UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended

September 30, 2017

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

For the transition period from ____________ to _______________

Commission File No. 000-55356

MW BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland		47-2259704
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

2110 Beechmont Avenue
Cincinnati, Ohio		45230
(Address of principal		(Zip Code)
executive office)

(513) 231-7871

(Registrant’s telephone number, including area code)

N/A

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

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

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

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

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company)

Smaller reporting company x Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.).

Yes ¨ No x

As of November 13, 2017, the latest practicable date, 891,209 shares of the registrant’s common stock, $.01 par value, were issued and outstanding.

MW Bancorp, Inc.

Index to Quarterly Report on Form 10-Q

PART I – FINANCIAL INFORMATION

	Item 1 Interim Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2017 and June 30, 2017	3

	Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2017 and 2016	4

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2017 and 2016	5

	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended September 30, 2017	6

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2017 and 2016	7

	Notes to Condensed Consolidated Financial Statements	8

	Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

	Item 3 Quantitative and Qualitative Disclosures About Market Risk	46

	Item 4 Controls and Procedures	46

PART II – OTHER INFORMATION

	Item 1 Legal Proceedings	47
	Item 1A Risk Factors	47
	Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	47
	Item 3 Defaults Upon Senior Securities	47
	Item 4 Mine Safety Disclosures	47
	Item 5 Other Information	47
	Item 6 Exhibits	48

	SIGNATURES	49

Part I – Financial Information

Item 1. Financial Statements

MW Bancorp, Inc.

Condensed Consolidated Balance Sheets

September 30, 2017 and June 30, 2017

(In thousands, except share data)

	September 30,			June 30,
	2017			2017
	(Unaudited)
Assets
Cash and due from banks	$	395		$	458
Interest-bearing demand deposits		10,976			7,410

Cash and cash equivalents		11,371			7,868

Interest-bearing time deposits in other financial institutions		100			100
Available-for-sale securities		4,800			4,024
Held-to-maturity securities (fair value of $183 at September 30, 2017 and $262 at June 30, 2017)		187			264
Loans, net of allowance for loan losses of $1,636 at September 30, 2017 and $1,640 at June 30, 2017		128,338			121,520
Premises and equipment, net		1,929			1,905
Federal Home Loan Bank stock, at cost		1,203			1,203
Accrued interest receivable		451			399
Bank owned life insurance		3,585			3,562
Other assets		280			297
Deferred federal income taxes		2,086			2,103

Total assets	$	154,330		$	143,245


Liabilities and Shareholders' Equity

Liabilities
Deposits
Demand and money market	$	47,594		$	41,545
Savings		16,445			16,899
Time		43,600			38,753

Total deposits		107,639			97,197

Federal Home Loan Bank advances		28,755			28,255
Other liabilities		612			445

Total liabilities		137,006			125,897

Commitments and Contigent Liabilities		-			-

Shareholders' Equity
Preferred stock - authorized 1,000,000 shares, $0.01 par value, none issued		-			-
Common stock - authorized 30,000,000 shares, $0.01 par value, 911,209 shares issued at September 30, 2017 and 910,709 shares issued at June 30, 2017		9			9
Additional paid-in capital		8,052			8,022
Shares acquired by ESOP		(627	)		(627	)
Unearned compensation - restricted stock awards		(466	)		(463	)
Retained earnings		10,665			10,715
Accumulated other comprehensive loss		(7	)		(6	)
Treasury stock, 20,000 shares - at cost		(302	)		(302	)

Total shareholders' equity		17,324			17,348

Total liabilities and shareholders' equity	$	154,330		$	143,245

See Notes to Condensed Consolidated Financial Statements

MW Bancorp, Inc.

Condensed Consolidated Statements of Income

For the Three Months Ended September 30, 2017 and 2016

(In thousands, except share data)

	Three Months Ended September 30,
	2017		2016
	(Unaudited)
Interest Income
Loans, including fees	$	1,272	$	1,018
Investment securities		21		16
Interest-bearing deposits		40		31

Total interest income		1,333		1,065

Interest Expense
Deposits		258		195
Federal Home Loan Bank advances		113		88

Total interest expense		371		283

Net Interest Income		962		782

Provision for Loan Losses		-		-

Net Interest Income After Provision for Loan Losses		962		782

Noninterest Income
Gain on sale of loans		16		124
Income from Bank owned life insurance		23		23
Other		19		10
Total noninterest income		58		157

Noninterest Expense
Salaries, employee benefits and directors fees		501		447
Occupancy and equipment		87		66
Data processing		72		61
Franchise taxes		33		31
FDIC insurance premiums		23		20
Professional services		111		96
Advertising		13		15
Office supplies		17		13
Business entertainment		14		15
Other		84		73

Total noninterest expense		955		837

Income Before Federal Income Taxes		65		102

Federal Income Tax Expense		17		29

Net Income	$	48	$	73

Basic earnings per share	$	0.06	$	0.09
Diluted earnings per share	$	0.06	$	0.09

Weighted-average shares outstanding
Basic		828,537		818,824
Diluted		862,799		824,700

See Notes to Condensed Consolidated Financial Statements

MW Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income

For the Three Months Ended September 30, 2017 and 2016

(In thousands)

	Three Months Ended September 30,
	2017			2016
	(Unaudited)

Net income	$	48		$	73

Other comprehensive loss:
Unrealized holding losses on securities available for sale		(3	)		(11	)

Amortization of net unrealized holding loss on held-to-maturity securities		1			1

Net unrealized losses		(2	)		(10	)
Tax effect		1			-

Total other comprehensive loss		(1	)		(10	)

Comprehensive income	$	47		$	63

See Notes to Condensed Consolidated Financial Statements

MW Bancorp, Inc.

Condensed Consolidated Statements of Shareholders’ Equity

For the Three Months Ended September 30, 2017

(In thousands)

								Unearned						Accumulated
			Additional		Shares			Compensation -						Other
	Common		Paid-in		Acquired			Restricted			Retained			Comprehensive			Treasury
	Stock		Capital		by ESOP			Stock Awards			Earnings			Loss			Stock			Total

Balance at July 1, 2017	$	9	$	8,022	$	(627	)	$	(463	)	$	10,715		$	(6	)	$	(302	)	$	17,348

Net income		-		-		-			-			48			-			-			48

Compensation expense related to stock options		-		27		-			-			-			-			-			27

Issuance of restricted stock awards		-		3		-			(3	)		-			-			-			-

Dividends paid, $0.11 per share		-		-		-			-			(98	)		-			-			(98	)

Other comprehensive loss		-		-		-						-			(1	)		-			(1	)

Balance at September 30, 2017	$	9	$	8,052	$	(627	)	$	(466	)	$	10,665		$	(7	)	$	(302	)	$	17,324

See Notes to Condensed Consolidated Financial Statements

MW Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

Three Months Ended September 30, 2017 and 2016

(In thousands)

	Three Months Ended September 30,
	2017			2016
	(Unaudited)
Cash Flows from Operating Activities
Net income	$	48		$	73
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		49			33
Amortization of premiums and discounts on securities, net		10			16
Accretion of deferred loan origination fees and costs, net		8			13
Provision for loan losses		-			-
Gain on sale of loans		(16	)		(124	)
Proceeds from sales of loans		427			4,766
Loans originated for sale		(422	)		(4,175	)
Compensation expense related to stock options		27			12
Net changes in:
Accrued interest receivable		(52	)		(58	)
Other assets		28			110
Cash surrender value of life insurance		(23	)		(23	)
Other liabilities		167			589
Deferred federal income taxes		17			29

Net cash provided by operating activities		268			1,261

Cash Flows from Investing Activities
Purchase of available-for-sale securities		(1,022	)		(100	)
Proceeds from maturities of available-for-sale securities		20			-
Principal repayments of held-to-maturity securities		78			496
Principal repayments of available-for-sale mortgage-backed securities		214			232
Net change in loans		(6,826	)		(7,914	)
Purchase of premises and equipment		(73	)		(178	)

Net cash used in investing activities		(7,609	)		(7,464	)

Cash Flows from Financing Activities
Net change in deposits		10,442			1,253
Proceeds from Federal Home Loan Bank advances		2,000			7,000
Repayment of Federal Home Loan Bank advances		(1,500	)		(3,615	)
Dividends paid		(98	)		(89	)

Net cash provided by financing activities		10,844			4,549

Net Change in Cash and Cash Equivalents		3,503			(1,654	)

Beginning Cash and Cash Equivalents		7,868			3,672

Ending Cash and Cash Equivalents	$	11,371		$	2,018

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest on deposits and borrowings	$	369		$	281

See Notes to Condensed Consolidated Financial Statements

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1: Basis of Presentation

MW Bancorp, Inc. (the “Company,” “we,” “us” or “our”), headquartered in Cincinnati, Ohio, was formed to serve as the stock holding company for Watch Hill Bank following its mutual-to-stock conversion. The conversion was completed effective January 29, 2015. The Company issued 876,163 shares at an offering price of $10.00 per share.

The accompanying unaudited condensed balance sheet of the Company as of June 30, 2017, which has been derived from audited financial statements, and unaudited condensed consolidated financial statements of the Company as of September 30, 2017 and for the three months ended September 30, 2017 and 2016, were prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. Accordingly, these condensed financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company as of and for the year ended June 30, 2017 included in the Company’s Form 10-K. Reference is made to the accounting policies of the Company described in the Notes to the Financial Statements contained in the Form 10-K.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the unaudited financial statements have been included to present fairly the financial position as of September 30, 2017 and the results of operations and cash flows for the three months ended September 30, 2017 and 2016. All interim amounts have not been audited and the results of operations for the three months ended September 30, 2017, herein are not necessarily indicative of the results of operations to be expected for the entire fiscal year.

Principles of Consolidation

The consolidated financial statements include MW Bancorp, Inc. and its wholly owned subsidiary, Watch Hill 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 U.S. generally accepted accounting principles 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 dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. 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, valuation of deferred tax assets and fair values of financial instruments.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 2: Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Available-for-sale Securities:
September 30, 2017
Municipal bonds	$	80	$	-	$	-		$	80
Mortgage-backed securities of U.S. government sponsored entities - residential		4,728		10		(18	)		4,720

	$	4,808	$	10	$	(18	)	$	4,800

June 30, 2017
Municipal bonds	$	100	$	-	$	(1	)	$	99
Mortgage-backed securities of U.S. government sponsored entities - residential		3,929		12		(16	)		3,925

	$	4,029	$	12	$	(17	)	$	4,024

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Held-to-maturity Securities:
September 30, 2017
Mortgage-backed securities of U.S. government sponsored entities - residential	$	187	$	-	$	(4	)	$	183

June 30, 2017
Mortgage-backed securities of U.S. government sponsored entities - residential	$	264	$	-	$	(2	)	$	262

The amortized cost and fair value of available-for-sale securities and held-to-maturity securities at September 30, 2017, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

	September 30, 2017
	Available-for-sale				Held-to-maturity
	Amortized				Amortized
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Municipal bonds
Due in three to five years	$	80	$	80	$	-	$	-
Mortgage-backed securities of U.S. government sponsored entities - residential - not due at a single maturity date		4,728		4,720		187		183

	$	4,808	$	4,800	$	187	$	183

The Company had no sales of investment securities during the three-month periods ended September 30, 2017 and 2016.

The Company had pledged $946,000 and $1.0 million of its investment securities at September 30, 2017 and June 30, 2017, respectively, to secure commercial deposits in excess of the FDIC insurance limit.

At September 30, 2017 and June 30, 2017, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of the Company’s equity.

On August 1, 2013, the Company reclassified its collateralized mortgage obligation portfolio to held-to-maturity from available-for sale because management intends to hold these securities to maturity. The securities had a total amortized cost of $2.925 million and a corresponding fair value of $2.894 million. The gross unrealized loss on these securities at the date of transfer was $31,000. The unrealized holding loss at the time of transfer continues to be reported in accumulated other comprehensive loss and is being amortized over the remaining lives of the securities as an adjustment to the yield. The amortization of the remaining holding loss reported in accumulated other comprehensive loss will offset the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of this loss was $2,000 at September 30, 2017.

The following tables show the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2017 and June 30, 2017:

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

	Less than 12 Months					12 Months or Longer					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
September 30, 2017
Available-for-sale Securities:
Mortgage-backed securities of U.S. government sponsored entities - residential	$	1,332	$	(3	)	$	865	$	(15	)	$	2,197	$	(18	)

Held-to-maturity Securities:
Mortgage-backed securities of U.S. government sponsored entities - residential		-		-			111		(4	)		111		(4	)

	$	1,332	$	(3	)	$	976	$	(19	)	$	2,308	$	(22	)

June 30, 2017
Available-for-sale Securities:
Municipal bonds	$	99	$	(1	)	$	-	$	-		$	99	$	(1	)

Mortgage-backed securities of U.S. government sponsored entities - residential		466		(3	)		926		(13	)		1,392		(16	)

Held-to-maturity Securities:
Mortgage-backed securities of U.S. government sponsored entities - residential		-		-			262		(2	)		262		(2	)

	$	565	$	(4	)	$	1,188	$	(15	)	$	1,753	$	(19	)

Other-than-temporary Impairment

At September 30, 2017 and June 30, 2017, all of the mortgage-backed securities held by the Company were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Ginnie Mae, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not have the intent, and it is likely that it will not be required, to sell these mortgage-backed securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2017 and June 30, 2017.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 3: Loans and Allowance for Loan Losses

Loans at September 30, 2017 and June 30, 2017 include:

	September 30,			June 30,
	2017			2017
	(In thousands)
Real estate loans
One- to four-family residential	$	72,799		$	70,622
Multi-family residential		11,601			10,378
Commercial		35,772			30,882
Construction		16,959			16,436
Commercial loans		3,391			3,304
Consumer and other		684			589

Total loans		141,206			132,211

Less:
Net deferred loan costs		(82	)		(72	)
Undisbursed loans in process		11,314			9,123
Allowance for loan losses		1,636			1,640

Net loans	$	128,338		$	121,520

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

The following table presents, by portfolio segment, the activity in the allowance for loan losses for the three months ended September 30, 2017 and the recorded investment in loans and impairment method as of September 30, 2017:

	At or for the three months ended September 30, 2017
	1-4 Family			1-4 Family
	Owner			Non-Owner			Multi-
	Occupied			Occupied			family		Commercial		Construction			Consumer			Total
	(In thousands)
Three Months Ended September 30, 2017
Allowance for loan losses:
Balance, July 1, 2017	$	812		$	326		$	27	$	359	$	116			-		$	1,640
Provision for loan losses		(47	)		(1	)		4		62		(16	)		(2	)		-
Charge-offs		(8	)		-			-		-		-			-			(8	)
Recoveries		2			-			-		-		-			2			4

Balance, September 30, 2017	$	759		$	325		$	31	$	421	$	100		$	-		$	1,636

Allowance for loan losses:

Ending balance, individually evaluated for impairment	$	8		$	14		$	-	$	-	$	-		$	-		$	22

Ending balance, collectively evaluated for impairment	$	751		$	311		$	31	$	421	$	100		$	-		$	1,614

Loans:
Ending balance	$	52,102		$	20,697		$	11,601	$	39,163	$	16,959		$	684		$	141,206

Ending balance; individually evaluated for impairment	$	738		$	225		$	101	$	135	$	-		$	-		$	1,199

Ending balance; collectively evaluated for impairment	$	51,364		$	20,472		$	11,500	$	39,028	$	16,959		$	684		$	140,007

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

The following table presents, by portfolio segment, the activity in the allowance for loan losses for the three months ended September 30, 2016:

	1-4 Family		1-4 Family
	Owner		Non-Owner			Multi-
	Occupied		Occupied			family			Commercial			Construction		Consumer			Total
	(In thousands)
Three Months Ended September 30, 2016
Allowance for loan losses:
Balance, July 1, 2016	$	1,004	$	282		$	66		$	167		$	116		-		$	1,635
Provision for loan losses		15		(56	)		(30	)		58			10		3			-
Charge-offs		-		-			-			-			-		(4	)		(4	)
Recoveries		-		-			-			-			-		1			1

Balance, September 30, 2016	$	1,019	$	226		$	36		$	225	#	$	126	$	-		$	1,632

The following table presents the recorded investment in loans and impairment method as of June 30, 2017:

	1-4 Family		1-4 Family
	Owner		Non-Owner		Multi-
	Occupied		Occupied		family		Commercial		Construction		Consumer		Total
	(In thousands)
June 30, 2017
Allowance for loan losses:
Ending balance, individually evaluated for impairment	$	20	$	13	$	-	$	-	$	-	$	-	$	33

Ending balance, collectively evaluated for impairment	$	792	$	313	$	27	$	359	$	116	$	-	$	1,607

Loans:
Ending balance	$	51,629	$	18,993	$	10,378	$	34,186	$	16,436	$	589	$	132,211

Ending balance; individually evaluated for impairment	$	977	$	331	$	103	$	137	$	-	$	-	$	1,548

Ending balance; collectively evaluated for impairment	$	50,652	$	18,662	$	10,275	$	34,049	$	16,436	$	589	$	130,663

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

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 credit concentrations, subprime criteria and delinquency of 90 days or more. Definitions are as follows:

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

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

Substandard: These are loans with a well-defined weakness, which gives the Company a serious concern about the borrower’s ability to make full repayment if the weakness is 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 rated substandard when full repayment is expected, but it must come from the liquidation of collateral.

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 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.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of September 30, 2017 and June 30, 2017:

	September 30, 2017
	1-4 Family		1-4 Family
	Owner		Non-Owner		Multi-
	Occupied		Occupied		family		Commercial		Construction		Consumer		Total
	(In thousands)
Pass	$	51,512	$	20,439	$	11,500	$	39,068	$	16,959	$	684	$	140,162
Special mention		-		-		-		-		-		-		-
Substandard		590		258		101		95		-		-		1,044
Doubtful		-		-		-		-		-		-		-

Total	$	52,102	$	20,697	$	11,601	$	39,163	$	16,959	$	684	$	141,206

	June 30, 2017
	1-4 Family		1-4 Family
	Owner		Non-Owner		Multi-
	Occupied		Occupied		family		Commercial		Construction		Consumer		Total
	(In thousands)
Pass	$	51,016	$	18,629	$	10,275	$	34,090	$	16,436	$	589	$	131,035
Special mention		-		-		-		-		-		-		-
Substandard		613		364		103		96		-		-		1,176
Doubtful		-		-		-		-		-		-		-

Total	$	51,629	$	18,993	$	10,378	$	34,186	$	16,436	$	589	$	132,211

The Company has a portfolio of loans designated as subprime, defined as those loans made to borrowers with a credit score below 660. These loans are primarily secured by 1-4 family real estate, including both owner-occupied and non-owner-occupied properties. Subprime loans totaled $7.6 million and $7.3 million at September 30, 2017 and June 30, 2017, respectively.

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.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of September 30, 2017 and June 30, 2017:

	September 30, 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)

1-4 family owner-occupied	$	415	$	-	$	13	$	428	$	51,674	$	52,102	$	-
1-4 family non-owner occupied		-		35		-		35		20,662		20,697		-
Multi-family residential		100		-		-		100		11,501		11,601		-
Commercial		108		-		-		108		39,055		39,163		-
Construction		-		-		-		-		16,959		16,959		-
Consumer and other		-		-		-		-		684		684		-

Total	$	623	$	35	$	13	$	671	$	140,535	$	141,206	$	-

	June 30, 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)

1-4 family owner-occupied	$	219	$	274	$	14	$	507	$	51,122	$	51,629	$	-
1-4 family non-owner occupied		-		-		-		-		18,993		18,993		-
Multi-family residential		-		-		-		-		10,378		10,378		-
Commercial		149		-		-		149		34,037		34,186		-
Construction		-		-		-		-		16,436		16,436		-
Consumer and other		-		-		-		-		589		589		-

Total	$	368	$	274	$	14	$	656	$	131,555	$	132,211	$	-

A loan is considered impaired 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.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

The following table presents impaired loan information as of September 30, 2017 and for the three months ended September 30, 2017 and 2016:

							For the Three Months Ended				For the Three Months Ended
	As of September 30, 2017						September 30, 2017				September 30, 2016
			Unpaid		Allowance for Loan		Average		Interest		Average		Interest
	Recorded Investment		Principal Balance		Losses Allocated		Recorded Investment		Income Recognized		Recorded Investment		Income Recognized
	(In thousands)
Loans with no related allowance recorded:
1-4 family owner-occupied	$	602	$	851	$	-	$	620	$	5	$	669	$	12
1-4 family non-owner occupied		195		233		-		201		-		180		-
Multi-family residential		101		108		-		108		-		-		-
Commercial		135		149		-		135		2		144		2
Construction		-		-		-		-		-		-		-
Consumer and other		-		-		-		-		-		-		-

Loans with an allowance recorded:
1-4 family owner-occupied		136		172		8		137		-		360		-
1-4 family non-owner occupied		30		40		14		31		-		345		-
Multi-family residential		-		-		-		-		-		111		-
Commercial		-		-		-		-		-		-		-
Construction		-		-		-		-		-		-		-
Consumer and other		-		-		-		-		-		-		-

Totals	$	1,199	$	1,553	$	22	$	1,232	$	7	$	1,809	$	14

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

The following table presents impaired loan information as of June 30, 2017:

	As of June 30, 2017
			Unpaid		Allowance for Loan
	Recorded Investment		Principal Balance		Losses Allocated
	(In thousands)
Loans with no related allowance recorded:
1-4 family owner-occupied	$	589	$	805	$	-
1-4 family non-owner occupied		202		243		-
Multi-family residential		103		108		-
Commercial		137		152		-
Construction		-		-		-
Consumer and other		-		-		-

Loans with an allowance recorded:
1-4 family owner-occupied		388		439		20
1-4 family non-owner occupied		129		175		13
Multi-family residential		-		-		-
Commercial		-		-		-
Construction		-		-		-
Consumer and other		-		-		-

Totals	$	1,548	$	1,922	$	33

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

The following table presents the Company’s nonaccrual loans at September 30, 2017 and June 30, 2017. The table excludes performing troubled debt restructurings.

	September 30,		June 30,
	2017		2017
	(In thousands)
Real estate
1-4 family owner-occupied	$	385	$	422
1-4 family non-owner occupied		225		331
Multi-family residential		101		103
Commercial		-		-
Construction		-		-
Consumer and other		-		-

Total nonaccrual	$	711	$	856

At September 30, 2017 and June 30, 2017, the Company had certain loans that were modified in troubled debt restructurings. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan. The Company had loans modified in a troubled debt restructuring totaling $817,000 and $961,000 at September 30, 2017 and June 30, 2017, respectively. Troubled debt restructured loans had specific allowances totaling $22,000 and $28,000 at September 30, 2017 and June 30, 2017, respectively. At September 30, 2017, the Company had no commitments to lend additional funds to borrowers with troubled debt restructured loans.

No loans were modified as troubled debt restructurings during either of the three-month periods ended September 30, 2017 or 2016.

The Company had no troubled debt restructurings modified during the twelve months ended September 30, 2017 or 2016 that subsequently defaulted during the three-month periods ended September 30, 2017 or 2016. A troubled debt restructured 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.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 4: 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 Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of 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.

Effective January 1, 2015, the Bank became subject to the capital requirements set forth by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule established a new common equity Tier 1 minimum capital requirement and assigned a higher risk weight (150%) to exposures that are more than 90 days past due, or are on nonaccrual status, and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements, unless a one-time opt-in or opt-out is exercised. The Bank has chosen to exclude unrealized gains and losses from regulatory capital. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement began to be phased in beginning January 1, 2016 and will be fully phased in January 1, 2019, when the full capital conservation buffer requirement will be effective.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total capital, Tier I capital and Common Equity (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital to total average assets (as defined).

To be categorized as well capitalized under the regulatory framework for prompt corrective action, the Bank must maintain minimum capital ratios as set forth in the below table. Management believes its capital still meets the requirements to be deemed well-capitalized as of the date of this report.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

The Bank’s actual capital amounts and ratios as of the dates indicated 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 September 30, 2017

Total Capital (to Risk-Weighted Assets)	$	16,515		14.6	%	$	9,061		8.0	%	$	11,326		10.0	%

Tier I Capital (to Risk-Weighted Assets)	$	15,093		13.3	%	$	6,795		6.0	%	$	9,061		8.0	%

Common Equity Tier I (to Risk-Weighted Assets)	$	15,093		13.3	%	$	5,097		4.5	%	$	7,362		6.5	%

Tier I Leverage Capital (to Average Assets)	$	15,093		10.3	%	$	5,852		4.0	%	$	7,315		5.0	%

As of June 30, 2017

Total Capital (to Risk-Weighted Assets)	$	16,266		15.4	%	$	8,431		8.0	%	$	10,538		10.0	%

Tier I Capital (to Risk-Weighted Assets)	$	14,941		14.2	%	$	6,323		6.0	%	$	8,431		8.0	%

Common Equity Tier I (to Risk-Weighted Assets)	$	14,941		14.2	%	$	4,742		4.5	%	$	6,850		6.5	%

Tier I Leverage Capital (to Average Assets)	$	14,941		10.7	%	$	5,574		4.0	%	$	6,968		5.0	%

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 5: 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.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Recurring Measurements

The following table presents the fair value measurement of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2017 and June 30, 2017:

			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)
September 30, 2017
Municipal bonds	$	80	$	-	$	80	$	-
Mortgage-backed securities of U.S. of government sponsored entities - residential		4,720		-		4,720		-

	$	4,800	$	-	$	4,800	$	-

June 30, 2017
Municipal bonds	$	99	$	-	$	99	$	-
Mortgage-backed securities of U.S. of government sponsored entities - residential		3,925		-		3,925		-

	$	4,024	$	-	$	4,024	$	-

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There were no assets classified within Level 3 of the fair value hierarchy measured on a recurring basis. There were no transfers between Level 1 and Level 2 during the periods ended September 30, 2017 and 2016.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flow. Such securities are classified within Level 2 of the valuation hierarchy.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Nonrecurring Measurements

The Company had no assets measured at fair value on a non-recurring basis that were revalued during the period ended September 30, 2017. 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 June 30, 2017:

			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)
June 30, 2017
Impaired loans - residential One-to-four family owner occupied	$	248	$	-	$	-	$	248

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.

Impaired Loans (Collateral Dependent)

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Unobservable (Level 3) Inputs

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

Fair Value at June
30, 2017

Valuation Technique

Unobservable Inputs

Range
(Weighted
Average)

(In thousands)

Impaired loans (collateral dependent) - one-to-four family owner occupied residential real estate

248

Sales comparison approach

Adjustment for differences between the comparable real estate sales

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Fair Value of Financial Instruments

The following table presents the carrying amount and 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 September 30, 2017 and June 30, 2017.

			Fair Value Measurement Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
September 30, 2017
Financial assets
Cash and cash equivalents	$	11,371	$	11,371	$	-	$	-	$	11,371
Interest-bearing demand deposits		100		100		-		-		100
Held-to-maturity securities		187		-		183		-		183
Loans		128,338		-		-		128,882		128,882
Federal Home Loan Bank stock		1,203		n/a		n/a		n/a		n/a
Accrued interest receivable		451		-		451		-		451
Financial liabilities
Deposits		107,639		64,039		43,615		-		107,654
Federal Home Loan Bank advances		28,755		-		28,508		-		28,508
Accrued interest payable		45		-		45		-		45

June 30, 2017
Financial assets
Cash and cash equivalents	$	7,868	$	7,868	$	-	$	-	$	7,868
Interest-bearing demand deposits		100		100		-		-		100
Held-to-maturity securities		264		-		262		-		262
Loans		121,520		-		-		120,623		120,623
Federal Home Loan Bank stock		1,203		n/a		n/a		n/a		n/a
Accrued interest receivable		399		-		399		-		399
Financial liabilities
Deposits		97,197		58,444		38,759				97,203
Federal Home Loan Bank advances		28,255		-		28,011		-		28,011
Accrued interest payable		43		-		43		-		43

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 Cash Equivalents and Interest-bearing Time Deposits

The carrying amount of cash, short-term instruments and time deposits approximate fair value and are classified as Level 1.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Held-to-Maturity Securities

The fair value of held-to-maturity securities was estimated by using pricing models that contain market pricing and information, quoted prices of securities with similar characteristics or discounted cash flows that use credit-adjusted discount rates, resulting in a Level 2 classification.

Loans

Fair values of loans are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values, resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality, resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value of collateral as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

Federal Home Loan Bank Stock

It is not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability.

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest approximate fair value, resulting in a Level 2 classification.

Deposits

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits, resulting in a Level 2 classification.

Federal Home Loan Bank Advances

The fair values of FHLB advances are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements, resulting in a Level 2 classification.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Off Balance Sheet Instruments

Fair values of off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

Note 6: Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component, net of tax, for the three months ended September 30, 2017 and 2016 are as follows:

				Unrealized
	Unrealized			Gains and Losses
	Gains and Losses			on Securities
	on Available			Transferred from
	for Sale			Available for Sale to
Three Months Ended September 30, 2017	Securities			Held to Maturity			Total
	(In thousands)
Balance, July 1, 2017	$	(2	)	$	(4	)	$	(6	)

Other comprehensive loss		(3	)		-			(3	)

Accretion of unrealized losses on securities transferred from available for sale to held to maturity recognized in other comprehensive income		-			2			2

Net current period other comprehensive loss		(3	)		2			(1	)

Balance, September 30, 2017	$	(5	)	$	(2	)	$	(7	)

Three Months Ended September 30, 2016

Balance, July 1, 2016	$	(67	)	$	(12	)	$	(79	)

Other comprehensive loss, net of tax		(11	)		-			(11	)

Accretion of unrealized losses on securities transferred from available for sale to held to maturity recognized in other comprehensive income		-			1			1

Net current period other comprehensive loss		(11	)		1			(10	)

Balance, September 30, 2016	$	(78	)	$	(11	)	$	(89	)

There were no material items reclassified from accumulated other comprehensive loss to the statement of operations for the three-month periods ended September 30, 2017 and 2016.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 7: Earnings Per Share

Earnings per share for the three months ended September 30, 2017 and 2016, were computed as follows:

	Three Months Ended September 30, 2017
			Weighted-
	Net		Average		Per Share
	Income		Shares		Amount
	(In thousands)

Net income	$	48

Basic earnings per share				828,537	$	0.06

Effect of dilutive securities
Stock options				24,135
Restricted stock awards				10,127

Diluted earnings per share				862,799	$	0.06

	Three Months Ended September 30, 2016
			Weighted-
	Net		Average		Per Share
	Income		Shares		Amount
	(In thousands)

Net income	$	73

Basic earnings per share				818,824	$	0.09

Effect of dilutive securities
Stock options				3,032
Restricted stock awards				2,844

Diluted earnings per share				824,700	$	0.09

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 8: Employee Stock Ownership Plan

On January 29, 2015, the Bank announced the formation of the Mt. Washington Savings Bank Employee Stock Ownership Plan (“ESOP”), a non-contributory plan for its employees. As part of the Company’s stock conversion, shares were purchased with a loan from MW Bancorp, Inc. All employees of the Bank meeting certain tenure requirements are entitled to participate in the ESOP. Compensation expense related to the ESOP was $35,000 and $14,000 for the three months ended September 30, 2017 and 2016, respectively.

The ESOP had 62,661 and 66,589 unallocated shares at September 30, 2017 and 2016, respectively.

The aggregate fair value of the 62,661 unallocated shares was $1.6 million based on the $24.85 closing price of our common stock on September 30, 2017.

Note 9: Equity Incentive Plan

In April 2016, the Company’s stockholders authorized the adoption of the MW Bancorp, Inc. 2016 Equity Incentive Plan (the “2016 Plan”). No more than 122,662 shares of the Company’s common stock may be issued under the 2016 Plan, of which a maximum of 87,616 may be issued pursuant to the exercise of stock options and 35,046 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 2016 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 2016 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 2016 Plan).

In July 2017, the Company granted stock options for 2,000 shares to certain members of management. Each option has an exercise price of $20.18 as determined on the grant date and expires 10 years from the grant date. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model, which resulted in a per share fair value of $6.50. The fair value was calculated for stock options using the following assumptions: expected volatility of 18.11%, a risk-free interest rate of 2.35%, an expected term of ten years and an expected dividend yield of 0.50%.

In January 2017, the Company granted stock options for 25,466 shares to certain members of management. Each option has an exercise price of $17.24 as determined on the grant date and expires 10 years from the grant date. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model, which resulted in a per share fair value of $5.42. The fair value was calculated for stock options using the following assumptions: expected volatility of 16.59%, a risk-free interest rate of 2.51%, an expected term of ten years and an expected dividend yield of 0.64%.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

A summary of option activity under the Plan as of September 30, 2017 and 2016, and changes during the periods then ended, is presented below:

					Weighted-
					Average
			Weighted-		Remaining		Aggregate
			Average		Contractual		Intrinsic
	Shares		Exercise Price		Term (Years)		Value
							(In thousands)
September 30, 2017
Outstanding, beginning of period		85,616	$	15.58		9.1
Granted		2,000		20.18		9.8
Exercised		-		-		-
Forfeited or expired		-		-		-

Outstanding, end of period		87,616	$	15.69		8.8	$	803

Exercisable, end of period		13,196	$	14.88		6.9	$	132

September 30, 2016
Outstanding, beginning of period		60,150	$	14.88
Granted		-		-
Exercised		-		-
Forfeited or expired		-		-

Outstanding, end of period		60,150	$	14.88		9.6	$	52

Exercisable, end of period		-	$	-		-	$	-

In July 2017 and January 2017, the Company awarded restricted stock totaling 500 and 5,736 shares, respectively, to certain members of management. In May 2016, the Company awarded restricted stock totaling 28,810 shares to members of the Board of Directors and certain members of management. The restricted stock awards have vesting periods ranging from three years to seven years. Shares of restricted stock granted to employees under the 2016 Plan are subject to restrictions as to continuous employment for a specified time period following the date of grant. During this period, the holder is entitled to full voting rights and dividends.

Total compensation cost recognized in the income statement for share-based payment arrangements during the three months ended September 30, 2017 and 2016 was $61,000 and $30,000, respectively.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

As of September 30, 2017, there was $742,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 6.0 years.

Note 10: Recent Accounting Pronouncements

FASB ASU 2014-09, Revenue from Contracts with Customers. In May 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance on revenue recognition from contracts with customers. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most contract revenue recognition guidance, including industry-specific guidance. The core principle of the amended guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amended guidance is effective, as to the Company, for annual reporting periods beginning after December 15, 2018, and interim periods within annual reporting periods beginning after December 15, 2019, and should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the amendments recognized at the date of initial application. Early adoption is prohibited. Management is currently in the process of evaluating the impact of the amended guidance on the Company’s financial statements.

FASB ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the 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.

For public business entities, the amendments in this update are effective 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 is currently evaluating the impact of adopting this guidance on the Company’s financial statements.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

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 fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. 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 guidance to simplify 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 to 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. The amendments are effective for annual periods beginning after December 15, 2016 (July 1, 2017 as to the Company) and interim periods within those annual periods. These amendments are not expected to have a material impact on the financial statements of the Company.

MW Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

FASB ASU 2016-13 Financial Instruments-Credit Losses. In June 2016, the FASB issued ASU 2016-13. The amendments in this ASU replace the incurred loss model for recognition of credit losses 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. The amendments are effective, as to the Company, for annual reporting periods beginning after December 15, 2020 and for interim reporting periods beginning after December 31, 2021. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations.

FASB ASU 2017-03 Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323). In January 2017, the FASB updated the Accounting Changes and Error Corrections and Investments—Equity Method and Joint Ventures Topics of the Accounting Standards Codification. The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The ASU was effective upon issuance. The Company is currently evaluating the impact of additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows.

FASB ASU 2017-09 Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic pf the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Management’s discussion and analysis of the financial condition at September 30, 2017 and results of operations for the three months ended September 30, 2017 and 2016, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto, appearing in Part I, Item 1 of this quarterly report on

Form 10-Q.

Forward-Looking Statements

This document contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and similar expressions. These forward-looking statements include: statements of goals, intentions and expectations, statements regarding prospects and business strategy, statements regarding asset quality and market risk, and estimates of future costs, benefits and results.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following: (1) general economic conditions, (2) competitive pressure among financial services companies, (3) changes in interest rates, (4) deposit flows, (5) loan demand, (6) changes in legislation or regulation, (7) changes in accounting principles, policies and guidelines, (8) other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services; and (9) other risk factors set forth from time to time in the Company’s reports filed with the Securities and Exchange Commission, including those described in “Item 1.A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. We have no obligation to update or revise any forward-looking statements to reflect any changed assumptions, any unanticipated events or any changes in the future.

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 U.S. generally accepted accounting principles. 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. The estimates and assumptions that we use are based on historical experience and various other factors we believe 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 or our results of operations.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was signed into law. 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 for probable incurred 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 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 it’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. The historical loss experience is determined by portfolio segment and is based on the Company’s actual loss history over the most recent twelve quarters. All periods are evenly weighted within the twelve quarter loss history. The methodology used in calculation of loss factors is consistently applied to all loan segments. 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 adverse effect on our financial results.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

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 Company 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 Company 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 Company can be found in Note 5 to this Form 10-Q — “Disclosures About Fair Value of Assets and Liabilities.”

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

Total Assets. Total assets were $154.3 million at September 30, 2017, an increase of $11.1 million, or 7.7%, over the $143.2 million total at June 30, 2017. The increase was primarily comprised of a $6.8 million increase in net loans and a $3.5 million increase in cash and cash equivalents.

Net Loans. Net loans increased by $6.8 million, or 5.6%, to $128.3 million at September 30, 2017, from $121.5 million at June 30, 2017. During the three months ended September 30, 2017, we originated $19.9 million of loans. These new loan originations were comprised primarily of $5.2 million of one- to four-family residential real estate loans, $5.6 million of commercial and commercial real estate loans, $8.7 million of construction loans and $336,000 of consumer loans. During the three months ended September 30, 2017, one- to four-family residential real estate loans increased $2.2 million, or 3.1%, to $72.8 million at September 30, 2017, from $70.6 million at June 30, 2017; commercial real estate loans increased $4.9 million, or 15.8%, to $35.8 million at September 30, 2017; and construction loans increased $523,000, or 3.2%, to $17.0 million at September 30, 2017.

Increases in loan balances reflect our strategy to grow and diversify our loan portfolio, with an emphasis on increasing commercial and multi-family residential loans, as we shift our strategy from our traditional focus on one- to four-family residential loans. Such growth has been achieved amid strong competition for commercial real estate, multi-family and one- to four-family residential mortgage loans in our market area in the current low interest rate environment.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

During the latter part of fiscal 2013, we initiated a program to sell certain fixed-rate, 30-year term mortgage loans in the secondary market. We have sold loans on both a servicing released and servicing retained basis, in transactions with the Federal Home Loan Bank-Cincinnati (“FHLB”), through its mortgage purchase program, and other investors. We sold $422,000 of loans in the three months ended September 30, 2017. Total loans sold with servicing retained totaled $27.4 million at September 30, 2017. Management intends to continue this sales activity in future periods.

Investment Securities. Investment securities increased $699,000, or 16.3%, to $5.0 million at September 30, 2017 from $4.3 million at June 30, 2017. The increase consisted primarily of purchases of mortgage-backed securities totaling $1.0 million during the three months ended September 30, 2017, partially offset by principal repayments on mortgage-backed securities.

The yield on our investment securities increased to 1.96% for the three months ended September 30, 2017, compared to 1.55% for the three months ended September 30, 2016. At September 30, 2017, investment securities classified as available-for-sale and held-to-maturity consisted of municipal securities and government-sponsored mortgage-backed securities.

Deposits. Deposits increased by $10.4 million, or 10.7%, to $107.6 million at September 30, 2017 from $97.2 million at June 30, 2017. Our core deposits, which consist of all deposit account types except certificates of deposit, increased $5.6 million, or 9.6%, to $64.0 million at September 30, 2017 from $58.4 million at June 30, 2017. Certificates of deposit increased $4.8 million, or 12.5%, to $43.6 million at September 30, 2017 from $38.8 million at June 30, 2017. During the three months ended September 30, 2017, management continued its strategy of pursuing growth in demand accounts and other lower cost core deposits. Demand accounts were first offered by the Company during 2013 and totaled $47.6 million at September 30, 2017. Management intends to continue its efforts to increase core deposits, with a special emphasis on growth in consumer and business demand deposits.

Federal Home Loan Bank Advances. FHLB advances increased $500,000, or 1.8%, to $28.8 million at September 30, 2017 from $28.3 million at June 30, 2017. Management has pursued a strategy of periodically increasing these advances to take advantage of this low-cost source of funding during the low interest rate environment to fund the Company’s loans and investments. The aggregate cost of these advances was 1.57% at September 30, 2017, compared to the Company’s cost of deposits of 1.05% at that date.

Shareholders’ Equity. Total shareholders’ equity decreased $24,000, or 0.1%, to $17.3 million at September 30, 2017 compared to June 30, 2017. The decrease was primarily attributable to dividends paid of $98,000, partially offset by net income of $48,000 for the three months ended September 30, 2017.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Three-Month Periods Ended September 30, 2017 and 2016

General. Net income for the three months ended September 30, 2017 was $48,000, a decrease of $25,000, or 34.2%, compared to net income of $73,000 for the three months ended September 30, 2016. The decrease in net income was primarily due to a $118,000 increase in noninterest expense and a $99,000 decrease in noninterest income, which were partially offset by a $180,000 increase in net interest income and a $12,000 decrease in income taxes.

Average Balance Sheets. The following table sets 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.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Three Months Ended September 30,
	2017								2016
	Average Outstanding Balance			Interest		Yield/ Rate			Average Outstanding Balance			Interest		Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	126,740		$	1,272		4.01	%	$	104,741		$	1,018		3.89	%
Investment securities		4,285			21		1.96	%		4,123			16		1.55	%
Other interest-earning assets (1)		8,894			40		1.80	%		5,956			31		2.08	%
Total interest-earning assets		139,919			1,333		3.81	%		114,820			1,065		3.71	%
Non-interest-earning assets		8,787								6,585
Allowance for loan losses		(1,635	)							(1,636	)
Total assets	$	147,071							$	119,769

Interest-bearing liabilities:
Interest-bearing demand	$	36,989			89		0.96	%	$	22,432			52		0.93	%
Money market accounts		1,859			3		0.65	%		2,683			3		0.45	%
Savings accounts		16,636			33		0.79	%		10,949			9		0.33	%
Certificates of deposit		40,813			133		1.30	%		37,991			131		1.38	%
Total deposits		96,297			258		1.07	%		74,055			195		1.05	%
FHLB advances		28,740			113		1.57	%		25,981			88		1.35	%
Total interest-bearing liabilities		125,037			371		1.19	%		100,036			283		1.13	%
Non-interest-bearing liabilities		4,702								3,627
Total liabilities		129,739								103,663
Equity		17,332								16,106
Total liabilities and equity	$	147,071							$	119,769

Net interest income				$	962							$	782
Net interest rate spread (2)							2.62	%							2.58	%
Net interest-earning assets (3)	$	14,882							$	14,784
Net interest margin (4)							2.75	%							2.72	%
Average interest-earning assets
to interest-bearing liabilities		111.90	%							114.78	%

(1)

Consists of stock in the FHLB and interest-bearing demand and time deposits in other banks.

(2)

Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3)

Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(4)

Net interest margin represents net interest income divided by average total interest-earning assets.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Interest Income. Interest income increased $268,000, or 25.2%, to $1.3 million for the three months ended September 30, 2017 from $1.1 million for the three months ended September 30, 2016. This increase was primarily attributable to a $254,000 increase in interest on loans receivable. The average balance of loans during the three months ended September 30, 2017 increased by $22.0 million, or 21.0%, from the balance for the three months ended September 30, 2016. The average yield on loans increased by 12 basis points to 4.01% for the three months ended September 30, 2017 from 3.89% for the three months ended September 30, 2016.

Interest income on investment securities increased $5,000, or 31.3%, to $21,000 for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. The average balance of investment securities increased $162,000 to $4.3 million for the three months ended September 30, 2017 from $4.1 million for the three months ended September 30, 2016, while the average yield on investment securities increased by 41 basis points, to 1.96% for the three months ended September 30, 2017 from 1.55% for the three months ended September 30, 2016. Interest income on other interest-earning assets, including certificates of deposit in other financial institutions, increased $9,000, or 29.0%, for the three months ended September 30, 2017, due to an increase in the average balance of $2.9 million period-to-period, partially offset by a decrease in the average yield of 28 basis points, to 1.80% for the three months ended September 30, 2017.

Interest Expense. Total interest expense increased $88,000, or 31.1%, to $371,000 for the three months ended September 30, 2017, from $283,000 for the three months ended September 30, 2016. Interest expense on deposit accounts increased $63,000, or 32.3%, to $258,000 for the three months ended September 30, 2017, from $195,000 for the three months ended September 30, 2016. The increase was primarily due to an increase of $22.2 million, or 30.0%, in the average balance of interest-bearing deposits to $96.3 million for the three months ended September 30, 2017 and an increase in the average cost of interest-bearing deposits of two basis points to 1.07% for the three months ended September 30, 2017 from 1.05% for the same quarter in 2016.

Interest expense on FHLB advances increased $25,000, or 28.4%, to $113,000 for the three months ended September 30, 2017 from $88,000 for the three months ended September 30, 2016. The average balance of advances increased by $2.8 million, or 10.6%, to $28.7 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016, while the average cost of these advances increased by 22 basis points to 1.57% from 1.35%. As noted above, management elected to increase outstanding advances as a source of low-cost funding.

Net Interest Income. Net interest income increased $180,000, or 23.0%, to $962,000 for the three months ended September 30, 2017, compared to $782,000 for the three months ended September 30, 2016. The increase reflected the overall growth in interest-earning assets and interest-bearing liabilities, along with the increase in the interest rate spread to 2.62% for the three months ended September 30, 2017 compared to 2.58% for the three months ended September 30, 2016. Our net interest margin increased to 2.75% for the three months ended September 30, 2017 from 2.72% for the three months ended September 30, 2016. The interest rate spread and net interest margin were impacted by the continuation of the low interest rate environment.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies—Allowance for Loan Losses,” we did not record a provision for loan losses for either of the three months ended September 30, 2017 or 2016. The allowance for loan losses was $1.6 million, or 1.16% of total loans, at September 30, 2017, compared to $1.6 million, or 1.24% of total loans, at June 30, 2017. The determination not to record a provision for loan losses in the three months ended September 30, 2017 and 2016, was due primarily to the continued low balances of nonperforming loans and delinquent loans in the periods. Total nonperforming loans were $711,000 at September 30, 2017, compared to $1.2 million at September 30, 2016. Classified loans declined to $1.0 million at September 30, 2017, compared to $1.4 million at September 30, 2016, and total loans past due greater than 30 days were $671,000 and $676,000 at those respective dates. Net charge-offs totaled $4,000 and $3,000 for the three months ended September 30, 2017 and 2016, respectively. As a percentage of nonperforming loans, the allowance for loan losses was 230.0% at September 30, 2017, compared to 138.0% at September 30, 2016.

The allowance for loan losses reflects the estimate we believe to be appropriate to cover probable incurred losses in the loan portfolio at September 30, 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 loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.

Non-Interest Income. Non-interest income decreased $99,000, or 63.1%, to $58,000 for the three months ended September 30, 2017 from $157,000 for the three months ended September 30, 2016. The decrease was due primarily to a $108,000 decrease in gain on sale of loans, due to a decline in the volume of loans sold period-to-period.

Non-Interest Expense. Non-interest expense increased $118,000, or 14.1%, to $955,000 for the three months ended September 30, 2017 compared to $837,000 for the three months ended September 30, 2016. The increase was primarily attributable to a $54,000, or 12.1%, increase in salaries, employee benefits and directors fees expense, and increases of $21,000, or 31.8%, in occupancy and equipment, and $11,000, or 18.0%, in data processing. The increase in compensation expense was due in part to the incremental expense associated with stock-based compensation, including the accelerated vesting of awards due to the death of a board member during the quarter, coupled with normal merit increases period-to-period. The increases in occupancy and equipment and data processing were due primarily to costs associated with the new ATM/ITM facility period-to-period, which opened in January 2017, and the related growth in loan and deposit accounts.

Federal Income Taxes. Federal income taxes decreased by $12,000, or 41.4%, to $17,000 for the three-month period ended September 30, 2017, compared to the same period in 2016. The decrease in federal income taxes was due primarily to the $37,000, or 36.3%, decrease in pre-tax income.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities, sales or calls of securities. We also have the ability to borrow from the FHLB. At September 30, 2017, we had the capacity to borrow approximately $23.7 million from the FHLB and have an additional $10.0 million on a line of credit with the FHLB. At September 30, 2017, we had $28.8 million outstanding in FHLB advances.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and 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.

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 $268,000 and $1.3 million for the three months ended September 30, 2017 and 2016, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from maturing securities and pay downs on mortgage-backed securities, was $7.6 million and $7.5 million for the three months ended September 30, 2017 and 2016, respectively. Net cash provided by financing activities, consisting primarily of the activity in deposit accounts and FHLB advances, was $10.8 million and $4.5 million for the three months ended September 30, 2017 and 2016, respectively. These funding increases also reflected our strategy of borrowing at lower interest rates to fund loan originations.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

At September 30, 2017, the Bank’s capital exceeded all of the Bank’s capital adequacy requirements and also exceeded all amounts necessary to be deemed well capitalized under the prompt corrective action regulations. See Note 4 to the Financial Statements for details.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At September 30, 2017 and 2016, we had outstanding commitments of $28.1 million and $8.6 million, respectively, including commitments to originate loans, undisbursed funds on construction loans, funds available on undrawn lines of credit and stand-by letters of credit. We anticipate that we will have sufficient funds available to meet our current lending commitments.

MW Bancorp, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certificates of deposit that are scheduled to mature in less than one year from September 30, 2017 totaled $32.1 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 advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for equipment and a branch location, and agreements with respect to borrowed funds and deposit liabilities.

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4

Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of the Registrant’s management, including our Chief Executive Officer and Chief Financial Officer, the Registrant evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective.

(b) Changes in internal controls.

There has been no change made in the Registrant’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

MW Bancorp, Inc.

Part II

Other Information

ITEM 1.

Legal Proceedings

We are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. At September 30, 2017, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

ITEM 1A.

Risk Factors

For information on risk factors, please refer to Part I, Item 1.A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

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

(b)

Not applicable.

(c)

There were no issuer repurchases of securities during the period covered by this report.

ITEM 3.

Defaults Upon Senior Securities

None.

ITEM 4.

Mine Safety Disclosures

Not applicable.

ITEM 5.

Other Information

None.

ITEM 6.

Exhibits

Exhibit		Page
Number	Description	Reference

3.1	Articles of Incorporation of MW Bancorp, Inc.	Incorporated by reference to registrant's Form S-1 filed on September 10, 2014, Exhibit 3.1 (File No. 333-198668).

3.2	Bylaws of MW Bancorp, Inc.	Incorporated by reference to registrant's Form S-1 filed on September 10, 2014, Exhibit 3.2 (File No. 333-198668).

4.1	Agreement to furnish instruments and agreements defining rights of holders of long term debt	Incorporated by reference to registrant’s Form 10-K filed on September 20, 2017, Exhibit 4.1 (File No. 000-55356).

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

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

32	Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Included herewith.

101.INS	XBRL Instance Document	Included herewith.

101.SCH	XBRL Taxonomy Extension Schema Document	Included herewith.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Included herewith.

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Included herewith.

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Included herewith.

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Included herewith.

MW Bancorp, Inc.

SIGNATURES

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

			MW Bancorp, Inc.

Date:	November 14, 2017	By:	/s/Gregory P. Niesen
			Gregory P. Niesen
			President and Chief Executive Officer

Date:	November 14, 2017	By:	/s/Julie M. Bertsch
			Julie M. Bertsch
			Senior Vice President and Chief Financial Officer

MW Bancorp, Inc. 10-Q