10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2017.

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______________ to _______________.

Commission file number: 000-55530

NEW BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland	47-4314938
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

45 North Whittaker Street, New Buffalo, Michigan	49117
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (269) 469-2222

Securities registered pursuant to Section 12(b) 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 website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES ☒     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 an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐     Accelerated filer ☐

Non-accelerated filer ☐     Smaller reporting company ☒

(Do not check if a 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 Act). YES ☐     NO ☒

Based on the closing sales price of $14.09 per share reported by the OTC Markets Group, Inc., on June 30, 2017, the aggregate market value of the voting and non-voting common equity held by non-affiliates on such date, was approximately $8.5 million.

As of March 28, 2018, there were 719,531 issued and outstanding shares of the Registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE:

(1) Proxy Statement for the 2018 Annual Meeting of Stockholders of the Registrant (Part III).

TABLE OF CONTENTS

ITEM 1.	Business	2
ITEM 1A.	Risk Factors	41
ITEM 1B.	Unresolved Staff Comments	41
ITEM 2.	Properties	41
ITEM 3.	Legal Proceedings	41
ITEM 4.	mine safety disclosures	41
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	42
ITEM 6.	Selected Financial Data	43
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	56
ITEM 8.	Financial Statements and Supplementary Data	56
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	56
ITEM 9A.	Controls and Procedures	56
ITEM 9B.	Other Information	57
ITEM 10.	Directors, Executive Officers and Corporate Governance	58
ITEM 11.	Executive Compensation	58
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	58
ITEM 13.	Certain Relationships and Related Transactions and Director Independence	58
ITEM 14.	Principal Accountant Fees and Services	58
ITEM 15.	Exhibits and Financial Statement Schedules	59
	CONSOLIDATED FINANCIAL STATEMENTS	F-1
ITEM 16.	FORM 10-K SUMMARY	59

PART I

ITEM 1.                Business

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

● statements of our goals, intentions and expectations;

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

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

● estimates of our risks and future costs and benefits.

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

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

● adverse changes in the financial industry, securities, credit and national and local real estate markets (including real estate values);

● significant increases in our loan losses, including as a result of our inability to resolve classified and non-performing assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for loan losses;

● credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses;

● the use of estimates in determining fair value of certain of our assets, which may prove to be incorrect and result in significant declines in valuations;

● competition among depository and other financial institutions;

● our success in increasing our residential real estate and commercial real estate lending, and selling certain of our residential real estate loans and commercial real estate loans;

● our ability to attract and maintain deposits and our success in introducing new financial products;

● our ability to improve our asset quality even as we increase our commercial real estate lending;

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● changes in interest rates generally, including changes in the relative differences between short term and long term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources;

● fluctuations in the demand for loans, which may be affected by the number of unsold homes, land and other properties in our market areas and by declines in the value of real estate in our market area;

● changes in consumer spending, borrowing and savings habits;

● declines in the net interest margin resulting from the rising interest rate environment placing pressure on increased liabilities expense;

● risks related to a high concentration of loans by industry and/or secured by real estate located in our market area;

● the results of examinations by our regulators, including the possibility that our regulators may, among other things, require us to increase our allowance for loan losses, write down assets, change our regulatory capital position, limit our ability to borrow funds or maintain or increase deposits, or prohibit us from paying dividends, which could adversely affect our dividends and earnings;

● changes in the level of government support of housing finance;

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

● changes in laws or government regulations or policies affecting financial institutions, including the Dodd-Frank Act and the JOBS Act, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements, regulatory fees and compliance costs, particularly the new capital regulations, and the resources we have available to address such changes; 

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

● changes in our compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs in response to product demand or to implement our strategic plans;

● loan delinquencies and changes in the underlying cash flows of our borrowers;

● our ability to control costs and expenses;

● the failure or security breaches of computer systems on which we depend;

● the ability of key third-party service providers to perform their obligations to us;

● other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this prospectus.

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

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BUSINESS OF NEW BANCORP, INC.

New Bancorp was incorporated in the State of Maryland in June 2015 for the purpose of becoming the stock holding company of New Buffalo Savings Bank (the “Bank”) in connection with the Bank’s mutual to stock conversion, which was consummated on October 19, 2015. New Bancorp owns all of the issued and outstanding stock of the Bank.

New Bancorp, as the registered savings and loan holding company of the Bank, is authorized to pursue business activities permitted by applicable laws and regulations, which may include the acquisition of banking and financial services companies.

Our cash flow depends in large part on earnings from the investment of the net proceeds that we retained from the conversion and stock offering and dividends we receive from the Bank. The Bank is subject to regulatory limitations on the amount of dividends that it may pay. See “Regulation and Supervision – Federal Banking Regulation – Capital Distributions.”

New Bancorp neither owns nor leases any property, but instead pays a fee to New Buffalo Savings Bank for the use of its premises, equipment and furniture. At the present time, we employ only persons who are officers of New Buffalo Savings Bank to serve as officers of New Bancorp. We use the support staff of New Buffalo Savings Bank from time to time and pay a fee to New Buffalo Savings Bank for the time devoted to New Bancorp by employees of New Buffalo Savings Bank; however, these persons are not separately compensated by New Bancorp. New Bancorp may hire additional employees, as appropriate, to the extent it expands its business in the future.

BUSINESS OF NEW BUFFALO SAVINGS BANK

General and Market Area

We conduct our business from our main office in New Buffalo, Michigan and our two additional full-service banking offices located in Three Oaks and Sawyer, Michigan, all of which are located in the western portion of Berrien County in southwestern Michigan and are part of an area popularly called “Harbor Country.” Additionally, we conduct business from our loan office in Troy, Michigan. New Buffalo is a popular resort town due to its location along the Lake Michigan shoreline and its proximity (approximately 70 miles) from downtown Chicago. Our primary market area includes the western portion of Berrien County, and, to a lesser extent, Cass County, Michigan, both of which are located in southwestern Michigan near the border of Indiana.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate and commercial real estate loans, and, to a much lesser extent, construction and land loans, commercial business loans and consumer loans. At December 31, 2017, $41.5 million, or 41.8% of our total loan portfolio, was comprised of one- to four-family residential real estate loans including home equity lines of credit, and at this date an additional $45.6 million, or 45.9% of our total loan portfolio, was comprised of commercial real estate loans. We offer a variety of deposit accounts, including interest-bearing and noninterest-bearing demand accounts, savings and money market accounts and certificates of deposit. We utilize advances from the FHLB-Indianapolis for asset/liability management purposes. On occasion we also utilize funds from a line of credit with another bank. At December 31, 2017, we had $9.0 million in advances outstanding from the FHLB-Indianapolis.

For the years ended December 31, 2017 and 2016, we had net income (loss) of $688,000 and $(534,000), respectively. The increase in our net income in 2017 was due primarily to a $714,000 increase in net interest income and an $844,000 increase in noninterest income due to growth in loans and gain on sale of loans, respectively.

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Our current business strategy includes increasing our asset size, diversifying our loan portfolio to increase our non-residential lending, including primarily by increasing our commercial real estate lending and increasing our non-interest income through sales of loans, as ways to improve our profitability in future periods.

New Buffalo Savings Bank is subject to comprehensive regulation and examination by its primary federal regulator, the Office of the Comptroller of the Currency (“OCC”).

Our executive and administrative office is located at 45 North Whittaker Street, New Buffalo, Michigan 49117, and our telephone number at this address is (269) 469-2222. Our website address is www.newbuffalosavings.com. Information on our website is not incorporated into this Annual Report and should not be considered part of this Annual Report.

Recent Losses from Operations / Restructuring of Management and Business Operations

Prior to January 2012, the Bank had less stringent underwriting processes and controls in extending credit. As a result of weak economic conditions and lending practices under prior management, which were not adequate to deal with such conditions, we experienced significant losses from operations, an elevated level of problem assets and a decline in capital ratios during the period from 2008 to 2014. During this period, we experienced aggregate losses of $8.5 million.

In order to address these issues, the Board made significant changes to the Bank’s management and operating processes. In January 2012, we hired Richard Sauerman to our executive staff, and in July 2012, Mr. Sauerman was promoted to President and Chief Executive Officer. In 2016, we hired two commercial loan officers, one of whom is focused on SBA lending. Although these hires have increased our salary and employee benefits expense, these hires are consistent with our business strategy of increasing our non-residential loan portfolio, to increase the net interest margin and our earnings.

Our business strategy includes being a profitable, well-managed community bank. We aim to achieve this through our growth strategy of increasing our commercial real estate, commercial business, and SBA lending. We have expanded our commercial loan emphasis in the Detroit metropolitan area to our east. Additionally, we will strive to continue to adhere to our conservative underwriting standards of recent years which, we believe have resulted in our improved credit quality. See “– Business Strategy.”

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Business Strategy

Our principal objective is to build long-term value for our stockholders by operating a profitable community-oriented financial institution dedicated to meeting the banking needs of our customers by emphasizing personalized and efficient customer service. Highlights of our current business strategy include:

● Prudently and opportunistically growing our loans and deposits by increasing our presence in the communities we serve in Michigan and continuing to expand our market area in Detroit and Troy, Michigan.

● Continuing to originate commercial loans with the Small Business Administration (SBA) guarantee through the 7(a) program, and related sales of the SBA guaranteed portion of those loans.

● Improving our asset quality by continuing to reduce loan delinquencies and classified loans and improving our risk profile through enhancements of our credit risk management systems and credit administration procedures.

● Expanding our banking franchise as opportunities arise through de novo branching and/or branch acquisitions, although we do not have any understandings or arrangements to establish or acquire any new branch offices.

● Continuing to generally sell our conforming, fixed-rate, one- to four-family residential real estate loans that we originate and retaining variable rate and certain fixed-rate loans.

● Continuing to generate low-cost deposits within our market area.

● Expanding our menu of deposit products and continuing to improve customer service to meet the demands of current customers and attract new customers in our market area.

● Implementing a growth strategy to improve our profitability, without compromising our conservative underwriting policies.

From April 1, 2014 through July 1, 2015, the population of Berrien County decreased 1.4%, while the population of Michigan from April 1, 2010 through July 1, 2016 increased 0.4% and the population of the United States increased 4.7% during the same time period.  From 2015 through 2020, the population of Berrien County is projected to decrease 0.5%, while the population of Michigan is projected to increase 1.6%.

Competition

We face competition within our market area both in making loans and attracting deposits. Our market area has a concentration of financial institutions that include large money center and regional banks, community banks and credit unions. We also face competition from commercial banks, savings institutions, mortgage banking firms, consumer finance companies and credit unions and, with respect to deposits, from money market funds, brokerage firms, mutual funds and insurance companies. As of June 30, 2017, based on the most recent available FDIC data, our market share of deposits represented 4.74% of FDIC-insured deposits in Berrien County, ranking us 7^th in market share of deposits.   We do not have a significant market share of either deposits or residential lending in any other county in our market area.

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Lending Activities

General. Our principal lending activity is originating one- to four-family residential real estate loans and commercial real estate loans and, to a much lesser extent, construction and land loans, commercial business loans and consumer loans. In recent years, we have generally sold our conforming, fixed-rate, one- to four-family residential real estate loans on a servicing-retained basis, while retaining adjustable-rate residential real estate loans, in order to manage the maturity and time to re-price our loan portfolio. We may, at times, retain within our loan portfolio fixed-rate one- to four-family residential real estate loans for asset-liability management purposes. In recent years, we have changed our strategy to focus on relationship-based banking, diversifying our loan portfolio and improving and managing our asset quality. Pursuant to our growth plan, the two commercial loan officers hired increased our loan portfolio at a managed pace, and continued to improve our customer service.

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

	At December 31,
	2017						2016
	Amount			Percent			Amount			Percent
	(Dollars in thousands)
Real estate loans
Residential (1)	$	41,474			41.8	%	$	38,636			45.0	%
Commercial		45,623			45.9	%		35,709			41.6	%
Construction and land		10,746			10.8	%		10,233			11.9	%
Commercial business		909			0.9	%		1,000			1.2	%
Consumer and other		557			0.6	%		335			0.4	%
Total loans		99,309			100.0	%		85,913			100.0	%
Less:
Net deferred loan fees, premiums and discounts		(176	)					(70	)
Undisbursed loans in process		(498	)					(1,772	)
Allowance for loan losses		(1,123	)					(1,063	)
Total loans receivable, net	$	97,512					$	83,008

____________________

(1) Includes $4.3 million and $4.7 million of home equity loans at December 31, 2017 and 2016, respectively. See Note 4 to the financial statements beginning on page F-1.

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Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2017. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in the year ending December 31, 2018. Maturities are based on the final contractual payment date and do not reflect the impact of prepayments and scheduled principal amortization.

	One to four family residential		Commercial real estate		Construction and land		Commercial business		Consumer		Total
	(In thousands)
Due During the Years Ending December 31,
2018	$	3,115	$	2,868	$	5,927	$	557	$	60	$	12,527
2019		140		1,520		723		17		68		2,468
2020		1,233		3,010		60		43		315		4,661
2021 to 2022		1,926		6,930		1,576		56		102		10,590
2023 to 2027		1,945		18,383		769		236		12		21,345
2028 to 2032		3,357		3,676		84		-		-		7,117
2033 and beyond		29,758		9,236		1,607		-		-		40,601
Total	$	41,474	$	45,623	$	10,746	$	909	$	557	$	99,309

The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at December 31, 2017 that are contractually due after December 31, 2018.

	Due after December 31, 2018
	Fixed		Adjustable		Total
			(In thousands)
Real estate loans:
One to four family residential	$	24,083	$	14,276	$	38,359
Commercial		15,156		27,599		42,755
Construction and land		3,779		1,040		4,819
Commercial business		150		202		352
Consumer		92		405		497
Total	$	43,260	$	43,522	$	86,782

Loan Approval Procedures and Authority. Our lending is subject to written, non-discriminatory underwriting standards and origination procedures. Decisions on loan applications are made on the basis of detailed applications submitted by the prospective borrower and property valuations. Our policies require that for all one-to four-family residential real estate loans that we originate, property valuations must be performed by outside independent state-licensed appraisers approved by our board of directors. Our practice is that for commercial real estate loans of $100,000 or less, such property valuations may be supported by either an outside independent appraisal or an evaluation conducted by a board-approved valuation company. The loan applications are designed primarily to determine the borrower’s ability to repay the requested loan, and the more significant items on the application are verified through use of credit reports, financial statements and tax returns. We will also evaluate a guarantor when a guarantee is provided as part of the loan.

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Pursuant to applicable law, the aggregate amount of loans that we are permitted to make to any one borrower or a group of related borrowers is generally limited to 15% of New Buffalo Savings Bank’s unimpaired capital and surplus (25% if the amount in excess of 15% is secured by “readily marketable collateral” or 30% for certain residential development loans). At December 31, 2017, our largest credit relationship consisted of a line of credit on commercial real estate which totaled $2.1 million. Our second largest relationship at this date consisted of multiple loans totaling $2.1 million and was secured by commercial real estate properties in our market area serviced by our loan office in Troy. At December 31, 2017, these loans were performing in accordance with their repayment terms.

Our President and Chief Executive Officer has approval authority of up to $750,000 for residential and commercial real estate loans. Loans which exceed our President’s authority may be approved by combining the President’s loan authority with one additional officer’s loan authority to a maximum of $1.0 million. Loans above $1.0 million are addressed by our Loan Committee, which consists of our President and Chief Executive Officer, a commercial loan officer and at least two of our outside directors, which may approve loans up to our legal lending limit. Amounts in excess of the combined authorities require approval of the Loan Committee. Loan Committee actions are reported at the next board meeting following approval.

Generally, we require title insurance on our one- to four-family residential real estate loans as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan. In addition, we require escrow for property taxes, insurance and flood insurance (where appropriate) on our conventional one- to four-family residential loans. For loans exceeding an 80% loan-to-value ratio, we require private mortgage insurance in amounts intended to reduce our exposure to 80% or less.

One- to Four-Family Residential Real Estate Lending. At December 31, 2017, $41.5 million, or 41.8%, of our total loans, was secured by one- to four-family residential real estate. Due to our market area being comprised, in part, of communities on the shoreline of Lake Michigan, a significant portion of our one- to four-family residential real estate loans are collateralized by vacation homes. We originate both fixed-rate and adjustable-rate one- to four-family residential real estate loans, and at December 31, 2017, these types of loans were comprised of 62.8% fixed-rate loans, and 37.2% adjustable-rate loans.

We generally limit the loan-to-value ratios of our one- to four-family residential real estate loans to 80% of the purchase price or appraised value, whichever is lower. In addition, we may make one- to four-family residential mortgage loans with loan-to-value ratios between 80% and 95% of the purchase price or appraised value, whichever is less, where the borrower obtains private mortgage insurance.

Our fixed-rate, one- to four-family residential real estate loans are generally underwritten according to Freddie Mac guidelines, typically with terms of 15, 20 or 30 years. We generally originate both fixed- and adjustable-rate one- to four-family residential real estate loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which as of December 31, 2017 was generally $424,100 for single-family homes in our market area. We generally have sold our conforming fixed-rate, one- to four-family residential real estate loans that we have originated, and in recent years Freddie Mac has been the purchaser of the majority of these loans. We also originate loans above the lending limit for conforming loans, which are referred to as “jumbo loans.” Virtually all of our one- to four-family residential real estate loans, including $4.3 million of home equity loans and lines of credit, are secured by properties located in our market area. On a limited basis we have made to our existing customers one- to four-family residential real estate loans out of our market area.

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Our adjustable-rate, one- to four-family residential real estate loans generally have fixed rates of interest for initial terms of five and seven years, and adjust annually thereafter at a margin, which in recent years has been 2.75% over the weekly average yield on U.S. treasury securities adjusted to a constant maturity of one year. In recent years our adjustable-rate loans have had a floor of the initial rate of the loan, and the maximum amount by which the interest rate may be increased is generally 2.00% per adjustment period and the lifetime interest rate cap is generally 5.00% over the initial interest rate of the loan. Our adjustable-rate loans carry terms to maturity of up to 30 years.

Although adjustable-rate one- to four-family residential real estate loans may reduce our vulnerability to changes in market interest rates because they periodically reprice, 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 the maximum periodic and lifetime rate adjustments permitted by our loan documents. Moreover, the interest rates on many of our adjustable-rate loans do not adjust for up to ten years after origination. As a result, the effectiveness of adjustable-rate one- to four-family residential real estate loans in compensating for changes in market interest rates may be limited during periods of rapidly rising interest rates.

We offer home equity lines of credit with terms of up to 10 years which are interest only for up to 15 years and thereafter amortize. Other than these types of loans, we do not offer “interest only” mortgage loans on permanent one- to four-family residential real estate loans (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan). We also do not offer one- to four-family residential real estate loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. We generally do not offer “subprime loans” on one-to four- family residential real estate loans (i.e., loans to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios), or “Alt-A” (i.e., loans to borrowers with better credit scores who borrow with alternative documentation such as little or no verification of income).

Commercial Real Estate Lending. In addition to one- to four-family residential real estate lending, we have historically also emphasized and continue to emphasize commercial real estate lending. At December 31, 2017, $45.6 million, or 45.9% of our total loan portfolio, was comprised of commercial real estate loans.

Our commercial real estate loans are either fixed- or adjustable-rate based generally on the 5, 7 or 10 year Treasury Index with initial terms that match the index used and amortization terms of not more than 20 years, with a balloon payment at the end of the initial term. The maximum loan-to-value ratio of our commercial real estate loans is generally 75% of the lower of the purchase price or appraised value of the property securing the loan, regardless of whether or not the property is owner-occupied.Our SBA real estate loans are adjustable-rate based generally on the Prime Rate Index and amortization terms of not more than 25 years. The maximum loan-to-value ratio of our SBA commercial real estate loans is generally 80% of the lower of the purchase price or appraised value of the property securing the loan, regardless of whether or not the property is owner-occupied. Our commercial and SBA real estate loans are typically secured by hotels, retail, industrial, warehouse, service or other commercial properties.

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Set forth below is information regarding our commercial real estate loans at December 31, 2017. Pursuant to our growth plan, including our intention to grow our commercial real estate lending, we expect to broaden the types of collateral securing our commercial real estate loans.

Industry Type	Number of Loans		Balance
			(Dollars in thousands)
Bed and breakfast		2	$	818
Food and beverage		5		921
Commercial rental		50		23,879
Full service restaurant		9		3,201
Hotel and motel		17		8,153
Residential rental		2		655
Amusement and recreation		2		652
Other miscellaneous		27		7,344
		114	$	45,623

At December 31, 2017, the average loan balance of our outstanding commercial real estate loans was $425,000, and the largest of such loans was a $2.1 million commercial line of credit secured by commercial real estate. This loan was performing in accordance with its original repayment terms at December 31, 2017.

We are a licensed Small Business Administration (SBA) lender and prior to 2016 we had a limited investment in SBA loans. During 2017, we originated SBA loans totaling $35.0 million, of which $17.4 million were subsequently sold with servicing retained. The originated total includes a $7.5 million construction loan ($5.5 million of which had been participated and $2.2 million was undisbursed at December 31, 2017) and $3.2 million of which were in loans held for sale at December 31, 2017. These sales represented the 75% guaranteed portion of the SBA loans and we retained the 25% unguaranteed portion of the loans. In accordance with applicable accounting standards, we have recorded a portion of the sales proceeds as a discount on the unguaranteed 25% of the loans we have retained. At December 31, 2017, we serviced $26.4 million of SBA loans that had been sold and we had $8.2 million excluding the $3.2 million of loans held for sale, of SBA loans in our portfolio. We intend to continue to increase this type of lending in future years.

We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including project-level and global cash flows, credit history, and management expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we first consider the financial resources of the borrower, then value of the property, 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 generally require a debt service ratio of at least 1.25 times.

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Commercial real estate loans entail greater credit risks compared to one- to four-family residential real estate loans because 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 property, as repayment of the loan generally is dependent, in large part, on sufficient income from the property to cover operating expenses and debt service. Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for commercial real estate than residential properties. There may be additional risk on commercial rentals, where the borrower is not the occupant of the collateral property. If we foreclose on a commercial real estate loan, our holding period for the collateral is typically longer than for one- to four-family residential real estate loans because there are fewer potential purchasers of the collateral. Further, our commercial real estate loans generally have relatively large balances to single borrowers or related groups of borrowers. Accordingly, if any of our judgments regarding the collectability of our commercial real estate loans prove incorrect, the resulting charge-offs may be larger on a per loan basis than those incurred with respect to one- to four-family residential loans.

Construction and Land Lending. At December 31, 2017, we had $10.7 million, or 10.8% of our total loan portfolio, in construction and land loans. Of these, $4.2 million were loans for the construction of one- to four -family residences, $1.4 million were for SBA real estate, $2.8 million were loans where raw land serves as collateral, $0.5 million were for residential building site loans and $1.8 million were for land development loans. At December 31, 2017, our largest construction and land loan was a $1.0 million loan secured by a residential home. This loan was performing in accordance with its original repayment terms at December 31, 2017.

In the future we expect to deemphasize all types of construction and land loans other than with respect to construction loans that become permanent loans to the end user.

Our residential construction loans generally have initial terms of 12 months (subject to extension), during which the borrower pays interest only. Upon completion of construction, these loans convert to conventional amortizing mortgage loans. We do not extend credit if construction has already commenced, except in unique circumstances and upon the approval of the President and Chief Executive Officer or the loan committee and if title insurance is obtained. Our residential construction loans have rates and terms comparable to residential real estate loans that we originate. The maximum loan-to-value ratio of our residential construction loans is generally 80% of the lesser of the appraised value of the completed property or the total cost of the construction project, which may be up to 100% of the cost to build if the land is owned by borrower free and clear, or the total cost of the construction project. Residential construction loans are generally underwritten pursuant to the same guidelines used for originating permanent residential mortgage loans.

Our commercial construction loans generally have terms consistent with the duration of the construction process, with a maximum of 18 months, during which the borrower pays interest only. The borrower must have a commitment for permanent financing at the conclusion of the construction loan, preferably with New Buffalo Savings Bank. Our commercial construction loans have rates and terms comparable to commercial real estate loans that we originate. The maximum loan-to-value of our commercial construction loans is generally 75% of the lesser of the appraised value of the completed property or the confirmed purchase price for the land plus the value of the improvements. Commercial construction loans are generally underwritten pursuant to the same guidelines used for originating permanent commercial real estate loans.

All construction loans require the borrower to engage a licensed contractor and for the contractor to provide a complete construction budget and timeline, plus a statement of planned sub-contractors and estimated payments to each. The borrower must obtain title insurance. Construction advances are approved through the title insurance company and require appropriate lien waivers from the contractor and sub-contractors. For each draw request, an inspection of the construction is required prior to disbursement of loan proceeds.

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Raw land loans have terms of not more than two years. The maximum loan-to-value of these loans is 65% of the lesser of the appraised value or the purchase price of the property.

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

Commercial Business Lending. At December 31, 2017, we had $909,000 of commercial business loans, representing 0.9% of our total loan portfolio. Because we believe that increasing originations of commercial business loans is essential to our profitability, pursuant to our growth plan, we intend to increase this part of our loan portfolio.

We offer short-term commercial business loans which are lines of credit with terms of up to one year and long-term commercial business loans with terms of up to seven years. Commercial business loans are generally secured by equipment, furniture and fixtures, inventory, accounts receivable or other business assets. We also offer revolving lines of credit to finance short-term working capital needs such as accounts payable and inventory. These lines of credit are in amounts proportionate to the borrower’s working capital position, are generally predicated on an advance formula based on the stated collateral, and typically require an annual full payoff. Our commercial lines of credit are generally priced on a floating rate basis utilizing an index rate such as the Wall Street Journal prime rate, and may be secured or, in very limited circumstances, unsecured. We generally obtain personal guarantees with respect to all commercial business loans and lines of credit.

We typically originate commercial business loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, the experience and stability of the borrower’s management team, earnings projections and the underlying assumptions, and the value and marketability of any collateral securing the loan. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself and the general economic environment in our market area. Therefore, commercial business loans that we originate have greater credit risk than residential real estate loans or, generally, consumer loans. In addition, commercial business 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.

We believe that commercial business loans will provide growth opportunities for us, and we expect to increase this business line in the future in order to develop banking relationships with depositors and related mortgage lending customers. The additional capital we received in connection with the stock offering modestly increased our maximum lending limits and has allowed us to increase the amounts of our loans to one borrower.

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Our commercial business loans are originated primarily based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Most often, this collateral consists of equipment, inventory or accounts receivable. Credit support provided by the borrower for most of these loans and the probability of repayment is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any. As a result, in the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The collateral securing other loans may depreciate over time, may be difficult to appraise and may fluctuate in value, and the cash flows of the borrower may fluctuate based on the success of the business.

Consumer Lending. At December 31, 2017, we had $557,000, or 0.6% of our loan portfolio, in consumer loans.

Our consumer loans have either a variable or fixed-rate of interest for a term of up to six years, depending on the type of collateral and the creditworthiness of the borrower. Our consumer loans are primarily secured by automobiles. Consumer loans are generally limited to 100% of the purchase price (excluding sales tax) with respect to new vehicles, and 100% of National Automobile Dealers Association (NADA) retail value or cost, whichever is less, with respect to used vehicles.

Loan Originations, Participations, Purchases and Sales.

We originate real estate and other loans through employee marketing and advertising efforts, our existing customer base, walk-in customers and referrals from customers. All loans that we originate are underwritten pursuant to our policies and procedures.

We generally sell our conforming, fixed-rate, one- to four-family residential real estate loans that we originate. We originate a limited number of these loans for sale on a servicing-retained basis based on the circumstances of the borrower and with specific loan approval. Otherwise we consider the market conditions and our asset and liability management and liquidity demands and interest rate risk analysis on an ongoing basis in making decisions as to whether to hold these loans for investment or to sell such loans considering profitability and risk management. For the years ended December 31, 2017 and 2016, we sold $3.6 million and $10.5 million of residential real estate loans, respectively. At December 31, 2017, we serviced $39.3 million of fixed-rate, residential real estate loans that we originated and sold.

During 2016, the Company initiated a program to originate loans under the Small Business Administration (“SBA”) 7a program. These loans are secured by commercial real estate and, in accordance with the SBA 7a program, are guaranteed at 75% of the principal balance. The Company has sold the 75% guaranteed portion of the loans originated, totaling $26.4 million, retaining servicing on the loans sold, and has retained the remaining 25% of these loans.  Additionally, we are servicing one loan for $4.4 million for another financial institution.

At times, we have purchased participation interests in loans originated by other institutions. We purchased no loan participations during 2017 and $501,000 in loan participations during 2016.

Servicing fees, net were $39,000 and $30,000, respectively, during the years ended December 31, 2017 and 2016, respectively. See “– Originations, Purchases and Sales of Loans.”

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The following table shows our loan origination, purchases, sales and repayment activities for the years indicated.

	Years ended December 31,
	2017			2016
	(In thousands)
Total loans, including loans held for sale, at beginning of year	$	85,913		$	78,162
Loans originated:
Real estate loans:
One- to four-family residential		8,726			16,463
Commercial		37,579			17,254
Construction and land		10,302			3,754
Commercial business		2,430			260
Consumer		55			169
Total loans originated		59,092			37,900
Loans sold:
Real estate loans:
One- to four-family residential		(3,557	)		(10,450	)
Commercial		(17,394	)		(5,379	)
Total loans sold		(20,951	)		(15,829	)
Other:
Principal repayments		(21,511	)		(14,320	)
Net loan activity		16,630			7,751
Total loans, including loans held for sale, at end of year	$	102,543		$	85,913

Delinquencies, Classified Assets and Non-Performing Assets

Delinquency Procedures. When a borrower fails to make a required monthly payment on a residential real estate loan, after 30 days the delinquent loan is reported to the board of directors. After 60 days delinquent the loan is transferred to the appropriate collections or risk management personnel. Our policies provide that a late notice be sent when a loan is 15 days past due, and a second late notice be sent when a loan is 30 days past due. In addition, we may call the borrower when the loan is 15 days past due, and we attempt to cooperate with the borrower to determine the reason for nonpayment and to work with the borrower to establish a repayment schedule that will cure the delinquency. Once the loan is considered in default, generally at 60 days past due, a certified letter is generally sent to the borrower explaining that the entire balance of the loan is due and payable, and additional efforts are made to contact the borrower. If the borrower does not respond, we generally initiate foreclosure proceedings when the loan is 90 days past due, and at that time the loan is placed on non accrual status. If the loan is reinstated, foreclosure proceedings will be discontinued and the borrower will be permitted to continue to make payments. In certain instances, we may modify the loan or grant a limited exemption from loan payments to allow the borrower to reorganize his or her financial affairs.

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When we foreclose on real estate located in Michigan and have acquired the sheriff’s deed on the property through the foreclosure process, the loan is classified as “in redemption” pursuant to Michigan law for a period of up to one year during which time the borrower is able to redeem the subject property. As a result, during this period, the borrower is permitted to occupy the property, and we are not permitted to dispose of the property, although we classify the property as real estate owned. The real estate is recorded at estimated fair value at the date of acquisition less estimated costs to sell, and any write-down resulting from the acquisition is charged to the allowance for loan losses. Estimated fair value is based on a new appraisal which is obtained as soon as practicable. Subsequent decreases in the value of the property are charged to operations. After acquisition, and potentially during the redemption period, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell. We generally attempt to sell real estate owned as soon as possible after foreclosure. Foreclosure laws vary depending on the state in which the property is located, so our foreclosure process may vary as a result. For example, there is no redemption period in Indiana, so we become the owner of foreclosed property upon acquisition of the sheriff’s deed. The majority of our mortgage loans are secured by property located in Michigan.

Delinquent commercial real estate, construction and land, commercial business, and consumer loans are handled in a similar fashion. Our procedures for repossession and sale of consumer collateral are subject to various requirements under applicable laws, including consumer protection laws. In addition, we may determine that foreclosure and sale of such collateral would not be cost-effective for us.

Troubled Debt Restructurings. We occasionally modify loans to extend the term or make other concessions to help a borrower stay current on his or her loan and to avoid foreclosure.  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. We generally do not forgive principal or interest on loans, but may do so if it is in our best interest and increases the likelihood that we can collect the remaining principal balance. We may modify the terms of loans to lower interest rates (which may be at below market rates), to provide for fixed interest rates on loans where fixed rates are otherwise not available, to provide for longer amortization schedules, or to provide for interest-only terms. 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.

At December 31, 2017, we had 18 loans totaling $2.5 million that were classified as troubled debt restructuring. Of these, three loans totaling $173,000 were included in our non-accrual loans at such date because they were not performing in accordance with their modified terms.

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Delinquent Loans. The following table sets forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated.

	Loans Delinquent For
	30-89 Days				90 Days and Over				Totals
	Number		Amount		Number		Amount		Number		Amount
At December 31, 2017	(Dollars in thousands)
Real estate
Residential		3	$	269		-	$	-		3	$	269
Commercial		-		-		-		-		-		-
Construction and land		-		-		-		-		-		-
Commercial business		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total		3	$	269		-	$	-		3	$	269
At December 31, 2016
Real estate
Residential		4	$	194		2	$	327		6	$	521
Commercial		1		-		-		4		1		4
Construction and land		-		-		-		-		-		-
Commercial business		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
										-
Total		5	$	194		2	$	331		7	$	525

Classified Assets. Federal regulations provide that loans and other assets of lesser quality should be classified 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 “watch” with respect to residential loans and “special mention” with respect to all other loans. At December 31, 2017, we had one loan of $48,000 designated as “special mention/watch.”

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.

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In connection with the filing of our periodic regulatory reports and in accordance with our classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations. If a problem loan deteriorates in asset quality, the classification is changed to “special mention/watch,” “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.”

The following table sets forth our amounts of classified assets as of the dates indicated. Amounts shown at December 31, 2017 and 2016 include $2.4 million and $618,000 of nonperforming loans, respectively. There was no related specific valuation allowance in the allowance for loan losses for reporting periods December 31, 2017 and December 31, 2016.

	At December 31,
	2017		2016
	(In thousands)
Classified assets:
Substandard loans (1)	$	3,214	$	3,453
Doubtful loans		-		-
Loss loans		-		-
Real estate owned and other repossessed assets		-		586
Total classified assets	$	3,214	$	4,039

(1) Includes non-accruing loans that are more than 90 days past due.

Non-Performing Assets. We generally cease accruing interest on our loans when contractual payments of principal or interest have become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income is reversed. Interest received on nonaccrual loans is applied against principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Troubled debt restructurings are loans that have renegotiated loan terms to assist borrowers who are unable to meet the original terms of their loans, with modifications to loan terms including a lower interest rate, a reduction in principal, or a longer term to maturity. Troubled debt restructurings are restored to accrual status when the obligation is brought current, has performed in accordance with the revised contractual terms for six months and the ultimate collectability of the total contractual principal and interest is deemed probable.

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The following table sets forth information regarding our non-performing assets and troubled debt restructurings at the dates indicated. The information reflects net charge-offs but not specific allowances for loan losses. Troubled debt restructurings are loans where the borrower is experiencing financial difficulty and for which either a portion of interest or principal has been forgiven or an extension of term granted, or the terms of which have been modified to reflect interest rates materially less than current market rates.

	At December 31,
	2017			2016
	(Dollars in thousands)
Nonaccrual loans:
Real estate loans:
One- to four-family residential	$	1,629		$	614
Commercial		-			4
Construction and land		728			-
Commercial business		-			-
Consumer		-			-
Total		2,357			618
Accruing loans 90 days or more past due:
Real estate loans:
One- to four-family residential		-			-
Commercial		-			-
Construction and land		-			-
Commercial business		-			-
Consumer		-			-
Total		-			-
Total nonperforming loans		2,357			618
Real estate owned		-			586
Other nonperforming assets		-			-
Total nonperforming assets	$	2,357		$	1,204
Troubled debt restructurings
Real estate loans:
One- to four-family residential	$	838		$	878
Commercial		33			35
Construction and land		1,585			1,711
Commercial business		-			-
Consumer		-			-
Total (1)	$	2,456		$	2,624
Ratios:
Total non-performing loans to total loans		2.37	%		0.72	%
Total non-performing loans to total assets		1.86	%		0.60	%
Total non-performing assets to total assets		1.86	%		1.17	%
Total non-performing loans and TDRs to total loans		4.65	%		3.55	%
Total non-performing loans and TDRs to total assets		3.64	%		2.95	%
Total non-performing assets and TDRs to total assets		3.64	%		3.52	%

________________

⁽¹⁾ Includes non-accrual loans of $173,000 and $192,000 at December 31, 2017 and 2016, respectively.

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For the year ended December 31, 2017, gross interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms was $40,000. Interest income recognized on such loans for the year ended December 31, 2017 was $94,000.

Other Loans of Concern. At December 31, 2017, there were not any other loans that are not already disclosed in the non-performing assets and troubled debt restructurings table where there is information about possible credit problems of borrowers that caused management to have doubts about the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure of such loans in the future.

Allowance for Loan Losses

Analysis and Determination of the Allowance for Loan Losses. Our allowance for loan losses is the amount considered necessary to reflect probable incurred losses in our 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.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of two key elements: (1) specific allowances for identified impaired loans; and (2) a general valuation allowance on the remainder of the loan portfolio. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the entire portfolio.

We identify loans that may need to be charged off as a loss by reviewing all delinquent loans, classified loans, and other loans about which management may have concerns about collectability. For individually reviewed loans, the borrower’s inability to make payments under the terms of the loan as well as the shortfall in collateral value could result in our charging off the loan or the portion of the loan that was impaired.

Among other factors, we consider current general economic conditions, including trends in real estate values, in determining the appropriateness of the allowance for loan losses for our residential real estate portfolio. We use evidence obtained from our own loan portfolio as well as published housing data on our local markets from third party sources we believe to be reliable as a basis for assumptions about the impact of housing values.

Substantially all of our loans are secured by collateral. Loans 90 days past due and other classified loans are evaluated for impairment and general or specific allowances are established. Typically for a nonperforming real estate loan in the process of collection, the value of the underlying collateral is estimated using either the original independent appraisal if it is less than 18 months old, adjusted for current economic conditions and other factors, or a new independent appraisal, and related general or specific allowances for loan losses are adjusted on a quarterly basis. If a nonperforming real estate loan is in the process of foreclosure and/or there are serious doubts about further collectability of principal or interest, and there is uncertainty about the value of the underlying collateral, we will order a new independent appraisal if it has not already been obtained. Any shortfall would result in immediately charging off the portion of the loan that was impaired.

Specific Allowances for Identified Problem Loans. We establish a specific allowance when loans are determined to be impaired. Loss is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral less estimated selling expenses. Factors in identifying a specific problem loan include: (1) the strength of the customer’s personal or business cash flows; (2) the availability of other sources of repayment; (3) the amount due or past due; (4) the type and value of collateral; (5) the strength of our collateral position; (6) the estimated cost to sell the collateral; and (7) the borrower’s effort to cure the delinquency. In addition, for loans secured by real estate, we consider the extent of any past due and unpaid property taxes applicable to the property serving as collateral on the mortgage.

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General Valuation Allowance on the Remainder of the Loan Portfolio. We establish a general allowance for loans that are not classified as impaired to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, has not been allocated to particular problem assets. This general valuation allowance is determined by segregating the loans by loan category and assigning allowance percentages based on our historical loss experience, delinquency trends and management’s evaluation of the collectability of the loan portfolio. The allowance may be adjusted for significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary market area, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, recent loss experience in particular segments of the portfolio, duration of the current business cycle and bank regulatory examination results. The applied loss factors are re-evaluated quarterly to ensure their relevance in the current real estate environment.

The following table sets forth activity in our allowance for loan losses for the years indicated.

	At or For the Year Ended
	December 31,
	2017			2016
	(Dollars in thousands)
Balance at beginning of year	$	1,063		$	1,155
Charge-offs:
Real estate loans:
One- to four-family residential		(17	)		(133	)
Commercial		(9)			-
Construction and land		-			-
Commercial business		-			-
Consumer		-			-
Total charge-offs		(26	)		(133	)
Recoveries:
Real estate loans:
One- to four-family residential		-			-
Commercial		16			-
Construction and land		-			41
Commercial business		-			-
Consumer		-			-
Total recoveries		16			41
Net charge-offs		(10	)		(92	)
Provision for loan losses		70			-
Balance at end of year	$	1,123		$	1,063
Ratios:
Net charge-offs to average loans outstanding		0.01	%		0.12	%
Allowance for loan losses to non-performing loans at end of year		47.65	%		172.01	%
Allowance for loan losses to total loans at end of year		1.13	%		1.24	%

Both classified loans and nonperforming loans at December 31, 2017 included a loan relationship with greater than five years of seasoning, totaling $1.7 million, performing throughout 2017 and deemed adequately collateralized, but showed increasing signs of weakness.

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Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. At the dates indicated, we did not have any unallocated allowance.

	At December 31,
	2017								2016
	Amount		Percent of Allowance to Total Allowance			Percent of Loans in Category to Total Loans			Amount		Percent of Allowance to Total Allowance			Percent of Loans in Category to Total Loans
	(Dollars in thousands)
Real estate loans:
One- to four-family residential	$	540		48.1	%		41.8	%	$	656		61.7	%		45.0	%
Commercial		484		43.1	%		45.9	%		326		30.6	%		41.5	%
Construction and land		76		6.8	%		10.8	%		72		6.8	%		11.9	%
Commercial business		15		1.3	%		0.9	%		4		0.4	%		1.2	%
Consumer		8		0.7	%		0.6	%		5		0.5	%		0.4	%
Total allowance for loan loss	$	1,123		100.0	%		100.0	%	$	1,063		100.0	%		100.0	%

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Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for loan losses may not be adequate and management may determine that increases in the allowance are necessary if the quality of any portion of our loan portfolio deteriorates as a result. Furthermore, as an integral part of its examination process, the OCC will periodically review our allowance for loan losses. The OCC may require that we increase our allowance based on its judgments of information available to it at the time of its examination. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.

Investment Activities

General. Our investment policy is established by the board of directors. The objectives of the policy are to: (i) ensure adequate liquidity for loan demand and deposit fluctuations, and to allow us to alter our liquidity position to meet both day-to-day and long-term changes in assets and liabilities; (ii) manage interest rate risk in accordance with our interest rate risk policy; (iii) provide collateral for pledging requirements; (iv) maximize return on our investments; and (v) maintain a balance of high quality diversified investments to minimize risk.

Our investment committee, consisting of our President and Chief Executive Officer, our Chief Financial Officer and a board member, is responsible for implementing our investment policy, including approval of investment strategies and monitoring investment performance. The board of directors regularly reviews our investment strategies and the market value of our investment portfolio. Historically we have invested in interest-earning certificates of deposit and bank owned life insurance, while investment in securities has not been part of our core investment strategy. Subject to ongoing asset/liability management, we do not expect to emphasize long-term investments in securities in the future.

We account for investment and mortgage-backed securities in accordance with Accounting Standards Codification Topic 320, “Investments - Debt and Equity Securities.” Accounting Standards Codification 320 requires that investments be categorized as held-to maturity, trading, or available for sale. Our decision to classify certain of our securities as available-for-sale is based on our need to meet daily liquidity needs and to take advantage of profits that may occur from time to time.

Federally chartered savings institutions have authority to invest in various types of assets, including government-sponsored enterprise obligations, securities of various federal agencies, residential mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks, corporate debt instruments, debt instruments of municipalities and Fannie Mae and Freddie Mac equity securities. At December 31, 2017 and 2016, we held no investment securities in our portfolio.

Federal Home Loan Bank Stock. We hold common stock of the FHLB-Indianapolis in connection with our borrowing activities totaling $468,000 at December 31, 2017. The Federal Home Loan Bank common stock is carried at cost and classified as restricted equity securities. We may be required to purchase additional Federal Home Loan Bank stock if we increase borrowings in the future.

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Sources of Funds

General. Deposits, scheduled amortization and prepayments of loan principal, maturities and calls of securities and funds provided by operations are our primary sources of funds for use in lending, investing and for other general purposes. We also use borrowings, primarily FHLB-Indianapolis advances, to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds.

Deposits. We offer deposit products having a range of interest rates and terms. We currently offer non-interest-bearing and interest-bearing demand accounts, savings accounts, money market accounts and certificates of deposit. In 2016, the Company implemented the Kasasa program which introduced interest bearing demand accounts, and provides tiered interest rates in relation to customer activities, such as estatements and debit card swipes. Pursuant to our growth plan, we are seeking to increase our core retail customer deposits and commercial deposits.

The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. Our deposits are primarily obtained from areas surrounding our office. In order to attract and retain deposits we rely on paying competitive interest rates and providing quality service. Based on experience, we believe that our deposits are relatively stable. However, the ability to attract and maintain deposits and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions. At December 31, 2017, $39.9 million, or 39.3% of our total deposit accounts, were certificates of deposit, of which $13.7 million had maturities of one year or less.

The following tables set forth the distribution of our average deposit accounts, by account type, for the periods indicated.

	For the Years Ended December 31,
	2017								2016
	Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate
	(Dollars in thousands)
Deposit type:
Non-interest bearing demand	$	6,740		7.8	%		0.00	%	$	6,896		8.8	%		0.00	%
Interest bearing demand		22,969		26.7	%		0.82	%		19,712		25.2	%		0.22	%
Savings		7,112		8.3	%		0.04	%		7,503		9.6	%		0.04	%
Money market		9,318		10.9	%		0.17	%		10,998		14.0	%		0.14	%
Certificates of deposit		39,729		46.3	%		1.59	%		33,268		42.4	%		1.64	%
	$	85,868		100.0	%		0.98	%	$	78,377		100.0	%		0.77	%

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As of December 31, 2017, the aggregate amount of our outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $31.0 million. The following table sets forth the maturity of those certificates as of December 31, 2017.

	At
	December 31, 2017
	(In thousands)
Three months or less	$	6,671
Over three months through six months		1,193
Over six months through one year		2,011
Over one year to three years		17,516
Over three years		3,580
Total	$	30,971

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

	At December 31,
	2017		2016
	(In thousands)
INTEREST RATE:
Less than 1.00%	$	6,575	$	13,693
1.00% - 1.99%		23,145		7,566
2.00% - 2.99%		8,182		6,080
3.00% - 3.99%		1,449		2,598
4.00% - 4.99%		570		1,724
5.00% - 5.99%		-		100
Total	$	39,921	$	31,761

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The following table sets forth the amount and maturities of all our certificates of deposit by interest rate at December 31, 2017.

	At December 31, 2017
	Period to Maturity
	Less than or Equal to One Year		Over One Year to Two Years		Over Two Years to Three Years		Over Three Years		Total		Percentage of Total Certificate Accounts
	(Dollars in thousands)
INTEREST RATE:
Less than or equal to 1.00%	$	5,438	$	1,006	$	126	$	5	$	6,575		16.5	%
1.00% - 1.99%		5,955		11,336		4,274		1,580		23,145		58.0	%
2.00% - 2.99%		1,111		138		4,086		2,847		8,182		20.5	%
3.00% - 3.99%		834		615		-		-		1,449		3.6	%
4.00% - 4.99%		320		250		-		-		570		1.4	%
Total	$	13,658	$	13,345	$	8,486	$	4,432	$	39,921		100.00	%

Borrowings. We may obtain advances from the FHLB-Indianapolis upon the security of our capital stock in the FHLB-Indianapolis and certain of our mortgage loans. We utilize these advances for asset/liability management purposes and for additional funding for our operations. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. To the extent such borrowings have different terms to reprice than our deposits, they can change our interest rate risk profile. At December 31, 2017, we had $9.0 million in outstanding advances from the FHLB-Indianapolis. At December 31, 2017, based on available collateral and our ownership of FHLB stock, and based upon our internal policy, we had access to additional Federal Home Loan Bank advances of up to $11.2 million.

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The following table sets forth information concerning balances and interest rates on our FHLB-Indianapolis advances and Federal Funds Purchased at the dates and for the periods indicated.

	At or For the Years Ended December 31,
	2017			2016
	(Dollars in thousands)
Balance at end of year	$	9,027		$	11,027
Average balance during year	$	9,989		$	6,950
Maximum outstanding at any month end	$	10,027		$	11,027
Weighted average interest rate at end of year		1.76	%		1.67	%
Average interest rate during year		1.75	%		1.65	%

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SUPERVISION AND REGULATION

General

As a federal savings bank, New Buffalo Savings Bank is subject to examination and regulation by the OCC, and is also subject to examination by the FDIC. The federal system of regulation and supervision establishes a comprehensive framework of activities in which New Buffalo Savings Bank may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund, and not for the protection of security holders. Under this system of federal regulation, financial institutions are periodically examined to ensure that they satisfy applicable standards with respect to their capital adequacy, assets, management, earnings, liquidity and sensitivity to market interest rates. New Buffalo Savings Bank also is regulated to a lesser extent by the Federal Reserve Board, which governs the reserves to be maintained against deposits and other matters. New Buffalo Savings Bank must comply with consumer protection regulations issued by the Consumer Financial Protection Bureau. New Buffalo Savings Bank also is a member of and owns stock in the Federal Home Loan Bank of Indianapolis, which is one of the twelve regional banks in the Federal Home Loan Bank System. The OCC examines New Buffalo Savings Bank and prepares reports for the consideration of its Board of Directors on any operating deficiencies. New Buffalo Savings Bank’s relationship with its depositors and borrowers also is regulated to a great extent by federal law and, to a much lesser extent, state law, especially in matters concerning the ownership of deposit accounts, the form and content of New Buffalo Savings Bank’s loan documents and certain consumer protection matters.

As a savings and loan holding company, New Bancorp is subject to examination and supervision by, and be required to file certain reports with, the Federal Reserve Board. New Bancorp is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Set forth below are certain material regulatory requirements that are applicable to New Buffalo Savings Bank and New Bancorp. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on New Buffalo Savings Bank and New Bancorp. Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on New Bancorp, New Buffalo Savings Bank and their operations.

Dodd-Frank Act

The Dodd-Frank Act made significant changes to the regulatory structure for depository institutions and their holding companies. However, the Dodd-Frank Act’s changes go well beyond that and affect the lending, investments and other operations of all depository institutions. The Dodd-Frank Act required the Federal Reserve Board to set minimum capital levels for both bank holding companies and savings and loan holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital for holding companies were restricted to capital instruments that were then currently considered to be Tier 1 capital for insured depository institutions. The legislation also established a floor for capital of insured depository institutions that cannot be lower than the standards in effect upon passage, and directed the federal banking regulators to implement new leverage and capital requirements that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

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The Dodd-Frank Act created a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as New Buffalo Savings Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets are still examined for compliance by their applicable bank regulators. The new legislation also weakened the federal preemption available for national banks and federal savings associations, and gave state attorneys general the ability to enforce applicable federal consumer protection laws.

The Dodd-Frank Act broadened the base for FDIC insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital of a financial institution, rather than on total deposits. The legislation also permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2008, and noninterest-bearing transaction accounts had unlimited deposit insurance through December 31, 2012. The Dodd-Frank Act increased stockholder influence over boards of directors by requiring companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not. Further, the legislation requires that originators of securitized loans retain a percentage of the risk for transferred loans, directs the Federal Reserve Board to regulate pricing of certain debit card interchange fees and contains a number of reforms related to mortgage origination.

Many provisions of the Dodd-Frank Act involve delayed effective dates and/or require implementing regulations or have not been issued in final form. Their impact on our operations cannot yet fully be assessed. However, there is a significant possibility that the Dodd-Frank Act will result in an increased regulatory burden and compliance, operating and interest expense for New Buffalo Savings Bank and New Bancorp.

Federal Banking Regulation

Business Activities. A federal savings association derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and applicable federal regulations. Under these laws and regulations, New Buffalo Savings Bank may invest in mortgage loans secured by residential and commercial real estate, commercial business and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits. The Dodd-Frank Act authorized, for the first time, the payment of interest on commercial checking accounts. New Buffalo Savings Bank may also establish subsidiaries that may engage in certain activities not otherwise permissible for New Buffalo Savings Bank, including real estate investment and securities and insurance brokerage.

Capital Requirements. Federal regulations require savings associations to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8%, and a 4% Tier 1 capital to average assets leverage ratio. The existing capital requirements were effective January 1, 2015 and are the result of regulations implementing recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.

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As noted, the risk-based capital standards for savings associations require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income, up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. In assessing an institution’s capital adequacy, the OCC takes into consideration, not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual associations where necessary.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented at 2.5% on January 1, 2019.

At December 31, 2017, New Buffalo Savings Bank’s capital exceeded all applicable requirements.

Loans-to-One Borrower. Generally, a federal savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2017, New Buffalo Savings Bank was in compliance with the loans-to-one borrower limitations.

Qualified Thrift Lender Test. As a federal savings association, New Buffalo Savings Bank must satisfy the qualified thrift lender, or “QTL,” test. Under the QTL test, New Buffalo Savings Bank must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of the most recent 12-month period. “Portfolio assets” generally means total assets of a savings association, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings association’s business.

Alternatively, New Buffalo Savings Bank may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code of 1986, as amended.

A federal savings association that fails the qualified thrift lender test must operate under specified restrictions set forth in the Home Owners’ Loan Act. The Dodd-Frank Act made noncompliance with the QTL test subject to enforcement action for a violation of law. New Buffalo Savings Bank met the QTL test requirement for 2017.

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Capital Distributions. Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the savings association’s capital account. A federal savings association must file an application for approval of a capital distribution if:

● the total capital distributions for the applicable calendar year exceed the sum of the savings association’s net income for that year to date plus the savings association’s retained net income for the preceding two years;

● the savings association would not be at least adequately capitalized following the distribution;

● the distribution would violate any applicable statute, regulation, agreement or regulatory condition; or

● the savings association is not eligible for expedited treatment of its filings.

Even if an application is not otherwise required, every savings association that is a subsidiary of a savings and loan holding company, such as New Buffalo Savings Bank, must still file a notice with the Federal Reserve Board at least 30 days before the board of directors declares a dividend or approves a capital distribution.

A notice or application related to a capital distribution may be disapproved if:

● the federal savings association would be undercapitalized following the distribution;

● the proposed capital distribution raises safety and soundness concerns; or

● the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

In addition, the Federal Deposit Insurance Act provides that an insured depository institution may not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital requirement. A federal savings association also may not make a capital distribution that would reduce its regulatory capital below the amount required for the liquidation account established in connection with its conversion to stock form. In addition, beginning in 2016, New Buffalo Savings Bank’s ability to pay dividends will be limited if New Buffalo Savings Bank does not have the capital conservation buffer required by the new capital rules, which may limit the ability of New Bancorp to pay dividends to its stockholders. See “– Capital Requirements.”

Community Reinvestment Act and Fair Lending Laws. 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 borrowers. In connection with its examination of a federal savings association, the OCC is required to assess the federal savings association’s record of compliance with the Community Reinvestment Act. A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice.

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The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. New Buffalo Savings Bank received an “outstanding” Community Reinvestment Act rating in its most recent federal examination.

Transactions with Related Parties. A federal savings association’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with an insured depository institution such as New Buffalo Savings Bank. New Bancorp is an affiliate of New Buffalo Savings Bank because of its control of New Buffalo Savings Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements. In addition, federal regulations prohibit a savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates. Federal regulations require savings associations to maintain detailed records of all transactions with affiliates.

New Buffalo Savings Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions generally require that extensions of credit to insiders:

● be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and

● not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of New Buffalo Savings Bank’s capital.

In addition, extensions of credit in excess of certain limits must be approved by New Buffalo Savings Bank’s loan committee or board of directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

Enforcement. The OCC has primary enforcement responsibility over federal savings associations and has authority to bring enforcement action against all “institution-affiliated parties,” including directors, officers, stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings association. Formal enforcement action by the OCC may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution and the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1 million per day. The FDIC also has the authority to terminate deposit insurance or recommend to the OCC that enforcement action be taken with respect to a particular savings association. If such action is not taken, the FDIC has authority to take the action under specified circumstances.

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Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.

Prompt Corrective Action Regulations. Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to insured institutions that do not meet minimum capital requirements. For these purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.

The OCC has adopted regulations to implement the prompt corrective action legislation. The regulations were amended to incorporate the previously mentioned increased regulatory capital standards that were effective January 1, 2015. An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.

At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends, and restrictions on the acceptance of brokered deposits. Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company must guarantee the performance of that plan. Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment. An undercapitalized bank’s compliance with a capital restoration plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the OCC to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. “Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.

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At December 31, 2017, New Buffalo Savings Bank met the criteria for being considered “well capitalized.”

Insurance of Deposit Accounts. The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured financial institutions such as New Buffalo Savings Bank. Deposit accounts in New Buffalo Savings Bank are insured by the FDIC generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund.

Under the FDIC’s risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other risk factors. Rates are based on each institution’s risk category and certain specified risk adjustments. Stronger institutions pay lower rates while riskier institutions pay higher rates.

Assessments are based on an institution’s average consolidated total assets minus average tangible equity and range from 2.5 to 45 basis points.

In addition to the FDIC assessments, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the FDIC, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the year ended December 31, 2017, the annualized FICO assessment was equal to 0.55 basis points of total assets less tangible capital.

The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of New Buffalo Savings Bank. Management cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

Prohibitions Against Tying Arrangements. Federal savings associations are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

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Federal Home Loan Bank System. New Buffalo Savings Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of Indianapolis, New Buffalo Savings Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of December 31, 2017, New Buffalo Savings Bank was in compliance with this requirement. While New Buffalo Savings Bank’s ability to borrow from the Federal Home Loan Bank of Indianapolis provides an additional source of liquidity, New Buffalo Savings Bank has historically not used advances from the Federal Home Loan Bank to fund its operations.

Other Regulations

Interest and other charges collected or contracted for by New Buffalo Savings Bank are subject to state usury laws and federal laws concerning interest rates. New Buffalo Savings Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

● Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

● Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

● Home Mortgage Disclosure Act, 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, 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;

● Truth in Savings Act; and

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

In addition, the Consumer Financial Protection Bureau issues regulations and standards under these federal consumer protection laws that affect our consumer businesses. These include regulations setting “ability to repay” and “qualified mortgage” standards for residential mortgage loans and mortgage loan servicing and originator compensation standards. New Buffalo Savings Bank is evaluating recent regulations and proposals, and devotes significant compliance, legal and operational resources to compliance with consumer protection regulations and standards.

The operations of New Buffalo Savings Bank also are subject to 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;

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● 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;

● Check Clearing for the 21^st 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;

● The USA PATRIOT Act, which requires savings associations to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

● The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Holding Company Regulation

General. New Bancorp is a savings and loan holding company within the meaning of HOLA. As such, New Bancorp is registered with the Federal Reserve Board and be subject to regulations, examinations, supervision and reporting requirements applicable to savings and loan holding companies. In addition, the Federal Reserve Board has enforcement authority over New Bancorp and its non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution.

Permissible Activities. Under present law, the business activities of New Bancorp are generally limited to those activities permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act of 1956, as amended, provided certain conditions are met, or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to regulatory approval, and certain additional activities authorized by federal regulations.

Federal law prohibits a savings and loan holding company, including New Bancorp, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior regulatory approval. It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a nonsubsidiary company engaged in activities that are not closely related to banking or financial in nature, or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

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The Federal Reserve Board is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions:

● the approval of interstate supervisory acquisitions by savings and loan holding companies; and

● the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisition.

The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Capital. Savings and loan holding companies historically have not been subject to consolidated regulatory capital requirements. The Dodd-Frank Act, however, requires the Federal Reserve Board to establish for all depository institution holding companies minimum consolidated capital requirements that are as stringent as those required for the insured depository subsidiaries. Under regulations recently enacted by the Federal Reserve Board, New Bancorp will be subject to regulatory capital requirements that generally are the same as the new capital requirements for New Buffalo Savings Bank. These new capital requirements include provisions that might limit the ability of New Bancorp to pay dividends to its stockholders or repurchase its shares. See “– Federal Banking Regulation – Capital Requirements.”

Source of Strength. The Dodd-Frank Act extended the “source of strength” doctrine to savings and loan holding companies. The Federal Reserve Board has issued regulations requiring that all savings and loan holding companies serve as a source of managerial and financial strength to their subsidiary savings associations by providing capital, liquidity and other support in times of financial stress.

Dividends. The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies and savings and loan holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a savings and loan holding company to pay dividends may be restricted if a subsidiary savings association becomes undercapitalized. The policy statement also states that a savings and loan holding company should inform the Federal Reserve Board supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the savings and loan holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, as of the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies may affect the ability of New Bancorp to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

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Acquisition. 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. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve Board has found that the acquisition will not result in control of the company. A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock. Under the Change in Bank 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 competitive effects of the acquisition.

Federal Securities Laws

New Bancorp’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. New Bancorp is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

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 $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” New Bancorp 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, New Bancorp 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). An emerging growth company was able to 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. New Bancorp had 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 $1.07 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).

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Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer will be required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the Board of Directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting. We became subject to further reporting and audit requirements within the year ended December 31, 2016 under the requirements of the Sarbanes-Oxley Act. We have prepared and implemented policies, procedures and systems designed to ensure compliance with these regulations.

TAXATION

Federal Taxation

General. New Bancorp and New Buffalo Savings 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 material federal income tax matters and is not a comprehensive description of the tax rules applicable to New Bancorp and New Buffalo Savings Bank.

Method of Accounting. For federal income tax purposes, New Buffalo Savings Bank currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31^st for filing its federal income tax returns. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for bad debt reserves by savings institutions, effective for taxable years beginning after 1995.

Minimum Tax. The Internal Revenue Code of 1986, as amended, imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, less an exemption amount, referred to as “alternative minimum taxable income.” The alternative minimum tax is payable to the extent tax computed this way exceeds tax computed by applying the regular tax rates to regular taxable income. Net operating losses can, in general, offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years.  At December 31, 2017, New Buffalo Savings Bank had $22,500 of minimum tax credit carryforward. On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act, which significantly changes the existing U.S. tax laws, including a repeal of the Alternative Minimum Tax for corporations effective January 1, 2018.

Net Operating Loss Carryovers. Generally, a financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At December 31, 2017, New Buffalo Savings Bank had $12.2 million of federal net operating loss carryforwards and $1.0 million of Indiana state net operating loss carryforwards available for future use.

Capital Loss Carryovers. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. Any capital loss carryback or carryover is treated as a short-term capital loss for the year to which it is carried. As such, it is grouped with any other capital losses for the year to which carried and is used to offset any capital gains. Any undeducted loss remaining after the five year carryover period is not deductible. At December 31, 2017, New Buffalo Savings Bank had no capital loss carryover.

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Corporate Dividends. We may generally exclude from our income 100% of dividends received from New Buffalo Savings Bank as a member of the same affiliated group of corporations.

Audit of Tax Returns. New Buffalo Savings Bank’s federal income tax returns have not been audited in the most recent five-year period.

State Taxation

Companies headquartered in Michigan, such as New Bancorp, are subject to a Michigan capital tax which is an assessment of 0.29% of a company’s consolidated net capital, based on a rolling five-year average. Due to New Buffalo Savings Bank’s activity in Indiana, the Bank is also subject to the Indiana Financial Institution Tax at a 2017 tax rate of 6.5% of apportioned adjusted income. Other applicable state taxes include generally applicable sales, use and real property taxes. As a Maryland business corporation, New Bancorp is required to file annual franchise tax return with the State of Maryland.

Personnel

As of December 31, 2017, we had 33 full-time employees and 1 part-time employee. Our employees are not represented by any collective bargaining group. Management believes that we have a good working relationship with our employees.

Availability of Annual Report on Form 10-K

This Annual Report on Form 10-K is available on our website at www.newbuffalosavings.com. Information on the website is not incorporated into, and is not otherwise considered a part of, this Annual Report on Form 10-K.

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ITEM 1A.              Risk Factors

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

ITEM 1B.              Unresolved Staff Comments

None.

ITEM 2.                 Properties

At December 31, 2017, the net book value of our properties was $1.8 million. While we believe that our current facilities are adequate to meet our present and foreseeable needs, other than modest and customary repair and replacement needs, we anticipate capital expenditures will approximate $200,000 during 2018.

The following table sets forth information regarding our office properties as of December 31, 2017.

Location	Leased or Owned	Year Acquired or Leased	Net Book Value of Real Property
			(In thousands)
Main Office: (including land)
45 North Whittaker Street New Buffalo, Michigan 49117	Owned	1951	$	806
Full Service Branches: (including land)
Three Oaks Branch 6701 West US 12 Three Oaks, Michigan 49128	Owned	1996		172
Sawyer Branch 8485 Sawyer Road Sawyer, Michigan 49125	Owned	2006		728
Loan Production Offices:
Troy Loan Production Office
700 Tower Drive Suite 510
Troy, Michigan 48098	Leased	2016		—

ITEM 3.                 Legal Proceedings

At December 31, 2017, we were not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, involve amounts which management believes will not materially adversely affect our financial condition, our results of operations and our cash flows.

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

(a)     Market, Holder and Dividend Information. Our common stock is quoted on the OTC Pink Marketplace under the symbol “NWBB.” The approximate number of holders of record of New Bancorp, Inc.’s common stock as of December 31, 2017 was 66. Certain shares of New Bancorp, Inc. are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.

New Bancorp, Inc. does not currently pay cash dividends on its common stock. Dividend payments by New Bancorp, Inc. are dependent in large part on dividends it receives from New Buffalo Savings Bank, because New Bancorp, Inc. has no source of income other than dividends from New Buffalo Savings Bank, earnings from the investment of proceeds from the sale of shares of common stock retained by New Bancorp, Inc. and interest payments with respect to New Bancorp, Inc.’s loan to the Employee Stock Ownership Plan. See “Item 1. Business—Supervision and Regulation—Federal Banking Regulation—Capital Distributions.”

The following table presents high and low quarterly trading prices for our shares for the periods indicated. There were no dividends declared or paid during the periods presented.

	High Sale		Low Sale
2017:
Quarter ended December 31	$	19.30	$	16.00
Quarter ended September 30	$	18.05	$	13.92
Quarter ended June 30	$	14.25	$	13.91
Quarter ended March 31	$	14.50	$	13.65
2016:
Quarter ended December 31	$	13.79	$	13.15
Quarter ended September 30	$	13.75	$	12.84
Quarter ended June 30	$	13.50	$	12.83
Quarter ended March 31	$	13.50	$	12.10

(b)     Sales of Unregistered Securities. Not applicable.

(c)     Use of Proceeds. Not applicable

(d)     Securities Authorized for Issuance Under Equity Compensation Plans.

Plan Category	Plan Name	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity Compensation Plans Approved by Stockholders	New Bancorp, Inc 2017 Equity Incentive Plan		60,080	$	14.09		9,580
Equity compensation plans not approved by stockholders	None		−		−		−

(e)     Stock Repurchases. None.

(f)     Stock Performance Graph. Not required for smaller reporting companies.

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ITEM 6.                Selected Finanical Data

Not required for smaller reporting companies.

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

This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited financial statements, which appear beginning on page F-1 of this Annual Report. You should read the information in this section in conjunction with the business and financial information regarding New Bancorp, Inc. and New Buffalo Savings Bank provided in this Annual Report.

Overview

We conduct our business from our main office in New Buffalo, Michigan and our two additional full-service banking offices located in Three Oaks and Sawyer, Michigan, all of which are located in the western portion of Berrien County in southwestern Michigan and are part of an area popularly called “Harbor Country.” Additionally, we conduct business from our loan office in Troy, Michigan. New Buffalo is a popular resort town due to its location along the Lake Michigan shoreline and its proximity (approximately 70 miles) from downtown Chicago. Our primary market area includes the areas surrounding our three branches, which are all located along the western portion of Berrien County, and, to a lesser extent, Cass County, Michigan, both of which are located in southwestern Michigan near the border of Indiana, and La Porte County in Indiana.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate and commercial real estate loans, and, to a much lesser extent, construction and land loans, commercial business loans and consumer loans. At December 31, 2017, $41.5 million, or 41.8% of our total loan portfolio, was comprised of one- to four-family residential real estate loans including home equity lines of credit, and at this date an additional $45.6 million, or 45.9% of our total loan portfolio, was comprised of commercial real estate loans. We offer a variety of deposit accounts, including interest-bearing and noninterest-bearing demand accounts, savings and money market accounts and certificates of deposit. We utilize advances from the FHLB-Indianapolis for asset/liability management purposes. On occasion we also utilize funds from a line of credit with another bank. At December 31, 2017, we had $9.0 million in advances outstanding with the FHLB-Indianapolis.

For the years ended December 31, 2017 and 2016, we had net income (loss) of $688,000 and $(534,000), respectively. The increase in net income during 2017 was due in large part to a $844,000 increase in noninterest income, primarily gain on sale of loans along with an $891,000 increase in interest income on loans.   

Our current business strategy includes increasing our asset size, diversifying our loan portfolio to increase our non-residential lending, including primarily commercial real estate lending and increasing our non-interest income, as ways to improve our profitability in future periods.

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Business Strategy

Our principal objective is to build long-term value for our stockholders by operating a profitable community-oriented financial institution dedicated to meeting the banking needs of our customers by emphasizing personalized and efficient customer service. Highlights of our current business strategy include:

● Prudently and opportunistically growing our loans and deposits and increasing our presence in the communities we serve in Michigan and expanding further our market area in the Detroit metropolitan area.

● Continuing to originate commercial loans with the Small Business Administration (SBA) guarantee through the 7(a) program, and related sales of the SBA guaranteed portion of those loans.

● Improving our asset quality by continuing to reduce loan delinquencies and classified loans

● Expanding our banking franchise as opportunities arise through de novo branching and/or branch acquisitions, although we do not have any understandings or arrangements to establish or acquire any new branch offices.

● Continuing to generally sell our conforming, fixed-rate, one- to four-family residential real estate loans that we originate and retaining variable rate and certain fixed-rate loans.

● Continuing to generate low-cost deposits within our market area.

● Expanding our menu of deposit products and continuing to improve customer service to meet the demands of current customers and attract new customers in our market area.

● Implementing a growth strategy to improve our profitability, without compromising our conservative underwriting policies.

Critical Accounting Policies

The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with generally accepted accounting principles used in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

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The Jumpstart Our Business Startups Act of 2012 (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.

The following represent our critical accounting policies:

Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered necessary to cover inherent, but unconfirmed, credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of our most critical accounting policies.

Management performs a quarterly evaluation of the allowance for loan losses. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.

The analysis has two components, specific and general allowances. The specific percentage allowance is for unconfirmed losses related to loans that are determined to be impaired. 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. If the fair value of the loan is less than the loan’s carrying value, a charge is recorded for the difference. The general allowance, which is for loans reviewed collectively, is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes historical loss percentages and qualitative factors that are applied to the loan groups to determine the amount of the allowance for loan losses necessary for loans that are reviewed collectively. The qualitative component is critical in determining the allowance for loan losses as certain trends may indicate the need for changes to the allowance for loan losses based on factors beyond the historical loss history. Not incorporating a qualitative component could misstate the allowance for loan losses. Actual loan losses may be significantly more than the allowances we have established which could result in a material negative effect on our financial results.

Deferred Tax Assets. 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. 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. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Determining the proper valuation allowance for deferred taxes is critical in properly valuing the deferred tax asset and the related recognition of income tax expense or benefit. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. At December 31, 2017, our deferred tax asset was reduced by a $2.7 million valuation allowance, which represented full impairment of our net deferred tax assets, which we deemed more likely than not will not be realized. The decrease in the valuation allowance on deferred income taxes was due primarily to a write down of the Company’s deferred tax assets, which was attributable to the change in federal income tax rates pursuant to the Tax Cuts and Jobs Act (the “Tax Act”) enacted in December 2017.  The new Tax Act had the effect of changing the corporate tax rate to 21% and accordingly, the Company adjusted the carrying value of the deferred tax assets to reflect the new rate. The deferred tax asset will only be recognized in future periods upon the Company’s ability to realize and maintain profitable results of operations.  We did not recognize any net deferred tax assets in our financial statements at December 31, 2017 or 2016.

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Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Bank estimates the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, the Bank estimates fair value. These estimates are subjective in nature and imprecision in estimating these factors can impact the amount of gain or loss recorded. A more detailed description of the fair values measured at each level of the fair value hierarchy and the methodology utilized by the Bank can be found in Note 14 of the Financial Statements “– Disclosures About Fair Value of Assets and Liabilities.”

Comparison of Financial Condition at December 31, 2017 and 2016

Total Assets. Total assets were $126.9 million at December 31, 2017, an increase of $23.7 million, or 22.9%, compared to the $103.2 million total at December 31, 2016. The increase was primarily due to an increase in loans of $14.5 million, an increase in loans held for sale of $3.2 million and an increase in cash and cash equivalents of $5.9 million.

Loans and Loans Held for Sale. Net loans increased $14.5 million, or 17.5%, to $97.5 million at December 31, 2017 from $83.0 million at December 31, 2016. During the year ended December 31, 2017, we originated $59.1 million of loans, consisting primarily of $37.6 million of commercial real estate loans, $10.3 million of construction and land loans and $8.7 million of one-to-four family loans. During 2017, commercial real estate loans increased $9.9 million, or 27.8%, to $45.6 million at December 31, 2017; construction and land loans increased $513,000, or 5.0%, to $10.7 million; and residential real estate loans increased $2.8 million, or 7.4%, to $41.5 million at December 31, 2017, from $38.6 million at December 31, 2016. Increases in loan balances reflect our strategy to grow and diversify our loan portfolio, with an emphasis on increasing both commercial and residential loans. During 2017 the Company added staff to support our senior loan officer specializing in Small Business Administration (SBA) lending, and reallocated staffing in support of commercial lending. Commercial loan originations during 2017 included commercial real estate loans and commercial loans guaranteed by the SBA’s 7(a) and USDA programs. These SBA and USDA originations totaled $35.0 million, of which $17.4 million were subsequently sold, with servicing retained. These sales represented the 75% guaranteed portion of the SBA loans and we retained the 25% unguaranteed portion of the loans. At December 31, 2017, we serviced $26.4 million of SBA loans that had been sold and we had $8.2 million of SBA loans in our portfolio. Additionally, at December 31, 2017, we had $3.2 million of SBA loans classified as loans held for sale that we were in the process of selling. The sale of these loans was completed in the first quarter of 2018. We intend to continue with commercial lending, including our origination and sale of commercial SBA loans, in future years.

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The Bank also engages in a program to sell certain fixed-rate, 30-year term mortgage loans in the secondary market. The Bank historically sold loans on a servicing retained basis with the Federal Home Loan Bank of Indianapolis, through its mortgage purchase program, and the Federal Home Loan Mortgage Corporation (FHLMC). During 2017, the Bank also sold certain loans on a servicing released basis. The Bank sold $3.6 million of residential mortgage loans in 2017 compared to $10.4 million in 2016. Management intends to continue loan sales activity in future periods.

Foreclosed Real Estate. The Bank did not have foreclosed real estate at December 31, 2017 and had $586,000 at December 31, 2016. During the year ended December 31,2017, we sold $586,000 of foreclosed properties.

Deposits. Deposits increased $24.8 million, or 32.3%, to $101.7 million at December 31, 2017 from $76.8 million at December 31, 2016. Our core deposits increased $16.7 million, or 37.0%, to $61.8 million at December 31, 2017 from $45.1 million at December 31, 2016. Certificates of deposit increased $8.2 million, or 25.7%, to $39.9 million at December 31, 2017 compared to December 31, 2016. During 2016, the Company implemented a strategy designed to promote growth in core deposits. The Company began to offer demand and savings accounts using the Kasasa program. The Kasasa program introduced interest bearing demand accounts, and provide tiered interest rates in relation to customer activities, such as estatements and debit card swipes. While the Bank is continually seeking growth in deposits, with an emphasis on core deposits, management has also elected to add certain listing service certificates of deposit to fund loan growth. These listing service deposits in certificates totaled $11.7 million and $9.2 million at December 31, 2017 and 2016, respectively. At December 31, 2017 maturities of these accounts ranged from less than one year to greater than three years and the average cost was 1.59%.   Additionally, at December 31, 2017 the Company held $3.0 million of brokered certificates of deposit with maturities ranging from less than one year to 2 years at an average cost of 1.67% compared to $3.3 million as of December 31, 2016 at an average cost of 1.55%. An additional listing service was added during the year ended December 31, 2017 for money market accounts totaling $8.0 million.  Management intends to continue to focus its efforts on increasing core deposits, with a special emphasis on growth in consumer and business demand deposits.

Borrowings. Borrowings totaled $9.0 million at December 31, 2017 compared to $11.0 million at December 31, 2016. At December 31, 2017, all of our borrowings were comprised of Federal Home Loan Bank advances. Management has elected to utilize borrowings to take advantage of the low-cost source of funding and to better match the terms of new loans with advances during the low interest rate environment. The aggregate cost of these borrowings was 1.76% at December 31, 2017, compared to the Bank’s cost of deposits of 1.67% at that date.

Shareholders’ Equity. Shareholders’ equity increased $783,000, or 5.4%, to $15.4 million at December 31, 2017 from  December 31, 2016. The increase was largely due to the net income of $688,000 during the year ended December 31, 2017.

Comparison of Operating Results for the Years Ended December 31, 2017 and 2016

General. The Company reported net income for the year ended December 31, 2017 of $688,000, compared to a net loss of $534,000 for the year ended December 31, 2016, an increase in net income of $1.2 million, or 228.9%. The increase in net income was primarily due to a $714,000 increase in net interest income and $844,000 increase in noninterest income, which was partially offset by a $266,000 increase in noninterest expense.

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Interest Income. Interest income increased $1.0 million, or 29.4%, to $4.4 million for the year ended December 31, 2017 from $3.4 million for the year ended December 31, 2016. This increase was primarily attributable to a $891,000, or 26.5 %, increase in interest on loans receivable, and a $117,000, or 191.8%, increase in interest on other interest-bearing deposits. The average balance of loans during 2017 increased $13.8 million, or 17.6%, from the balance for 2016, while the average yield on loans increased 33 basis points to 4.62% for 2017 from 4.29% for 2016. The increase in average yield on loans was due primarily to the growth in the commercial loan portfolio including SBA loans and the overall increase in interest rates in the economy. The average balance of other interest-bearing deposits, including certificates of deposit in other banks, increased $3.7 million to $16.1 million for the year ended December 31, 2017 compared to the year ended December 31, 2016, while the average yield increased by 62 basis points to 1.11% for the year ended December 31, 2017 from 0.49% for the year ended December 31, 2016.

Interest Expense. Total interest expense increased $294,000, or 40.8%, to $1.0 million for the year ended December 31, 2017 from $721,000 for the year ended December 31, 2016. Interest expense on deposit accounts increased $234,000, or 38.6%, to $840,000 for the year ended December 31, 2017 from $606,000 for the year ended December 31, 2016. The increase was primarily due to an increase of $7.6 million, or 10.7%, in the average balance of deposits, to $79.1 million for the year ended December 31, 2017 from $71.5 million for the year ended December 31, 2016, resulting in an increase of 21 basis points in the average cost of interest-bearing deposits to 1.06% for the year ended December 31, 2017 from 0.85% for the year ended December 31, 2016. Interest expense on borrowings increased $60,000, or 52.2%, to $175,000 for the year ended December 31, 2017, from $115,000 for the year ended December 31, 2016. The average balance of borrowings increased $3.0 million to $10.0 million for the year ended December 31, 2017 compared to the year ended December 31, 2016, while the average cost of these borrowings increased by 10 basis points to 1.75% in 2017 from 1.65% in 2016. During 2016 management increased outstanding borrowings as a source of lower-cost funding, which occurred late in the year which accommodates for the increased average borrowings.

Net Interest Income. Net interest income increased $714,000 or 26.4%, to $3.4 million for the year ended December 31, 2017 compared to the year ended December 31, 2016. The increase is reflective of an increase in the average amount of net interest earning assets to $19.0 million for the year ended December 31, 2017 from $2.8 million for the year ended December 31, 2016. Our net interest margin increased to 3.16% for the year ended December 31, 2017 from 2.98% for the year ended December 31, 2016. The interest rate spread and net interest margin were impacted by a rising interest rate environment.

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies—Allowance for Loan Losses,” we recorded a provision for loan loss of $70,000 for the year ended December 31, 2017 due primarily to the overall growth of the loan portfolio. The allowance for loan losses was $1.1 million, or 1.13% of total loans, at December 31, 2017, compared to $1.1 million, or 1.24% of total loans, at December 31, 2016. The determination to record a provision for loan losses in 2017 was due primarily to commercial loan growth, although the commercial portfolio does not have a history of nonperformance and delinquent loans. Total nonperforming loans were $2.4 million at December 31, 2017, compared to $618,000 at December 31, 2016. Classified loans were $3.2 million at December 31, 2017, compared to $3.5 million at December 31, 2016, and total loans past due greater than 30 days were $269,000 and $525,000 at those respective dates. Both classified loans and nonperforming loans at December 31, 2017 included a loan relationship with greater than five years of seasoning, totaling $1.7 million, performing throughout 2017 and deemed adequately collateralized, but showed increasing signs of weakness.  Net charge-offs totaled $10,000 for the year ended December 31, 2017, compared to $92,000 of net charge-offs for the year ended December 31, 2016. During 2017, management elected to charge-off that portion of the overall allowance for loan losses that had been specifically allocated to certain impaired loans at December 31, 2016. As a percentage of nonperforming loans, the allowance for loan losses was 47.7% at December 31, 2017 compared to 172.01% at December 31, 2016. 

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The allowance for loan losses reflects the estimate we believe to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at December 31, 2017 and 2016. While we believe the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact our financial condition and results of operations. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.

Non-Interest Income. Non-interest income increased $844,000, or 68.7%, to $2.1 million for the year ended December 31, 2017 from $1.2 million for the year ended December 31, 2016. The increase was primarily due to a $773,000 increase in gains on sales of loans and an $83,000 increase in fee income. The Bank recognized a $15,000 gain on sales of foreclosed real estate in 2017 compared to a $21,000 gain on such sales in 2016. Gains on sales of loans amounted to $1.5 million in 2017, an increase of $773,000, or 112.2%, compared to $689,000 in 2016. The increase in gain on sales of loans was due primarily to a $4.7 million increase in sales volume year-to-year, including an increase in SBA loans sold of $17.4 million which was partially offset by a decline in sales of residential mortgage loans of $7.3 million.  The increase in service charges and fees was primarily due to the fee income associated with SBA loans.

Non-Interest Expense. Non-interest expense increased $266,000, or 6.0%, to $4.7 million for the year ended December 31, 2017 compared to year ended December 31, 2016. The increase was due primarily to a $166,000, or 6.8%, increase in salaries and employee benefits, a $77,000, or 17.5%, increase in data processing expenses. The increase in salaries and employee benefits was due primarily to the addition of support staff for commercial lending with a new SBA assistant position and a new credit analyst position. Stock-based compensation expense increased due to the awards of restricted shares and stock options grants, along with an increase in expense of the ESOP plan due to increase in the fair value of the shares year to year. The increase in data processing expenses was due primarily to increased expenses associated with information technology security.

Non-interest expense can be expected to increase because of compensation costs related to stock-based benefit plans adopted in June 2017, with a full year of expenses allocated during 2018.

Federal Income Taxes. The Company did not record a federal income tax benefit in either of the years ended December 31, 2017 and 2016. The federal income tax benefit was reduced by the full impairment valuation allowance recorded on the Company’s deferred tax assets in both 2017 and 2016. Management evaluated the deferred tax asset based upon a projection of future operating results and determined that a full impairment valuation allowance was required at both December 31, 2017 and 2016. The Company had a total valuation allowance on its deferred tax assets of $2.7 million and $4.5 million at December 31, 2017 and 2016, respectively. The decrease in the valuation allowance on deferred income taxes was due primarily to a write down of the Company’s deferred tax assets, which was attributable to the change in federal income tax rates pursuant to the Tax Cuts and Jobs Act (the “Tax Act”) enacted in December 2017.  The new Tax Act had the effect of changing the corporate tax rate to 21% and accordingly, the Company adjusted the carrying value of the deferred tax assets to reflect the new rate. The deferred tax asset will only be recognized in future periods upon the Company’s ability to realize and maintain profitable results of operations.

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Average Balances and Yields.The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of net deferred costs, discounts and premiums that are accreted to interest income.

	For the year ended December 31,
	2017								2016
	Average Outstanding Balance			Interest		Yield/ Rate			Average Outstanding Balance			Interest		Yield/ Rate
Interest-earning assets:
Loans	$	92,095		$	4,254		4.62	%	$	78,311		$	3,363		4.29	%
Other interest-earning assets		16,067			178		1.11	%		12,415			61		0.49	%
Total interest-earning assets		108,162			4,432		4.10	%		90,726			3,424		3.77	%
Non-interest-earning assets		12,070								10,088
Allowance for loan losses		(1,082	)							(1,150	)
Total assets	$	119,150							$	99,664
Interest-bearing liabilities:
Interest-bearing demand	$	22,969			189		0.82	%	$	19,712			44		0.22	%
Money market accounts		9,318			16		0.17	%		10,998			15		0.14	%
Savings accounts		7,112			3		0.04	%		7,503			3		0.04	%
Certificates of deposit		39,729			632		1.59	%		33,268			544		1.64	%
Total deposits		79,128			840		1.06	%		71,481			606		0.85	%
Borrowings		9,989			175		1.75	%		6,950			115		1.65	%
Total interest-bearing liabilities		89,117			1,015		1.14	%		78,431			721		0.92	%
Non-interest-bearing liabilities		15,043								6,324
Total liabilities		104,160								84,755
Equity		14,990								14,909
Total liabilities and equity	$	119,150							$	99,664
Net interest income				$	3,417							$	2,703
Net interest rate spread (1)							2.96	%							2.85	%
Net interest-earning assets (2)	$	19,045							$	2,800
Net interest margin (3)							3.16	%							2.98	%
Average interest-earning assets to interest-bearing liabilities		121.37	%							103.57	%

_________________________

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

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

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

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Rate/Volume Analysis

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

	Years Ended December 31,
	2017 vs. 2016
							Total
	Increase (decrease) due to						Increase
	Volume			Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	624		$	267		$	891
Other interest-earning assets		22			95			117
Total interest-earning assets		646			362			1,708
Interest-bearing liabilities:
Interest-bearing demand		8			137			145
Money market accounts		(2	)		3			1
Savings accounts		-			-			-
Certificates of deposit		104			(16	)		88
Total deposits		110			124			234
Borrowings		53			7			60
Total interest-bearing liabilities		163			131			294
Change in net interest income	$	483		$	231		$	714

Management of Market Risk

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset-Liability Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors.

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Our asset/liability management strategy attempts to manage the impact of changes in interest rates on net interest income, our primary source of earnings. Among the techniques we use to manage interest rate risk are:

● originating commercial real estate and SBA loans, which tend to have shorter terms and higher interest rates than one- to four-family residential real estate loans, and which generate customer relationships that can result in larger non-interest bearing checking accounts;

● generally selling our conforming fixed-rate one- to four-family residential real estate loans that we originate and retaining certain fixed-rate loans and the majority of the adjustable-rate residential real estate loans that we originate, subject to market conditions and periodic review of our asset/liability management needs;

● lengthening the weighted average maturity of our liabilities through retail deposit pricing strategies and through longer-term wholesale funding sources such as fixed-rate advances from the FHLB-Indianapolis; and

● increasing non-interest income as a percentage of total income to decrease our reliance on net interest margin and interest rate spread.

Our board of directors is responsible for the review and oversight of our Asset/Liability Committee, which is comprised of our executive management team and other essential operational staff. This committee is charged with developing and implementing an asset/liability management plan, and meets at least quarterly to review pricing and liquidity needs and assess our interest rate risk. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. In addition, we regularly perform a “gap analysis” of the discrepancy between the repricing of our assets and liabilities. We also engage a third party asset/liability advisor, who meets with our Asset/Liability Committee on a quarterly basis and with our board of directors at least annually.

Net Portfolio Value. The Office of the Comptroller of Currency requires the computation of amounts by which the net present value of an institution’s cash flow from assets, liabilities and off-balance sheet items (the institution’s net portfolio value or “NPV”) would change in the event of a range of assumed changes in market interest rates. The model utilized by New Buffalo Savings Bank is a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance-sheet contract under the assumption of instantaneous rate increases or decreases of 100 to 300 basis points in 100 basis point increments. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change In Rates” column below.

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The table below sets forth, as of December 31, 2017, the calculation of the estimated changes in our net portfolio value that would result from the designated immediate changes in the United States Treasury yield curve.

									EVE as a Percentage of Present Value of Assets (3)
Change in Interest	Estimated EVE		Estimated Increase (Decrease) in EVE						EVE			Increase (Decrease)
Rates (basis points) (1)	(2)		Amount			Percent			Ratio (4)			(basis points)
(Dollars in thousands)
+300	$	16,675	$	526			3.30	%		13.60	%		(15	)
+200		16,533		384			2.40	%		13.40	%		(10	)
+100		16,355		206			1.30	%		13.10	%		(7	)
—		16,149		—			—			12.80	%		—
-100		15,448		(701	)		(4.30)	%		12.10	%		(7	)

(1) Assumes an immediate uniform change in interest rates at all maturities.

(2) EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3) Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4) EVE Ratio represents EVE divided by the present value of assets.

The table above indicates that at December 31, 2017, in the event of a 200 basis point increase in interest rates, we would experience a 2.4% increase in net portfolio value. In the event of a 100 basis point decrease in interest rates, we would experience a 4.3% decrease in net portfolio value.

Certain shortcomings are inherent in the methodologies used in determining interest rate risk through changes in net portfolio value. Modeling changes in net portfolio value require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net portfolio value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net portfolio value tables provide 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 and will differ from actual results.

Liquidity and Capital Resources

Our primary sources of funds are deposits, principal and interest payments on loans, proceeds from sale of loans and advances from the FHLB-Indianapolis. While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

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Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $208,000 for the year ended December 31, 2017. Net cash used in investing activities, which consists primarily of net change in loans receivable and proceeds from sale of foreclosed assets was $17.1 million for the year ended December 31, 2017. Net cash provided by financing activities, which is comprised of net change in deposits and net changes in borrowings, was $22.8 million for the year ended December 31, 2017.

At December 31, 2017, we exceeded all of our regulatory capital requirements with a Tier 1 leverage capital level of $14.0 million, or 11.3% of adjusted average assets, which is above the required level of $4.9 million or 4.0%; total risk-based capital of $15.1 million, or 16.3% of risk-weighted assets, which is above the required level of $7.4 million, or 8.0%; and common equity Tier 1 capital of $14.0 million, or 15.1% of risk-weighted assets, which is above the required level of $4.2 million, or 4.5% of risk-weighted assets. Accordingly, New Buffalo Savings Bank was categorized as well capitalized at December 31, 2017. Management is not aware of any conditions or events since the most recent notification that would change our category.

At December 31, 2017, we had outstanding commitments to originate loans totaling $1.3 million. Commitments under available lines of credit and undisbursed construction loans totaled $10.5 million and $498,000, respectively. We anticipate that we will have sufficient funds available to meet our current loan origination commitments. Certificates of deposit that are scheduled to mature in less than one year from December 31, 2017 totaled $13.7 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize FHLB-Indianapolis advances or raise

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with U.S. 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, lines of credit and standby letters of credit.

We also generally sell our conforming, fixed-rate one- to four-family residential real estate loans in transactions with the FHLB-Indianapolis, through its mortgage purchase program, and the Federal Home Loan Mortgage Corporation (FHLMC). In 2017, we sold $2.4 million of these loans. Subject to our ongoing interest rate risk analysis, we generally intend to continue to sell our conforming, fixed-rate one- to four-family residential real estate loans that we originate.  Under specific circumstances we may be obligated to repurchase certain loans as required by the sales agreement. Based on our historical experience, our reserve at December 31, 2017 was deemed immaterial.

For information about our loan commitments, unused lines of credit and standby letters of credit, see Note 14 of the Notes to our Consolidated Financial Statements beginning on page F-1 of this Annual Report.

We have not engaged in any other off-balance-sheet transactions in the normal course of our lending activities.

Recent Accounting Pronouncements

For a discussion of the impact of recent accounting pronouncements, see Note 16 of the notes to our financial statements beginning on page F-1 of this Annual Report.

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Impact of Inflation and Changing Prices

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

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ITEM 7A.             Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies.

ITEM 8.                Financial Statements and Supplementary Data

The Company’s Consolidated Financial Statements are presented in this Annual Report on Form 10-K beginning at page F-1.

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

Information concerning change in our accountants is incorporated herein by reference from the Proxy Statement, specifically the section captioned “Change in Accountants.”

ITEM 9A.             Controls and Procedures

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

During the year ended December 31, 2017, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

(b)     Management’s annual 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.

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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 December 31, 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 December 31, 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 report was 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.

ITEM 9B.              Other Information

Date of Annual Meeting of Stockholders.

The 2018 Annual Meeting of Stockholders of New Bancorp, Inc. will be held on Tuesday, June 5, 2018 at 9:00 at its main office located at 45 North Whitaker Street, New Buffalo, Michigan.

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PART III

ITEM 10.              Directors, Executive Officers and Corporate Governance

New Bancorp, Inc. has adopted a Code of Ethics that applies to New Bancorp, Inc.’s principal executive officer, principal financial officer and all other employees and directors. The Code of Ethics is available on our website at www.newbuffalosavings.com.

Information concerning directors and executive officers of New Bancorp, Inc. is incorporated herein by reference from the Proxy Statement, specifically the section captioned “Proposal I – Election of Directors.”

ITEM 11.              Executive Compensation

Information concerning executive compensation is incorporated herein by reference from the Proxy Statement, specifically the section captioned “Executive Compensation.”

ITEM 12.              Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information concerning security ownership of certain owners and management is incorporated herein by reference from the Proxy Statement, specifically the section captioned “Voting Securities and Principal Holder Thereof.”

ITEM 13.              Certain Relationships and Related Transactions and Director Independence

Information concerning relationships, transactions and director independence is incorporated herein by reference from the Proxy Statement, specifically the section captioned “Transactions with Certain Related Persons” and “Board Independence.”

ITEM 14.              Principal Accountant Fees and Services

Information concerning principal accountant fees and services is incorporated herein by reference from the Proxy Statement, specifically the section captioned “Proposal II – Ratification of Appointment of Auditor.”

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PART IV

ITEM 15.               Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

The documents filed as a part of this Form 10-K are:

(A) Report of Independent Registered Public Accounting Firm;

(B) Consolidated Balance Sheets - December 31, 2017 and 2016;

(C) Consolidated Statements of Operations for the years ended December 31, 2017 and 2016;

(D) Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2017 and 2016;

(E) Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016

(F) Notes to Consolidated Financial Statements.

(a)(2) Financial Statement Schedules

All financial statement schedules have been omitted as the required information is inapplicable or has been included in the Notes to Consolidated Financial Statements.

(a)(3) Exhibits

3.1 Articles of Incorporation of New Bancorp, Inc.*

3.2 Bylaws of New Bancorp, Inc.*

4 Form of Common Stock Certificate of New Bancorp, Inc.*

10.1 Employment Agreement of Richard C. Sauerman*

10.3 Salary Continuation Agreement with Richard C. Sauerman*

10.4 Multiple Employer Defined Benefit Plan*

10.5	2017 Equity Incentive Plan**
21	Subsidiaries

23.1 Consent of Independent Registered Public Accounting Firm

31.1 Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

*	Incorporated by reference to the Registration Statement on Form S-1 (file no. 333-204842), initially filed June 9, 2015.
**	Incorporated by reference to the definitive proxy statement for the 2017 Annual Meeting filed on April 26, 2017.

ITEM 16.              Form 10-K Summary

None

59

New Bancorp, Inc.

Report of Independent Registered Public Accounting Firm and Consolidated Financial Statements

December 31, 2017 and 2016

New Bancorp, Inc.

December 31, 2017 and 2016

Contents
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements
Balance Sheets	F-3
Statements of Operations	F-4
Statements of Changes in Shareholders’ Equity	F-5
Statements of Cash Flows	F-6
Notes to Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Management
New Bancorp, Inc.
New Buffalo, Michigan

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of New Bancorp, Inc. (the "Company") as of December 31, 2017 and 2016, the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the years then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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 included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BKD, LLP

BKD, LLP

We have served as the Company's auditor since 2014.

Indianapolis, Indiana

April 2, 2018

F-2

New Bancorp, Inc.

Consolidated Balance Sheets

December 31, 2017 and 2016

(In thousands, except share data)

	December 31,
	2017			2016
Assets
Cash and due from banks	$	1,085		$	1,419
Interest-earning demand deposits		2,997			8,438
Federal funds sold		11,711			-
Cash and cash equivalents		15,793			9,857
Interest-earning time deposits in banks		744			992
Loans held for sale		3,234			-
Loans, net of allowance for loan losses of $1,123 and $1,063 at December 31, 2017 and 2016, respectively		97,512			83,008
Premises and equipment		1,894			1,934
Federal Home Loan Bank stock		468			468
Foreclosed real estate held for sale, net		-			586
Accrued interest receivable		267			203
Bank owned life insurance		5,589			5,418
Servicing rights		937			483
Prepaid expenses and other assets		441			269
Total assets	$	126,879		$	103,218
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand	$	37,025		$	28,676
Savings and money market accounts		24,742			16,404
Time		39,921			31,761
Total deposits		101,688			76,841
Federal funds purchased		-			1,000
Borrowings		9,027			10,027
Other liabilities		812			781
Total liabilities		111,527			88,649
Commitments and Contingencies		-			-
Redeemable common stock held by Employee Stock Ownership Plan (ESOP)		160			73
Shareholders' Equity
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued		-			-
Common stock, $0.01 par value, 4,000,000 shares authorized, 719,531 and 696,600 shares issued and outstanding		7			7
Additional paid-in capital		5,827			5,761
Unearned ESOP shares		(472	)		(501	)
Retained earnings		9,990			9,302
Total shareholders' equity		15,352			14,569
Less maximum cash obligation related to ESOP shares		(160	)		(73	)
Total shareholders' equity less maximum cash obligation related to ESOP shares		15,192			14,496
Total liabilities and shareholders' equity	$	126,879		$	103,218

See Notes to Consolidated Financial Statements

F-3

New Bancorp, Inc.

Consolidated Statements of Operations

Years Ended December 31, 2017 and 2016

(In thousands, except per share data)

	Years Ended December 31,
	2017		2016
Interest Income
Loans	$	4,254	$	3,363
Interest-bearing deposits		178		61
Total interest income		4,432		3,424
Interest Expense
Deposits		840		606
Borrowings		175		115
Total interest expense		1,015		721
Net Interest Income		3,417		2,703
Provision for Loan Losses		70		-
Net Interest Income After Provision for Loan Losses		3,347		2,703
Noninterest Income
Service charges and fees		365		282
Gain on sale of loans		1,462		689
Gain on sale of foreclosed real estate, net		15		21
Income from bank owned life insurance		171		171
Loan servicing fees, net		39		30
Other operating		22		37
Total noninterest income		2,074		1,230
Noninterest Expense
Salaries and employee benefits		2,615		2,449
Occupancy and equipment		396		411
Data processing fees		516		439
Franchise taxes		39		42
FDIC insurance premiums		45		54
Insurance premiums		39		45
Professional services		450		395
Impairment losses and expenses of foreclosed real estate		15		18
Loss on disposals of premises and equipment		25		-
Other		593		614
Total noninterest expense		4,733		4,467
Net Income (Loss)	$	688	$	(534	)
Earnings (loss) per share - basic	$	1.06	$	(0.83	)
Earnings (loss) per share - diluted	$	1.06	$	(0.83	)
Weighted average shares basic		647,472		644,247
Weighted average shares diluted		650,340		644,247

See Notes to Consolidated Financial Statements

F-4

New Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

Years Ended December 31, 2017 and 2016

(In thousands)

											Maximum Cash
			Additional		Unearned						Obligation
	Common		Paid-in		ESOP			Retained			Related to
	Stock		Capital		Shares			Earnings			ESOP Shares			Total
Balance at January 1, 2016	$	7	$	5,754	$	(523	)	$	9,836		$	(44	)	$	15,030
ESOP shares earned		-		7		22			-			-			29
Change related to ESOP shares		-		-		-			-			(29	)		(29	)
Net loss for the year ended December 31, 2016		-		-		-			(534	)		-			(534	)
Balance at December 31, 2016		7		5,761		(501	)		9,302			(73	)		14,496
ESOP shares earned		-		16		29			-			-			45
Compensation expense related to restricted shares				32											32
Compensation expense related to stock options				18											18
Change related to ESOP shares		-		-		-			-			(87	)		(87	)
Net income for the year ended December 31, 2017		-		-		-			688			-			688
Balance at December 31, 2017	$	7	$	5,827	$	(472	)	$	9,990		$	(160	)	$	15,192

See Notes to Consolidated Financial Statements

F-5

New Bancorp, Inc.

Consolidated Statements of Cash Flows

December 31, 2017 and 2016

(In thousands)

	Years Ended December 31,
	2017			2016
Operating Activities
Net income (loss)	$	688		$	(534	)
Items not requiring (providing) cash
Depreciation and amortization		258			270
Provision for loan losses		70			-
Deferred loan origination fees, costs, premiums, discounts, net		-			1
Gain on sale of loans		(1,462)			(689	)
Proceeds from sales of loans originated for sale		21,876			16,425
Loans originated for sale		(20,951	)		(15,829	)
Gain on sale of foreclosed real estate		(15	)		(21	)
Loss on disposal of premises and equipment		25			-
ESOP shares earned		45			29
Compensation expense related to stock benefit plans		50
Increase in cash surrender value of life insurance		(171	)		(171	)
Changes in
Accrued interest receivable		(64	)		14
Prepaid expenses and other assets		(172	)		(119	)
Other liabilities		31			3
Net cash provided by (used in) operating activities		208			(621	)
Investing Activities
Net change in loans		(17,808	)		(7,178	)
Net change in interest-earning time deposits		248			-
Purchase of premises and equipment		(160	)		(95	)
Proceeds from sale of foreclosed assets		601			266
Net cash used in investing activities		(17,119	)		(7,007	)
Financing Activities
Net increase in deposits		24,847			4,575
Net change in federal funds purchased		(1,000	)		1,000
Proceeds from borrowings		-			3,100
Repayment of borrowings		(1,000	)		-
Net cash provided by financing activities		22,847			8,675
Increase in Cash and Cash Equivalents		5,936			1,047
Cash and Cash Equivalents, Beginning of Year		9,857			8,810
Cash and Cash Equivalents, End of Year	$	15,793		$	9,857
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest on deposits and borrowings	$	1,023		$	715
Supplemental Disclosure of Noncash Investing Activities
Transfers from loans to real estate acquired through foreclosure	$	-		$	586
Transfers from loans to loans held for sale	$	3,234		$	-

See Notes to Consolidated Financial Statements

F-6

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Note 1:     Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

New Bancorp, Inc. was formed to serve as the stock holding company for New Buffalo Savings Bank (the “Bank”) upon completion of its mutual-to-stock conversion. The conversion was effective October 19, 2015. New Bancorp, Inc. issued 696,600 shares at an offering price of $10.00 per share.

The Bank conducts a general banking business in southwestern Michigan which primarily consists of attracting deposits from the general public and applying those funds to the origination of loans for residential, consumer and nonresidential purposes.

Principles of Consolidation

The consolidated financial statements include New Bancorp, Inc. and its wholly-owned subsidiary the Bank, together referred to as the “Company.” Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

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

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, mortgage servicing rights, valuation of deferred tax assets and fair values of financial instruments.

Reclassifications

Certain reclassifications have been made to the December 31, 2017 financial statements to conform to the December 31, 2016 financial statement presentation. These reclassifications had no effect on our results of operations

Cash and Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2017, the Company’s cash accounts exceeded federally insured limits by approximately $11.6 million. Additionally, approximately $1.9 million of cash in total is held by the Federal Home Loan Bank and Federal Reserve Bank as of December 31, 2017, which is not federally insured.

F-7

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Interest-earning Deposits in Banks

Interest-earning time deposits in banks mature within the year 2018 and are carried at cost.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses and any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past-due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

F-8

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any 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. The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. 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. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Bank’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

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 loan-by-loan basis for commercial and construction loans 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.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

F-9

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of depreciable assets is 39 years for buildings, 10 years for building improvements, and three to seven years for furniture, fixtures and equipment. Maintenance and repairs are expensed and major improvements are capitalized.

Federal Home Loan Bank Stock

Federal Home Loan Bank (“FHLB”) stock is a required investment for institutions that are members of the FHLB system. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Foreclosed Real Estate Held for Sale

Real estate acquired through, or in lieu of, loan foreclosure is held for sale and is initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets. There were no loans in the process of foreclosure at December 31, 2017. Foreclosed real estate held for sale consisted of residential real estate at December 31, 2016.

Servicing Rights

Servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company subsequently measures the servicing asset using either the fair value or the amortization method. The Company has elected to initially and subsequently measure the servicing rights for loans sold with servicing retained loans using 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 at each reporting date.

Fair value is based on market prices for comparable servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to noninterest income.

F-10

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche. The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment. Fair value in excess of the carrying amount of servicing assets for that stratum is not recognized.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

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 —put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

F-11

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company has established a full valuation allowance for its net deferred tax asset as of December 31, 2017 and 2016. See Note 9, Income Taxes, for further information.

Bank Owned Life Insurance

The cash surrender value of bank owned life insurance policies represents the value of life insurance policies on certain current and former officers of the Company for which the Company is the beneficiary. The Company accounts for these assets using the cash surrender value method in determining the carrying value of the insurance policies.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other comprehensive income. The Company had no elements of other comprehensive income at December 31, 2017 and 2016.

Income (Loss) Per Share

Basic income (loss) per share excludes dilution and is calculated by dividing net income (loss) applicable to common stock by the weighted-average number of shares of common stock outstanding during the period, less unallocated Employee Stock Ownership Plan (the “ESOP”) shares.

Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding if all potentially dilutive common stock equivalents were issued during the year, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options and restricted stock awards and are determined using the treasury stock method.

Unallocated common shares held by the Company’s ESOP are shown as a reduction in shareholders’ equity and are excluded from weighted-average common shares outstanding for both basic and diluted earnings (loss) per share calculations until they are committed to be released.

Emerging Growth Company Critical Accounting Policy Disclosure

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 ( the “JOBS Act”). We are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. 

F-12

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

As an “emerging growth company” we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Note 2:     Restriction on Cash and Due From Banks

The Company is generally required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The Company had no reserve balance requirement at December 31, 2017.

Note 3:     Securities

The Company had no investment securities at December 31, 2017 and 2016.

The Company had no sales of investment securities during the years ended December 31, 2017 and 2016.

Note 4:     Loans and Allowance for Loan Losses

Classes of loans at December 31, 2017 and 2016 include:

	2017			2016
	(In thousands)
Real estate loans
Residential	$	41,474		$	38,636
Commercial		45,623			35,709
Construction and land		10,746			10,233
Commercial business		909			1,000
Consumer and other		557			335
Total loans		99,309			85,913
Less:
Net deferred loan fees, premiums and discounts		(176	)		(70	)
Undisbursed loans in process		(498	)		(1,772	)
Allowance for loan losses		(1,123	)		(1,063	)
Net loans	$	97,512		$	83,008

F-13

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The risk characteristics applicable to each segment of the loan portfolio are described below:

Residential 1-4 Family and Equity Lines of Credit Real Estate: The residential 1-4 family and home equity real estate loans are generally secured by owner-occupied 1-4 family residences. The Company’s portfolio of home equity loans totaled $4.8 million and $4.7 million, at December 31, 2017 and 2016, respectively, the majority of which were secured by first liens, or by second liens on properties where the Company also holds the first lien. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Company’s market areas that might impact either property values or a borrower’s personal income. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Commercial Real Estate: Commercial real estate loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economy in the Company’s market area.

During 2016, the Company initiated a program to originate loans under the Small Business Administration (“SBA”) 7a program. These loans are secured by commercial real estate and, in accordance with the SBA 7a program, are guaranteed at 75% of the principal balance. The Company has sold the 75% guaranteed portion of the loans originated, retaining servicing on the loans sold, and has retained the remaining 25% of these loans. In addition, during 2017 the Company originated a loan under the United States Department of Agriculture (“USDA”) program, which guarantees 80% of the principal balance.

Construction and Land: Construction and land loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economy in the Company’s market area.

Commercial Business: The commercial business loan portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

Consumer: The consumer loan portfolio consists of various term and line of credit loans such as automobile loans and loans for other personal purposes. Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Company’s market area) and the creditworthiness of a borrower.

F-14

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The following tables present by portfolio segment, the activity in the allowance for loan losses for the years ended December 31, 2017 and 2016, and the recorded investment in loans and impairment method as of December 31, 2017 and 2016:

	December 31, 2017
	Real Estate
							Construction		Commercial
	Residential			Commercial			and Land		Business		Consumer		Total
	(In thousands)
Allowance for loan losses:
Balance, January 1, 2017	$	656		$	326		$	72	$	4	$	5	$	1,063
Provision for loan losses		(99	)		151			4		11		3		70
Charge-offs		(17	)		(9	)		-		-		-		(26	)
Recoveries		-			16			-		-		-		16
Balance, December 31, 2017	$	540		$	484		$	76	$	15	$	8	$	1,123
Allowance for loan losses:
Ending balance, individually evaluated for impairment	$	-		$	-		$	-	$	-	$	-	$	-
Ending balance, collectively evaluated for impairment	$	540		$	484		$	76	$	15	$	8	$	1,123
Loans:
Ending balance	$	41,474		$	45,623		$	10,746	$	909	$	557	$	99,309
Ending balance; individually evaluated for impairment	$	2,294		$	33		$	2,312	$	-	$	-	$	4,639
Ending balance; collectively evaluated for impairment	$	39,180		$	45,590		$	8,434	$	909	$	557	$	94,670

F-15

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

	December 31, 2016
	Real Estate
							Construction			Commercial
	Residential			Commercial			and Land			Business			Consumer		Total
	(In thousands)
Allowance for loan losses:
Balance, January 1, 2016	$	648		$	383		$	102		$	19		$	3	$	1,155
Provision (credit) for loan losses		141			(57	)		(71	)		(15	)		2		-
Charge-offs		(133	)		-			-			-			-		(133	)
Recoveries		-			-			41			-			-		41
Balance, December 31, 2016	$	656		$	326		$	72		$	4		$	5	$	1,063
Allowance for loan losses:
Ending balance, individually evaluated for impairment	$	-		$	-		$	-		$	-		$	-	$	-
Ending balance, collectively evaluated for impairment	$	656		$	326		$	72		$	4		$	5	$	1,063
Loans:
Ending balance	$	38,636		$	35,709		$	10,233		$	1,000		$	335	$	85,913
Ending balance; individually evaluated for impairment	$	2,779		$	533		$	1,709		$	-		$	-	$	5,021
Ending balance; collectively evaluated for impairment	$	35,857		$	35,176		$	8,524		$	1,000		$	335	$	80,892

F-16

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Internal Risk Categories

The Company has adopted a standard loan grading system for all loans. Loans are selected for a grading review based on certain characteristics, including concentrations of credit and upon delinquency of 90 days or more. Definitions are as follows:

Pass: Loans categorized as Pass are higher quality loans that do not fit any of the other categories described below.

Special Mention/Watch: The loans identified as special mention/watch have an obvious flaw or a potential weakness that deserves special management attention, but which has not yet impacted collectability. These flaws or weaknesses, if left uncorrected, may result in the deterioration of the prospects of repayment or the deterioration of the Company’s credit position.

Substandard: These are loans with a well-defined weakness, where the Company has a serious concern about the borrower’s ability to make full repayment if the weaknesses are not corrected. The loan may contain a flaw, which could impact the borrower’s ability to repay, or the borrower’s continuance as a “going concern”. When collateral values are not sufficient to secure the loan and other weaknesses are present, the loan may be rated substandard. A loan will also be graded substandard when full repayment is expected, but it must come from the liquidation of collateral. One-to-four family residential real estate loans and home equity loans that are past due 90 days or more with loan to value ratios greater than 60 percent are classified as substandard.

Doubtful: These are loans with major defined weaknesses, where future charge-off of a part of the credit is highly likely. The primary repayment source is no longer viable and the viability of the secondary source of repayment is in doubt. The amount of loss is uncertain due to circumstances within the credit that are not yet fully developed and the loan is rated “Doubtful” until the loss can be accurately estimated.

Loss: These are loans that represent near term charge-offs. Loans classified as loss are considered uncollectible and of such little value that it is not desirable to continue carrying them as assets on the Company’s financial statements, even though partial recovery may be possible at some future time.

F-17

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of December 31, 2017 and 2016:

	December 31, 2017
	Real Estate
					Construction		Commercial
	Residential		Commercial		and Land		Business		Consumer		Total
	(In thousands)
Pass	$	39,639	$	45,136	$	9,839	$	876	$	557	$	96,047
Special mention/Watch		48		-		-		-				48
Substandard		1,787		487		907		33		-		3,214
Doubtful		-		-		-		-		-		-
Total	$	41,474	$	45,623	$	10,746	$	909	$	557	$	99,309

	December 31, 2016
	Real Estate
					Construction		Commercial
	Residential		Commercial		and Land		Business		Consumer		Total
	(In thousands)
Pass	$	36,324	$	35,211	$	9,210	$	965	$	325	$	82,035
Special mention/Watch		415		-		-		-		10		425
Substandard		1,897		498		1,023		35		-		3,453
Doubtful		-		-		-		-		-		-
Total	$	38,636	$	35,709	$	10,233	$	1,000	$	335	$	85,913

The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the past year.

F-18

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of December 31, 2017 and 2016:

	December 31, 2017
													Total Loans >
	30-59 Days		60-89 Days		Greater Than		Total				Total Loans		90 Days &
	Past Due		Past Due		90 Days		Past Due		Current		Receivable		Accruing
	(In thousands)
Real estate
Residential	$	73	$	196	$	-	$	269	$	41,205	$	41,474	$	-
Commercial		-		-				-		45,623		45,623		-
Construction and land		-		-		-		-		10,746		10,746		-
Commercial business		-		-		-		-		909		909		-
Consumer		-		-		-		-		557		557		-
Total	$	73	$	196	$	-	$	269	$	99,040	$	99,309	$	-

	December 31, 2016
													Total Loans >
	30-59 Days		60-89 Days		Greater Than		Total				Total Loans		90 Days &
	Past Due		Past Due		90 Days		Past Due		Current		Receivable		Accruing
	(In thousands)
Real estate
Residential	$	194	$	-	$	327	$	521	$	38,115	$	38,636	$	-
Commercial		-		-		4		4		35,705		35,709		-
Construction and land		-		-		-		-		10,233		10,233		-
Commercial business		-		-		-		-		1,000		1,000		-
Consumer		-		-		-		-		335		335		-
Total	$	194	$	-	$	331	$	525	$	85,388	$	85,913	$	-

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming multi-family and commercial loans but also include loans modified in troubled debt restructurings.

F-19

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The following tables present impaired loans as of and for the years ended December 31, 2017 and 2016:

	As of and for the year ended December 31, 2017
			Unpaid				Average Balance of		Interest
	Recorded Balance		Principal Balance		Specific Allowance		Impaired Loans		Income Recognized
	(In thousands)
Loans without a specific valuation allowance:
Real estate
Residential	$	2,294	$	2,439	$	-	$	2,166	$	73
Commercial		33		33		-		35		2
Construction and land		2,312		2,323		-		1,799		90
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
Real estate
Residential		-		-		-		-		-
Commercial		-		-		-		-		-
Construction and land		-		-		-		-		-
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Totals	$	4,639	$	4,795	$	-	$	4,000	$	165

	As of and for the year ended December 31, 2016
			Unpaid				Average Balance of		Interest
	Recorded Balance		Principal Balance		Specific Allowance		Impaired Loans		Income Recognized
	(In thousands)
Loans without a specific valuation allowance:
Real estate
Residential	$	2,779	$	2,936	$	-	$	2,420	$	140
Commercial		533		560		-		230		28
Construction and land		1,709		1,709		-		1,760		95
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
Real estate
Residential		-		-		-		-		-
Commercial		-		-		-		-		-
Construction and land		-		-		-		-		-
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Totals	$	5,021	$	5,205	$	-	$	4,410	$	263

F-20

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The following table presents the Company’s nonaccrual loans at December 31, 2017 and 2016. The table excludes performing troubled debt restructurings.

	December 31,
	2017		2016
	(In thousands)
Real estate loans
Residential	$	1,629	$	614
Commercial		-		4
Construction and land		728		-
Commercial business		-		-
Consumer and other		-		-
Total nonaccrual	$	2,357	$	618

The Company had no loans modified in a troubled debt restructuring during the years ended December 31, 2017 and December 31, 2016.

The Company had no troubled debt restructurings modified in the years ended December 31, 2017 and 2016 that subsequently defaulted. A loan is considered to be in payment default once it is 30 days contractually past due under the loan’s modified terms.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

F-21

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Note 5:     Premises and Equipment

Major classifications of premises and equipment, stated at cost, at December 31, 2017 and 2016, are as follows:

	2017		2016
	(In thousands)
Land	$	342	$	342
Buildings and improvements		3,252		3,155
Furniture and equipment		2,508		2,503
		6,102		6,000
Less accumulated depreciation		4,208		4,066
Net premises and equipment	$	1,894	$	1,934

Note 6:     Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The risks inherent in servicing assets relate primarily to changes in prepayments that result from shifts in interest rates. The unpaid principal balances of mortgage and other loans serviced for others were $70.1 million and $50.5 million at December 31, 2017 and 2016, respectively. Loans serviced at December 31, 2017 includes $26.4 million of SBA loans.

Servicing rights activity for the years ended December 31, 2017 and 2016 was as follows:

	2017			2016
	(In thousands)
Balance at beginning of year	$	483		$	317
Additions		537			251
Amortization		(83	)		(85	)
Balance at end of year	$	937		$	483

The fair value of servicing rights approximates the carrying value at December 31, 2017 and 2016.

F-22

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Note 7:     Time Deposits

Time deposits in denominations of $250,000 or more were $10.5 million and $6.1 million at December 31, 2017 and 2016, respectively.

At December 31, 2017, the scheduled maturities of time deposits were as follows:

	2017
	(In thousands)
Maturing year ending December 31,
2018	$	13,658
2019		13,345
2020		8,486
2021		1,440
2022		2,721
Thereafter		271
Balance at end of year	$	39,921

        The Company held $2.3 million and $3.3 million in brokered certificates of deposit at December 31, 2017 and 2016, respectively. 

Note 8:     Borrowings

Scheduled maturities of advances from the Federal Home Loan Bank were as follows at December 31, 2017:

			Maturing in year ended
Interest rate			December 31,		2017
					(In thousands)
1.34%	-	1.80%		2018	$	4,100
	1.85%			2019		1,927
	2.08%			2020		3,000
				Balance at end of year	$	9,027

The Company’s advances totalling $9.0 million and $10.0 million at December 31, 2017 and 2016, the Federal Home Loan Bank are all at fixed rates of interest. The advances are secured by a pledge of certain eligible mortgage loans, totaling $38.7 million and $23.9 million at December 31, 2017 and 2016, respectively, and the Company’s investment in FHLB stock. The advances are subject to restrictions or penalties in the event of prepayment. At December 31, 2017, the Company had the ability to borrow additional advances from the FHLB totaling $11.2 million.

The Company had no outstanding federal funds purchased at December 31, 2017 and $1.0 million outstanding at December 31, 2016 year ended..

F-23

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Note 9:     Income Taxes

A reconciliation of the federal income tax benefit at the statutory rate to the Company’s actual income tax benefit is shown below:

	Year Ended December 31,
	2017			2016
	(In thousands)
Computed at statutory rate (34%)	$	234		$	(182	)
Increase (decrease) resulting from:
Bank-owned life insurance		(58	)		(58	)
Effect of Tax Cuts and Jobs Act		1,633			-
Change in valuation allowance		(1,818	)		234
Other		9			3
Actual income tax (benefit)	$	-		$	-

F-24

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act, which significantly changes the existing U.S. tax laws, including a reduction in the corporate tax rate for the Company from 34% to 21%.  As a result of enactment of the legislation, the composition of the Company's net deferred tax asset at December 31, 2017 and 2016 is as follows:

	2017			2016
	(In thousands)
Deferred tax assets
Allowance for loan losses	$	240		$	368
Deferred compensation		48			58
Net operating loss carryforward		2,640			4,287
Deferred loan origination costs		-			12
Stock based compensation		11			-
Loans held for sale		35			-
Other		37			8
Deferred tax assets		3,011			4,733
Deferred tax liabilities
Federal Home Loan Bank stock dividends		(10	)		(16	)
Servicing rights		(200	)		(167	)
Depreciation		(22	)		(24	)
Deferred loan costs		(71	)		-
Deferred tax liabilities		(303	)		(207	)
Net deferred tax asset before valuation allowance		2,708			4,526
Valuation allowance
Beginning balance		(4,526	)		(4,292	)
(Increase) decrease during period		1,818			(234	)
Ending balance		(2,708	)		(4,526	)
Net deferred tax asset	$	-		$	-

As of December 31, 2017 and 2016, the net deferred tax asset was fully reserved. Management recorded a valuation allowance against the net deferred tax asset at December 31, 2017 and 2016, based on consideration of, but not limited to, the Company’s cumulative pre-tax losses during the past three years, the composition of recurring and non-recurring income from operations over the past several years and the magnitude of recent taxable income as compared to net operating loss carryforwards. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items. Based on these criteria, the Company determined that it was necessary to maintain a full valuation allowance against the entire net deferred tax asset.

The Company had a total valuation allowance on its deferred tax assets of $2.6 million and $4.5 million at December 31, 2017 and 2016, respectively. The decrease in the valuation allowance on deferred income taxes was due primarily to a write down of the Company’s net deferred tax assets, which was attributable to the change in federal income tax rates pursuant to the Tax Cuts and Jobs Act (the “Tax Act”) enacted in December 2017.  The new Tax Act had the effect of changing the corporate tax rate to 21% and accordingly, the Company adjusted the carrying value of the deferred tax assets to reflect the new rate.

F-25

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The Company’s net operating loss of $12.2 million at December 31, 2017, will be carried forward to use against future federal taxable income. The net operating loss carryforwards begin to expire in the year ending December 31, 2030. Indiana net operating loss carryforwards totaled $1.0 million at December 31, 2017 and will begin to expire in the year ending December 31, 2024.

Retained earnings at both December 31, 2017 and 2016, includes approximately $1.5 million for which no deferred federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred income tax liability on the preceding amount that would have been recorded if it was expected to reverse into taxable income in the foreseeable future was approximately $315,000 and $510,000 at December 31, 2017 and 2016, respectively.

As of December 31, 2017 and 2016, the Company had no unrecognized tax benefits or accrued interest and penalties recorded. The Bank does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. The Company will record interest and penalties as a component of income tax expense.

The Company is subject to U.S. federal and Indiana income tax. The Company is no longer subject to examination by taxing authorities for years prior to 2014.

Note 10:     Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory- and possibly additional discretionary- actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulation to ensure capital adequacy requires the Bank to maintain minimum amounts and ratios (set forth in the table below), of total capital, Tier 1 capital and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 leverage capital to average total assets.

Basel III was effective for the Company on January 1, 2015. Basel III requires the Company and the Bank to maintain minimum amounts and ratios of common equity tier 1capital to risk weighted assets, as defined in the regulation. Under the new Basel III rules, in order to avoid limitations on capital distributions, including dividends, the Company must hold a capital conservation buffer above the adequately capitalized common equity tier 1 capital to risk-weighted assets ratio. The capital conservation buffer is being phased in from zero percent to 2.50 percent by 2019. Under Basel III, the Company and Bank elected to opt-out of including accumulated other comprehensive income in regulatory capital.

F-26

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Management believes, as of December 31, 2017 and 2016, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2017 and 2016, the most recent notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1, and Tier 1 leverage capital ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

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

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of December 31, 2017
Total Capital (to Risk-Weighted Assets)	$	15,094		16.3	%	$	7,394		8.0	%	$	9,243		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	13,971		15.1	%	$	5,546		6.0	%	$	7,394		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets)	$	13,971		15.1	%	$	4,159		4.5	%	$	6,008		6.5	%
Tier I Leverage Capital (to Average Total Assets)	$	13,971		11.3	%	$	4,933		4.0	%	$	6,166		5.0	%
As of December 31, 2016
Total Capital (to Risk-Weighted Assets)	$	13,943		17.6	%	$	6,327		8.0	%	$	7,908		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	12,954		16.4	%	$	4,745		6.0	%	$	6,327		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets)	$	12,954		16.4	%	$	3,559		4.5	%	$	5,140		6.5	%
Tier I Leverage Capital (to Average Total Assets)	$	12,954		12.9	%	$	4,024		4.0	%	$	5,030		5.0	%

F-27

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The Bank is subject to certain restrictions on the amounts of dividends that it may declare without prior regulatory approval. Generally, the Bank’s payment of dividends is limited to net income for the current year plus the two preceding calendar years, less capital distributions paid over the comparable time period. At December 31, 2017, dividends available for dividend declaration without prior regulatory approval totaled $520,000.

Note 11:     Related Party Transactions

At December 31, 2017 and 2016, the Company had loans outstanding to executive officers, directors and their affiliates (related parties), in the amount of approximately $2.1 million and $2.4 million, respectively. During the year ended December 31, 2017 and 2016, loans originated to related parties totaled $400,000 and $$600,000, and principal repayments from related parties totaled $670,000 and $600,000, respectively.

At December 31, 2017 and 2016, the Company had deposits from certain officers, directors and other related interests totaling approximately $437,000 and $694,000, respectively.

Note 12:     Employee Benefits

The Company has an agreement to provide partial reimbursement of medical coverage expenses for the former executive officers. The liability recorded under these agreements was $160,000 and $167,000 at December 31, 2017 and 2016, respectively. The Company recognized no expense for these agreements during the year ended December 31, 2017 and $48,000 for the year ended December 31, 2016.

During 2015, the Company entered into a salary continuation agreement with the Company’s President that provides supplemental retirement benefits. The Company will contribute a total of $150,000 to the plan over a five year period that will be paid out over a 15 year period upon retirement. The funds will accrue interest at a rate of 4.50%. The Company has accrued $66,000 and recognized expense for this plan totaling $22,000 during the year ended December 31, 2017.

The Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “Plan”), a multiemployer defined benefit pension plan, for the benefit of substantially all employees. The risks of participating in a multiemployer plan are different from single-employer plans in the following aspects:

1. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

2. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

3. If the Company chooses to stop participating in its multiemployer plan, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

F-28

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The Company maintained participation in the Plan for the years ended December 31, 2017 and 2016. The Employee Identification Number (EIN) is 13-5645888 and the three-digit plan number is 333. The Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code 413(c). There are no collective bargaining agreements in place that require contributions to the Plan. The Company has frozen this Plan effective 2011. The Plan is administered by the trustees of the Financial Institutions Retirement Fund. Plan contributions and expense were approximately $73,000 and $66,000, for the years ended December 31, 2017 and 2016, respectively. The Company’s funded status in the Plan at December 31, 2017 and 2016 was approximately 97.20% and 97.15%, respectively.

Total contributions made to the Pentegra DB Plan as reported on the Form 5500, equal $153.2 million and $163.1 million for the plan years ended June 30, 2016 and 2015, respectively. The Company’s contributions to the Pentegra DB Plan are not more than 5% of the total contributions to the Pentegra DB Plan.

The Company has a retirement savings 401(k) plan covering substantially all employees. Employees attain eligibility in the 401(k) plan upon completing one year of service and being 21 years of age or older. Employees may contribute amounts, up to the federal limitations, of their compensation with the Company matching 3% of the employee’s total contributions. Employer contributions charged to expense were $34,000 and $19,000, for the years ended December 31, 2017 and 2016, respectively.

As part of the Company’s stock conversion, shares were purchased by the ESOP with a loan from New Bancorp, Inc. All employees of the Bank meeting certain tenure requirements are entitled to participate in the ESOP. The ESOP acquired 55,728 shares of the Company’s common stock in the conversion. During the years ended December 31, 2017 and 2016, a total of 2,975 and 2,732 shares, respectively, were allocated to ESOP plan participants, leaving 47,235 unallocated shares in the ESOP at December 31, 2017. Compensation expense related to the ESOP was $45,000 and $29,000 for the years ended December 31, 2017 and 2016, respectively.

The stock price at the formation date was $10.00. The aggregate fair value of the 47,235 unallocated shares was $912,000 based on the $19.30 closing price of the common stock on December 31, 2017.

In the event the ESOP is unable to satisfy the obligation to repurchase the shares held by each beneficiary upon the beneficiary’s termination or retirement, the Company is obligated to repurchase the shares. At December 31, 2017 and 2016, the fair value of these shares was $160,000 and $73,000, respectively. There are no outstanding shares held by former employees that are subject to an ESOP related repurchase option.

In June 2017, the Company’s stockholders authorized the adoption of the New Bancorp, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). No more than 97,524 shares of the Company’s common stock may be issued under the 2017 Plan, of which a maximum of 69,660 may be issued pursuant to the exercise of stock options and 27,864 may be issued pursuant to restricted stock awards, restricted stock units and unrestricted share awards. Stock options awarded to employees may be incentive stock options or non-qualified stock options. The shares that may be issued may be authorized but unissued shares or treasury shares. The 2017 Plan permits the grant of incentive awards in the form of options, stock appreciation rights, restricted share and share unit awards, and performance share awards. The 2017 Plan contains annual and lifetime limits on certain types of awards to individual participants.

Awards may vest or become exercisable only upon the achievement of performance measures or based solely on the passage of time after award.  Stock options and restricted stock awards provide for accelerated vesting if there is a change in control (as defined in the 2017 Plan).

On June 30, 2017, the Company made awards of restricted shares and granted stock options for 22,931 and 60,080 shares, respectively, to members of the Board of Directors and to certain members of management. The awards vest over a five year period and the stock options have a ten year period to expiration.  Each option has an exercise price of $14.09 as determined on the grant date and expires 10 years from the grant date.

Stock Options

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

					Remaining
			Weighted-average		contractual
	Options		exercise price		life (years)
Options outstanding at January 1, 2017		-	$	-		-
Granted		60,080		14.09		10.0
Exercised		-		-		-
Forfeited		-		-		-
Expired		-		-		-
Options outstanding at December 31, 2017		60,080		14.09		9.5

As of December 31, 2017, the Company had $165,000 of unrecognized compensation expense related to stock options.  The cost of stock options will be amortized over the five-year vesting period.  The aggregate grant date fair value of the stock options granted in 2017 was $2.87 per share.  The Company recognized $18,000 of compensation expense related to the stock options granted for the year ended December 31, 2017. 

F-29

The fair value of the Company's stock options granted in 2017 of $3.06 per share was determined using the Black-Scholes option pricing formula.  The following assumptions were used in the formula:

Expected volatility		13.87%
Risk-free interest rate		2.18%
Expected dividend yield		-
Expected life (in years)		7
Exercise price for the stock options	$	14.09

The expected volatility was based on the historical volatility of share price for the Company.  The risk-free interest rate was based on the U.S. Treasury yield curve and expected life of the options at the time of grant.  The dividend yield was 0.00% as the Company does not currently anticipate paying a dividend.  The expected life was based on the average of the five year vesting period and the ten year contractual term of the stock option plan.  The exercise price for the stock options was based on the closing price of the Company's stock on the date of grant. 

Restricted Shares

Restricted shares are accounted for as fixed grants using the fair value of the Company's stock at the time of the grant.  Unvested restricted shares may not be disposed of or transferred during the vesting period.

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

			Weighted-average
	Restricted		grant date
	stock awards		fair value
Non-vested at January 1, 2017		-	$	-
Granted		22,931		14.09
Vested		-		-
Forfeited		-		-
Nonvested at December 31, 2017		22,931	$	14.09

As of December 31, 2017, the Company had $291,000 of unrecognized compensation expense related to restricted shares.  The cost of the restricted shares will be amortized over the five-year vesting period.  The Company recognized $32,000 expense related to the restricted shares during the year ended December 30, 2017.

Note 13:     Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) applicable to common stock by the weighted-average number of shares of common stock outstanding during the period.  Unallocated common shares held by the Company’s Employee Stock Ownership Plan (the “ESOP”) are shown as a reduction in stockholders’ equity and are excluded from weighted-average common shares outstanding for basic and diluted earnings (loss) per share calculations until they are committed to be released.

Calculations of earnings (loss) per share for the years ended December 31, 2017 are as follows:

	Year Ended December 31, 2017
			Weighted-
	Net		Average		Per Share
	Income		Shares		Amount
	(In thousands)
Net income	$	688
Basic earnings per share				647,472	$	1.06
Effect of dilutive securities
Restricted stock awards and stock options				2,868
Diluted earnings per share				650,340	$	1.06

Loss per share for the year ended December 31, 2016 was $0.83, calculated using 696,600 average shares issued, less 52,353 unallocated average shares held by the ESOP. The Company had no dilutive or potentially dilutive securities at December 31, 2016.

F-30

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Note 14:     Commitments and Credit Risk

Commitments to Originate Loans

Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations, including receipt of collateral, as those utilized for on-balance-sheet instruments.

At December 31, 2017, the Company had outstanding commitments to originate loans aggregating approximately $1.3 million, comprised of fixed-rate loans, with interest rates ranging from 3.875% to 4.875%. At December 31, 2017, the Company had commitments under undisbursed construction loans totaling $498,000 and commitments under commercial and consumer lines of credit totaling $6.7 million and $3.8 million, respectively.

At December 31, 2016, the Company had outstanding commitments to originate loans aggregating approximately $670,000, comprised of fixed-rate loans, with interest rates ranging from 3.5% to 4.5%. In addition, at December 31, 2016, the Company had commitments under undisbursed construction loans totaling $1.8 million and commitments under commercial and consumer lines of credit totaling $5.5 million and $3.8 million, respectively.

The Company had commitments under outstanding financial standby letters of credit totaling $169,000 and $219,000 at December 31, 2017 and 2016, respectively.

F-31

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Note 15:     Disclosures about Fair Value of Assets and Liabilities

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

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 an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Nonrecurring Measurements

The following table presents fair value measurements of assets measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which fair value measurements fall at December 31, 2017 and 2016:

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2017
Impaired loans	$	-	$	-	$	-	$	-
December 31, 2016
Impaired loans	$	232	$	-	$	-	$	232

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

F-32

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Collateral-dependent Impaired Loans, Net of ALLL

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

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

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements:

	Fair Value		Valuation Technique	Unobservable Inputs	Range
	(In thousands)
December 31, 2016
Impaired loans (collateral dependent)	$	232	Marketable comparable properties	Marketability discount		10%	-	15%

F-33

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

 Fair Value of Financial Instruments

The following table presents the estimated fair values of the Company’s financial instruments not carried at fair value and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2017 and 2016.

					Fair Value Measurement Using
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(In thousands)
December 31, 2017
Financial assets
Cash and due from banks	$	1,085	$	1,085	$	1,085	$	-	$	-
Interest-earning demand deposits		2,997		2,997		2,997		-		-
Federal funds sold		11,711		11,711		11,711		-		-
Interest-earning time deposits in banks		744		744		-		744		-
Loans and loans held for sale, net		100,746		100,273		-		-		100,273
Federal Home Loan Bank stock		468		468		-		468		-
Accrued interest receivable		267		267		-		267		-
Servicing rights		937		937		-		-		937
Financial liabilities
Deposits		101,688		101,603		61,767		39,836		-
Advances from the Federal Home Loan Bank		9,027		9,024		-		9,024		-
Accrued interest payable		30		30		-		30		-
December 31, 2016
Financial assets
Cash and due from banks	$	1,419	$	1,419	$	1,419	$	-	$	-
Interest-earning demand deposits		8,438		8,438		8,438		-		-
Interest-earning time deposits in banks		992		992		-		992		-
Loans, net		83,008		83,538		-		-		83,538
Federal Home Loan Bank stock		468		468		-		468		-
Accrued interest receivable		203		203		-		203		-
Servicing rights		483		483		-		-		483
Financial liabilities
Deposits		76,841		77,104		45,080		32,024		-
Federal funds purchased		1,000		1,000		1,000		-		-
Advances from the Federal Home Loan Bank		10,027		11,127		1,000		10,127		-
Accrued interest payable		7		7		-		7		-

F-34

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

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

Cash and Due from Banks and Interest-bearing Demand Deposits

The carrying amount approximates fair value.

Interest-earning Time Deposits in Banks

The carrying amount approximates fair value.

Federal Funds Sold

The carrying amount approximates fair value.

Loans and Loans Held for Sale

Fair value is estimated by discounting the future cash flows using the market rates at which similar notes would be made to borrowers with similar credit ratings and for the same remaining maturities. The market rates used are based on current rates the Company would impose for similar loans and reflect a market participant assumption about risks associated with nonperformance, illiquidity, and the structure and term of the loans along with local economic and market conditions.

Federal Home Loan Bank Stock

Fair value is estimated at book value due to restrictions that limit the sale or transfer of such securities.

Accrued Interest Receivable and Payable

The carrying amount approximates fair value. The carrying amount is determined using the interest rate, balance and last payment date.

Servicing Rights

Servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed and default rate.

Deposits

Fair value of term deposits is estimated by discounting the future cash flows using rates of similar deposits with similar maturities. The market rates used were obtained from a knowledgeable independent third party and reviewed by the Company. The rates were the average of current rates offered by local competitors of the Company.

F-35

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The estimated fair value of demand, NOW, savings and money market deposits is the book value since rates are regularly adjusted to market rates and amounts are payable on demand at the reporting date.

Federal Funds Purchased

The carrying amount approximates fair value.

Federal Home Loan Bank Advances

Fair value is estimated by discounting the future cash flows using rates of similar advances with similar maturities. These rates were obtained from current rates offered by FHLB.

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

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.

The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. The fair value of loan commitments was not material at December 31, 2017 and 2016.

Note 16:     Recent Accounting Pronouncements

FASB ASU 2014‑09, Revenue from Contracts with Customers

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

As an emerging growth company, these amendments are effective for annual reporting periods beginning after December 15, 2018, and for interim periods within annual periods beginning after December 15, 2019. The Company’s revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09.    The Company is continuing to evaluate the impact of adopting ASU 2014-09, but does not expect the impact to have a material impact on the Company’s financial position or results of operation.

FASB ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. For public business entities, the amendments in this update include the elimination of the requirement to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, the requirement to use the exit price notion when measuring fair value of financial instruments for disclosure purposes, the requirement to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, the requirement for separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or accompanying notes to the financial statements, and the amendments clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.

F-36

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The amendments in this update are effective, as to the Company, for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the amendments in this update is not permitted, except that early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued or, by all other entities, that have not yet been made available for issuance are permitted as of the beginning of the fiscal year of adoption for the following amendment: An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. An entity should apply the amendments to this update by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Management adopted ASU No. 2016-01 effective January 1, 2018, without a material impact on the Company’s results of operations or financial position.

FASB ASU 2016-02, Leases

In February 2016 the FASB issued ASU 2016-02, Leases. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

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

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

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

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

The amendments in ASU 2016-02 are effective, as to the Company, for years beginning after December 15, 2019, and for interim periods for years beginning after January 1, 2020. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently evaluating the impact of adopting this guidance on the Company’s financial statements.

F-37

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

FASB ASU 2016‑09 Share‑Based Payments.

In March 2016, the FASB issued ASU 2016‑09 “Share‑Based Payments.” The guidance in this ASU simplifies several aspects of the accounting for share‑based payment award transactions, including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one‑time election to switch from measuring all liability‑classified awards at fair value to measuring them at intrinsic value.

For emerging growth companies, the amendments are effective for annual periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 15, 2018.  Management does not expect to make material changes to its accounting for share-based payments and implementation of ASU 2016-09 is not expected to have a material effect on the Company’s financial position and results of operations.  Additionally, Merchants share-based compensation plan awards have been classified as equity awards, whereby available elections to switch to intrinsic value measurement do not apply.

FASB ASU 2016-13, Financial Instruments – Credit Losses

In June 2016, FASB issued ASU 2016-13, “Financial Instruments - Credit Losses”. The amendments in this Update replace the incurred loss model with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. ASU No. 2016-13 replaces the incurred loss impairment methodology with a new methodology that reflects expected credit losses over the lives of the loans and requires consideration of a broader range of information to inform credit loss estimates. The ASU requires an organization to estimate all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts. Additional disclosures are required. ASU No. 2016-13 is effective, as to the Company, for fiscal years, beginning after December 15, 2019, and interim periods within those fiscal years. Management expects that the implementation of ASU No. 2016-13 may increase the balance of the allowance for loan losses and is continuing to evaluate the potential impact on the Company's results of operations and financial position.

Note 17:     Change in Corporate Form

On October 19, 2015, the Bank consummated its mutual –to-stock conversion pursuant to which it became a Federal stock savings bank and the wholly owned subsidiary of New Bancorp, Inc., as parent of the Bank.

As part of the conversion, the Bank became the wholly owned subsidiary of the Company, and the Company issued and sold shares of its capital stock pursuant to an independent valuation appraisal of the Bank and the Company. The stock was priced at $10.00 per share. In addition, the Bank’s board of directors adopted an employee stock ownership plan (ESOP) which subscribed for 8% of the common stock sold in the offering. The Conversion was completed on October 19, 2015 and resulted in the issuance of 696,600 common shares by the Company. The cost of the Conversion and issuing the capital stock totaled $1.2 million and was deducted from the proceeds of the offering.

The conversion was accounted for as a change in corporate form with the historic basis of the Bank’s assets, liabilities and equity unchanged as a result.

F-38

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Note 18:     Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to the financial position, results of operations and cash flows of New Bancorp, Inc.:

Condensed Balance Sheets
December 31, 2017 and 2016
	2017		2016
	(In thousands)
Assets
Cash	$	1,376	$	1,615
Investment in Bank subsidiary		13,980		12,955
Total assets	$	15,356	$	14,570
Liabilities and Shareholders' Equity
Liabilities	$	4	$	1
Redeemable common stock held by ESOP		160		73
Shareholders' equity less maximum cash obligation related to ESOP shares		15,192		14,496
Total liabilities and shareholders' equity	$	15,356	$	14,570

F-39

New Bancorp, Inc.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Condensed Statement of Operations

For the Years Ended December 31, 2017 and 2016

	2017		2016
	(In thousands)
Income
Interest income	$	19	$	18
Equity in net income (loss) of Bank subsidiary		988		(295	)
Expenses
General and administrative expenses		319		257
Total expenses		319		257
Net income (loss)	$	688	$	(534	)

Condensed Statement of Cash Flows

For the Years Ended December 31, 2017 and 2016

	2017		2016
	(In thousands)
Operating activities
Net income (loss)	$	688	$	(534	)
Other adjustments		61		21
Items not requiring cash:
Equity in net (income) loss of Bank subsidiary		(988)		295
Net cash used in operating activities		(239)		(218	)
Net change in cash		(239)		(218	)
Cash at beginning of year		1,615		1,833
Cash at end of year	$	1,376	$	1,615

F-40

Signatures

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

		New Bancorp, Inc.
Date: April 2, 2018	By:	/s/ Richard C. Sauerman
		Richard C. Sauerman President and Chief Executive Officer (Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange 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/ Richard C. Sauerman	President, Chief Executive Officer and Director (Principal	April 2, 2018
Richard C. Sauerman	Executive Officer)
/s/ Shawna L. Zawada	Chief Financial Officer and Sr.	April 2, 2018
Shawna L. Zawada	Vice President
/s/ Jeffrey L. Vickers	Director	April 2, 2018
Jeffrey L. Vickers
/s/ Dale A. Parkison	Director	April 2, 2018
Dale A. Parkison
/s/ Ralph R. Sommerfeld	Director	April 2, 2018
Ralph R. Sommerfeld
/s/ Robert P. Rose	Director	April 2, 2018
Robert P.  Rose

EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Subsidiary	Ownership	State of Incorporation
New Buffalo Savings Bank	100%	Federal

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement on Form S-8, File No. 333-219182, of New Bancorp, Inc. of our report dated April 2, 2018, on our audits of the consolidated financial statements of New Bancorp, Inc. as of and for the years ended December 31, 2017 and 2016, which report is included in the Annual Report on Form 10-K of New Bancorp, Inc. for the year ended December 31, 2017.

/s/ BKD, LLP

BKD, LLP

April 2, 2018

EX-31.1

EXHIBITS 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION

302 OF THE SARBANES-OXLEY ACT OF 2002

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard C. Sauerman, certify that:

1. I have reviewed this annual report on Form 10-K of New Bancorp, Inc.;

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

3. Based on my knowledge, the 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)and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

5. The registrant’s other certifying officer and I have disclosed, based on 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.

April 2, 2018	/s/ Richard C. Sauerman
Date	Richard C. Sauerman
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION

302 OF THE SARBANES-OXLEY ACT OF 2002

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Shawna L. Zawada, certify that:

1. I have reviewed this annual report on Form 10-K of New Bancorp, Inc.;

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

3. Based on my knowledge, the 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)and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

5. The registrant’s other certifying officer and I have disclosed, based on 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.

April 2, 2018	/s/ Shawna L. Zawada
Date	Shawna L. Zawada
	Chief Financial Officer and Sr. Vice President

EX-32.1

EXHIBIT 32

CERTIFICATE PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Richard C. Sauerman, President and Chief Executive Officer and Shawna L. Zawada, Chief Financial Officer and Sr. Vice President of New Bancorp, Inc. (the “Company”) each certify in their capacity as officers of the Company that they have reviewed the Annual Report of the Company on Form 10-K for the year ended December 31, 2017 and that to the best of their knowledge:

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

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

April 2, 2018	/s/ Richard C. Sauerman
Date	Richard C. Sauerman President and Chief Executive Officer
April 2  , 2018	/s/ Shawna L. Zawada
Date	Shawna L. Zawada
	Chief Financial Officer and Sr. Vice President

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Document And Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Mar. 28, 2018	Jun. 30, 2017
Document Information [Line Items]
Entity Registrant Name	New Bancorp, Inc.
Entity Central Index Key	0001644482
Trading Symbol	nwbb
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		719,531
Entity Public Float			$ 8.5
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Amendment Flag	false

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 1,085	$ 1,419
Interest-earning demand deposits	2,997	8,438
Federal funds sold	11,711
Cash and cash equivalents	15,793	9,857
Interest-earning time deposits in banks	744	992
Loans held for sale	3,234
Loans, net of allowance for loan losses of $1,123 and $1,063 at December 31, 2017 and 2016, respectively	97,512	83,008
Premises and equipment	1,894	1,934
Federal Home Loan Bank stock	468	468
Foreclosed real estate held for sale, net		586
Accrued interest receivable	267	203
Bank owned life insurance	5,589	5,418
Servicing rights	937	483
Prepaid expenses and other assets	441	269
Total assets	126,879	103,218
Liabilities
Demand	37,025	28,676
Savings and money market accounts	24,742	16,404
Time	39,921	31,761
Total deposits	101,688	76,841
Federal funds purchased	0	1,000
Borrowings	9,027	10,027
Other liabilities	812	781
Total liabilities	111,527	88,649
Commitments and Contingencies
Redeemable common stock held by Employee Stock Ownership Plan (ESOP)	160	73
Shareholders' Equity
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued	0	0
Common stock, $0.01 par value, 4,000,000 shares authorized, 719,531 and 696,600 shares issued and outstanding	7	7
Additional paid-in capital	5,827	5,761
Unearned ESOP shares	(472)	(501)
Retained earnings	9,990	9,302
Total shareholders' equity	15,352	14,569
Less maximum cash obligation related to ESOP shares	(160)	(73)
Total shareholders' equity less maximum cash obligation related to ESOP shares	15,192	14,496
Total liabilities and shareholders' equity	$ 126,879	$ 103,218

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Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Loans, allowance for loan losses	$ 1,123	$ 1,063
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	4,000,000	4,000,000
Common stock, shares issued (in shares)	719,531	696,600
Common stock, shares outstanding (in shares)	719,531	696,600

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Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Interest Income
Loans	$ 4,254	$ 3,363
Interest-bearing deposits	178	61
Total interest income	4,432	3,424
Interest Expense
Deposits	840	606
Borrowings	175	115
Total interest expense	1,015	721
Net Interest Income	3,417	2,703
Provision for Loan Losses	70
Net Interest Income After Provision for Loan Losses	3,347	2,703
Noninterest Income
Service charges and fees	365	282
Gain on sale of loans	1,462	689
Gain on sale of foreclosed real estate, net	15	21
Income from bank owned life insurance	171	171
Loan servicing fees, net	39	30
Other operating	22	37
Total noninterest income	2,074	1,230
Noninterest Expense
Salaries and employee benefits	2,615	2,449
Occupancy and equipment	396	411
Data processing fees	516	439
Franchise taxes	39	42
FDIC insurance premiums	45	54
Insurance premiums	39	45
Professional services	450	395
Impairment losses and expenses of foreclosed real estate	15	18
Loss on disposals of premises and equipment	25
Other	593	614
Total noninterest expense	4,733	4,467
Net Income (Loss)	$ 688	$ (534)
Earnings (loss) per share - basic (in dollars per share)	$ 1.06	$ (0.83)
Earnings (loss) per share - diluted (in dollars per share)	$ 1.06	$ (0.83)
Weighted average shares basic (in shares)	647,472	644,247
Weighted average shares diluted (in shares)	650,340	644,247

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Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Deferred Compensation, Share-based Payments [Member]	Retained Earnings [Member]	Maximum Cash Obligation Related to ESOP Shares [Member]	Total
Balance at Dec. 31, 2015	$ 7	$ 5,754	$ (523)	$ 9,836	$ (44)	$ 15,030
ESOP shares earned		7	22			29
Change related to ESOP shares					(29)	(29)
Net income (loss)				(534)		(534)
Balance at Dec. 31, 2016	7	5,761	(501)	9,302	(73)	14,496
Change related to ESOP shares					(87)	(87)
Net income (loss)				688		688
ESOP shares earned		16	29			45
Compensation expense related to restricted shares		32				32
Compensation expense related to stock options		18				18
Balance at Dec. 31, 2017	$ 7	$ 5,827	$ (472)	$ 9,990	$ (160)	$ 15,192

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Operating Activities
Net income (loss)	$ 688,000	$ (534,000)
Items not requiring (providing) cash
Depreciation and amortization	258,000	270,000
Provision for Loan Losses	70,000
Deferred loan origination fees, costs, premiums, discounts, net		1,000
Gain on sale of loans	(1,462,000)	(689,000)
Proceeds from sales of loans originated for sale	21,876,000	16,425,000
Loans originated for sale	(20,951,000)	(15,829,000)
Gain on sale of foreclosed real estate	(15,000)	(21,000)
Loss on disposals of premises and equipment	25,000
Employee Stock Ownership Plan (ESOP), Compensation Expense	45,000	29,000
Compensation expense related to stock benefit plans	50,000
Increase in cash surrender value of life insurance	(171,000)	(171,000)
Changes in
Accrued interest receivable	(64,000)	14,000
Prepaid expenses and other assets	(172,000)	(119,000)
Other liabilities	31,000	3,000
Net cash provided by (used in) operating activities	208,000	(621,000)
Investing Activities
Net change in loans	(17,808,000)	(7,178,000)
Net change in interest-earning time deposits	248,000
Purchase of premises and equipment	(160,000)	(95,000)
Proceeds from sale of foreclosed assets	601,000	266,000
Net cash used in investing activities	(17,119,000)	(7,007,000)
Financing Activities
Net increase in deposits	24,847,000	4,575,000
Net change in federal funds purchased	(1,000,000)	1,000,000
Proceeds from borrowings		3,100,000
Repayment of borrowings	(1,000,000)
Net cash provided by financing activities	22,847,000	8,675,000
Increase in Cash and Cash Equivalents	5,936,000	1,047,000
Cash and Cash Equivalents, Beginning of Year	9,857,000	8,810,000
Cash and Cash Equivalents, End of Year	15,793,000	9,857,000
Supplemental Disclosure of Cash Flow Information
Interest on deposits and borrowings	1,023,000	715,000
Supplemental Disclosure of Noncash Investing Activities
Transfers from loans to real estate acquired through foreclosure		586,000
Transfers from loans to loans held for sale	$ 3,234,000

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Note 1 - Nature of Operations and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Basis of Presentation and Significant Accounting Policies [Text Block]

Note

1:

    

Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

New Bancorp, Inc. was formed to serve as the stock holding company for New Buffalo Savings Bank

(the “Bank”) upon completion of its mutual-to-stock conversion. The conversion was effective

October 19, 2015.

New Bancorp, Inc. issued

696,600

shares at an offering price of

$10.00

per share.

The

Bank conducts a general banking business in southwestern Michigan which primarily consists of attracting deposits from the general public and applying those funds to the origination of loans for residential, consumer and nonresidential purposes.

Principles of Consolidation

The consolidated financial statements include New Bancorp, Inc. and its wholly-owned subsidiary the Bank, together referred to as the “Company.” Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the

United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans

, mortgage servicing rights, valuation of deferred tax assets and fair values of financial instruments.

Reclassifications

Certain reclassifications have been made to the

December 31,

201

7

financial statements to conform to the

December 31, 2016

financial statement presentation. These reclassifications had

no

effect on our results of operations

Cash

and Cash Equivalents

The

Company considers all liquid investments with original maturities of

three

months or less to be cash equivalents. At

December 31, 2017,

the Company’s cash accounts exceeded federally insured limits by approximately

$11.6

million. Additionally, approximately

$1.9

million of cash in total is held by the Federal Home Loan Bank and Federal Reserve Bank as of

December 31, 2017,

which is

not

federally insured.

Interest-

earning Deposits in Banks

Interest-earning

time deposits in banks mature within the year

2018

and are carried at cost.

Loans Held for Sale

L

oans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses

and any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid princip

al balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is

90

days past due unless the credit is well-secured and

in process of collection. Past-due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but

not

collected for loans that are placed on nonaccrual or charged off

is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when ma

nagement believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The

allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that

may

affect the borrower’s ability to repay, estimated value of any 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. The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. 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. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Bank’s internal risk rating process. Other adjustments

may

be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are

not

fully reflected in the historical loss or risk rating data.

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 loan-by-loan basis for commercial and construction loans 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.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group

’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does

not

separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives of depreciable assets is

39

years for buildings,

10

years for building improvements, and

three

to

seven

years for furniture, fixtures and equipment. Maintenance and repairs are expensed and major improvements are capitalized.

Federal Home Loan Bank Stock

Federal Home Loan Bank

(“FHLB”) stock is a required investment for institutions that are members of the FHLB system. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Foreclosed

Real Estate Held for Sale

Real estate

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

no

loans in the process of foreclosure at

December 31, 2017.

Foreclosed real estate held for sale consisted of residential real estate at

December 31, 2016.

Servicing Rights

S

ervicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 

860

-

50

), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company subsequently measures the servicing asset using either the fair value or the amortization method. The Company has elected to initially and subsequently measure the servicing rights for loans sold with servicing retained loans using 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 at each reporting date.

Fair value is based on market

prices for comparable servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and

may

have an adverse impact on the value of the mortgage servicing right and

may

result in a reduction to noninterest income.

Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche. The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment. Fair value in excess of the carrying amount of servicing assets for that stratum is

not

recognized.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percenta

ge of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

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 de

emed to be surrendered when (

1

) the assets have been isolated from the Company —put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (

2

) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (

3

) the Company does

not

maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

The

Company accounts for income taxes in accordance with income tax accounting guidance (ASC 

740,

Income Taxes

). The income tax accounting guidance results in

two

components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than

not

that some portion or all of a deferred tax asset will

not

be realized.

T

ax positions are recognized if it is more likely than

not,

based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than

not

means a likelihood of more than

50

percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-

not

recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than

50

percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether

 or

not

a tax position has met the more-likely-than-

not

recognition threshold con

siders the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

The

Company recognizes interest and penalties on income taxes as a component of income tax expense.

The

Company has established a full valuation allowance for its net deferred tax asset as of

December 31, 2017

and

2016.

See Note

9,

Income Taxes, for further information.

Bank

Owned Life Insurance

The cash surrender value of

bank owned life insurance policies represents the value of life insurance policies on certain current and former officers of the Company for which the Company is the beneficiary. The Company accounts for these assets using the cash surrender value method in determining the carrying value of the insurance policies.

Comprehensive Income (Loss)

Comprehensive income

(loss) consists of net income (loss) and other comprehensive income. The Company had

no

elements of other comprehensive income at

December 31, 2017

and

2016.

Income (L

oss) Per Share

Basic

income (loss) per share excludes dilution and is calculated by dividing net income (loss) applicable to common stock by the weighted-average number of shares of common stock outstanding during the period, less unallocated Employee Stock Ownership Plan (the “ESOP”) shares.

Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding if all potentially dilutive common stock equivalents were issued during the year, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that

may

be issued by the Company relate to outstanding stock options and restricted stock awards and are determined using the treasury stock method.

Unallocated common shares held by the Company

’s ESOP are shown as a reduction in shareholders’ equity and are excluded from weighted-average common shares outstanding for both basic and diluted earnings (loss) per share calculations until they are committed to be released.

Emerging Growth Company Critical Accounting Policy Disclosure

W

e are an “emerging growth company,” as defined in Section 

2

(a) of the Securities Act of

1933

(the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of

2012

( the “JOBS Act”). We are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are

not

emerging growthcompanies. 

As an “emerging

growth company” we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements

may

not

be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

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Note 2 - Restriction on Cash and Due From Banks

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Cash Restrictions and Due from Banks [Text Block]

Note

2:

    

Restriction on Cash and Due From Banks

The

Company is generally required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The Company had

no

reserve balance requirement at

December 31, 2017.

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Note 3 - Securities

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

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

Note

3:

    

Securities

The

Company

had

no

investment securities at

December 31, 2017

and

2016.

The

Company had

no

sales of investment securities during the years ended

December 31, 2017

and

2016.

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Note 4 - Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

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

Note

4:

    

Loans and Allowance for Loan Losses

Classes of

loans at

December 31, 2017

and

2016

include:

	2017			2016
	(In thousands)
Real estate loans
Residential	$	41,474		$	38,636
Commercial		45,623			35,709
Construction and land		10,746			10,233
Commercial business		909			1,000
Consumer and other		557			335
Total loans		99,309			85,913
Less:
Net deferred loan fees, premiums and discounts		(176	)		(70	)
Undisbursed loans in process		(498	)		(1,772	)
Allowance for loan losses		(1,123	)		(1,063	)
Net loans	$	97,512		$	83,008

The risk characteristics

applicable to each segment of the loan portfolio are described below:

Residential

1

-

4

Family and Equity Lines of Credit Real Estate:

The residential

1

-

4

family and home equity real estate loans are generally secured by owner-occupied

1

-

4

family residences. The Company’s portfolio of home equity loans totaled

$4.8

million and

$4.7

million, at

December 31, 2017

and

2016,

respectively, the majority of which were secured by

first

liens, or by

second

liens on properties where the Company also holds the

first

lien. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Company’s market areas that might impact either property values or a borrower’s personal income. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Commercial Real Estate:

Commercial real estate loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Credit risk in these loans

may

be impacted by the creditworthiness of a borrower, property values and the local economy in the Company’s market area.

During

2016,

the Company initiated a program to originate loans under the Small Business Administration (“SBA”)

7a

program. These loans are secured by commercial real estate and, in accordance with the SBA

7a

program, are guaranteed at

75%

of the principal balance. The Company has sold the

75%

guaranteed portion of the loans originated, retaining servicing on the loans sold, and has retained the remaining

25%

of these loans. In addition, during

2017

the Company originated a loan under the United States Department of Agriculture (“USDA”) program, which guarantees

80%

of the principal balance.

Construction and Land:

Construction and land loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans

may

include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans

may

be impacted by the creditworthiness of a borrower, property values and the local economy in the Company’s market area.

Commercial

Business

:

The commercial business loan portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

Consumer:

The consumer loan portfolio consists of various term and line of credit loans such as automobile loans and loans for other personal purposes. Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Company’s market area) and the creditworthiness of a borrower.

The following tables present by portfolio segment, the activity in the allowance for loan losses for the years ended

December 31, 2017

and

2016,

and the recorded investment in loans and impairment method as of

December 31, 2017

and

2016:

	December 31, 2017
	Real Estate
							Construction		Commercial
	Residential			Commercial			and Land		Business		Consumer		Total
	(In thousands)
Allowance for loan losses:
Balance, January 1, 2017	$	656		$	326		$	72	$	4	$	5	$	1,063
Provision for loan losses		(99	)		151			4		11		3		70
Charge-offs		(17	)		(9	)		-		-		-		(26	)
Recoveries		-			16			-		-		-		16
Balance, December 31, 2017	$	540		$	484		$	76	$	15	$	8	$	1,123
Allowance for loan losses:
Ending balance, individually evaluated for impairment	$	-		$	-		$	-	$	-	$	-	$	-
Ending balance, collectively evaluated for impairment	$	540		$	484		$	76	$	15	$	8	$	1,123
Loans:
Ending balance	$	41,474		$	45,623		$	10,746	$	909	$	557	$	99,309
Ending balance; individually evaluated for impairment	$	2,294		$	33		$	2,312	$	-	$	-	$	4,639
Ending balance; collectively evaluated for impairment	$	39,180		$	45,590		$	8,434	$	909	$	557	$	94,670

	December 31, 2016
	Real Estate
							Construction			Commercial
	Residential			Commercial			and Land			Business			Consumer		Total
	(In thousands)
Allowance for loan losses:
Balance, January 1, 2016	$	648		$	383		$	102		$	19		$	3	$	1,155
Provision (credit) for loan losses		141			(57	)		(71	)		(15	)		2		-
Charge-offs		(133	)		-			-			-			-		(133	)
Recoveries		-			-			41			-			-		41
Balance, December 31, 2016	$	656		$	326		$	72		$	4		$	5	$	1,063
Allowance for loan losses:
Ending balance, individually evaluated for impairment	$	-		$	-		$	-		$	-		$	-	$	-
Ending balance, collectively evaluated for impairment	$	656		$	326		$	72		$	4		$	5	$	1,063
Loans:
Ending balance	$	38,636		$	35,709		$	10,233		$	1,000		$	335	$	85,913
Ending balance; individually evaluated for impairment	$	2,779		$	533		$	1,709		$	-		$	-	$	5,021
Ending balance; collectively evaluated for impairment	$	35,857		$	35,176		$	8,524		$	1,000		$	335	$	80,892

Internal Risk Categories

The

Company has adopted a standard loan grading system for all loans. Loans are selected for a grading review based on certain characteristics, including concentrations of credit and upon delinquency of

90

days or more. Definitions are as follows:

Pass

:

Loans categorized as Pass are higher quality loans that do

not

fit any of the other categories described below.

Special Mention

/Watch

: The loans identified as special mention/watch have an obvious flaw or a potential weakness that deserves special management attention, but which has

not

yet impacted collectability. These flaws or weaknesses, if left uncorrected,

may

result in the deterioration of the prospects of repayment or the deterioration of the Company’s credit position.

Substandard

:These are loans with a well-defined weakness, where the Company has a serious concern about the borrower’s ability to make full repayment if the weaknesses are

not

corrected. The loan

may

contain a flaw, which could impact the borrower’s ability to repay, or the borrower’s continuance as a “going concern”. When collateral values are

not

sufficient to secure the loan and other weaknesses are present, the loan

may

be rated substandard. A loan will also be graded substandard when full repayment is expected, but it must come from the liquidation of collateral. One-to-

four

family residential real estate loans and home equity loans that are past due

90

days or more with loan to value ratios greater than

60

percent are classified as substandard.

Doubtful

: These are loans with major defined weaknesses, where future charge-off of a part of the credit is highly likely. The primary repayment source is

no

longer viable and the viability of the secondary source of repayment is in doubt. The amount of loss is uncertain due to circumstances within the credit that are

not

yet fully developed and the loan is rated “Doubtful” until the loss can be accurately estimated.

Loss

: These are loans that represent near term charge-offs. Loans classified as loss are considered uncollectible and of such little value that it is

not

desirable to continue carrying them as assets on the Company’s financial statements, even though partial recovery

may

be possible at some future time.

The following table

s present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of

December 31, 2017

and

2016:

	December 31, 2017
	Real Estate
					Construction		Commercial
	Residential		Commercial		and Land		Business		Consumer		Total
	(In thousands)
Pass	$	39,639	$	45,136	$	9,839	$	876	$	557	$	96,047
Special mention/Watch		48		-		-		-				48
Substandard		1,787		487		907		33		-		3,214
Doubtful		-		-		-		-		-		-
Total	$	41,474	$	45,623	$	10,746	$	909	$	557	$	99,309

	December 31, 2016
	Real Estate
					Construction		Commercial
	Residential		Commercial		and Land		Business		Consumer		Total
	(In thousands)
Pass	$	36,324	$	35,211	$	9,210	$	965	$	325	$	82,035
Special mention/Watch		415		-		-		-		10		425
Substandard		1,897		498		1,023		35		-		3,453
Doubtful		-		-		-		-		-		-
Total	$	38,636	$	35,709	$	10,233	$	1,000	$	335	$	85,913

The

Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis.

No

significant changes were made to either during the past year.

The following table

s present the Company’s loan portfolio aging analysis of the recorded investment in loans as of

December 31, 2017

and

2016:

	December 31, 2017
													Total Loans >
	30-59 Days		60-89 Days		Greater Than		Total				Total Loans		90 Days &
	Past Due		Past Due		90 Days		Past Due		Current		Receivable		Accruing
	(In thousands)
Real estate
Residential	$	73	$	196	$	-	$	269	$	41,205	$	41,474	$	-
Commercial		-		-				-		45,623		45,623		-
Construction and land		-		-		-		-		10,746		10,746		-
Commercial business		-		-		-		-		909		909		-
Consumer		-		-		-		-		557		557		-
Total	$	73	$	196	$	-	$	269	$	99,040	$	99,309	$	-

	December 31, 2016
													Total Loans >
	30-59 Days		60-89 Days		Greater Than		Total				Total Loans		90 Days &
	Past Due		Past Due		90 Days		Past Due		Current		Receivable		Accruing
	(In thousands)
Real estate
Residential	$	194	$	-	$	327	$	521	$	38,115	$	38,636	$	-
Commercial		-		-		4		4		35,705		35,709		-
Construction and land		-		-		-		-		10,233		10,233		-
Commercial business		-		-		-		-		1,000		1,000		-
Consumer		-		-		-		-		335		335		-
Total	$	194	$	-	$	331	$	525	$	85,388	$	85,913	$	-

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

310

-

10

-

35

-

16

), when based on current information and events, it is probable the

Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming multi-family and commercial loans but also include loans modified in troubled debt restructurings.

The following table

s present impaired loans as of and for the years ended

December 31, 2017

and

2016:

	As of and for the year ended December 31, 2017
			Unpaid				Average Balance of		Interest
	Recorded Balance		Principal Balance		Specific Allowance		Impaired Loans		Income Recognized
	(In thousands)
Loans without a specific valuation allowance:
Real estate
Residential	$	2,294	$	2,439	$	-	$	2,166	$	73
Commercial		33		33		-		35		2
Construction and land		2,312		2,323		-		1,799		90
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
Real estate
Residential		-		-		-		-		-
Commercial		-		-		-		-		-
Construction and land		-		-		-		-		-
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Totals	$	4,639	$	4,795	$	-	$	4,000	$	165

	As of and for the year ended December 31, 2016
			Unpaid				Average Balance of		Interest
	Recorded Balance		Principal Balance		Specific Allowance		Impaired Loans		Income Recognized
	(In thousands)
Loans without a specific valuation allowance:
Real estate
Residential	$	2,779	$	2,936	$	-	$	2,420	$	140
Commercial		533		560		-		230		28
Construction and land		1,709		1,709		-		1,760		95
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
Real estate
Residential		-		-		-		-		-
Commercial		-		-		-		-		-
Construction and land		-		-		-		-		-
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Totals	$	5,021	$	5,205	$	-	$	4,410	$	263

The following table presents the

Company’s nonaccrual loans at

December 31, 2017

and

2016.

The table excludes performing troubled debt restructurings.

	December 31,
	2017		2016
	(In thousands)
Real estate loans
Residential	$	1,629	$	614
Commercial		-		4
Construction and land		728		-
Commercial business		-		-
Consumer and other		-		-
Total nonaccrual	$	2,357	$	618

The Company had

no

loans modified in a troubled debt restructuring during th

e years ended

December 31, 2017

and

December 31, 2016.

The

Company had

no

troubled debt restructurings modified in the years ended

December 31, 2017

and

2016

that subsequently defaulted. A loan is considered to be in payment default once it is

30

days contractually past due under the loan’s modified terms.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the

Company’s internal underwriting policy.

XML

Note 5 - Premises and Equipment

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

Note

5:

    

Premises and Equipment

Major classifications of premises and equipment, stated at cost,

at

December 31, 2017

and

2016,

are as follows:

	2017		2016
	(In thousands)
Land	$	342	$	342
Buildings and improvements		3,252		3,155
Furniture and equipment		2,508		2,503
		6,102		6,000
Less accumulated depreciation		4,208		4,066
Net premises and equipment	$	1,894	$	1,934

XML

Note 6 - Loan Servicing

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Transfers and Servicing of Financial Assets [Text Block]

Note

6:

    

Loan Servicing

Loans serviced for others are

not

included in the accompanying

consolidated balance sheets. The risks inherent in servicing assets relate primarily to changes in prepayments that result from shifts in interest rates. The unpaid principal balances of mortgage and other loans serviced for others were

$70.1

million and

$50.5

million at

December 

31,

2017

and

2016,

respectively. Loans serviced at

December 31, 2017

includes

$26.4

million of SBA loans.

S

ervicing rights activity for the years ended

December 31, 2017

and

2016

was as follows:

	2017			2016
	(In thousands)
Balance at beginning of year	$	483		$	317
Additions		537			251
Amortization		(83	)		(85	)
Balance at end of year	$	937		$	483

The fair value of

servicing rights approximates the carrying value at

December 31, 2017

and

2016.

XML

Note 7 - Time Deposits

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Deposit Liabilities Disclosures [Text Block]

Note

7:

    

Time Deposits

Time

deposits in denominations of

$250,000

or more were

$10.5

million and

$6.1

million at

December 31, 2017

and

2016,

respectively.

At

December 31, 2017,

the scheduled maturities of time deposits were as follows:

	2017
	(In thousands)
Maturing year ending December 31,
2018	$	13,658
2019		13,345
2020		8,486
2021		1,440
2022		2,721
Thereafter		271
Balance at end of year	$	39,921

        The Company held

$2.3

million

 and

$3.3

million in brokered certificates of deposit at

December 31, 2017

and

2016,

respectively. 

XML

Note 8 - Borrowings

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

8:

    

Borrowings

Scheduled maturities of a

dvances from the Federal Home Loan Bank were as follows at

December 31, 2017:

			Maturing in year ended
Interest rate			December 31,		2017
					(In thousands)
1.34%	-	1.80%		2018	$	4,100
	1.85%			2019		1,927
	2.08%			2020		3,000
				Balance at end of year	$	9,027

The

Company’s advances totalling

$9.0

million and

$10.0

million at

December 31, 2017

and

2016,

 the Federal Home Loan Bank are all at fixed rates of interest. The advances are secured by a pledge of certain eligible mortgage loans, totaling

$38.7

million and

$23.9

million at

December 31, 2017

and

2016,

respectively, and the Company’s investment in FHLB stock. The advances are subject to restrictions or penalties in the event of prepayment. At

December 31, 2017,

the Company had the ability to borrow additional advances from the FHLB totaling

$11.2

million.

The

Company had

no

outstanding federal funds purchased at

December 31, 2017 and $1.0 million outstanding at December 31, 2016 year ended..

XML

Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

9:

    

I

ncome Taxes

A reconciliation of the federal income tax benefit at the statutory rate to the

Company’s actual income tax benefit is shown below:

	Year Ended December 31,
	2017			2016
	(In thousands)
Computed at statutory rate (34%)	$	234		$	(182	)
Increase (decrease) resulting from:
Bank-owned life insurance		(58	)		(58	)
Effect of Tax Cuts and Jobs Act		1,633			-
Change in valuation allowance		(1,818	)		234
Other		9			3
Actual income tax (benefit)	$	-		$	-

On

December 22, 2017,

the United States enacted tax reform legislation through the Tax Cuts and Jobs Act, which significantly changes the existing U.S. tax laws, including a reduction in the corporate tax rate for the Company from

34%

to

21%.

  As a result of enactment of the legislation, the composition of the Company's net deferred tax asset at

December 31, 2017

and

2016

is as follows:

	2017			2016
	(In thousands)
Deferred tax assets
Allowance for loan losses	$	240		$	368
Deferred compensation		48			58
Net operating loss carryforward		2,640			4,287
Deferred loan origination costs		-			12
Stock based compensation		11			-
Loans held for sale		35			-
Other		37			8
Deferred tax assets		3,011			4,733
Deferred tax liabilities
Federal Home Loan Bank stock dividends		(10	)		(16	)
Servicing rights		(200	)		(167	)
Depreciation		(22	)		(24	)
Deferred loan costs		(71	)		-
Deferred tax liabilities		(303	)		(207	)
Net deferred tax asset before valuation allowance		2,708			4,526
Valuation allowance
Beginning balance		(4,526	)		(4,292	)
(Increase) decrease during period		1,818			(234	)
Ending balance		(2,708	)		(4,526	)
Net deferred tax asset	$	-		$	-

As of

December 31, 2017

and

2016,

the net deferred tax asset was fully reserved. Management recorded a valuation allowance against the net deferred tax asset at

December 31, 2017

and

2016,

based on consideration of, but

not

limited to, the Company’s cumulative pre-tax losses during the past

three

years, the composition of recurring and non-recurring income from operations over the past several years and the magnitude of recent taxable income as compared to net operating loss carryforwards. When determining the amount of deferred tax assets that are more-likely-than-

not

to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is

not

limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items. Based on these criteria, the Company determined that it was necessary to maintain a full valuation allowance against the entire net deferred tax asset.

The Company had a total valuation allowance on its deferred tax assets of

$2.6

million and

$4.5

million at

December 31, 2017

and

2016,

respectively. The decrease in the valuation allowance on deferred income taxes was due primarily to a write down of the Company

’s net deferred tax assets, which was attributable to the change in federal income tax rates pursuant to the Tax Cuts and Jobs Act (the “Tax Act”) enacted in

December 2017. 

The new Tax Act had the effect of changing the corporate tax rate to

21%

and accordingly, the Company adjusted the carrying value of the deferred tax assets to reflect the new rate.

The Company

’s net operating loss of

$12.2

million at

December 31, 2017,

will be carried forward to use against future federal taxable income. The net operating loss carryforwards begin to expire in the year ending

December 31, 2030

.

Indiana net operating loss carryforwards totaled

$1.0

million at

December 31, 2017

and will begin to expire in the year ending

December 31, 2024

.

Retained earnings at both

December 31, 2017

and

2016,

includes approximately

$1.5

million for which

no

deferred federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred income tax liability on the preceding amount that would have been recorded if it was expected to reverse into taxable income in the foreseeable future was approximately

$315,000

and

$510,000

at

December 31, 2017

and

2016,

respectively.

As of

December 31, 2017

and

2016,

the Company had

no

unrecognized tax benefits or accrued interest and penalties recorded. The Bank does

not

expect the total amount of unrecognized tax benefits to significantly increase within the next

twelve

months. The Company will record interest and penalties as a component of income tax expense.

The Company is subject to U.S. federal and Indiana income tax. The Company is

no

longer subject to examination by taxing authorities for years prior to

201

4.

XML

Note 10 - Regulatory Matters

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note

10:

    

Regulatory Matters

The

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

not

reflected in these financial statements.

Quantitative

measures established by regulation to ensure capital adequacy requires the Bank to maintain minimum amounts and ratios (set forth in the table below), of total capital, Tier

1

capital and common equity Tier

1

capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier

1

leverage capital to average total assets.

Basel III was effective for the Company on

January 1, 2015.

Basel III requires the Company and the Bank to maintain minimum amounts and ratios of common equity tier

1capital

to risk weighted assets, as defined in the regulation. Under the new Basel III rules, in order to avoid limitations on capital distributions, including dividends, the Company must hold a capital conservation buffer above the adequately capitalized common equity tier

1

capital to risk-weighted assets ratio. The capital conservation buffer is being phased in from

zero

percent to

2.50

percent by

2019.

Under Basel III, the Company and Bank elected to opt-out of including accumulated other comprehensive income in regulatory capital.

Management believes, as of

December 31, 2017

and

2016,

that the Bank meets all capital adequacy requirements to which it is subject.

As of

December 31, 2017

and

2016,

the most recent notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier

1

risk-based, common equity Tier

1,

and Tier

1

leverage capital ratios as set forth in the table. There are

no

conditions or events since that notification that management believes have changed the Bank’s category.

The

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

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of December 31, 2017
Total Capital (to Risk-Weighted Assets)	$	15,094		16.3	%	$	7,394		8.0	%	$	9,243		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	13,971		15.1	%	$	5,546		6.0	%	$	7,394		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets)	$	13,971		15.1	%	$	4,159		4.5	%	$	6,008		6.5	%
Tier I Leverage Capital (to Average Total Assets)	$	13,971		11.3	%	$	4,933		4.0	%	$	6,166		5.0	%
As of December 31, 2016
Total Capital (to Risk-Weighted Assets)	$	13,943		17.6	%	$	6,327		8.0	%	$	7,908		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	12,954		16.4	%	$	4,745		6.0	%	$	6,327		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets)	$	12,954		16.4	%	$	3,559		4.5	%	$	5,140		6.5	%
Tier I Leverage Capital (to Average Total Assets)	$	12,954		12.9	%	$	4,024		4.0	%	$	5,030		5.0	%

The Bank is subject to certain restrictions on the amounts of dividends that it

may

declare without prior regulatory approval. Generally, the Bank

’s payment of dividends is limited to net income for the current year plus the

two

preceding calendar years, less capital distributions paid over the comparable time period. At

December 31, 2017,

dividends available for dividend declaration without prior regulatory approval totaled

$520,000

.

XML

Note 11 - Related Party Transactions

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

11:

    

Related Party Transactions

At

December 31, 2017

and

2016,

the Company had loans outstanding to executive officers, directors and their affiliates (related parties), in the amount of approximately

$2.1

million and

$2.4

million, respectively. During the year ended

December 31, 2017 and 2016,

loans originated to related parties totaled

$400,000

and

$$600,000,

and principal repayments from related parties totaled

$670,000

and

$600,000,

 respectively.

At

December 31, 2017

and

2016,

the Company had deposits from certain officers, directors and other related interests totaling approximately

$437,000

and

$694,000,

respectively.

XML

Note 12 - Employee Benefits

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

Note

12:

    

Employee Benefits

The

Company has an agreement to provide partial reimbursement of medical coverage expenses for the former executive officers. The liability recorded under these agreements was

$160,000

and

$167,000

at

December 31, 2017

and

2016,

respectively. 

The Company recognized

no

expense for these agreements during the year ended

December 31, 2017

and

$48,000

for the year ended

December 31, 2016.

During

2015,

the Company entered into a salary continuation agreement with the

Company’s President that provides supplemental retirement benefits. The Company will contribute a total of

$150,000

to the plan over a

five

year period that will be paid out over a

15

year period upon retirement. The funds will accrue interest at a rate of

4.50%.

The Company has accrued

$66,000

and recognized expense for this plan totaling

$22,000

during the year ended

December 31, 2017

.

The

Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “Plan”), a multiemployer defined benefit pension plan, for the benefit of substantially all employees. The risks of participating in a multiemployer plan are different from single-employer plans in the following aspects:

1. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

2. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

3. If the Company chooses to stop participating in its multiemployer plan, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The

Company maintained participation in the Plan for the years ended

December 31, 2017

and

2016.

The Employee Identification Number (EIN) is

13

-

5645888

and the

three

-digit plan number is

333.

The Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of

1974

and the Internal Revenue Code

413

(c). There are

no

collective bargaining agreements in place that require contributions to the Plan. The Company has frozen this Plan effective

2011.

The Plan is administered by the trustees of the Financial Institutions Retirement Fund. Plan contributions and expense were approximately

$73,000

and

$66,000,

for the years ended

December 31, 2017

and

2016,

respectively. The Company’s funded status in the Plan at

December 31, 2017

and

2016

was approximately

97.20%

and

97.15%,

respectively.

Total contributions made to the Pentegra DB Plan as reported on the Form

5500,

equal

$153.2

million and

$163.1

million for the plan years ended

June 30, 2016

and

2015,

respectively. The Company’s contributions to the Pentegra DB Plan are

not

more than

5%

of the total contributions to the Pentegra DB Plan.

The

Company has a retirement savings

401

(k) plan covering substantially all employees. Employees attain eligibility in the

401

(k) plan upon completing

one

year of service and being

21

years of age or older. Employees

may

contribute amounts, up to the federal limitations, of their compensation with the Company matching

3%

of the employee’s total contributions. Employer contributions charged to expense were

$34,000

and

$19,000,

for the years ended

December 31, 2017

and

2016,

respectively.

As part of the Company

’s stock conversion, shares were purchased by the ESOP with a loan from New Bancorp, Inc. All employees of the Bank meeting certain tenure requirements are entitled to participate in the ESOP. The ESOP acquired

55,728

shares of the Company’s common stock in the conversion. During the years ended

December 31, 2017

and

2016,

a total of

2,975

and

2,732

shares, respectively, were allocated to ESOP plan participants, leaving

47,235

unallocated shares in the ESOP at

December 31, 2017.

Compensation expense related to the ESOP was

$45,000

and

$29,000

for the years ended

December 31, 2017

and

2016,

respectively.

The stock price at the formation date was

$10.00.

The aggregate fair value of the

47,235

unallocated shares was

$912,000

based on the

$19.30

closing price of the common stock on

December 31, 2017.

In the event the ESOP is unable to satisfy the obligation to repurchase the shares held by each beneficiary upon the beneficiary

’s termination or retirement, the Company is obligated to repurchase the shares. At

December 31, 2017

and

2016,

the fair value of these shares was

$160,000

and

$73,000,

respectively. There are

no

outstanding shares held by former employees that are subject to an ESOP related repurchase option.

In

June 2017,

the Company

’s stockholders authorized the adoption of the New Bancorp, Inc.

2017

Equity Incentive Plan (the

“2017

Plan”).

No

more than

97,524

shares of the Company’s common stock

may

be issued under the

2017

Plan, of which a maximum of

69,660

may

be issued pursuant to the exercise of stock options and

27,864

may

be issued pursuant to restricted stock awards, restricted stock units and unrestricted share awards. Stock options awarded to employees

may

be incentive stock options or non-qualified stock options. The shares that

may

be issued

may

be authorized but unissued shares or treasury shares. The

2017

Plan permits the grant of incentive awards in the form of options, stock appreciation rights, restricted share and share unit awards, and performance share awards. The

2017

Plan contains annual and lifetime limits on certain types of awards to individual participants.

Awards

may

vest or become exercisable only upon the achievement of performance measures or based solely on the passage of time after award.

 Stock options and restricted stock awards provide for accelerated vesting if there is a change in control (as defined in the

2017

Plan).

On

June 30, 2017,

the Company made awards of restricted shares and granted stock options for

22,931

and

60,080

shares, respectively, to members of the Board of Directors and to certain members of management. The awards vest over a

five

year period and the stock options have a

ten

year period to expiration.

  Each option has an exercise price of

$14.09

as determined on the grant date and expires

10

years from the grant date.

Stock Options

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

					Remaining
			Weighted-average		contractual
	Options		exercise price		life (years)
Options outstanding at January 1, 2017		-	$	-		-
Granted		60,080		14.09		10.0
Exercised		-		-		-
Forfeited		-		-		-
Expired		-		-		-
Options outstanding at December 31, 2017		60,080		14.09		9.5

As of

December 31, 2017,

the Company had

$165,000

of unrecognized compensation expense related to stock options.

  The cost of stock options will be amortized over the

five

-year vesting period.  The aggregate grant date fair value of the stock options granted in

2017

was

$2.87

per share.  The Company recognized

$18,000

of compensation expense related to the stock options granted for the year ended

December 31, 2017. 

The fair value of the Company's stock options granted in

2017

of

$3.06

per share was determined using the Black-Scholes option pricing formula.

  The following assumptions were used in the formula:

Expected volatility		13.87%
Risk-free interest rate		2.18%
Expected dividend yield		-
Expected life (in years)		7
Exercise price for the stock options	$	14.09

The expected volatility was based on the historical volatility of share price for the Company.

  The risk-free interest rate was based on the U.S. Treasury yield curve and expected life of the options at the time of grant.  The dividend yield was

0.00%

as the Company does

not

currently anticipate paying a dividend.  The expected life was based on the average of the

five

year vesting period and the

ten

year contractual term of the stock option plan.  The exercise price for the stock options was based on the closing price of the Company's stock on the date of grant. 

Restricted Shares

Restricted shares are accounted for as fixed grants using the fair value of the Company's stock at the time of the grant.

  Unvested restricted shares

may

not

be disposed of or transferred during the vesting period.

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

			Weighted-average
	Restricted		grant date
	stock awards		fair value
Non-vested at January 1, 2017		-	$	-
Granted		22,931		14.09
Vested		-		-
Forfeited		-		-
Nonvested at December 31, 2017		22,931	$	14.09

As of

December 31, 2017,

the Company had

$291,000

of unrecognized compensation expense related to restricted shares.

  The cost of the restricted shares will be amortized over the

five

-year vesting period.  The Company recognized

$32,000

expense related to the restricted shares during the year ended

December 30, 2017.

XML

Note 13 - Earnings (Loss) Per Share

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

13:

    

Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) applicable to common stock by the weighted-average number of shares of common stock outstanding during the period.

  Unallocated common shares held by the Company’s Employee Stock Ownership Plan (the “ESOP”) are shown as a reduction in stockholders’ equity and are excluded from weighted-average common shares outstanding for basic and diluted earnings (loss) per share calculations until they are committed to be released.

Calculations of earnings (loss) per share for the years ended

December 31, 2017

are as follows:

	Year Ended December 31, 2017
			Weighted-
	Net		Average		Per Share
	Income		Shares		Amount
	(In thousands)
Net income	$	688
Basic earnings per share				647,472	$	1.06
Effect of dilutive securities
Restricted stock awards and stock options				2,868
Diluted earnings per share				650,340	$	1.06

Loss per share for the year ended

December 31, 2016

was

$0.83,

calculated using

696,600

average shares issued, less

52,353

unallocated average shares held by the ESOP. The Company had

no

dilutive or potentially dilutive securities at

December 31, 2016.

XML

Note 14 - Commitments and Credit Risk

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

14:

    

Commitments and Credit Risk

Commitments to Originate Loans

Commitments to originate loans are agreements to lend to a customer as long as there is

no

violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and

may

require payment of a fee. Since a portion of the commitments

may

expire without being drawn upon, the total commitment amounts do

not

necessarily represent future cash requirements. Each customer

’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but

may

include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

The

Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations, including receipt of collateral, as those utilized for on-balance-sheet instruments.

At

December 31, 2017,

the Company had outstanding commitments to originate loans aggregating approximately

$1.3

million, comprised of fixed-rate loans, with interest rates ranging from

3.875%

to

4.875%.

At

December 31, 2017,

the Company had commitments under undisbursed construction loans totaling

$498,000

and commitments under commercial and consumer lines of credit totaling

$6.7

million and

$3.8

million, respectively.

At

December 31, 2016,

the Company had outstanding commitments to originate loans aggregating approximately

$670,000,

comprised of fixed-rate loans, with interest rates ranging from

3.5%

to

4.5%.

In addition, at

December 31, 2016,

the Company had commitments under undisbursed construction loans totaling

$1.8

million and commitments under commercial and consumer lines of credit totaling

$5.5

million and

$3.8

million, respectively.

The

Company had commitments under outstanding financial standby letters of credit totaling

$169,000

and

$219,000

at

December 31, 2017

and

2016,

respectively.

XML

Note 15- Disclosures About Fair Value of Assets and Liabilities

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

15:

    

Disclosures about Fair Value of Assets and Liabilities

F

air value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of

three

levels of inputs that

may

be used to measure fair value:

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 an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Nonrecurring Measurements

The following table presents fair value measurements of assets measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which fair value measurements fall at

December 31, 2017

and

2016:

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2017
Impaired loans	$	-	$	-	$	-	$	-
December 31, 2016
Impaired loans	$	232	$	-	$	-	$	232

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a non-recurring basis and recognized in the accompanying balance sheet

s, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level

3

of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral-dependent Impaired Loans, Net of ALLL

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

3

of the fair value hierarchy.

The

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

may

affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by management. Appraisals are reviewed for accuracy and consistency by management. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by management by comparison to historical results.

Unobservable (Level

3

) Inputs

The following table

presents quantitative information about unobservable inputs used in nonrecurring Level

3

fair value measurements:

	Fair Value		Valuation Technique	Unobservable Inputs	Range
	(In thousands)
December 31, 2016
Impaired loans (collateral dependent)	$	232	Marketable comparable properties	Marketability discount		10%	-	15%

 

Fair Value of Financial Instruments

The following table presents

the estimated fair values of the Company’s financial instruments

not

carried at fair value and the level within the fair value hierarchy in which the fair value measurements fall at

December 31, 2017

and

2016.

					Fair Value Measurement Using
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(In thousands)
December 31, 2017
Financial assets
Cash and due from banks	$	1,085	$	1,085	$	1,085	$	-	$	-
Interest-earning demand deposits		2,997		2,997		2,997		-		-
Federal funds sold		11,711		11,711		11,711		-		-
Interest-earning time deposits in banks		744		744		-		744		-
Loans and loans held for sale, net		100,746		100,273		-		-		100,273
Federal Home Loan Bank stock		468		468		-		468		-
Accrued interest receivable		267		267		-		267		-
Servicing rights		937		937		-		-		937
Financial liabilities
Deposits		101,688		101,603		61,767		39,836		-
Advances from the Federal Home Loan Bank		9,027		9,024		-		9,024		-
Accrued interest payable		30		30		-		30		-
December 31, 2016
Financial assets
Cash and due from banks	$	1,419	$	1,419	$	1,419	$	-	$	-
Interest-earning demand deposits		8,438		8,438		8,438		-		-
Interest-earning time deposits in banks		992		992		-		992		-
Loans, net		83,008		83,538		-		-		83,538
Federal Home Loan Bank stock		468		468		-		468		-
Accrued interest receivable		203		203		-		203		-
Servicing rights		483		483		-		-		483
Financial liabilities
Deposits		76,841		77,104		45,080		32,024		-
Federal funds purchased		1,000		1,000		1,000		-		-
Advances from the Federal Home Loan Bank		10,027		11,127		1,000		10,127		-
Accrued interest payable		7		7		-		7		-

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

Cash and

Due from Banks and Interest-bearing Demand Deposits

The carrying amount approximates fair value.

Interest-

earning Time Deposits in Banks

The carrying amount approximates fair value.

Federal Funds Sold

The carrying amount approximates fair value.

Loans

 and Loans Held for Sale

Fair value is estimated by discounting the future cash flows using the market rates at which similar notes would be made to borrowers with similar credit ratings and for the same remaining maturities. The market rates used are based on current rates the

Company would impose for similar loans and reflect a market participant assumption about risks associated with nonperformance, illiquidity, and the structure and term of the loans along with local economic and market conditions.

Federal Home Loan Bank Stock

Fair value is estimated at book value due to restrictions that limit the sale or transfer of such securities.

Accrued Interest Receivable and Payable

The carrying amount approximates fair value. The carrying amount is determined using the interest rate, balance and last payment date.

Servicing Rights

S

ervicing rights do

not

trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed and default rate.

Deposits

Fair value of term deposits is estimated by discounting the future cash flows using rates of similar deposits with similar maturities. The market rates used were obtained from a knowledgeable independent

third

party and reviewed by the

Company. The rates were the average of current rates offered by local competitors of the Company.

The estimated fair val

ue of demand, NOW, savings and money market deposits is the book value since rates are regularly adjusted to market rates and amounts are payable on demand at the reporting date.

Federal Funds Purchased

The carrying amount approximates fair value.

F

ederal Home Loan Bank Advances

Fair value is estimated by discounting the future cash flows using rates of similar advances with similar maturities. These rates were obtained from current rates offered by FHLB.

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

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.

The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

The fair value of loan commitments was

not

material at

December 31, 2017

and

2016.

XML

Note 16 - Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

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

Note

16:

    

Recent Accounting Pronouncements

FASB ASU

2014

‑

09,

Revenue from Contracts with Customers

In

May 

2014,

the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)

2014‑09,

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

March 2016

the FASB issued ASU

2016‑08,

“Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the guidance in determining revenue recognition as principal versus agent. In

April 

2016,

the FASB issued ASU

2016‑10,

“Identifying Performance Obligations and Licensing,” which provides guidance in accounting for immaterial performance obligations and shipping and handling. In

May 

2016,

the FASB issued ASU

2016‑12,

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

As an emerging growth company, these amendments are effective for annual reporting periods beginning after

December 15, 2018,

and for interim periods within annual periods beginning after

December 15, 2019.

The Company’s revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 

2014

-

09.

    The Company is continuing to evaluate the impact of adopting ASU

2014

-

09,

but does

not

expect the impact to have a material impact on the Company’s financial position or results of operation.

FASB ASU

2016

-

01,

Recognition and Measurement of Financial Assets and Financial Liabilities

In

January 2016,

the

Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016

-

01,

 

Recognition and Measurement of Financial Assets and Financial Liabilities

. For public business entities, the amendments in this update include the elimination of the requirement to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, the requirement to use the exit price notion when measuring fair value of financial instruments for disclosure purposes, the requirement to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, the requirement for separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or accompanying notes to the financial statements, and the amendments clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.

The amendments in this update are effective, as to the Company, for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal

years. Early adoption of the amendments in this update is

not

permitted, except that early application by public business entities to financial statements of fiscal years or interim periods that have

not

yet been issued or, by all other entities, that have

not

yet been made available for issuance are permitted as of the beginning of the fiscal year of adoption for the following amendment: An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. An entity should apply the amendments to this update by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Management adopted ASU

No.

2016

-

01

effective

January 1, 2018,

without a material impact on the Company’s results of operations or financial position.

FASB ASU

2016

-

02,

Leases

In

February 2016

the

FASB issued ASU

2016

-

02,

Leases.

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

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

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

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

606,

Revenue from Contracts with Customers

.

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will

no

longer be provided with a source of off-balance sheet financing.

The amendments in ASU

2016

-

02

are effective, as to the Company, for years beginning after

December 15, 2019,

and for interim periods for years beginning after

January 1, 2020.

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

not

require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors

may

not

apply a full retrospective transition approach. Management is currently evaluating the impact of adopting this guidance on the Company’s financial statements.

FASB ASU

2016

‑

09

Share

‑

Based Payments.

In

March 

2016,

the FASB issued ASU

2016‑09

“Share‑Based Payments.” The guidance in this ASU simplifies several aspects of the accounting for share‑based payment award transactions, including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. Additionally, the guidance simplifies

two

areas specific to entities other than public business entities allowing them apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one‑time election to switch from measuring all liability‑classified awards at fair value to measuring them at intrinsic value.

For emerging growth companies, the amendments are effective for annual periods beginning after

December 

15,

2017

and interim periods within annual periods beginning after

December 

15,

2018.

  Management does

not

expect to make material changes to its accounting for share-based payments and implementation of ASU

2016

-

09

is

not

expected to have a material effect on the Company’s financial position and results of operations.  Additionally, Merchants share-based compensation plan awards have been classified as equity awards, whereby available elections to switch to intrinsic value measurement do

not

apply.

FASB ASU

2016

-

13,

Financial Instruments

– Credit Losses

In

June 2016,

FASB issued ASU

2016

-

13,

“Financial Instruments - Credit Losses”. The amendments in this Update replace the incurred loss model with a

methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. ASU

No.

2016

-

13

replaces the incurred loss impairment methodology with a new methodology that reflects expected credit losses over the lives of the loans and requires consideration of a broader range of information to inform credit loss estimates. The ASU requires an organization to estimate all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts. Additional disclosures are required. ASU

No.

2016

-

13

is effective, as to the Company, for fiscal years, beginning after

December 15, 2019,

and interim periods within those fiscal years. Management expects that the implementation of ASU

No.

2016

-

13

may

increase the balance of the allowance for loan losses and is continuing to evaluate the potential impact on the Company's results of operations and financial position.

XML

Note 17 - Change in Corporate Form

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Change in Corporate Form [Text Block]

Note

17:

    

Change in Corporate Form

On

October 19, 2015,

the

Bank consummated its mutual –to-stock conversion pursuant to which it became a Federal stock savings bank and the wholly owned subsidiary of New Bancorp, Inc., as parent of the Bank.

As part of the conversion, the Bank became the wholly owned subsidiary of the Company, and the Company issued and sold shares of its capital stock pursuant to an independent valuation appraisal of the Bank and the Company. The stock was priced at

$10.00

per share. In addition, the Bank’s board of directors adopted an employee stock ownership plan (ESOP) which subscribed for

8%

of the common stock sold in the offering. The Conversion was completed on

October 19, 2015

and resulted in the issuance of

696,600

common shares by the Company.

The cost of the Conversion and issuing the capital stock

totaled

$1.2

million and was deducted from the proceeds of the offering.

The conversion was accounted for as a change in corporate form with the historic basis of the Bank

’s assets, liabilities and equity unchanged as a result.

XML

Note 18 - Condensed Financial Information (Parent Company Only)

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

Note

18:

    

Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to the financial position, results of operations and cash flows of

New Bancorp, Inc.:

Condensed Balance Sheets
December 31, 2017 and 2016
	2017		2016
	(In thousands)
Assets
Cash	$	1,376	$	1,615
Investment in Bank subsidiary		13,980		12,955
Total assets	$	15,356	$	14,570
Liabilities and Shareholders' Equity
Liabilities	$	4	$	1
Redeemable common stock held by ESOP		160		73
Shareholders' equity less maximum cash obligation related to ESOP shares		15,192		14,496
Total liabilities and shareholders' equity	$	15,356	$	14,570

Condensed Statement of Operations

For the Years Ended

December 31, 2017

and

2016

	2017		2016
	(In thousands)
Income
Interest income	$	19	$	18
Equity in net income (loss) of Bank subsidiary		988		(295	)
Expenses
General and administrative expenses		319		257
Total expenses		319		257
Net income (loss)	$	688	$	(534	)

Condensed Statement of Cash Flows

For the Years Ended

December 31, 2017

and

2016

	2017		2016
	(In thousands)
Operating activities
Net income (loss)	$	688	$	(534	)
Other adjustments		61		21
Items not requiring cash:
Equity in net (income) loss of Bank subsidiary		(988)		295
Net cash used in operating activities		(239)		(218	)
Net change in cash		(239)		(218	)
Cash at beginning of year		1,615		1,833
Cash at end of year	$	1,376	$	1,615

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The consolidated financial statements include New Bancorp, Inc. and its wholly-owned subsidiary the Bank, together referred to as the “Company.” Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the

United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans

, mortgage servicing rights, valuation of deferred tax assets and fair values of financial instruments.

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain reclassifications have been made to the

December 31,

201

7

financial statements to conform to the

December 31, 2016

financial statement presentation. These reclassifications had

no

effect on our results of operations

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash

and Cash Equivalents

The

Company considers all liquid investments with original maturities of

three

months or less to be cash equivalents. At

December 31, 2017,

the Company’s cash accounts exceeded federally insured limits by approximately

$11.6

million. Additionally, approximately

$1.9

million of cash in total is held by the Federal Home Loan Bank and Federal Reserve Bank as of

December 31, 2017,

which is

not

federally insured.

Deposits in Banks [Policy Text Block]

Interest-

earning Deposits in Banks

Interest-earning

time deposits in banks mature within the year

2018

and are carried at cost.

Loans Held-for-sale [Policy Text Block]

Loans Held for Sale

L

oans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses

and any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid princip

al balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is

90

days past due unless the credit is well-secured and

in process of collection. Past-due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but

not

collected for loans that are placed on nonaccrual or charged off

is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when ma

nagement believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The

allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that

may

affect the borrower’s ability to repay, estimated value of any 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. The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. 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. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Bank’s internal risk rating process. Other adjustments

may

be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are

not

fully reflected in the historical loss or risk rating data.

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 loan-by-loan basis for commercial and construction loans 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.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group

’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does

not

separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Property, Plant and Equipment, Policy [Policy Text Block]

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives of depreciable assets is

39

years for buildings,

10

years for building improvements, and

three

to

seven

years for furniture, fixtures and equipment. Maintenance and repairs are expensed and major improvements are capitalized.

Federal Home Loan Bank Stock [Policy Text Block]

Federal Home Loan Bank Stock

Federal Home Loan Bank

(“FHLB”) stock is a required investment for institutions that are members of the FHLB system. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Loans and Leases Receivable, Real Estate Acquired Through Foreclosure, Policy [Policy Text Block]

Foreclosed

Real Estate Held for Sale

Real estate

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

no

loans in the process of foreclosure at

December 31, 2017.

Foreclosed real estate held for sale consisted of residential real estate at

December 31, 2016.

Loans and Leases Receivable, Mortgage Banking Activities, Policy [Policy Text Block]

Servicing Rights

S

ervicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 

860

-

50

), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company subsequently measures the servicing asset using either the fair value or the amortization method. The Company has elected to initially and subsequently measure the servicing rights for loans sold with servicing retained loans using 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 at each reporting date.

Fair value is based on market

prices for comparable servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and

may

have an adverse impact on the value of the mortgage servicing right and

may

result in a reduction to noninterest income.

Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche. The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment. Fair value in excess of the carrying amount of servicing assets for that stratum is

not

recognized.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percenta

ge of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

Transfers and Servicing of Financial Assets, Policy [Policy Text Block]

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 de

emed to be surrendered when (

1

) the assets have been isolated from the Company —put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (

2

) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (

3

) the Company does

not

maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Tax, Policy [Policy Text Block]

Income Taxes

The

Company accounts for income taxes in accordance with income tax accounting guidance (ASC 

740,

Income Taxes

). The income tax accounting guidance results in

two

components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than

not

that some portion or all of a deferred tax asset will

not

be realized.

T

ax positions are recognized if it is more likely than

not,

based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than

not

means a likelihood of more than

50

percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-

not

recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than

50

percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether

 or

not

a tax position has met the more-likely-than-

not

recognition threshold con

siders the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

The

Company recognizes interest and penalties on income taxes as a component of income tax expense.

The

Company has established a full valuation allowance for its net deferred tax asset as of

December 31, 2017

and

2016.

See Note

9,

Income Taxes, for further information.

Life Settlement Contracts, Policy [Policy Text Block]

Bank

Owned Life Insurance

The cash surrender value of

bank owned life insurance policies represents the value of life insurance policies on certain current and former officers of the Company for which the Company is the beneficiary. The Company accounts for these assets using the cash surrender value method in determining the carrying value of the insurance policies.

Comprehensive Income, Policy [Policy Text Block]

any is the beneficiary. The Company accounts for these assets using the cash surrender value method in determining the carrying value of the insurance policies.

Comprehensive Income (Loss)

Comprehensive income

(loss) consists of net income (loss) and other comprehensive income. The Company had

no

elements of other comprehensive income at

December 31, 2017

and

2016.

Earnings Per Share, Policy [Policy Text Block]

Income (L

oss) Per Share

Basic

income (loss) per share excludes dilution and is calculated by dividing net income (loss) applicable to common stock by the weighted-average number of shares of common stock outstanding during the period, less unallocated Employee Stock Ownership Plan (the “ESOP”) shares.

Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding if all potentially dilutive common stock equivalents were issued during the year, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that

may

be issued by the Company relate to outstanding stock options and restricted stock awards and are determined using the treasury stock method.

Unallocated common shares held by the Company

’s ESOP are shown as a reduction in shareholders’ equity and are excluded from weighted-average common shares outstanding for both basic and diluted earnings (loss) per share calculations until they are committed to be released.

Emerging Growth Company, Policy [Policy Text Block]

Emerging Growth Company Critical Accounting Policy Disclosure

W

e are an “emerging growth company,” as defined in Section 

2

(a) of the Securities Act of

1933

(the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of

2012

( the “JOBS Act”). We are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are

not

emerging growthcompanies. 

As an “emerging

growth company” we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements

may

not

be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

XML

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

12 Months Ended

Dec. 31, 2017

Notes Tables

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

	2017			2016
	(In thousands)
Real estate loans
Residential	$	41,474		$	38,636
Commercial		45,623			35,709
Construction and land		10,746			10,233
Commercial business		909			1,000
Consumer and other		557			335
Total loans		99,309			85,913
Less:
Net deferred loan fees, premiums and discounts		(176	)		(70	)
Undisbursed loans in process		(498	)		(1,772	)
Allowance for loan losses		(1,123	)		(1,063	)
Net loans	$	97,512		$	83,008

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

	December 31, 2017
	Real Estate
							Construction		Commercial
	Residential			Commercial			and Land		Business		Consumer		Total
	(In thousands)
Allowance for loan losses:
Balance, January 1, 2017	$	656		$	326		$	72	$	4	$	5	$	1,063
Provision for loan losses		(99	)		151			4		11		3		70
Charge-offs		(17	)		(9	)		-		-		-		(26	)
Recoveries		-			16			-		-		-		16
Balance, December 31, 2017	$	540		$	484		$	76	$	15	$	8	$	1,123
Allowance for loan losses:
Ending balance, individually evaluated for impairment	$	-		$	-		$	-	$	-	$	-	$	-
Ending balance, collectively evaluated for impairment	$	540		$	484		$	76	$	15	$	8	$	1,123
Loans:
Ending balance	$	41,474		$	45,623		$	10,746	$	909	$	557	$	99,309
Ending balance; individually evaluated for impairment	$	2,294		$	33		$	2,312	$	-	$	-	$	4,639
Ending balance; collectively evaluated for impairment	$	39,180		$	45,590		$	8,434	$	909	$	557	$	94,670

	December 31, 2016
	Real Estate
							Construction			Commercial
	Residential			Commercial			and Land			Business			Consumer		Total
	(In thousands)
Allowance for loan losses:
Balance, January 1, 2016	$	648		$	383		$	102		$	19		$	3	$	1,155
Provision (credit) for loan losses		141			(57	)		(71	)		(15	)		2		-
Charge-offs		(133	)		-			-			-			-		(133	)
Recoveries		-			-			41			-			-		41
Balance, December 31, 2016	$	656		$	326		$	72		$	4		$	5	$	1,063
Allowance for loan losses:
Ending balance, individually evaluated for impairment	$	-		$	-		$	-		$	-		$	-	$	-
Ending balance, collectively evaluated for impairment	$	656		$	326		$	72		$	4		$	5	$	1,063
Loans:
Ending balance	$	38,636		$	35,709		$	10,233		$	1,000		$	335	$	85,913
Ending balance; individually evaluated for impairment	$	2,779		$	533		$	1,709		$	-		$	-	$	5,021
Ending balance; collectively evaluated for impairment	$	35,857		$	35,176		$	8,524		$	1,000		$	335	$	80,892

Financing Receivable Credit Quality Indicators [Table Text Block]

	December 31, 2017
	Real Estate
					Construction		Commercial
	Residential		Commercial		and Land		Business		Consumer		Total
	(In thousands)
Pass	$	39,639	$	45,136	$	9,839	$	876	$	557	$	96,047
Special mention/Watch		48		-		-		-				48
Substandard		1,787		487		907		33		-		3,214
Doubtful		-		-		-		-		-		-
Total	$	41,474	$	45,623	$	10,746	$	909	$	557	$	99,309

	December 31, 2016
	Real Estate
					Construction		Commercial
	Residential		Commercial		and Land		Business		Consumer		Total
	(In thousands)
Pass	$	36,324	$	35,211	$	9,210	$	965	$	325	$	82,035
Special mention/Watch		415		-		-		-		10		425
Substandard		1,897		498		1,023		35		-		3,453
Doubtful		-		-		-		-		-		-
Total	$	38,636	$	35,709	$	10,233	$	1,000	$	335	$	85,913

Past Due Financing Receivables [Table Text Block]

	December 31, 2017
													Total Loans >
	30-59 Days		60-89 Days		Greater Than		Total				Total Loans		90 Days &
	Past Due		Past Due		90 Days		Past Due		Current		Receivable		Accruing
	(In thousands)
Real estate
Residential	$	73	$	196	$	-	$	269	$	41,205	$	41,474	$	-
Commercial		-		-				-		45,623		45,623		-
Construction and land		-		-		-		-		10,746		10,746		-
Commercial business		-		-		-		-		909		909		-
Consumer		-		-		-		-		557		557		-
Total	$	73	$	196	$	-	$	269	$	99,040	$	99,309	$	-

	December 31, 2016
													Total Loans >
	30-59 Days		60-89 Days		Greater Than		Total				Total Loans		90 Days &
	Past Due		Past Due		90 Days		Past Due		Current		Receivable		Accruing
	(In thousands)
Real estate
Residential	$	194	$	-	$	327	$	521	$	38,115	$	38,636	$	-
Commercial		-		-		4		4		35,705		35,709		-
Construction and land		-		-		-		-		10,233		10,233		-
Commercial business		-		-		-		-		1,000		1,000		-
Consumer		-		-		-		-		335		335		-
Total	$	194	$	-	$	331	$	525	$	85,388	$	85,913	$	-

Impaired Financing Receivables [Table Text Block]

	As of and for the year ended December 31, 2017
			Unpaid				Average Balance of		Interest
	Recorded Balance		Principal Balance		Specific Allowance		Impaired Loans		Income Recognized
	(In thousands)
Loans without a specific valuation allowance:
Real estate
Residential	$	2,294	$	2,439	$	-	$	2,166	$	73
Commercial		33		33		-		35		2
Construction and land		2,312		2,323		-		1,799		90
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
Real estate
Residential		-		-		-		-		-
Commercial		-		-		-		-		-
Construction and land		-		-		-		-		-
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Totals	$	4,639	$	4,795	$	-	$	4,000	$	165

	As of and for the year ended December 31, 2016
			Unpaid				Average Balance of		Interest
	Recorded Balance		Principal Balance		Specific Allowance		Impaired Loans		Income Recognized
	(In thousands)
Loans without a specific valuation allowance:
Real estate
Residential	$	2,779	$	2,936	$	-	$	2,420	$	140
Commercial		533		560		-		230		28
Construction and land		1,709		1,709		-		1,760		95
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Loans with a specific valuation allowance:
Real estate
Residential		-		-		-		-		-
Commercial		-		-		-		-		-
Construction and land		-		-		-		-		-
Commercial business		-		-		-		-		-
Consumer		-		-		-		-		-
Totals	$	5,021	$	5,205	$	-	$	4,410	$	263

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

	December 31,
	2017		2016
	(In thousands)
Real estate loans
Residential	$	1,629	$	614
Commercial		-		4
Construction and land		728		-
Commercial business		-		-
Consumer and other		-		-
Total nonaccrual	$	2,357	$	618

XML

Note 5 - Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

Property, Plant and Equipment [Table Text Block]

	2017		2016
	(In thousands)
Land	$	342	$	342
Buildings and improvements		3,252		3,155
Furniture and equipment		2,508		2,503
		6,102		6,000
Less accumulated depreciation		4,208		4,066
Net premises and equipment	$	1,894	$	1,934

XML

Note 6 - Loan Servicing (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

Schedule of Servicing Assets at Fair Value [Table Text Block]

	2017			2016
	(In thousands)
Balance at beginning of year	$	483		$	317
Additions		537			251
Amortization		(83	)		(85	)
Balance at end of year	$	937		$	483

XML

Note 7 - Time Deposits (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

Deposits, Schedule of Maturities [Table Text Block]

	2017
	(In thousands)
Maturing year ending December 31,
2018	$	13,658
2019		13,345
2020		8,486
2021		1,440
2022		2,721
Thereafter		271
Balance at end of year	$	39,921

XML

Note 8 - Borrowings (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

Federal Home Loan Bank, Advances, Maturities [Table Text Block]

			Maturing in year ended
Interest rate			December 31,		2017
					(In thousands)
1.34%	-	1.80%		2018	$	4,100
	1.85%			2019		1,927
	2.08%			2020		3,000
				Balance at end of year	$	9,027

XML

Note 9 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Year Ended December 31,
	2017			2016
	(In thousands)
Computed at statutory rate (34%)	$	234		$	(182	)
Increase (decrease) resulting from:
Bank-owned life insurance		(58	)		(58	)
Effect of Tax Cuts and Jobs Act		1,633			-
Change in valuation allowance		(1,818	)		234
Other		9			3
Actual income tax (benefit)	$	-		$	-

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	2017			2016
	(In thousands)
Deferred tax assets
Allowance for loan losses	$	240		$	368
Deferred compensation		48			58
Net operating loss carryforward		2,640			4,287
Deferred loan origination costs		-			12
Stock based compensation		11			-
Loans held for sale		35			-
Other		37			8
Deferred tax assets		3,011			4,733
Deferred tax liabilities
Federal Home Loan Bank stock dividends		(10	)		(16	)
Servicing rights		(200	)		(167	)
Depreciation		(22	)		(24	)
Deferred loan costs		(71	)		-
Deferred tax liabilities		(303	)		(207	)
Net deferred tax asset before valuation allowance		2,708			4,526
Valuation allowance
Beginning balance		(4,526	)		(4,292	)
(Increase) decrease during period		1,818			(234	)
Ending balance		(2,708	)		(4,526	)
Net deferred tax asset	$	-		$	-

XML

Note 10 - Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of December 31, 2017
Total Capital (to Risk-Weighted Assets)	$	15,094		16.3	%	$	7,394		8.0	%	$	9,243		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	13,971		15.1	%	$	5,546		6.0	%	$	7,394		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets)	$	13,971		15.1	%	$	4,159		4.5	%	$	6,008		6.5	%
Tier I Leverage Capital (to Average Total Assets)	$	13,971		11.3	%	$	4,933		4.0	%	$	6,166		5.0	%
As of December 31, 2016
Total Capital (to Risk-Weighted Assets)	$	13,943		17.6	%	$	6,327		8.0	%	$	7,908		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	12,954		16.4	%	$	4,745		6.0	%	$	6,327		8.0	%
Common Equity Tier I Capital (to Risk-Weighted Assets)	$	12,954		16.4	%	$	3,559		4.5	%	$	5,140		6.5	%
Tier I Leverage Capital (to Average Total Assets)	$	12,954		12.9	%	$	4,024		4.0	%	$	5,030		5.0	%

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Note 12 - Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

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

					Remaining
			Weighted-average		contractual
	Options		exercise price		life (years)
Options outstanding at January 1, 2017		-	$	-		-
Granted		60,080		14.09		10.0
Exercised		-		-		-
Forfeited		-		-		-
Expired		-		-		-
Options outstanding at December 31, 2017		60,080		14.09		9.5

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

Expected volatility		13.87%
Risk-free interest rate		2.18%
Expected dividend yield		-
Expected life (in years)		7
Exercise price for the stock options	$	14.09

Nonvested Restricted Stock Shares Activity [Table Text Block]

			Weighted-average
	Restricted		grant date
	stock awards		fair value
Non-vested at January 1, 2017		-	$	-
Granted		22,931		14.09
Vested		-		-
Forfeited		-		-
Nonvested at December 31, 2017		22,931	$	14.09

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Note 13 - Earnings (Loss) Per Share (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

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

	Year Ended December 31, 2017
			Weighted-
	Net		Average		Per Share
	Income		Shares		Amount
	(In thousands)
Net income	$	688
Basic earnings per share				647,472	$	1.06
Effect of dilutive securities
Restricted stock awards and stock options				2,868
Diluted earnings per share				650,340	$	1.06

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Note 15- Disclosures About Fair Value of Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

Fair Value Measurements, Nonrecurring [Table Text Block]

			Fair Value Measurement Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2017
Impaired loans	$	-	$	-	$	-	$	-
December 31, 2016
Impaired loans	$	232	$	-	$	-	$	232

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

	Fair Value		Valuation Technique	Unobservable Inputs	Range
	(In thousands)
December 31, 2016
Impaired loans (collateral dependent)	$	232	Marketable comparable properties	Marketability discount		10%	-	15%

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

					Fair Value Measurement Using
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(In thousands)
December 31, 2017
Financial assets
Cash and due from banks	$	1,085	$	1,085	$	1,085	$	-	$	-
Interest-earning demand deposits		2,997		2,997		2,997		-		-
Federal funds sold		11,711		11,711		11,711		-		-
Interest-earning time deposits in banks		744		744		-		744		-
Loans and loans held for sale, net		100,746		100,273		-		-		100,273
Federal Home Loan Bank stock		468		468		-		468		-
Accrued interest receivable		267		267		-		267		-
Servicing rights		937		937		-		-		937
Financial liabilities
Deposits		101,688		101,603		61,767		39,836		-
Advances from the Federal Home Loan Bank		9,027		9,024		-		9,024		-
Accrued interest payable		30		30		-		30		-
December 31, 2016
Financial assets
Cash and due from banks	$	1,419	$	1,419	$	1,419	$	-	$	-
Interest-earning demand deposits		8,438		8,438		8,438		-		-
Interest-earning time deposits in banks		992		992		-		992		-
Loans, net		83,008		83,538		-		-		83,538
Federal Home Loan Bank stock		468		468		-		468		-
Accrued interest receivable		203		203		-		203		-
Servicing rights		483		483		-		-		483
Financial liabilities
Deposits		76,841		77,104		45,080		32,024		-
Federal funds purchased		1,000		1,000		1,000		-		-
Advances from the Federal Home Loan Bank		10,027		11,127		1,000		10,127		-
Accrued interest payable		7		7		-		7		-

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Note 18 - Condensed Financial Information (Parent Company Only) (Tables)

12 Months Ended

Dec. 31, 2017

Notes Tables

Condensed Balance Sheet [Table Text Block]

Condensed Balance Sheets
December 31, 2017 and 2016
	2017		2016
	(In thousands)
Assets
Cash	$	1,376	$	1,615
Investment in Bank subsidiary		13,980		12,955
Total assets	$	15,356	$	14,570
Liabilities and Shareholders' Equity
Liabilities	$	4	$	1
Redeemable common stock held by ESOP		160		73
Shareholders' equity less maximum cash obligation related to ESOP shares		15,192		14,496
Total liabilities and shareholders' equity	$	15,356	$	14,570

Condensed Income Statement [Table Text Block]

	2017		2016
	(In thousands)
Income
Interest income	$	19	$	18
Equity in net income (loss) of Bank subsidiary		988		(295	)
Expenses
General and administrative expenses		319		257
Total expenses		319		257
Net income (loss)	$	688	$	(534	)

Condensed Cash Flow Statement [Table Text Block]

	2017		2016
	(In thousands)
Operating activities
Net income (loss)	$	688	$	(534	)
Other adjustments		61		21
Items not requiring cash:
Equity in net (income) loss of Bank subsidiary		(988)		295
Net cash used in operating activities		(239)		(218	)
Net change in cash		(239)		(218	)
Cash at beginning of year		1,615		1,833
Cash at end of year	$	1,376	$	1,615

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Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details Textual) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Oct. 19, 2015
Common Stock, Shares, Issued	719,531	696,600	696,600
Share Price	$ 19.30		$ 10
Cash, Uninsured Amount	$ 11,600
Restricted Cash and Cash Equivalents	1,900
Mortgage Loans in Process of Foreclosure, Amount	0	$ 0
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	$ 0	$ 0
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		0
Building [Member]
Property, Plant and Equipment, Useful Life	39 years
Building Improvements [Member]
Property, Plant and Equipment, Useful Life	10 years
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	3 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	7 years

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Note 2 - Restriction on Cash and Due From Banks (Details Textual) $ in Thousands	Dec. 31, 2017 USD ($)
Federal Reserve Bank, Reserve Balance Requirement	$ 0

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Note 3 - Securities (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Available-for-sale Securities	$ 0	$ 0
Proceeds from Sale of Available-for-sale Securities	$ 0	$ 0

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Note 4 - Loans and Allowance for Loan Losses (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Small Business Administration Loans, Percentage of Principal Balance, Guaranteed		75.00%
Small Business Administration Loans, Percentage of Principal Balance, Sold		75.00%
Small Business Administration Loans, Percentage of Principal Balance, Retained		25.00%
United State Department of Agriculture, Percentage of Principle Balance, Guaranteed	80.00%
Financing Receivable, Modifications, Number of Contracts	0	0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	0
Residential Portfolio Segment [Member] | Home Equity Loan [Member]
Loans and Leases Receivable, Collateral for Secured Borrowings	$ 4.8	$ 4.7

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Note 4 - Loans and Allowance for Loan Losses - Classes of Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Real estate loans
Loans	$ 99,309	$ 85,913
Net deferred loan fees, premiums and discounts	(176)	(70)
Undisbursed loans in process	(498)	(1,772)
Allowance for loan losses	(1,123)	(1,063)	$ (1,155)
Net loans	97,512	83,008
Residential Portfolio Segment [Member]
Real estate loans
Loans	41,474	38,636
Allowance for loan losses	(540)	(656)	(648)
Commercial Real Estate Portfolio Segment [Member]
Real estate loans
Loans	45,623	35,709
Allowance for loan losses	(484)	(326)	(383)
Construction and Land Real Estate [Member]
Real estate loans
Loans	10,746	10,233
Allowance for loan losses	(76)	(72)	(102)
Commercial Portfolio Segment [Member]
Real estate loans
Loans	909	1,000
Allowance for loan losses	(15)	(4)	(19)
Consumer Portfolio Segment [Member]
Real estate loans
Loans	557	335
Allowance for loan losses	$ (8)	$ (5)	$ (3)

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Note 4 - Loans and Allowance for Loan Losses - Activity in Allowance for Loan Losses and Recorded Investment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Balance	$ 1,063	$ 1,155
Provision (credit) for loan losses	70
Charge-offs	(26)	(133)
Recoveries	16	41
Balance	1,123	1,063
Ending balance, individually evaluated for impairment
Ending balance, collectively evaluated for impairment	1,123	1,063
Loans	99,309	85,913
Ending balance; individually evaluated for impairment	4,639	5,021
Ending balance; collectively evaluated for impairment	94,670	80,892
Residential Portfolio Segment [Member]
Balance	656	648
Provision (credit) for loan losses	(99)	141
Charge-offs	(17)	(133)
Recoveries
Balance	540	656
Ending balance, individually evaluated for impairment
Ending balance, collectively evaluated for impairment	540	656
Loans	41,474	38,636
Ending balance; individually evaluated for impairment	2,294	2,779
Ending balance; collectively evaluated for impairment	39,180	35,857
Commercial Real Estate Portfolio Segment [Member]
Balance	326	383
Provision (credit) for loan losses	151	(57)
Charge-offs	(9)
Recoveries	16
Balance	484	326
Ending balance, individually evaluated for impairment
Ending balance, collectively evaluated for impairment	484	326
Loans	45,623	35,709
Ending balance; individually evaluated for impairment	33	533
Ending balance; collectively evaluated for impairment	45,590	35,176
Construction and Land Real Estate [Member]
Balance	72	102
Provision (credit) for loan losses	4	(71)
Charge-offs
Recoveries		41
Balance	76	72
Ending balance, individually evaluated for impairment
Ending balance, collectively evaluated for impairment	76	72
Loans	10,746	10,233
Ending balance; individually evaluated for impairment	2,312	1,709
Ending balance; collectively evaluated for impairment	8,434	8,524
Commercial Portfolio Segment [Member]
Balance	4	19
Provision (credit) for loan losses	11	(15)
Charge-offs
Recoveries
Balance	15	4
Ending balance, individually evaluated for impairment
Ending balance, collectively evaluated for impairment	15	4
Loans	909	1,000
Ending balance; individually evaluated for impairment
Ending balance; collectively evaluated for impairment	909	1,000
Consumer Portfolio Segment [Member]
Balance	5	3
Provision (credit) for loan losses	3	2
Charge-offs
Recoveries
Balance	8	5
Ending balance, individually evaluated for impairment
Ending balance, collectively evaluated for impairment	8	5
Loans	557	335
Ending balance; individually evaluated for impairment
Ending balance; collectively evaluated for impairment	$ 557	$ 335

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Note 4 - Loans and Allowance for Loan Losses - Credit Risk Profile Based on Internal Rating Category (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Loans	$ 99,309	$ 85,913
Residential Portfolio Segment [Member]
Loans	41,474	38,636
Commercial Real Estate Portfolio Segment [Member]
Loans	45,623	35,709
Construction and Land Real Estate [Member]
Loans	10,746	10,233
Commercial Portfolio Segment [Member]
Loans	909	1,000
Consumer Portfolio Segment [Member]
Loans	557	335
Pass [Member]
Loans	96,047	82,035
Pass [Member] | Residential Portfolio Segment [Member]
Loans	39,639	36,324
Pass [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans	45,136	35,211
Pass [Member] | Construction and Land Real Estate [Member]
Loans	9,839	9,210
Pass [Member] | Commercial Portfolio Segment [Member]
Loans	876	965
Pass [Member] | Consumer Portfolio Segment [Member]
Loans	557	325
Special Mention [Member]
Loans	48	425
Special Mention [Member] | Residential Portfolio Segment [Member]
Loans	48	415
Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans
Special Mention [Member] | Construction and Land Real Estate [Member]
Loans
Special Mention [Member] | Commercial Portfolio Segment [Member]
Loans
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans		10
Substandard [Member]
Loans	3,214	3,453
Substandard [Member] | Residential Portfolio Segment [Member]
Loans	1,787	1,897
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans	487	498
Substandard [Member] | Construction and Land Real Estate [Member]
Loans	907	1,023
Substandard [Member] | Commercial Portfolio Segment [Member]
Loans	33	35
Substandard [Member] | Consumer Portfolio Segment [Member]
Loans
Doubtful [Member]
Loans
Doubtful [Member] | Residential Portfolio Segment [Member]
Loans
Doubtful [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans
Doubtful [Member] | Construction and Land Real Estate [Member]
Loans
Doubtful [Member] | Commercial Portfolio Segment [Member]
Loans
Doubtful [Member] | Consumer Portfolio Segment [Member]
Loans

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Note 4 - Loans and Allowance for Loan Losses - Aging Analysis of the Recorded Investment in Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Loans past due	$ 269	$ 525
Current	99,040	85,388
Loans	99,309	85,913
90 days past due and still accruing
Financing Receivables, 30 to 59 Days Past Due [Member]
Loans past due	73	194
Financing Receivables, 60 to 89 Days Past Due [Member]
Loans past due	196
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due		331
Residential Portfolio Segment [Member]
Loans past due	269	521
Current	41,205	38,115
Loans	41,474	38,636
90 days past due and still accruing
Residential Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Loans past due	73	194
Residential Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Loans past due	196
Residential Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due		327
Commercial Real Estate Portfolio Segment [Member]
Loans past due		4
Current	45,623	35,705
Loans	45,623	35,709
90 days past due and still accruing
Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Loans past due
Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Loans past due
Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due		4
Construction and Land Real Estate [Member]
Loans past due
Current	10,746	10,233
Loans	10,746	10,233
90 days past due and still accruing
Construction and Land Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Loans past due
Construction and Land Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Loans past due
Construction and Land Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due
Commercial Portfolio Segment [Member]
Loans past due
Current	909	1,000
Loans	909	1,000
90 days past due and still accruing
Commercial Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Loans past due
Commercial Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Loans past due
Commercial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due
Consumer Portfolio Segment [Member]
Loans past due
Current	557	335
Loans	557	335
90 days past due and still accruing
Consumer Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Loans past due
Consumer Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Loans past due
Consumer Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due

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Note 4 - Loans and Allowance for Loan Losses - Impaired Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Specific allowance
Recorded balance	4,639	5,021
Unpaid principal balance	4,795	5,205
Average balance of impaired loans	4,000	4,410
Interest income recognized	165	263
Residential Portfolio Segment [Member]
Recorded balance, with no valuation allowance	2,294	2,779
Unpaid principal balance, with no valuation allowance	2,439	2,936
Average balance of impaired loans, with no valuation allowance	2,166	2,420
Interest income recognized, with no valuation allowance	73	140
Recorded balance, with a valuation allowance
Unpaid principal balance, with a valuation allowance
Specific allowance
Average balance of impaired loans, with a valuation allowance
Interest income recognized, with a valuation allowance
Commercial Real Estate Portfolio Segment [Member]
Recorded balance, with no valuation allowance	33	533
Unpaid principal balance, with no valuation allowance	33	560
Average balance of impaired loans, with no valuation allowance	35	230
Interest income recognized, with no valuation allowance	2	28
Recorded balance, with a valuation allowance
Unpaid principal balance, with a valuation allowance
Specific allowance
Average balance of impaired loans, with a valuation allowance
Interest income recognized, with a valuation allowance
Construction and Land Real Estate [Member]
Recorded balance, with no valuation allowance	2,312	1,709
Unpaid principal balance, with no valuation allowance	2,323	1,709
Average balance of impaired loans, with no valuation allowance	1,799	1,760
Interest income recognized, with no valuation allowance	90	95
Recorded balance, with a valuation allowance
Unpaid principal balance, with a valuation allowance
Specific allowance
Average balance of impaired loans, with a valuation allowance
Interest income recognized, with a valuation allowance
Commercial Portfolio Segment [Member]
Recorded balance, with no valuation allowance
Unpaid principal balance, with no valuation allowance
Average balance of impaired loans, with no valuation allowance
Interest income recognized, with no valuation allowance
Recorded balance, with a valuation allowance
Unpaid principal balance, with a valuation allowance
Specific allowance
Average balance of impaired loans, with a valuation allowance
Interest income recognized, with a valuation allowance
Consumer Portfolio Segment [Member]
Recorded balance, with no valuation allowance
Unpaid principal balance, with no valuation allowance
Average balance of impaired loans, with no valuation allowance
Interest income recognized, with no valuation allowance
Recorded balance, with a valuation allowance
Unpaid principal balance, with a valuation allowance
Specific allowance
Average balance of impaired loans, with a valuation allowance
Interest income recognized, with a valuation allowance

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Note 4 - Loans and Allowance for Loan Losses - Nonaccrual Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Nonaccrual loans	$ 2,357	$ 618
Residential Portfolio Segment [Member]
Nonaccrual loans	1,629	614
Commercial Real Estate Portfolio Segment [Member]
Nonaccrual loans		4
Construction and Land Real Estate [Member]
Nonaccrual loans	728
Commercial Portfolio Segment [Member]
Nonaccrual loans
Consumer Portfolio Segment [Member]
Nonaccrual loans

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Note 5 - Premises and Equipment - Major Classifications of Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Land	$ 6,102	$ 6,000
Less accumulated depreciation	4,208	4,066
Net premises and equipment	1,894	1,934
Land [Member]
Land	342	342
Building and Building Improvements [Member]
Land	3,252	3,155
Furniture and Fixtures [Member]
Land	$ 2,508	$ 2,503

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Note 6 - Loan Servicing (Details Textual) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Principal Amount Outstanding on Loans Managed and Securitized or Asset-backed Financing Arrangement	$ 70.1	$ 50.5
Small Business Administration Loans [Member]
Principal Amount Outstanding on Loans Managed and Securitized or Asset-backed Financing Arrangement	$ 26.4

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Note 6 - Loan Servicing - Mortgage Servicing Rights Activity (Details) - Mortgage Servicing Rights [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Balance at beginning of year	$ 483	$ 317
Additions	537	251
Amortization	(83)	(85)
Balance at end of year	$ 937	$ 483

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Note 7 - Time Deposits (Details Textual) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Time Deposits, at or Above FDIC Insurance Limit	$ 10.5	$ 6.1
Interest-bearing Domestic Deposit, Brokered	$ 2.3	$ 3.3

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Note 7 - Time Deposits - Scheduled Maturities of Time Deposits (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
2018	$ 13,658
2019	13,345
2020	8,486
2021	1,440
2022	2,721
Thereafter	271
Balance at end of year	$ 39,921	$ 31,761

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Note 8 - Borrowings (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Advances from Federal Home Loan Banks	$ 9,027	$ 10,027
Federal Funds Purchased	0	1,000
Federal Home Loan Bank [Member]
Debt Instrument, Unused Borrowing Capacity, Amount	11,200
Eligible Mortage Loans [Member]
Advances from Federal Home Loan Banks	$ 38,700	$ 23,900

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Note 8 - Borrowings - Maturities of Advances From the Federal Home Loan Bank (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Federal Home Loan Bank Advances, 2018	$ 4,100
Interest rate, 2019	1.85%
Federal Home Loan Bank Advances, 2019	$ 1,927
Interest rate, 2020	2.08%
Federal Home Loan Bank Advances, 2020	$ 3,000
Federal Home Loan Bank Advances, total	$ 9,027
Minimum [Member]
Interest rate, 2018	1.34%
Maximum [Member]
Interest rate, 2018	1.80%

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Note 9 - Income Taxes (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		34.00%
Deferred Tax Assets, Valuation Allowance		$ 2,708,000	$ 4,526,000	$ 4,292,000
Bad Debt Reserve forTax Purposes of Qualified Lender		1,500,000	1,500,000
Deferred Tax Liability Not Recognized, Amount of Unrecognized Deferred Tax Liability, Bad Debt Reserve for Tax Purposes of Qualified Lender		0	0
Deferred Tax Liability Not Recognized, Amount of Unrecognized Deferred Tax Liability that Would Have Been Recognized		315,000	510,000
Unrecognized Tax Benefits		0	0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued		0	$ 0
Domestic Tax Authority [Member] | Internal Revenue Service (IRS) [Member]
Operating Loss Carryforwards		$ 12,200,000
Operating Loss Carryforwards, Expiration Date		Dec. 31, 2030
State and Local Jurisdiction [Member] | Indiana Department of Revenue [Member]
Operating Loss Carryforwards		$ 1,000,000
Operating Loss Carryforwards, Expiration Date		Dec. 31, 2024
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%

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Note 9 - Income Taxes - Reconciliation of Federal Income Tax Expense (Benefit) at the Statutory Rate (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Computed at statutory rate (34%)	$ 234	$ (182)
Bank-owned life insurance	(58)	(58)
Effect of Tax Cuts and Jobs Act	1,633
Change in valuation allowance	(1,818)	234
Other	9	3
Actual income tax (benefit)

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Note 9 - Income Taxes - Composition of Net Deferred Tax Asset (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Deferred tax assets
Allowance for loan losses	$ 240	$ 368
Deferred compensation	48	58
Net operating loss carryforward	2,640	4,287
Deferred loan origination costs		12
Stock based compensation	11
Loans held for sale	35
Other	37	8
Deferred tax assets	3,011	4,733
Deferred tax liabilities
Federal Home Loan Bank stock dividends	(10)	(16)
Servicing rights	(200)	(167)
Depreciation	(22)	(24)
Deferred loan costs	(71)
Deferred tax liabilities	(303)	(207)
Net deferred tax asset before valuation allowance	2,708	4,526
Valuation allowance
Beginning balance	(4,526)	(4,292)
(Increase) decrease during period	1,818	(234)
Ending balance	(2,708)	(4,526)
Net deferred tax asset	$ 0	$ 0

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Note 10 - Regulatory Matters (Details Textual) - USD ($) $ in Billions	Jan. 01, 2019	Dec. 31, 2017	Dec. 31, 2015
Capital Conservation Buffer			0.00%
Retained Earnings, Unappropriated		$ 520
Scenario, Forecast [Member]
Capital Conservation Buffer	2.50%

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Note 10 - Regulatory Matters - Actual Capital Amounts and Ratios (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Capital	$ 15,094	$ 13,943
Capital to Risk Weighted Assets	16.30%	17.60%
Capital Required for Capital Adequacy	$ 7,394	$ 6,327
Capital Required for Capital Adequacy to Risk Weighted Assets	8.00%	8.00%
Capital Required to be Well Capitalized	$ 9,243	$ 7,908
Capital Required to be Well Capitalized to Risk Weighted Assets	10.00%	10.00%
Tier I Capital	$ 13,971	$ 12,954
Tier 1 Capital to Risk Weighted Assets	15.10%	16.40%
Tier 1 Risk Based Capital Required for Capital Adequacy	$ 5,546	$ 4,745
Tier 1 Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	6.00%	6.00%
Tier 1 Risk Based Capital Required to be Well Capitalized	$ 7,394	$ 6,327
Tier 1 Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	8.00%	8.00%
Common Equity Tier I Capital	$ 13,971	$ 12,954
Common Equity Tier 1 Risk Based Capital to Risk Weighted Assets	15.10%	16.40%
Common Equity Tier 1 Risk Based Capital Required for Capital Adequacy	$ 4,159	$ 3,559
Common Equity Tier 1 Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	4.50%	4.50%
Common Equity Tier 1 Risk Based Capital Required to be Well Capitalized	$ 6,008	$ 5,140
Common Equity Tier 1 Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	6.50%	6.50%
Tier 1 Leverage Capital	$ 13,971	$ 12,954
Tier 1 Leverage Capital to Average Assets	11.30%	12.90%
Tier 1 Leverage Capital Required for Capital Adequacy	$ 4,933	$ 4,024
Tier 1 Leverage Capital Required for Capital Adequacy to Average Assets	4.00%	4.00%
Tier 1 Leverage Capital Required to be Well Capitalized	$ 6,166	$ 5,030
Tier I Leverage Capital Required to be Well Capitalized to Risk Weighted Assets	5.00%	5.00%

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Note 11 - Related Party Transactions (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Notes Payable, Related Parties, Noncurrent	$ 2,100,000	$ 2,400,000
Payments to Fund Long-term Loans to Related Parties	400,000	600,000
Proceeds from Collection of (Payments to Fund) Long-term Loans to Related Parties	670,000	600,000
Related Party Deposit Liabilities	$ 437,000	$ 694,000

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Note 12 - Employee Benefits (Details Textual) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Oct. 19, 2015
Employee Stock Ownership Plan (ESOP), Shares in ESOP				55,728
Employee Stock Ownership Plan (ESOP), Number of Allocated Shares		2,975	2,732
Employee Stock Ownership Plan (ESOP), Number of Committed-to-be-Released Shares		47,235
Employee Stock Ownership Plan (ESOP), Compensation Expense		$ 45,000	$ 29,000
Share Price at Formation Date		$ 10
Employee Stock Ownership Plan (ESOP), Deferred Shares, Fair Value		$ 912,000
Share Price		$ 19.30			$ 10
Employee Stock Ownership Plan (ESOP), Fair Value of Shares Subject to Repurchase Obligation		$ 160,000	73,000
Common Stock, Dividends, Per Share, Cash Paid		$ 0
The 2017 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	97,524
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		60,080
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 14.09	$ 14.09
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options		$ 165,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value		$ 2.87
The 2017 Equity Incentive Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	69,660
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	60,080
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		5 years
Allocated Share-based Compensation Expense		$ 18,000
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate		0.00%
The 2017 Equity Incentive Plan [Member] | Restricted Stock Awards, Restricted Stock Units and Unrestricted Share Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	27,864
The 2017 Equity Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	22,931	22,931
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		5 years
Allocated Share-based Compensation Expense		$ 32,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options		291,000
Pension Plan [Member]
Defined Contribution Plan, Cost		$ 34,000	19,000
Defined Contribution Plan, Employer Matching Contribution, Percent of Match		3.00%
Pentegra Defined Benefit Plan (The Plan) [Member]
Defined Contribution Plan, Cost		$ 73,000	$ 66,000
Defined Benefit Plan, Funded Percentage		97.20%	97.15%
Defined Benefit Plan, Plan Assets, Contributions by Employer		$ 153,200,000	$ 163,100,000
Defined Benefit Plan, Plan Assets, Target Allocation, Percentage		5.00%
Former Executive Officers [Member]
Accrued Employee Benefits		$ 160,000	167,000
Defined Contribution Plan, Cost		0	$ 48,000
President [Member]
Accrued Employee Benefits		66,000
Defined Contribution Plan, Cost		$ 22,000
Defined Benefit Plans, Estimated Future Employer Contributions in Next Five Years				$ 150,000
Defined Benefit Plans, Accrued Interest Rate on Funds				4.50%

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Note 12 - Employee Benefits - Stock Option Activity (Details) - The 2017 Equity Incentive Plan [Member] - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2017
Options outstanding at January 1, 2017, Options (in shares)
Options outstanding at January 1, 2017, Weighted average exercise price (in dollars per share)
Granted, Options (in shares)		60,080
Granted, Weighted average exercise price (in dollars per share)	$ 14.09	$ 14.09
Granted, Remaining contractual life (Year)		10 years
Exercised, Options (in shares)
Exercised, Weighted average exercise price (in dollars per share)
Forfeited, Options (in shares)
Forfeited, Weighted average exercise price (in dollars per share)
Expired, Options (in shares)
Expired, Weighted average exercise price (in dollars per share)
Options outstanding at June 30, 2017, Options (in shares)		60,080
Options outstanding at June 30, 2017, Weighted average exercise price (in dollars per share)		$ 14.09
Remaining contractual life of options (Year)		9 years 182 days

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Note 12 - Employee Benefits - Fair Value Assumptions (Details) - The 2017 Equity Incentive Plan [Member] - Employee Stock Option [Member]	12 Months Ended
	Dec. 31, 2017 $ / shares
Expected volatility	13.87%
Risk-free interest rate	2.18%
Expected dividend yield	0.00%
Expected life (Year)	7 years
Exercise price for the stock options (in dollars per share)	$ 14.09

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Note 12 - Employee Benefits - Restricted Stock Activity (Details) - The 2017 Equity Incentive Plan [Member] - Restricted Stock [Member] - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2017
Non-vested at January 1, 2017, Service-based restricted stock awards (in shares)
Non-vested at January 1, 2017, Weighted average grant date fair value (in dollars per share)
Granted, Service-based restricted stock awards (in shares)	22,931	22,931
Granted, Weighted average grant date fair value (in dollars per share)		$ 14.09
Vested, Service-based restricted stock awards (in shares)
Vested, Weighted average grant date fair value (in dollars per share)
Forfeited, Service-based restricted stock awards (in shares)
Forfeited, Weighted average grant date fair value (in dollars per share)
Nonvested at June 30, 2017, Service-based restricted stock awards (in shares)		22,931
Nonvested at June 30, 2017, Weighted average grant date fair value (in dollars per share)		$ 14.09

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Note 13 - Earnings (Loss) Per Share (Details Textual) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Oct. 19, 2015
Earnings Per Share, Basic and Diluted		$ 0.83
Common Stock, Shares, Issued	719,531	696,600	696,600
Weighted Average Number of Shares, Employee Stock Ownership Plan Shares Not Committed to be Released	52,353
Weighted Average Number Diluted Shares Outstanding Adjustment	2,868	0

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Note 13 - Earnings (Loss) Per Share - Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Net income	$ 688	$ (534)
Basic earnings per share, weighted average shares (in shares)	647,472	644,247
Basic earnings per share (in dollars per share)	$ 1.06	$ (0.83)
Restricted stock awards and stock options (in shares)	2,868	0
Diluted earnings per share, weighted average shares (in shares)	650,340	644,247
Diluted earnings per share (in dollars per share)	$ 1.06	$ (0.83)

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Note 14 - Commitments and Credit Risk (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Loan Origination Commitments [Member]
Fair Value, Concentration of Risk, Commitments	$ 1,300,000	$ 670,000
Loan Origination Commitments [Member] | Minimum [Member]
Fair Value Inputs, Interest Rate	3.875%	3.50%
Loan Origination Commitments [Member] | Maximum [Member]
Fair Value Inputs, Interest Rate	4.875%	4.50%
Construction Loans [Member]
Fair Value, Concentration of Risk, Commitments	$ 498,000	$ 1,800,000
Commercial Lines of Credit [Member]
Fair Value, Concentration of Risk, Commitments	6,700,000	5,500,000
Consumer Lines of Credit [Member]
Fair Value, Concentration of Risk, Commitments	3,800,000	3,800,000
Standby Letters of Credit Commitments [Member]
Fair Value, Concentration of Risk, Commitments	$ 169,000	$ 219,000

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Note 15 - Disclosures About Fair Value of Assets and Liabilities - Assets Measured at Fair Value on a Non-Recurring Basis (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Impaired loans		$ 232
Fair Value, Inputs, Level 1 [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member]
Impaired loans
Fair Value, Inputs, Level 3 [Member]
Impaired loans		$ 232

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Note 15 - Disclosures About Fair Value of Assets and Liabilities - Quantitative Information About Unobservable Inputs (Details) - Market Approach Valuation Technique [Member] - Fair Value, Inputs, Level 3 [Member] $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)
Impaired loans (collateral dependent)	$ 232
Valuation technique	Marketable comparable properties
Minimum [Member]
Range	10.00%
Maximum [Member]
Range	15.00%

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Note 15 - Disclosures About Fair Value of Assets and Liabilities - Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Reported Value Measurement [Member]
Financial assets
Cash and due from banks	$ 1,085		$ 1,419
Interest-earning demand deposits	2,997		8,438
Federal funds sold	11,711		1,000
Interest-earning time deposits in banks	744		992
Loans, net	100,746	$ 83,008
Federal Home Loan Bank stock	468		468
Accrued interest receivable	267		203
Servicing rights	937		483
Financial liabilities
Deposits	101,688		76,841
Advances from the Federal Home Loan Bank	9,027		10,027
Accrued interest payable	30		7
Federal funds sold	11,711		1,000
Estimate of Fair Value Measurement [Member]
Financial assets
Cash and due from banks	1,085		1,419
Interest-earning demand deposits	2,997		8,438
Federal funds sold	11,711		1,000
Interest-earning time deposits in banks	744		992
Loans, net	100,273	83,538
Federal Home Loan Bank stock	468		468
Accrued interest receivable	267		203
Servicing rights	937		483
Financial liabilities
Deposits	101,603		77,104
Advances from the Federal Home Loan Bank	9,024		11,127
Accrued interest payable	30		7
Federal funds sold	11,711		1,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets
Cash and due from banks	1,085		1,419
Interest-earning demand deposits	2,997		8,438
Federal funds sold	11,711		1,000
Interest-earning time deposits in banks
Loans, net
Federal Home Loan Bank stock
Accrued interest receivable
Servicing rights
Financial liabilities
Deposits	61,767		45,080
Advances from the Federal Home Loan Bank			1,000
Accrued interest payable
Federal funds sold	11,711		1,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets
Cash and due from banks
Interest-earning demand deposits
Federal funds sold
Interest-earning time deposits in banks	744		992
Loans, net
Federal Home Loan Bank stock	468		468
Accrued interest receivable	267		203
Servicing rights
Financial liabilities
Deposits	39,836		32,024
Advances from the Federal Home Loan Bank	9,024		10,127
Accrued interest payable	30		7
Federal funds sold
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets
Cash and due from banks
Interest-earning demand deposits
Federal funds sold
Interest-earning time deposits in banks
Loans, net	100,273	$ 83,538
Federal Home Loan Bank stock
Accrued interest receivable
Servicing rights	937		483
Financial liabilities
Deposits
Advances from the Federal Home Loan Bank
Accrued interest payable
Federal funds sold

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Note 17 - Change in Corporate Form (Details Textual) - USD ($) $ / shares in Units, $ in Millions	Dec. 31, 2017	Dec. 31, 2016	Oct. 19, 2015
Sale of Stock, Price Per Share			$ 10
Common Stock, Subscriptions, Percentage			8.00%
Common Stock, Shares, Issued	719,531	696,600	696,600
Costs of Conversion and to Issue Stock			$ 1.2

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Note 18 - Condensed Financial Information (Parent Company Only) - Condensed Balance Sheet (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Assets
Cash	$ 1,085	$ 1,419
Total assets	126,879	103,218
Liabilities and Shareholders' Equity
Liabilities	111,527	88,649
Total liabilities and shareholders' equity	126,879	103,218
Parent Company [Member]
Assets
Cash	1,376	1,615	$ 1,833
Investment in Bank subsidiary	13,980	12,955
Total assets	15,356	14,570
Liabilities and Shareholders' Equity
Liabilities	4	1
Redeemable common stock held by ESOP	160	73
Shareholders' equity less maximum cash obligation related to ESOP shares	15,192	14,496
Total liabilities and shareholders' equity	$ 15,356	$ 14,570

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Note 18 - Condensed Financial Information (Parent Company Only) - Condensed Statement of Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Income
Interest income	$ 4,432	$ 3,424
Expenses
Net income (loss)	688	(534)
Parent Company [Member]
Income
Interest income	19	18
Equity in net income (loss) of Bank subsidiary	988	(295)
Expenses
General and administrative expenses	319	257
Total expenses	319	257
Net income (loss)	$ 688	$ (534)

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Note 18 - Condensed Financial Information (Parent Company Only) - Condensed Statement of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Operating Activities
Net income (loss)	$ 688	$ (534)
Items not requiring (providing) cash
Net cash used in operating activities	208	(621)
Net change in cash	5,936	1,047
Cash at beginning of year	1,419
Cash at end of year	1,085	1,419
Parent Company [Member]
Operating Activities
Net income (loss)	688	(534)
Other adjustments	61	21
Items not requiring (providing) cash
Equity in net (income) loss of Bank subsidiary	(988)	295
Net cash used in operating activities	(239)	(218)
Net change in cash	(239)	(218)
Cash at beginning of year	1,615	1,833
Cash at end of year	$ 1,376	$ 1,615