,499,320
	$	1,703,000		$	918,000		$	656,000		$	278,000		$	3,555,000
Loans individually evaluated for impairment	$	870,377		$	864,357		$	3,142,020		$	20,408		$	4,897,162
Loans collectively evaluated for impairment		106,078,606			56,980,840			51,666,356			19,829,964			234,555,766
	$	106,948,983		$	57,845,197		$	54,808,376		$	19,850,372		$	239,452,928
Allowance as a percentage of loans individually evaluated for impairment		0.75	%		2.08	%		0.93	%		9.55	%		1.14	%
Allowance as a percentage of loans collectively evaluated for impairment		1.60	%		1.58	%		1.21	%		1.39	%		1.49	%
Allowance as a percentage of total loans evaluated for impairment		1.59	%		1.59	%		1.20	%		1.40	%		1.48	%

							Residential
	Commercial			Agricultural			Real Estate			Other			Total
	2016
Allowance for loans individually evaluated for impairment	$	34,975		$	—		$	17,828		$	—		$	52,803
Allowance for loans collectively evaluated for impairment		1,302,025			738,000			637,172			217,000			2,894,197
	$	1,337,000		$	738,000		$	655,000		$	217,000		$	2,947,000
Loans individually evaluated for impairment	$	227,824		$	885,757		$	3,726,602		$	3,194		$	4,843,377
Loans collectively evaluated for impairment		82,826,781			47,022,344			49,227,819			16,774,116			195,851,060
	$	83,054,605		$	47,908,101		$	52,954,421		$	16,777,310		$	200,694,437
Allowance as a percentage of loans individually evaluated for impairment		15.35	%		—	%		0.48	%		—	%		1.09	%
Allowance as a percentage of loans collectively evaluated for impairment		1.57	%		1.57	%		1.29	%		1.29	%		1.48	%
Allowance as a percentage of total loans evaluated for impairment		1.61	%		1.54	%		1.24	%		1.29	%		1.47	%

Summary of aging in terms of unpaid balance of the loan portfolio by classes of loans

										> 90 days
				31-60 days			61-90 days			Past Due						Non accrual
	Current			Past Due			Past Due			(Nonaccrual)			Total			Loans
	2017
Classes of loans:
Commercial:
Operating	$	20,072,350		$	33,060		$	13,240		$	20,395		$	20,139,045		$	154,671
Real estate		86,809,938			—			—			—			86,809,938			640,881
Agricultural:
Operating		26,699,805			32,754			—			6,848			26,739,407			6,848
Real estate		30,263,281			47,900			—			794,609			31,105,790			857,509
Residential real estate:
1-4 family		42,722,767			164,549			—			172,697			43,060,013			675,197
Home equity		11,748,363			—			—			—			11,748,363			22,649
Other:
Construction and land		16,175,698			—			—			—			16,175,698			—
Consumer		3,670,927			—			3,747			—			3,674,674			24,124
	$	238,163,129		$	278,263		$	16,987		$	994,549		$	239,452,928		$	2,381,879
As a percentage of total loan portfolio		99.45	%		0.12	%		0.01	%		0.42	%		100.00	%		0.99	%

										> 90 days
				31-60 days			61-90 days			Past Due						Non accrual
	Current			Past Due			Past Due			(Nonaccrual)			Total			Loans
	2016
Classes of loans:
Commercial:
Operating	$	15,256,328		$	99,348		$	—		$	—		$	15,355,676		$	97,294
Real estate		67,606,842			—			—			92,087			67,698,929			92,087
Agricultural:
Operating		22,318,246			624,314			—			—			22,942,560			6,848
Real estate		24,965,541			—			—			—			24,965,541			877,909
Residential real estate:
1-4 family		38,428,793			1,823,353			23,736			33,915			40,309,797			688,454
Home equity		12,644,624			—			—			—			12,644,624			29,807
Other:
Construction and land		13,210,393			—			—			—			13,210,393			—
Consumer		3,563,221			1,294			—			2,402			3,566,917			7,248
	$	197,993,988		$	2,548,309		$	23,736		$	2,402		$	200,694,437		$	1,799,647
As a percentage of total loan portfolio		98.66	%		1.27	%		0.01	%		0.06	%		100.00	%		0.90	%

Summary of unpaid principal balance by credit quality indicator

									Other —
	Commercial —		Commercial —		Agricultural —		Agricultural —		Construction
	Operating		Real Estate		Operating		Real Estate		and Land		Total
	2017
Internally assigned risk rating:
Highest Quality (rating 1)	$	—	$	—	$	324,038	$	326,045	$	—	$	650,083
Good Quality (rating 2)		177,795		6,638,998		5,185,147		3,541,630		2,868,632		18,412,202
Acceptable Quality (rating 3)		8,470,283		44,240,531		9,271,425		12,354,765		10,426,245		84,763,249
Fair Quality (rating 4)		11,313,276		31,603,455		11,489,750		13,116,352		2,880,821		70,403,654
Special Mention (rating 5)		—		1,948,017		403,234		—		—		2,351,251
Substandard (rating 6)		177,691		2,378,937		65,813		1,766,998		—		4,389,439
Doubtful (rating 7)		—		—		—		—		—		—
Loss (rating 8)		—		—		—		—		—		—
	$	20,139,045	$	86,809,938	$	26,739,407	$	31,105,790	$	16,175,698	$	180,969,878

									Other —
	Commercial —		Commercial —		Agricultural —		Agricultural —		Construction
	Operating		Real Estate		Operating		Real Estate		and Land		Total
	2016
Internally assigned risk rating:
Highest Quality (rating 1)	$	—	$	—	$	484,813	$	348,011	$	—	$	832,824
Good Quality (rating 2)		213,824		4,923,002		5,510,208		6,173,479		1,987,892		18,808,405
Acceptable Quality (rating 3)		7,732,341		33,606,696		5,992,063		9,729,301		6,675,761		63,736,162
Fair Quality (rating 4)		7,294,630		28,578,771		9,604,176		7,836,841		4,546,740		57,861,158
Special Mention (rating 5)		—		—		829,738		—		—		829,738
Substandard (rating 6)		114,881		590,460		521,562		877,909		—		2,104,812
Doubtful (rating 7)		—		—		—		—		—		—
Loss (rating 8)		—		—		—		—		—		—
	$	15,355,676	$	67,698,929	$	22,942,560	$	24,965,541	$	13,210,393	$	144,173,099

	Residential RE —		Residential RE —		Other —
	1-4 Family		Home Equity		Consumer		Total
	2017
Delinquency status*:
Performing	$	42,220,268	$	11,725,714	$	3,650,519	$	57,596,501
Nonperforming		839,745		22,649		24,155		886,549
	$	43,060,013	$	11,748,363	$	3,674,674	$	58,483,050

	Residential RE —		Residential RE —		Other —
	1-4 Family		Home Equity		Consumer		Total
	2016
Delinquency status*:
Performing	$	37,832,838	$	12,614,817	$	3,558,375	$	54,006,030
Nonperforming		2,476,959		29,807		8,542		2,515,308
	$	40,309,797	$	12,644,624	$	3,566,917	$	56,521,338

*     Performing loans are those which are accruing and less than 31 days past due. Nonperforming loans are those on nonaccrual and accruing loans that are greater than or equal to 31 days past due.

Summary of loans, by classes of loans, considered to be impaired

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
	2017
Classes of loans:
Impaired loans with no specific allowance recorded:
Commercial:
Operating	$	164,823	$	164,128	$	—	$	163,276	$	10,709
Real estate		643,226		640,881		—		321,613		14,232
Agricultural:
Operating		7,503		6,848		—		7,256		—
Real estate		432,468		371,452		—		437,100		—
Residential real estate:
1-4 family		2,448,574		2,439,137		—		2,523,171		142,377
Home equity		7,880		7,868		—		8,712		584
		3,704,474		3,630,314		—		3,461,128		167,902
Impaired loans with specific allowance recorded:
Commercial:
Operating		65,701		65,369		6,487		40,279		3,037
Agricultural:
Real estate		525,068		486,056		17,973		511,830		951
Residential real estate:
1-4 family		695,327		679,474		28,857		699,391		18,137
Home equity		15,553		15,541		414		16,717		1,240
Other:
Consumer		20,433		20,408		1,949		23,116		1,213
		1,322,082		1,266,848		55,680		1,291,333		24,578
Total impaired loans:
Commercial:
Operating		230,524		229,497		6,487		203,555		13,746
Real estate		643,226		640,881		—		321,613		14,232
Agricultural:
Operating		7,503		6,848		—		7,256		—
Real estate		957,536		857,508		17,973		948,930		951
Residential real estate:
1-4 family		3,143,901		3,118,611		28,857		3,222,562		160,514
Home equity		23,433		23,409		414		25,429		1,824
Other:
Consumer		20,433		20,408		1,949		23,116		1,213
	$	5,026,556	$	4,897,162	$	55,680	$	4,752,461	$	192,480

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
	2016
Classes of loans:
Impaired loans with no specific allowance recorded:
Commercial:
Operating	$	88,902	$	87,497	$	—	$	57,873	$	4,560
Agricultural:
Operating		8,009		7,848		—		117,809		21,178
Real estate		925,288		877,909		—		834,054		15,344
Residential real estate:
1-4 family		3,330,310		3,320,028		—		3,382,528		185,997
Home equity		59,336		59,123		—		61,455		3,962
Other:
Consumer		3,756		3,194		—		5,158		254
		4,415,601		4,355,599		—		4,458,877		231,295
Impaired loans with specific allowance recorded:
Commercial:
Operating		48,302		48,240		4,824		52,274		2,266
Real estate		114,837		92,087		30,151		171,863		—
Residential real estate:
1-4 family		330,997		329,623		16,913		336,629		19,949
Home equity		17,882		17,828		915		18,971		1,405
		512,018		487,778		52,803		579,737		23,620
Total impaired loans:
Commercial:
Operating		137,204		135,737		4,824		110,147		6,826
Real estate		114,837		92,087		30,151		171,863		—
Agricultural:
Operating		8,009		7,848		—		117,809		21,178
Real estate		925,288		877,909		—		834,054		15,344
Residential real estate:
1-4 family		3,661,307		3,649,651		16,913		3,719,157		205,946
Home equity		77,218		76,951		915		80,426		5,367
Other:
Consumer		3,756		3,194		—		5,158		254
	$	4,927,619	$	4,843,377	$	52,803	$	5,038,614	$	254,915

Summary of the number and recorded investment of troubled debt restructurings ("TDRs")

	June 30, 2017
	Number	Recorded
	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	10	$	177,272
Real estate	1		643,226
Agricultural:
Real estate	7		775,731
Residential real estate:
1-4 family	28		1,370,885
Home equity	2		7,881
	48	$	2,974,995
Concession — Reduction of interest rate below market:
Commercial:
Operating	1	$	39,836
Residential real estate:
1-4 family	48		1,637,621
Home equity	1		15,553
	50	$	1,693,010
Total:
Commercial:
Operating	11	$	217,108
Real estate	1		643,226
Agricultural:
Real estate	7		775,731
Residential real estate:
1-4 family	76		3,008,506
Home equity	3		23,434
	98	$	4,668,005

	June 30, 2016
	Number	Recorded
	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	5	$	76,088
Real estate	2		103,462
Agricultural:
Operating	1		1,000
Real estate	7		732,633
Residential real estate:
1-4 family	36		1,769,362
Home equity	4		59,336
Other:
Consumer	1		3,756
	56	$	2,745,637
Concession — Reduction of interest rate below market:
Commercial:
Operating	1	$	48,302
Residential real estate:
1-4 family	48		1,722,564
Home equity	1		17,882
	50	$	1,788,748
Total:
Commercial:
Operating	6	$	124,390
Real estate	2		103,462
Agricultural:
Operating	1		1,000
Real estate	7		732,633
Residential real estate:
1-4 family	84		3,491,926
Home equity	5		77,218
Other:
Consumer	1		3,756
	106	$	4,534,385

Summary of the number and investment in TDRs by type of concession that were restructured

	Number	Recorded
For the year ended June 30, 2017	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	3	$	77,919
Real estate	1		643,226
Residential real estate:
1-4 family	1		128,075
	5	$	849,220
Total:
Commercial:
Operating	3	$	77,919
Real estate	1		643,226
Residential real estate:
1-4 family	1		128,075
	5	$	849,220

	Number	Recorded
For the year ended June 30, 2016	of TDRs	Investment
Concession — Extension of maturity:
Commercial:
Operating	2	$	65,085
Agricultural:
Operating	1		1,000
Real estate	6	$	483,556
Residential real estate:
1-4 family	3	$	268,490
	12	$	818,131
Total:
Commercial:
Operating	2	$	65,085
Agricultural:
Operating	1		1,000
Real estate	6	$	483,556
Residential real estate:
1-4 family	3	$	268,490
	12	$	818,131

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Accrued Interest Receivable (Tables)

12 Months Ended

Jun. 30, 2017

Accrued Interest Receivable

Schedule of components of accrued interest receivable

	2017		2016
Securities	$	5,373	$	3,259
Loans		1,292,535		1,144,208
	$	1,297,908	$	1,147,467

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Premises and Equipment, Net (Tables)

12 Months Ended

Jun. 30, 2017

Premises and Equipment, Net

Schedule of premises and equipment, net

	2017		2016
Land and land improvements	$	1,485,458	$	1,337,723
Buildings and improvements		7,038,547		6,923,640
Furniture and equipment		1,282,315		1,252,015
Computer equipment		471,979		492,766
Vehicles		57,016		57,016
		10,335,315		10,063,160
Less accumulated depreciation		(4,910,460)		(4,788,699)
	$	5,424,855	$	5,274,461

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Deposits (Tables)

12 Months Ended

Jun. 30, 2017

Deposits

Schedule of deposits

	2017		2016
Noninterest-bearing demand	$	29,546,051	$	24,296,166
Interest-bearing NOW		49,252,671		42,734,473
Money market		67,039,151		60,352,403
Savings		17,104,400		14,869,638
Certificates of deposit		46,116,043		44,709,672
	$	209,058,316	$	186,962,352

Schedule of maturities of certificates of deposit

Year Ending June 30,
2018	$	21,990,649
2019		13,386,469
2020		6,041,736
2021		1,445,231
2022 and beyond		3,251,958
	$	46,116,043

Summary of interest expense on deposit accounts

	2017		2016
Interest-bearing NOW	$	186,561	$	169,242
Money market		477,148		403,825
Savings		38,922		33,941
Certificates of deposit		422,687		436,887
	$	1,125,318	$	1,043,895

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Regulatory Matters (Tables)

12 Months Ended

Jun. 30, 2017

Equitable Bank

Summary of bank's actual capital levels and minimum required levels

									Minimum
									Required to Be
									Well Capitalized
					Minimum Required for				Under Prompt
					Capital Adequacy				Corrective Action
					Purposes				Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2017
Total capital (to risk-weighted assets)	$	30,893	13.2	%	$	18,740	8.0	%	$	23,425	10.0	%
Common equity Tier 1 capital (to risk-weighted assets)		27,956	11.9	%		10,541	4.5	%		15,226	6.5	%
Tier 1 (core) capital (to risk-weighted assets)		27,956	11.9	%		14,055	6.0	%		18,740	8.0	%
Tier 1 (core) capital (to adjusted total assets)		27,956	11.4	%		9,806	4.0	%		12,257	5.0	%
June 30, 2016
Total capital (to risk-weighted assets)	$	28,977	14.7	%	$	15,805	8.0	%	$	19,757	10.0	%
Common equity Tier 1 capital (to risk-weighted		26,500	13.4	%		8,891	4.5	%		12,842	6.5	%
Tier 1 (core) capital (to risk-weighted assets)		26,500	13.4	%		11,854	6.0	%		15,805	8.0	%
Tier 1 (core) capital (to adjusted total assets)		26,500	11.6	%		9,114	4.0	%		11,393	5.0	%

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Income Taxes (Tables)

12 Months Ended

Jun. 30, 2017

Income Taxes

Schedule of income tax expense

	2017		2016
Current:
Federal	$	(35,227)	$	(73,021)
State		(83,962)		(72,879)
Deferred:
Federal		(561,635)		(344,906)
	$	(680,824)	$	(490,806)

Schedule of reconciliation of the provision for income taxes

	2017		2016
Provision computed at the statutory federal tax rate	$	(651,395)	$	(525,492)
State income taxes, net of federal tax		(55,045)		(48,100)
Valuation allowance adjustment		—		79,000
Return-to-provision, net		24,562		(32,837)
Other		1,054		36,623
Total income tax expense	$	(680,824)	$	(490,806)

Schedule of net deferred tax asset

	2017		2016
Gross deferred tax assets:
Allowance for loan losses	$	1,208,020	$	1,001,980
Net operating loss carryover		—		530,899
General business credits		324,364		324,364
Foreclosed asset writedowns		50,592		50,592
Unrealized loss on securities		6,393		—
Other		50,760		245,290
		1,640,129		2,153,125
Gross deferred tax liabilities:
Additions in excess of base year loan reserve		(572,404)		(585,334)
Depreciation		(73,623)		(68,425)
FHLB stock dividends		(74,630)		(77,656)
Unrealized gain on securities		—		(2,100)
Other		(57,463)		(3,517)
		(778,120)		(737,032)
Net deferred tax asset	$	862,009	$	1,416,093

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Employee Benefit Plans (Tables)

12 Months Ended

Jun. 30, 2017

Employee Benefit Plans

Summary of ESOP shares

	2017		2016
Allocated shares		86,104		71,803
Shares allocated to be released		7,929		7,932
Unearned ESOP shares		134,843		150,700
Total ESOP shares		228,876		230,435
Fair value of unearned ESOP shares	$	1,348,430	$	1,252,317
Fair value of allocated shares subject to repurchase obligation	$	815,280	$	564,723

Schedule of stock option activity

			Weighted		Remaining
			Average		Contractual
	Awards		Exercise Price		Life (Years)
Options outstanding at July 1, 2016		—	$	—		—
Granted		158,653		9.90		9.70
Options outstanding at June 30, 2017		158,653	$	9.90		9.70

Schedule of assumptions used in options valuation

Expected Volatility		9.54	%
Risk-free interest rate		1.90	%
Expected dividend yield		—
Expected life (in years)		5.00
Exercise price for the stock options	$	9.90

Schedule of restricted stock award activity

	Service-Based		Weighted
	Stock		Grant Date
	Awards		Fair Value
Non-vested at July 1, 2015		43,094		4.02
Conversion for stock offering		3,907		—
Granted		4,900		8.53
Vested		(12,620)		4.02
Non-vested at June 30, 2016		39,281		4.32
Non-vested at July 1, 2016		39,281		4.32
Granted		63,461		9.90
Vested		(13,617)		4.32
Non-vested at June 30, 2016		89,125		6.97

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Earnings per Share (Tables)

12 Months Ended

Jun. 30, 2017

Earnings per Share

Schedule of reconciliation of the components used to compute basic earnings per share

	2017		2016
Weighted average common shares outstanding		3,299,269		3,264,979
Net income available to common stockholders	$	1,235,045	$	1,054,758
Basic earnings per share	$	0.37	$	0.32

Schedule of reconciliation of the components used to compute diluted earnings per share

	2017		2016
Weighted average common shares outstanding		3,299,269		3,264,979
Dilutive effect of net additional shares from restricted stock awards and stock options		200,289		26,538
Weighted average number of shares outstanding		3,499,558		3,291,517
Net income available to common stockholders	$	1,235,045	$	1,054,758
Diluted earnings per share	$	0.35	$	0.32

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Loan Commitments and Other Related Activities (Tables)

12 Months Ended

Jun. 30, 2017

Loan Commitments and Other Related Activities

Schedule of contractual or notional amounts of loan commitments and other related activities

	2017		2016
Financial instruments wherein contractual amounts represent credit risk:
Commitments to extend credit	$	19,271,000	$	12,486,000
Standby letters of credit		200,000		310,000
Unused lines of credit		33,227,000		32,370,000

Summary of future commitments under the operating lease

Year Ending June 30,
2018	$	110,000
2019		110,000
2020		110,000
2021		110,000
2022		110,000

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Fair Value Measurements (Tables)

12 Months Ended

Jun. 30, 2017

Fair Value Measurements

Summary of fair value of assets and liabilities measured on a recurring basis

	Fair Value Measurement at June 30, 2017 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3
Assets
Securities available-for-sale	$	1,410,955	$	—	$	1,410,955	$	—

	Fair Value Measurement at June 30, 2016 Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		Level 1		Level 2		Level 3
Assets
Securities available-for-sale	$	664,755	$	—	$	664,755	$	—

Schedule of carrying and estimated fair value of financial instruments

	Fair Value	Carrying		Estimated
June 30, 2017	Hierarchy Level	Amount		Fair Value
Financial assets:
Cash and due from financial institutions	Level 1	$	4,881,007	$	4,881,000
Securities available-for-sale	See previous table		1,410,955		1,411,000
Securities held-to-maturity	Level 2		735,978		746,000
Federal Home Loan Bank stock	Level 1		453,400		453,000
Loans, net	Level 2		236,545,125		232,931,000
Mortgage servicing rights	Level 2		852,715		1,089,000
Accrued interest receivable	Level 1		1,297,908		1,298,000
Financial liabilities:
Noninterest-bearing deposits	Level 2		29,546,051		29,546,000
Interest-bearing deposits	Level 2		179,512,265		185,040,000
Federal Home Loan Bank borrowings	Level 2		6,745,400		6,745,000
Accrued interest payable and other liabilities	Level 1		820,229		820,000

	Fair Value	Carrying		Estimated
June 30, 2016	Hierarchy Level	Amount		Fair Value
Financial assets:
Cash and due from financial institutions	Level 1	$	14,947,296	$	14,947,000
Securities available-for-sale	See previous table		664,755		665,000
Securities held-to-maturity	Level 2		781,740		801,000
Federal Home Loan Bank stock	Level 1		229,900		230,000
Loans, net	Level 2		198,309,920		198,000,000
Mortgage servicing rights	Level 2		701,293		841,000
Accrued interest receivable	Level 1		1,147,467		1,147,000
Financial liabilities:
Noninterest-bearing deposits	Level 2		24,296,166		24,296,000
Interest-bearing deposits	Level 2		162,666,186		170,276,000
Accrued interest payable and other liabilities	Level 1		1,198,850		1,199,000

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Accumulated Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Jun. 30, 2017

Accumulated Other Comprehensive Income (Loss)

Schedule of components of accumulated other comprehensive income/(loss)

	2017		2016
Unrealized holding gains (losses) on securities available-for-sale	$	(16,034)	$	6,176
Tax benefit		5,452		(2,100)
	$	(10,582)	$	4,076

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Transactions with Related Parties (Tables)

12 Months Ended

Jun. 30, 2017

Transactions with Related Parties

Schedule of transactions with related parties

	2017		2016
Beginning balance	$	2,723,398	$	1,310,605
New loans or transfers in		4,133,252		1,552,533
Repayments or transfers out		(1,120,301)		(139,740)
Ending balance	$	5,736,349	$	2,723,398

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Condensed Financial Information (Holding Company Only) (Tables)

12 Months Ended

Jun. 30, 2017

Condensed Financial Information (Holding Company Only)

Condensed Balance Sheets

Condensed Balance Sheets

	June 30,
	2017		2016
Assets
Cash and due from financial institutions	$	5,046,023	$	6,816,101
Investment in Bank		28,547,549		27,153,439
Other assets		2,007,731		2,026,340
Total assets	$	35,601,303	$	35,995,880
Liabilities and Stockholders’ Equity
Other liabilities	$	30,000	$	21,794
Stockholders' equity		35,571,303		35,974,086
Total liabilities and stockholders’ equity	$	35,601,303	$	35,995,880

Condensed Statements of Income

Condensed Statements of Income

	Year Ended June 30,
	2017		2016
Interest income	$	82,092	$	78,342
Professional fees and other expenses		355,237		445,625
Loss before income tax and equity in undistributed net income of subsidiary		(273,145)		(367,283)
Income tax benefit		115,212		124,876
Loss before equity in undistributed net income of subsidiary		(157,933)		(242,407)
Equity in undistributed net income of subsidiary		1,392,978		1,297,165
Net income	$	1,235,045	$	1,054,758
Comprehensive income	$	1,220,387	$	1,062,889

Condensed Statements of Cash Flows

Condensed Statements of Cash Flows

	Year Ended June 30,
	2017		2016
Cash Flows from Operating Activities:
Net income	$	1,235,045	$	1,054,758
Items not providing cash		(1,366,163)		(1,168,812)
Net cash used by operating activities		(131,118)		(114,054)
Cash Flows from Investing Activities:
Downstream capital to Bank	$	—	$	(6,930,000)
Net cash used by investing activities		—		(6,930,000)
Cash Flows from Financing Activities:
ESOP Loan Finance	$	—	$	(951,912)
Stock buyback		(1,638,960)		—
Proceeds in advance of offering		—		(2,555,176)
Net cash used by financing activities		(1,638,960)		(3,507,088)
Decrease in cash and cash equivalents		(1,770,078)		(10,551,142)
Cash and Cash Equivalents
Beginning		6,816,101		17,367,243
Ending	$	5,046,023	$	6,816,101

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Stock Buyback (Tables)

12 Months Ended

Jun. 30, 2017

Stock Buyback

Common stock purchased during the period

				Total Number of
				Shares Purchased	Maximum Number of
			Weighted	as Part of Publicly	Shares that May Yet Be
	Total Number of	Average Price		Announced Plans	Purchased Under the
Period	Shares Purchased	Paid Per Share		or Programs	Plans or Programs
10/1/16 - 10/31/16	—	$	—	—	173,857
11/1/16 - 11/30/16	60,000		9.07	60,000	113,857
12/1/16 - 12/31/16	26,455		9.57	86,455	87,402
01/1/17 - 01/31/17	—		—	86,455	87,402
02/1/17 - 02/28/17	—		—	86,455	87,402
03/1/17 - 03/31/17	22,200		10.25	108,655	65,202
04/1/17 - 04/30/17	5,000		10.25	113,655	60,202
05/1/17 - 05/31/17	49,000		10.25	162,655	11,202
06/1/17 - 06/30/17	5,431		10.17	168,086	5,771
Total	168,086	$	9.72

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Nature of Business and Significant Accounting Policies - Stock Conversion (Details) - $ / shares	Jul. 08, 2015	Jun. 30, 2017	Jun. 30, 2016
Stock Conversion
Sale of common stock, par value under Stock Conversion (in dollars per share)		$ 0.01	$ 0.01
Stock conversion between Equitable Financial Corp, Equitable MHC and Equitable Bank
Stock Conversion
Sale of common stock under Stock Conversion (in shares)	1,983,160
Sale of common stock, par value under Stock Conversion (in dollars per share)	$ 0.01
Subscription price of common stock under Stock Conversion (in dollars per share)	$ 8.00
Sale of common stock to employee stock ownership plan under Stock Conversion	118,989
Percentage of shares sold to employee stock ownership plan from total shares sold in initial stock offering under Stock Conversion	6.00%

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Nature of Business and Significant Accounting Policies - Cash flows (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Cash and due from financial institutions	$ 4,881,007	$ 14,947,296
Midwest Independent Bank
Cash and due from financial institutions	$ 0	$ 12,400,000

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Nature of Business and Significant Accounting Policies - Loans (Details)	12 Months Ended
	Jun. 30, 2017 USD ($)
Fair Quality
Allowance for loan losses
Possible realized loss term	4 years
Commercial | Term loans | Maximum
Allowance for loan losses
Loan term	10 years
Commercial | Lines of credit | Maximum
Allowance for loan losses
Loan term	1 year
Agricultural | Term loans | Maximum
Allowance for loan losses
Loan term	10 years
Agricultural | Lines of credit | Maximum
Allowance for loan losses
Loan term	1 year
Commercial and Agricultural
Allowance for loan losses
Maximum aggregate exposure not requiring a loan review within 12 months of most recent credit review	$ 250,000

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Nature of Business and Significant Accounting Policies - Impairment and Stock based compensation (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Long-term assets
Recognized impairment	$ 0	$ 0
Award vesting period	5 years
Buildings and improvements | Minimum
Premises and equipment
Depreciable life	25 years
Buildings and improvements | Maximum
Premises and equipment
Depreciable life	40 years
Routine building improvements | Minimum
Premises and equipment
Depreciable life	10 years
Routine building improvements | Maximum
Premises and equipment
Depreciable life	20 years
Furniture and equipment | Minimum
Premises and equipment
Depreciable life	5 years
Furniture and equipment | Maximum
Premises and equipment
Depreciable life	15 years
Vehicles
Premises and equipment
Depreciable life	5 years
Computer equipment | Minimum
Premises and equipment
Depreciable life	2 years
Computer equipment | Maximum
Premises and equipment
Depreciable life	5 years

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Securities (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Amortized cost and estimated fair value of investments in debt and equity securities
Investment securities available-for-sale, amortized cost	$ 1,426,989
Investment securities available-for-sale , gross unrealized gains	1,973
Investment securities available-for-sale , gross unrealized losses	(18,007)
Securities available-for-sale	1,410,955	$ 664,755
Investment securities held-to-maturity, amortized cost	735,978	781,740
Investment securities held-to-maturity , gross unrealized gains	10,279	19,374
Investment securities held-to-maturity , gross unrealized losses	(384)
Investment securities held-to-maturity, estimated fair value	745,873	801,114
Available-for-sale Securities, Debt Maturities, Single Maturity Date [Abstract]
Interest income	47,078	79,639
Securities sold	0	0
Securities available-for-sale, at fair value	1,410,955	664,755
Securities held-to-maturity, at amortized cost	643,978	746,084
Residential mortgage-backed securities
Amortized cost and estimated fair value of investments in debt and equity securities
Investment securities available-for-sale, amortized cost	440,070	658,579
Investment securities available-for-sale , gross unrealized gains	1,973	6,176
Investment securities available-for-sale , gross unrealized losses	(33)
Securities available-for-sale	442,010	664,755
Investment securities held-to-maturity, amortized cost	135,978	180,035
Investment securities held-to-maturity , gross unrealized gains	10,279	15,281
Investment securities held-to-maturity, estimated fair value	146,257	195,316
Municipal securities
Amortized cost and estimated fair value of investments in debt and equity securities
Investment securities held-to-maturity, amortized cost	600,000	601,705
Investment securities held-to-maturity , gross unrealized gains		4,093
Investment securities held-to-maturity , gross unrealized losses	(384)
Investment securities held-to-maturity, estimated fair value	599,616	605,798
Available-for-sale Securities, Debt Maturities, Single Maturity Date [Abstract]
Interest income	17,000	58,000
Held-to-maturity securities maturing June 30, 2019	400,000
U.S. Government-sponsored agencies securities
Amortized cost and estimated fair value of investments in debt and equity securities
Investment securities available-for-sale, amortized cost	986,919
Investment securities available-for-sale , gross unrealized losses	(17,974)
Securities available-for-sale	968,945
Available-for-sale Securities, Debt Maturities, Single Maturity Date [Abstract]
Interest income	12,000	$ 0
Securities maturing in the year ending June 30, 2023	$ 969,000

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Loans (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2015
Loans disclosures
Total loans	$ 239,452,928	$ 200,694,437
Deferred loan origination costs, net	647,197	562,483
Allowance for loan losses	(3,555,000)	(2,947,000)	$ (2,583,000)
Deferred loan origination costs and allowance	(2,907,803)	(2,384,517)
Loans, net	236,545,125	198,309,920
Commercial
Loans disclosures
Total loans	106,948,983	83,054,605
Allowance for loan losses	(1,703,000)	(1,337,000)	(1,124,000)
Commercial | Operating
Loans disclosures
Total loans	20,139,045	15,355,676
Commercial | Real Estate
Loans disclosures
Total loans	86,809,938	67,698,929
Agricultural
Loans disclosures
Total loans	57,845,197	47,908,101
Allowance for loan losses	(918,000)	(738,000)	(697,000)
Agricultural | Operating
Loans disclosures
Total loans	26,739,407	22,942,560
Agricultural | Real Estate
Loans disclosures
Total loans	31,105,790	24,965,541
Residential
Loans disclosures
Total loans	54,808,376	52,954,421
Allowance for loan losses	(656,000)	(655,000)	(644,000)
Residential | 1 - 4 family
Loans disclosures
Total loans	43,060,013	40,309,797
Residential | Consumer - Home equity and lines of credit
Loans disclosures
Total loans	11,748,363	12,644,624
Other
Loans disclosures
Total loans	19,850,372	16,777,310
Allowance for loan losses	(278,000)	(217,000)	$ (118,000)
Other | Construction and land
Loans disclosures
Total loans	16,175,698	13,210,393
Other | Consumer - Personal
Loans disclosures
Total loans	$ 3,674,674	$ 3,566,917

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Loans - Allowance for Loan Losses (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Allowance for loan losses:
Balance, beginning	$ 2,947,000	$ 2,583,000
Provision charged to expense	644,029	275,024
Recoveries	30,339	101,717
Loans charged off	(66,368)	(12,741)
Balance, ending	3,555,000	2,947,000
Commercial
Allowance for loan losses:
Balance, beginning	1,337,000	1,124,000
Provision charged to expense	396,291	118,418
Recoveries	24,511	94,582
Loans charged off	(54,802)
Balance, ending	1,703,000	1,337,000
Agricultural
Allowance for loan losses:
Balance, beginning	738,000	697,000
Provision charged to expense	180,000	41,000
Balance, ending	918,000	738,000
Residential
Allowance for loan losses:
Balance, beginning	655,000	644,000
Provision charged to expense	(1,432)	9,416
Recoveries	2,620	1,584
Loans charged off	(188)
Balance, ending	656,000	655,000
Other
Allowance for loan losses:
Balance, beginning	217,000	118,000
Provision charged to expense	69,170	106,190
Recoveries	3,208	5,551
Loans charged off	(11,378)	(12,741)
Balance, ending	$ 278,000	$ 217,000

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Loans - Impairment Evaluation (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2015
Allowance for loan losses:
Allowance for loans individually evaluated for impairment	$ 55,680	$ 52,803
Allowance for loans collectively evaluated for impairment	3,499,320	2,894,197
Total Allowance	3,555,000	2,947,000	$ 2,583,000
Loan balances
Loans individually evaluated for impairment	4,897,162	4,843,377
Loans collectively evaluated for impairment	234,555,766	195,851,060
Total loans	$ 239,452,928	$ 200,694,437
Allowance as percentage of loans:
Allowance as a percentage of loans individually evaluated for impairment	1.14%	1.09%
Allowance as a percentage of loans collectively evaluated for impairment	1.49%	1.48%
Allowance as a percentage of total loans evaluated for impairment	1.48%	1.47%
Commercial
Allowance for loan losses:
Allowance for loans individually evaluated for impairment	$ 6,487	$ 34,975
Allowance for loans collectively evaluated for impairment	1,696,513	1,302,025
Total Allowance	1,703,000	1,337,000	1,124,000
Loan balances
Loans individually evaluated for impairment	870,377	227,824
Loans collectively evaluated for impairment	106,078,606	82,826,781
Total loans	$ 106,948,983	$ 83,054,605
Allowance as percentage of loans:
Allowance as a percentage of loans individually evaluated for impairment	0.75%	15.35%
Allowance as a percentage of loans collectively evaluated for impairment	1.60%	1.57%
Allowance as a percentage of total loans evaluated for impairment	1.59%	1.61%
Agricultural
Allowance for loan losses:
Allowance for loans individually evaluated for impairment	$ 17,973
Allowance for loans collectively evaluated for impairment	900,027	$ 738,000
Total Allowance	918,000	738,000	697,000
Loan balances
Loans individually evaluated for impairment	864,357	885,757
Loans collectively evaluated for impairment	56,980,840	47,022,344
Total loans	$ 57,845,197	$ 47,908,101
Allowance as percentage of loans:
Allowance as a percentage of loans individually evaluated for impairment	2.08%
Allowance as a percentage of loans collectively evaluated for impairment	1.58%	1.57%
Allowance as a percentage of total loans evaluated for impairment	1.59%	1.54%
Residential
Allowance for loan losses:
Allowance for loans individually evaluated for impairment	$ 29,271	$ 17,828
Allowance for loans collectively evaluated for impairment	626,729	637,172
Total Allowance	656,000	655,000	644,000
Loan balances
Loans individually evaluated for impairment	3,142,020	3,726,602
Loans collectively evaluated for impairment	51,666,356	49,227,819
Total loans	$ 54,808,376	$ 52,954,421
Allowance as percentage of loans:
Allowance as a percentage of loans individually evaluated for impairment	0.93%	0.48%
Allowance as a percentage of loans collectively evaluated for impairment	1.21%	1.29%
Allowance as a percentage of total loans evaluated for impairment	1.20%	1.24%
Other
Allowance for loan losses:
Allowance for loans individually evaluated for impairment	$ 1,949
Allowance for loans collectively evaluated for impairment	276,051	$ 217,000
Total Allowance	278,000	217,000	$ 118,000
Loan balances
Loans individually evaluated for impairment	20,408	3,194
Loans collectively evaluated for impairment	19,829,964	16,774,116
Total loans	$ 19,850,372	$ 16,777,310
Allowance as percentage of loans:
Allowance as a percentage of loans individually evaluated for impairment	9.55%
Allowance as a percentage of loans collectively evaluated for impairment	1.39%	1.29%
Allowance as a percentage of total loans evaluated for impairment	1.40%	1.29%

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Loans - Aging Unpaid Principal (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Summary of aging in terms of unpaid principal balance
Current	$ 238,163,129	$ 197,993,988
Total loans	239,452,928	200,694,437
Nonaccrual Loans	$ 2,381,879	$ 1,799,647
As a percentage of total loan portfolio
Current, Percentage	99.45%	98.66%
Total Loans, Percentage	100.00%	100.00%
Nonaccrual Loans, Percentage	0.99%	0.90%
31 to 60 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	$ 278,263	$ 2,548,309
As a percentage of total loan portfolio
31-60 Days Past Due, Percentage	0.12%	1.27%
61 to 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	$ 16,987	$ 23,736
As a percentage of total loan portfolio
61-90 Days Past Due, Percentage	0.01%	0.01%
Greater than 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	$ 994,549	$ 2,402
As a percentage of total loan portfolio
Greater Than 90 Days Past Due, Percentage	0.42%	0.06%
Commercial
Summary of aging in terms of unpaid principal balance
Total loans	$ 106,948,983	$ 83,054,605
Commercial | Operating
Summary of aging in terms of unpaid principal balance
Current	20,072,350	15,256,328
Total loans	20,139,045	15,355,676
Nonaccrual Loans	154,671	97,294
Commercial | Operating | 31 to 60 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	33,060	99,348
Commercial | Operating | 61 to 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	13,240
Commercial | Operating | Greater than 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	20,395
Commercial | Real Estate
Summary of aging in terms of unpaid principal balance
Current	86,809,938	67,606,842
Total loans	86,809,938	67,698,929
Nonaccrual Loans	640,881	92,087
Commercial | Real Estate | Greater than 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due		92,087
Agricultural
Summary of aging in terms of unpaid principal balance
Total loans	57,845,197	47,908,101
Agricultural | Operating
Summary of aging in terms of unpaid principal balance
Current	26,699,805	22,318,246
Total loans	26,739,407	22,942,560
Nonaccrual Loans	6,848	6,848
Agricultural | Operating | 31 to 60 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	32,754	624,314
Agricultural | Operating | Greater than 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	6,848
Agricultural | Real Estate
Summary of aging in terms of unpaid principal balance
Current	30,263,281	24,965,541
Total loans	31,105,790	24,965,541
Nonaccrual Loans	857,509	877,909
Agricultural | Real Estate | 31 to 60 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	47,900
Agricultural | Real Estate | Greater than 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	794,609
Residential
Summary of aging in terms of unpaid principal balance
Total loans	54,808,376	52,954,421
Residential | 1 - 4 family
Summary of aging in terms of unpaid principal balance
Current	42,722,767	38,428,793
Total loans	43,060,013	40,309,797
Nonaccrual Loans	675,197	688,454
Residential | 1 - 4 family | 31 to 60 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	164,549	1,823,353
Residential | 1 - 4 family | 61 to 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due		23,736
Residential | 1 - 4 family | Greater than 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	172,697	33,915
Residential | Consumer - Home equity and lines of credit
Summary of aging in terms of unpaid principal balance
Current	11,748,363	12,644,624
Total loans	11,748,363	12,644,624
Nonaccrual Loans	22,649	29,807
Other
Summary of aging in terms of unpaid principal balance
Total loans	19,850,372	16,777,310
Other | Construction and land
Summary of aging in terms of unpaid principal balance
Current	16,175,698	13,210,393
Total loans	16,175,698	13,210,393
Other | Consumer - Personal
Summary of aging in terms of unpaid principal balance
Current	3,670,927	3,563,221
Total loans	3,674,674	3,566,917
Nonaccrual Loans	24,124	7,248
Other | Consumer - Personal | 31 to 60 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due		1,294
Other | Consumer - Personal | 61 to 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due	$ 3,747
Other | Consumer - Personal | Greater than 90 Days Past Due
Summary of aging in terms of unpaid principal balance
Financing Receivable Past Due		$ 2,402

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Loans - Credit Quality (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Unpaid principal balance by credit quality indicator
Unpaid principal balance	$ 239,452,928	$ 200,694,437
Performing Financing Receivable Maximum Days Past Due	31 days
Nonperforming Financing Receivable Minimum Days Past Due	31 days
Commercial and Agricultural
Unpaid principal balance by credit quality indicator
Unpaid principal balance	$ 180,969,878	144,173,099
Financing Receivable Risk Rating Minimum Review Period	12 months
Maximum aggregate exposure not requiring a loan review within 12 months of most recent credit review	$ 250,000
Commercial
Unpaid principal balance by credit quality indicator
Unpaid principal balance	106,948,983	83,054,605
Commercial | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	20,139,045	15,355,676
Commercial | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	86,809,938	67,698,929
Agricultural
Unpaid principal balance by credit quality indicator
Unpaid principal balance	57,845,197	47,908,101
Agricultural | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	26,739,407	22,942,560
Agricultural | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	31,105,790	24,965,541
Residential Real Estate and Other Combined
Unpaid principal balance by credit quality indicator
Unpaid principal balance	58,483,050	56,521,338
Residential
Unpaid principal balance by credit quality indicator
Unpaid principal balance	54,808,376	52,954,421
Residential | 1 - 4 family
Unpaid principal balance by credit quality indicator
Unpaid principal balance	43,060,013	40,309,797
Residential | Consumer - Home equity and lines of credit
Unpaid principal balance by credit quality indicator
Unpaid principal balance	11,748,363	12,644,624
Other
Unpaid principal balance by credit quality indicator
Unpaid principal balance	19,850,372	16,777,310
Other | Construction and land
Unpaid principal balance by credit quality indicator
Unpaid principal balance	16,175,698	13,210,393
Other | Consumer - Personal
Unpaid principal balance by credit quality indicator
Unpaid principal balance	3,674,674	3,566,917
Highest Quality (rating 1) | Commercial and Agricultural
Unpaid principal balance by credit quality indicator
Unpaid principal balance	650,083	832,824
Highest Quality (rating 1) | Agricultural | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	324,038	484,813
Highest Quality (rating 1) | Agricultural | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	326,045	348,011
Good Quality (rating 2) | Commercial and Agricultural
Unpaid principal balance by credit quality indicator
Unpaid principal balance	18,412,202	18,808,405
Good Quality (rating 2) | Commercial | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	177,795	213,824
Good Quality (rating 2) | Commercial | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	6,638,998	4,923,002
Good Quality (rating 2) | Agricultural | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	5,185,147	5,510,208
Good Quality (rating 2) | Agricultural | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	3,541,630	6,173,479
Good Quality (rating 2) | Other | Construction and land
Unpaid principal balance by credit quality indicator
Unpaid principal balance	2,868,632	1,987,892
Acceptable Quality (rating 3) | Commercial and Agricultural
Unpaid principal balance by credit quality indicator
Unpaid principal balance	84,763,249	63,736,162
Acceptable Quality (rating 3) | Commercial | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	8,470,283	7,732,341
Acceptable Quality (rating 3) | Commercial | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	44,240,531	33,606,696
Acceptable Quality (rating 3) | Agricultural | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	9,271,425	5,992,063
Acceptable Quality (rating 3) | Agricultural | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	12,354,765	9,729,301
Acceptable Quality (rating 3) | Other | Construction and land
Unpaid principal balance by credit quality indicator
Unpaid principal balance	10,426,245	6,675,761
Fair Quality (rating 4) | Commercial and Agricultural
Unpaid principal balance by credit quality indicator
Unpaid principal balance	70,403,654	57,861,158
Fair Quality (rating 4) | Commercial | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	11,313,276	7,294,630
Fair Quality (rating 4) | Commercial | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	31,603,455	28,578,771
Fair Quality (rating 4) | Agricultural | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	11,489,750	9,604,176
Fair Quality (rating 4) | Agricultural | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	13,116,352	7,836,841
Fair Quality (rating 4) | Other | Construction and land
Unpaid principal balance by credit quality indicator
Unpaid principal balance	2,880,821	4,546,740
Special Mention | Commercial and Agricultural
Unpaid principal balance by credit quality indicator
Unpaid principal balance	2,351,251	829,738
Special Mention | Commercial | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	1,948,017
Special Mention | Agricultural | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	403,234	829,738
Substandard | Commercial and Agricultural
Unpaid principal balance by credit quality indicator
Unpaid principal balance	4,389,439	2,104,812
Substandard | Commercial | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	177,691	114,881
Substandard | Commercial | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	2,378,937	590,460
Substandard | Agricultural | Operating
Unpaid principal balance by credit quality indicator
Unpaid principal balance	65,813	521,562
Substandard | Agricultural | Real Estate
Unpaid principal balance by credit quality indicator
Unpaid principal balance	1,766,998	877,909
Performing | Residential Real Estate and Other Combined
Unpaid principal balance by credit quality indicator
Unpaid principal balance	57,596,501	54,006,030
Performing | Residential | 1 - 4 family
Unpaid principal balance by credit quality indicator
Unpaid principal balance	42,220,268	37,832,838
Performing | Residential | Consumer - Home equity and lines of credit
Unpaid principal balance by credit quality indicator
Unpaid principal balance	11,725,714	12,614,817
Performing | Other | Consumer - Personal
Unpaid principal balance by credit quality indicator
Unpaid principal balance	3,650,519	3,558,375
Nonperforming | Residential Real Estate and Other Combined
Unpaid principal balance by credit quality indicator
Unpaid principal balance	886,549	2,515,308
Nonperforming | Residential | 1 - 4 family
Unpaid principal balance by credit quality indicator
Unpaid principal balance	839,745	2,476,959
Nonperforming | Residential | Consumer - Home equity and lines of credit
Unpaid principal balance by credit quality indicator
Unpaid principal balance	22,649	29,807
Nonperforming | Other | Consumer - Personal
Unpaid principal balance by credit quality indicator
Unpaid principal balance	$ 24,155	$ 8,542

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Loans - Impaired (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Impaired loans with no specific allowance recorded:
Recorded Investment	$ 3,704,474	$ 4,415,601
Unpaid Principal Balance	3,630,314	4,355,599
Average Recorded Investment	3,461,128	4,458,877
Interest Income Recognized	167,902	231,295
Impaired loans with specific allowance recorded:
Recorded Investment	1,322,082	512,018
Unpaid Principal Balance	1,266,848	487,778
Related Allowance	55,680	52,803
Average Recorded Investment	1,291,333	579,737
Interest Income Recognized	24,578	23,620
Total impaired loans:
Recorded Investment	5,026,556	4,927,619
Unpaid Principal Balance	4,897,162	4,843,377
Related Allowance	55,680	52,803
Average Recorded Investment	4,752,461	5,038,614
Interest Income Recognized	192,480	254,915
Commercial | Operating
Impaired loans with no specific allowance recorded:
Recorded Investment	164,823	88,902
Unpaid Principal Balance	164,128	87,497
Average Recorded Investment	163,276	57,873
Interest Income Recognized	10,709	4,560
Impaired loans with specific allowance recorded:
Recorded Investment	65,701	48,302
Unpaid Principal Balance	65,369	48,240
Related Allowance	6,487	4,824
Average Recorded Investment	40,279	52,274
Interest Income Recognized	3,037	2,266
Total impaired loans:
Recorded Investment	230,524	137,204
Unpaid Principal Balance	229,497	135,737
Related Allowance	6,487	4,824
Average Recorded Investment	203,555	110,147
Interest Income Recognized	13,746	6,826
Commercial | Real Estate
Impaired loans with no specific allowance recorded:
Recorded Investment	643,226
Unpaid Principal Balance	640,881
Average Recorded Investment	321,613
Interest Income Recognized	14,232
Impaired loans with specific allowance recorded:
Recorded Investment		114,837
Unpaid Principal Balance		92,087
Related Allowance		30,151
Average Recorded Investment		171,863
Total impaired loans:
Recorded Investment	643,226	114,837
Unpaid Principal Balance	640,881	92,087
Related Allowance		30,151
Average Recorded Investment	321,613	171,863
Interest Income Recognized	14,232
Agricultural | Operating
Impaired loans with no specific allowance recorded:
Recorded Investment	7,503	8,009
Unpaid Principal Balance	6,848	7,848
Average Recorded Investment	7,256	117,809
Interest Income Recognized		21,178
Total impaired loans:
Recorded Investment	7,503	8,009
Unpaid Principal Balance	6,848	7,848
Average Recorded Investment	7,256	117,809
Interest Income Recognized		21,178
Agricultural | Real Estate
Impaired loans with no specific allowance recorded:
Recorded Investment	432,468	925,288
Unpaid Principal Balance	371,452	877,909
Average Recorded Investment	437,100	834,054
Interest Income Recognized		15,344
Impaired loans with specific allowance recorded:
Recorded Investment	525,068
Unpaid Principal Balance	486,056
Related Allowance	17,973
Average Recorded Investment	511,830
Interest Income Recognized	951
Total impaired loans:
Recorded Investment	957,536	925,288
Unpaid Principal Balance	857,508	877,909
Related Allowance	17,973
Average Recorded Investment	948,930	834,054
Interest Income Recognized	951	15,344
Residential | 1 - 4 family
Impaired loans with no specific allowance recorded:
Recorded Investment	2,448,574	3,330,310
Unpaid Principal Balance	2,439,137	3,320,028
Average Recorded Investment	2,523,171	3,382,528
Interest Income Recognized	142,377	185,997
Impaired loans with specific allowance recorded:
Recorded Investment	695,327	330,997
Unpaid Principal Balance	679,474	329,623
Related Allowance	28,857	16,913
Average Recorded Investment	699,391	336,629
Interest Income Recognized	18,137	19,949
Total impaired loans:
Recorded Investment	3,143,901	3,661,307
Unpaid Principal Balance	3,118,611	3,649,651
Related Allowance	28,857	16,913
Average Recorded Investment	3,222,562	3,719,157
Interest Income Recognized	160,514	205,946
Residential | Consumer - Home equity and lines of credit
Impaired loans with no specific allowance recorded:
Recorded Investment	7,880	59,336
Unpaid Principal Balance	7,868	59,123
Average Recorded Investment	8,712	61,455
Interest Income Recognized	584	3,962
Impaired loans with specific allowance recorded:
Recorded Investment	15,553	17,882
Unpaid Principal Balance	15,541	17,828
Related Allowance	414	915
Average Recorded Investment	16,717	18,971
Interest Income Recognized	1,240	1,405
Total impaired loans:
Recorded Investment	23,433	77,218
Unpaid Principal Balance	23,409	76,951
Related Allowance	414	915
Average Recorded Investment	25,429	80,426
Interest Income Recognized	1,824	5,367
Other | Consumer - Personal
Impaired loans with no specific allowance recorded:
Recorded Investment		3,756
Unpaid Principal Balance		3,194
Average Recorded Investment		5,158
Interest Income Recognized		254
Impaired loans with specific allowance recorded:
Recorded Investment	20,433
Unpaid Principal Balance	20,408
Related Allowance	1,949
Average Recorded Investment	23,116
Interest Income Recognized	1,213
Total impaired loans:
Recorded Investment	20,433	3,756
Unpaid Principal Balance	20,408	3,194
Related Allowance	1,949
Average Recorded Investment	23,116	5,158
Interest Income Recognized	$ 1,213	$ 254

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Loans - TDRs (Details)	Jun. 30, 2017 USD ($) item	Jun. 30, 2016 USD ($) item
Summary of troubled debt restructured loans
Number of TDRs | item	98	106
Recorded Investment | $	$ 4,668,005	$ 4,534,385
Extension of maturity
Summary of troubled debt restructured loans
Number of TDRs | item	48	56
Recorded Investment | $	$ 2,974,995	$ 2,745,637
Reduction of interest rate below market
Summary of troubled debt restructured loans
Number of TDRs | item	50	50
Recorded Investment | $	$ 1,693,010	$ 1,788,748
Operating | Commercial
Summary of troubled debt restructured loans
Number of TDRs | item	11	6
Recorded Investment | $	$ 217,108	$ 124,390
Operating | Agricultural
Summary of troubled debt restructured loans
Number of TDRs | item		1
Recorded Investment | $		$ 1,000
Operating | Extension of maturity | Commercial
Summary of troubled debt restructured loans
Number of TDRs | item	10	5
Recorded Investment | $	$ 177,272	$ 76,088
Operating | Extension of maturity | Agricultural
Summary of troubled debt restructured loans
Number of TDRs | item		1
Recorded Investment | $		$ 1,000
Operating | Reduction of interest rate below market | Commercial
Summary of troubled debt restructured loans
Number of TDRs | item	1	1
Recorded Investment | $	$ 39,836	$ 48,302
Real Estate | Commercial
Summary of troubled debt restructured loans
Number of TDRs | item	1	2
Recorded Investment | $	$ 643,226	$ 103,462
Real Estate | Agricultural
Summary of troubled debt restructured loans
Number of TDRs | item	7	7
Recorded Investment | $	$ 775,731	$ 732,633
Real Estate | Extension of maturity | Commercial
Summary of troubled debt restructured loans
Number of TDRs | item	1	2
Recorded Investment | $	$ 643,226	$ 103,462
Real Estate | Extension of maturity | Agricultural
Summary of troubled debt restructured loans
Number of TDRs | item	7	7
Recorded Investment | $	$ 775,731	$ 732,633
1 - 4 family | Residential
Summary of troubled debt restructured loans
Number of TDRs | item	76	84
Recorded Investment | $	$ 3,008,506	$ 3,491,926
1 - 4 family | Extension of maturity | Residential
Summary of troubled debt restructured loans
Number of TDRs | item	28	36
Recorded Investment | $	$ 1,370,885	$ 1,769,362
1 - 4 family | Reduction of interest rate below market | Residential
Summary of troubled debt restructured loans
Number of TDRs | item	48	48
Recorded Investment | $	$ 1,637,621	$ 1,722,564
Consumer - Home equity and lines of credit | Residential
Summary of troubled debt restructured loans
Number of TDRs | item	3	5
Recorded Investment | $	$ 23,434	$ 77,218
Consumer - Home equity and lines of credit | Extension of maturity | Residential
Summary of troubled debt restructured loans
Number of TDRs | item	2	4
Recorded Investment | $	$ 7,881	$ 59,336
Consumer - Home equity and lines of credit | Reduction of interest rate below market | Residential
Summary of troubled debt restructured loans
Number of TDRs | item	1	1
Recorded Investment | $	$ 15,553	$ 17,882
Consumer - Personal | Other
Summary of troubled debt restructured loans
Number of TDRs | item		1
Recorded Investment | $		$ 3,756
Consumer - Personal | Extension of maturity | Other
Summary of troubled debt restructured loans
Number of TDRs | item		1
Recorded Investment | $		$ 3,756

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Loans - TDRs-By Type Of Concession (Details)	12 Months Ended
	Jun. 30, 2017 USD ($) item	Jun. 30, 2016 USD ($) item
Summary of troubled debt restructured loans
Number of TDRs | item	5	12
Recorded Investment | $	$ 849,220	$ 818,131
Extension of maturity
Summary of troubled debt restructured loans
Number of TDRs | item	5	12
Recorded Investment | $	$ 849,220	$ 818,131
Operating | Commercial
Summary of troubled debt restructured loans
Number of TDRs | item	3	2
Recorded Investment | $	$ 77,919	$ 65,085
Operating | Agricultural
Summary of troubled debt restructured loans
Number of TDRs | item		1
Recorded Investment | $		$ 1,000
Operating | Extension of maturity | Commercial
Summary of troubled debt restructured loans
Number of TDRs | item	3	2
Recorded Investment | $	$ 77,919	$ 65,085
Operating | Extension of maturity | Agricultural
Summary of troubled debt restructured loans
Number of TDRs | item		1
Recorded Investment | $		$ 1,000
Real Estate | Commercial
Summary of troubled debt restructured loans
Number of TDRs | item	1
Recorded Investment | $	$ 643,226
Real Estate | Agricultural
Summary of troubled debt restructured loans
Number of TDRs | item		6
Recorded Investment | $		$ 483,556
Real Estate | Extension of maturity | Commercial
Summary of troubled debt restructured loans
Number of TDRs | item	1
Recorded Investment | $	$ 643,226
Real Estate | Extension of maturity | Agricultural
Summary of troubled debt restructured loans
Number of TDRs | item		6
Recorded Investment | $		$ 483,556
1 - 4 family | Residential
Summary of troubled debt restructured loans
Number of TDRs | item	1	3
Recorded Investment | $	$ 128,075	$ 268,490
1 - 4 family | Extension of maturity | Residential
Summary of troubled debt restructured loans
Number of TDRs | item	1	3
Recorded Investment | $	$ 128,075	$ 268,490

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Loan Servicing (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Loan Servicing
Principal amount outstanding on loans serviced for others	$ 112,128,000	$ 100,745,000
Proceeds from sale of loans	33,721,173	28,507,437
Other assets
Loan Servicing
Servicing Asset	853,000	701,000
Fixed rate | 1 - 4 family | Residential
Loan Servicing
Proceeds from sale of loans	33,721,000	28,507,000
Pre-tax gain on sale of loans	856,000	750,000
Conventional loan | Federal Home Loan Bank
Loan Servicing
Principal amount outstanding of loans originated and sold in Mortgage Partnership Finance ("MPF") Program	26,882,089	20,078,590
Possible credit enhancement losses cap on loans originated and sold in Mortgage Partnership Finance ("MPF") Program	583,203	1,035,414
Accrual of credit enhancement losses on loans originated and sold in Mortgage Partnership Finance ("MPF") Program	$ 0	$ 0

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Accrued Interest Receivable (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Interest Receivable	$ 1,297,908	$ 1,147,467
Securities
Interest Receivable	5,373	3,259
Loans
Interest Receivable	$ 1,292,535	$ 1,144,208

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Premises and Equipment, Net (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 10,335,315	$ 10,063,160
Less accumulated depreciation	(4,910,460)	(4,788,699)
Total premises and equipment, net	5,424,855	5,274,461
Land and land improvements
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	1,485,458	1,337,723
Buildings and improvements
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	7,038,547	6,923,640
Furniture and equipment
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	1,282,315	1,252,015
Computer equipment
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	471,979	492,766
Vehicles
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 57,016	$ 57,016

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Deposits (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Noninterest-bearing deposits	$ 29,546,051	$ 24,296,166
Interest-bearing NOW	49,252,671	42,734,473
Money market	67,039,151	60,352,403
Savings	17,104,400	14,869,638
Certificates of deposit	46,116,043	44,709,672
Total deposits	209,058,316	186,962,352
Certificates of deposit
Certificates of deposit of $250,000 or more	$ 4,737,000	$ 3,866,000

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Deposits - Scheduled maturities (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Scheduled maturities of certificates of deposit:
2018	$ 21,990,649
2019	13,386,469
2020	6,041,736
2021	1,445,231
2022 and beyond	3,251,958
Total certificates of deposit	46,116,043	$ 44,709,672
Interest expense on deposit accounts:
Interest-bearing NOW	186,561	169,242
Money market	477,148	403,825
Savings	38,922	33,941
Certificates of deposit	422,687	436,887
Total interest expense on deposit accounts	$ 1,125,318	$ 1,043,895

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Borrowings (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Federal Home Loan Bank Advances Disclosures
Federal Home Loan Bank Advances, Amount of Available, Unused Funds	$ 35,300,000
Line of credit
Outstanding balance		$ 0
Midwest Independent Bank
Line of credit
Outstanding balance	399,000
Borrowing capacity	4,600,000
Pacific Coast Bankers Bank
Line of credit
Borrowing capacity	4,000,000
Zions Bank
Line of credit
Borrowing capacity	6,000,000
Federal Home Loan Bank of Topeka
Federal Home Loan Bank Advances Disclosures
Loans Pledged as Collateral	61,800,000	49,500,000
Advances outstanding	$ 6,745,400	$ 0
Interest rate	1.24%

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Regulatory Matters (Details) - Equitable Bank - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Compliance with regulatory capital requirements under banking regulations
Total capital (to risk weighted assets), amount	$ 30,893	$ 28,977
Total capital (to risk weighted assets), as a percent	13.20%	14.70%
Tier 1 (core) capital (to risk weighted assets), amount	$ 27,956	$ 26,500
Tier 1 (core) capital (to risk weighted assets), as a percent	11.90%	13.40%
Tier 1 (core) capital (to adjusted total assets), amount	$ 27,956	$ 26,500
Tier 1 (core) capital (to adjusted total assets), as a percent	11.40%	11.60%
Minimum Required for Capital Adequacy Purposes
Total capital (to risk weighted assets), amount	$ 18,740	$ 15,805
Total capital (to risk weighted assets), as a percent	8.00%	8.00%
Tier 1 (core) capital (to risk weighted assets), amount	$ 14,055	$ 11,854
Tier 1 (core) capital (to risk weighted assets), as a percent	6.00%	6.00%
Tier 1 (core) capital (to adjusted total assets), amount	$ 9,806	$ 9,114
Tier 1 (core) capital (to adjusted total assets), as a percent	4.00%	4.00%
Minimum Required to Be Well Capitalized Under Prompt Corrective Action Provisions
Total capital (to risk weighted assets), amount	$ 23,425	$ 19,757
Total capital (to risk weighted assets), as a percent	10.00%	10.00%
Tier 1 (core) capital (to risk weighted assets), amount	$ 18,740	$ 15,805
Tier 1 (core) capital (to risk weighted assets), as a percent	8.00%	8.00%
Tier 1 (core) capital (to adjusted total assets), amount	$ 12,257	$ 11,393
Tier 1 (core) capital (to adjusted total assets), as a percent	5.00%	5.00%
Common Equity
Compliance with regulatory capital requirements under banking regulations
Tier 1 (core) capital (to risk weighted assets), amount	$ 27,956	$ 26,500
Tier 1 (core) capital (to risk weighted assets), as a percent	11.90%	13.40%
Minimum Required for Capital Adequacy Purposes
Tier 1 (core) capital (to risk weighted assets), amount	$ 10,541	$ 8,891
Tier 1 (core) capital (to risk weighted assets), as a percent	4.50%	4.50%
Minimum Required to Be Well Capitalized Under Prompt Corrective Action Provisions
Tier 1 (core) capital (to risk weighted assets), amount	$ 15,226	$ 12,842
Tier 1 (core) capital (to risk weighted assets), as a percent	6.50%	6.50%

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Income Taxes (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Current:
Federal	$ (35,227)	$ (73,021)
State	(83,962)	(72,879)
Deferred:
Federal	(561,635)	(344,906)
Income tax expense	$ (680,824)	$ (490,806)

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Income Taxes - Reconciliation (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Income Taxes
Statutory federal corporate tax rate (as a percent)	34.00%	34.00%
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Provision computed at the statutory federal tax rate	$ (651,395)	$ (525,492)
State income taxes, net of federal tax	(55,045)	(48,100)
Return-to-provision, net	24,562	(32,837)
Valuation allowance adjustment		79,000
Other	1,054	36,623
Total income tax expense	(680,824)	(490,806)
Deferred Tax Liability Not Recognized, Bad Debt Reserve for Tax Purposes of Qualified Lender [Abstract]
Bad debt reserves not included in deferred income tax liability	2,132,000	2,132,000
Unrecognized deferred tax liability amount related to bad debt reserves	$ 0	$ 0

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Income Taxes - Net deferred tax assets (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Gross deferred tax assets:
Allowance for loan losses	$ 1,208,020	$ 1,001,980
Net operating loss carryover		530,899
General business credits	324,364	324,364
Foreclosed asset writedowns	50,592	50,592
Unrealized loss on securities	6,393
Other	50,760	245,290
Total gross deferred tax assets	1,640,129	2,153,125
Gross deferred tax liabilities:
Additions in excess of base year loan reserve	(572,404)	(585,334)
Depreciation	(73,623)	(68,425)
FHLB stock dividends	(74,630)	(77,656)
Unrealized gain on securities		(2,100)
Other	(57,463)	(3,517)
Total gross deferred tax liabilities	(778,120)	(737,032)
Net deferred tax asset	862,009	1,416,093
Income tax uncertainties:
Adjustment for unrecognized income tax benefits	0	0
Income tax examination, interest and penalties expense:
Interest and penalties expense	0	0
Income tax examination, interest and penalties accrued:
Interest and penalties accrued	$ 0	$ 0

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Employee Benefit Plans - 401K (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Employee Benefit Plans
401(k) and profit sharing plans, minimum vesting period	1 year
401(k) and profit sharing plans, maximum vesting period	5 years
Company contributions to the 401(k) and profit sharing plans	$ 121,000	$ 100,000

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Employee Benefit Plan - ESOP (Details) - USD ($)			12 Months Ended
	Jul. 08, 2015	Nov. 08, 2005	Jun. 30, 2017	Jun. 30, 2016
Employee stock ownership plan ("ESOP")
Funds borrowed by the ESOP from the Company	$ 951,912	$ 1,292,620
Company stock acquired by the ESOP (in shares)	$ 118,989	$ 129,262
Price of Company stock acquired by the ESOP (in dollars per share)	$ 8.00	$ 10.00
Annual principal and interest payments to be made by the ESOP	$ 65,000	$ 145,000
Compensation expense			$ 152,104	$ 105,645
Shares held by the ESOP
Allocated shares (in shares)			86,104	71,803
Shares allocated to be released			7,929	7,932
Unearned ESOP shares (in shares)			134,843	150,700
Total ESOP shares (in shares)			228,876	230,435
Fair value of unearned ESOP shares			$ 1,348,430	$ 1,252,317
Fair value of allocated shares subject to repurchase obligation			$ 815,280	$ 564,723

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Employee Benefit Plan - Stock Options (Details)	12 Months Ended
	Jun. 30, 2017 $ / shares shares
Summary of stock option activity
Options, granted (in shares)	158,653
Options outstanding, ending balance (in shares)	158,653
Weighted average exercise price
Weighted average exercise price, granted (in dollars per share) | $ / shares	$ 9.90
Weighted average exercise price, ending balance (in dollars per share) | $ / shares	$ 9.90
Remaining contractual life (years)
Remaining contractual life of options outstanding	9 years 8 months 12 days
Granted, remaining contractual life	9 years 8 months 12 days
2016 Equity Incentive Plan
Summary of stock option activity
Options outstanding, ending balance (in shares)	63,461

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Employee Benefit Plan - Assumptions (Details)	12 Months Ended
	Jun. 30, 2017 $ / shares
Assumptions
Expected volatility	9.54%
Risk-free interest rate	1.90%
Expected life (in years)	5 years
Exercise price for the stock options	$ 9.90

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Employee Benefit Plan - Shares Awarded (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Share-based compensation
Award vesting period	5 years
Number of shares awarded	158,653
Stock options
Share-based compensation
Compensation expense	$ 14,067
Restricted stock
Share-based compensation
Unrecognized compensation costs	$ 670,319
Period for recognizing unrecognized compensation	4 years 3 months 18 days
Compensation expense	$ 100,176	$ 105,645
Service-Based Stock Awards
Non-vested at beginning of the year (in shares)	39,281	43,094
Conversion for stock offering (in shares)		3,907
Granted (in shares)	63,461	4,900
Vested (in shares)	(13,617)	(12,620)
Non-vested at end of the year (in share)	89,125	39,281
Weighted Grant Date Fair Value
Non-vested at beginning of the year (in dollars per share)	$ 4.32	$ 4.02
Granted (in dollars per share)	9.90	8.53
Vested (in dollars per share)	4.32	4.02
Non-vested at end of the year (in dollars per share)	$ 6.97	$ 4.32
2016 Equity Incentive Plan
Share-based compensation
Award vesting period	5 years
Number of shares awarded	63,461
2016 Equity Incentive Plan | Stock options
Share-based compensation
Number of shares authorized	198,316
2016 Equity Incentive Plan | Restricted stock
Share-based compensation
Number of shares authorized	79,326

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Earnings per Share - Basic (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Components of basic earnings per share:
Weighted average common shares outstanding	3,299,269	3,264,979
Net income available to common stockholders	$ 1,235,045	$ 1,054,758
Basic earnings per share (in dollars per share)	$ 0.37	$ 0.32

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Earnings per Share - Diluted (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Components of diluted earnings per share:
Weighted average common shares outstanding	3,299,269	3,264,979
Dilutive effect of net additional shares from restricted stock awards and stock options	200,289	26,538
Weighted average number of shares outstanding	3,499,558	3,291,517
Net income available to common stockholders	$ 1,235,045	$ 1,054,758
Diluted earnings per share (in dollars per share)	$ 0.35	$ 0.32

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Loan Commitments And Other Related Activities (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Loan Commitments and Other Related Activities
Fixed-rate commitments	$ 24,745,000
Commitments to extend credit
Loan Commitments and Other Related Activities
Contractual or notional amounts of financial instruments wherein contractual amounts represent credit risk	19,271,000	$ 12,486,000
Standby letters of credit
Loan Commitments and Other Related Activities
Contractual or notional amounts of financial instruments wherein contractual amounts represent credit risk	200,000	310,000
Unused lines of credit
Loan Commitments and Other Related Activities
Contractual or notional amounts of financial instruments wherein contractual amounts represent credit risk	$ 33,227,000	$ 32,370,000

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Loan Commitments and Other Related Activities - Future commitments (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Future commitments under operating lease
2018	$ 110,000
2019	110,000
2020	110,000
2021	110,000
2022	110,000
Rental expense under lease
Rental expense	$ 81,000	$ 89,000

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Fair Value Measurements (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Assets and Liabilities Measured on Recurring Basis
Fair value asset transfers from Level 1 to Level 2	$ 0	$ 0
Fair value asset transfers from Level 2 to Level 1	0	0
Fair value liability transfers from Level 1 to Level 2	0	0
Fair value liability transfers from Level 2 to Level 1	0	0
Assets:
Securities available-for-sale	1,410,955	664,755
Recurring
Assets:
Securities available-for-sale	1,410,955	664,755
Recurring | Level 2
Assets:
Securities available-for-sale	$ 1,410,955	$ 664,755

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Fair Value Measurements - Financial Instruments (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Financial assets:
Cash and due from financial institutions	$ 4,881,007	$ 2,567,296
Securities available-for-sale	1,410,955	664,755
Securities held-to-maturity	745,873	801,114
Federal Home Loan Bank stock	453,400	229,900
Loans, net	236,545,125	198,309,920
Accrued interest receivable	1,297,908	1,147,467
Financial liabilities:
Noninterest-bearing deposits	29,546,051	24,296,166
Interest-bearing deposits	179,512,265	162,666,186
Federal funds purchased	399,000
Federal Home Loan Bank borrowings	6,745,400
Accrued interest payable and other liabilities	820,229	1,198,850
Carrying Amount | Level 1
Financial assets:
Cash and due from financial institutions	4,881,007	14,947,296
Federal Home Loan Bank stock	453,400	229,900
Accrued interest receivable	1,297,908	1,147,467
Financial liabilities:
Accrued interest payable and other liabilities	820,229	1,198,850
Carrying Amount | Level 2
Financial assets:
Securities available-for-sale	1,410,955	664,755
Securities held-to-maturity	735,978	781,740
Loans, net	236,545,125	198,309,920
Mortgage servicing rights	852,715	701,293
Financial liabilities:
Noninterest-bearing deposits	29,546,051	24,296,166
Interest-bearing deposits	179,512,265	162,666,186
Federal Home Loan Bank borrowings	6,745,400
Estimated Fair Value | Level 1
Financial assets:
Cash and due from financial institutions	4,881,000	14,947,000
Federal Home Loan Bank stock	453,000	230,000
Accrued interest receivable	1,298,000	1,147,000
Financial liabilities:
Accrued interest payable and other liabilities	820,000	1,199,000
Estimated Fair Value | Level 2
Financial assets:
Securities available-for-sale	1,411,000	665,000
Securities held-to-maturity	746,000	801,000
Loans, net	232,931,000	198,000,000
Mortgage servicing rights	1,089,000	841,000
Financial liabilities:
Noninterest-bearing deposits	29,546,000	24,296,000
Interest-bearing deposits	185,040,000	$ 170,276,000
Federal Home Loan Bank borrowings	$ 6,745,000

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Accumulated Other Comprehensive Income (Loss) (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Accumulated Other Comprehensive Income (Loss)
Unrealized holding gains (losses) on securities available-for-sale	$ (16,034)	$ 6,176
Tax expense	5,452	(2,100)
Total accumulated other comprehensive income (loss)	$ (10,582)	$ 4,076

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Transactions with Related Parties (Details) - Principal officers, directors, and affiliated entities - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Loans and Leases Receivable, Related Parties [Roll Forward]
Beginning balance	$ 2,723,398	$ 1,310,605
New loans or transfers in	4,133,252	1,552,533
Repayments or transfers out	(1,120,301)	(139,740)
Ending balance	5,736,349	2,723,398
Deposits	$ 1,047,000	$ 364,000

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Condensed Financial Information (Holding Company Only) (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2015
Assets
Cash and due from financial institutions	$ 4,881,007	$ 2,567,296
Other assets	2,008,051	1,853,698
Total assets	253,842,488	225,087,177
Liabilities and Stockholders’ Equity
Stockholders' Equity	35,571,303	35,974,086	$ 20,931,210
Total liabilities and stockholders' equity	253,842,488	225,087,177
Equitable Financial MHC
Assets
Cash and due from financial institutions	5,046,023	6,816,101
Investment in Bank	28,547,549	27,153,439
Other assets	2,007,731	2,026,340
Total assets	35,601,303	35,995,880
Liabilities and Stockholders’ Equity
Other liabilities	30,000	21,794
Stockholders' Equity	35,571,303	35,974,086
Total liabilities and stockholders' equity	$ 35,601,303	$ 35,995,880

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Condensed Financial Information (Holding Company Only) - Statments of Income (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Condensed Statements of Income
Interest income	$ 9,295,577	$ 8,379,514
Income tax benefit	(680,824)	(490,806)
Net income	1,235,045	1,054,758
Comprehensive income	1,220,387	1,062,889
Equitable Financial MHC
Condensed Statements of Income
Interest income	82,092	78,342
Professional fees and other expenses	355,237	445,625
Loss before income tax and equity in undistributed net income of subsidiary	(273,145)	(367,283)
Income tax benefit	115,212	124,876
Loss before equity in undistributed net income of subsidiary	(157,933)	(242,407)
Equity in undistributed net income of subsidiary	1,392,978	1,297,165
Net income	1,235,045	1,054,758
Comprehensive income	$ 1,220,387	$ 1,062,889

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Condensed Financial Information (Holding Company Only) - Cash Flow (Details) - USD ($)	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash Flows from Operating Activities:
Net income	$ 1,235,045	$ 1,054,758
Net cash provided by operating activities	2,795,299	3,309,127
Cash Flows from Investing Activities:
Net cash used in investing activities	(40,508,786)	(18,543,526)
Cash Flows From Financing Activities:
ESOP Loan Finance		(951,912)
Stock buyback	(1,638,960)
Net cash provided by financing activities	27,647,198	8,669,042
Decrease in cash and cash equivalents	(10,066,289)	(6,565,357)
Cash and Cash Equivalents:
Beginning	14,947,296	21,512,653
Ending	4,881,007	14,947,296
Equitable Financial MHC
Cash Flows from Operating Activities:
Net income	1,235,045	1,054,758
Items not providing cash	(1,366,163)	(1,168,812)
Net cash provided by operating activities	(131,118)	(114,054)
Cash Flows from Investing Activities:
Downstream capital to Bank		(6,930,000)
Net cash used in investing activities		(6,930,000)
Cash Flows From Financing Activities:
ESOP Loan Finance		(951,912)
Stock buyback	(1,638,960)
Proceeds in advance of offering		(2,555,176)
Net cash provided by financing activities	(1,638,960)	(3,507,088)
Decrease in cash and cash equivalents	(1,770,078)	(10,551,142)
Cash and Cash Equivalents:
Beginning	6,816,101	17,367,243
Ending	$ 5,046,023	$ 6,816,101

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Stock Buyback (Details) - Common Stock - $ / shares		1 Months Ended								12 Months Ended
	Oct. 07, 2016	Jun. 30, 2017	May 31, 2017	Apr. 30, 2017	Mar. 31, 2017	Feb. 28, 2017	Jan. 31, 2017	Dec. 31, 2016	Nov. 30, 2016	Jun. 30, 2017	Oct. 31, 2016
Common stock purchased during the period:
Shares purchased		5,431	49,000	5,000	22,200			26,455	60,000	168,086
Average price paid per share		$ 10.17	$ 10.25	$ 10.25	$ 10.25			$ 9.57	$ 9.07	$ 9.72
Stock Repurchase Plan
Common stock purchased during the period:
Current shares outstanding (as a percentage)	5.00%
Shares purchased		168,086	162,655	113,655	108,655	86,455	86,455	86,455	60,000
Maximum number of shares that may yet be purchased		5,771	11,202	60,202	65,202	87,402	87,402	87,402	113,857	5,771	173,857