UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from _______________ to _______________
Commission File No.
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
1895 Bancorp of Wisconsin, Inc.
Form 10-Q
Table of Contents
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Page |
PART I. FINANCIAL INFORMATION |
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Item 1. |
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1 |
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Consolidated Balance Sheets at September 30, 2024 (unaudited) and December 31, 2023 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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35 |
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Item 3. |
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46 |
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Item 4. |
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46 |
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PART II. OTHER INFORMATION |
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Item 1. |
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47 |
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Item 1A. |
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47 |
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Item 2. |
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Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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Item 3. |
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47 |
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Item 4. |
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47 |
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Item 5. |
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47 |
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Item 6. |
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48 |
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49 |
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
1895 Bancorp of Wisconsin, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
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September 30, |
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December 31, |
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(unaudited) |
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Assets |
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Cash and due from banks |
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$ |
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$ |
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Fed funds sold |
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Cash and cash equivalents |
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Marketable equity securities, stated at fair value |
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Available-for-sale securities, stated at fair value (amortized cost $ |
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Loans held for sale |
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Loans, net of deferred costs |
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Allowance for credit losses for loans |
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Total loans, net of deferred loan costs and allowance for credit losses |
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Premises and equipment, net |
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Mortgage servicing rights, net |
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Federal Home Loan Bank (FHLB) stock, at cost |
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Accrued interest receivable |
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Cash value of life insurance |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Deposits |
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$ |
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$ |
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Advance payments by borrowers for taxes and insurance |
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FHLB advances |
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Accrued interest payable |
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Other liabilities |
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TOTAL LIABILITIES |
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Preferred stock, $ |
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Common stock (par value $ |
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Additional paid-in capital |
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Unallocated common stock of Employee Stock Ownership Plan (ESOP), |
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Less treasury stock at cost, |
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Retained earnings |
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Accumulated other comprehensive loss, net of income taxes |
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Total stockholders’ equity |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
1
1895 BANCORP OF WISCONSIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) – Unaudited
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Three months ended |
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Nine months ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Interest and dividend income: |
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Loans, including fees |
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$ |
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$ |
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$ |
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$ |
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Securities, taxable |
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Other |
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Total interest and dividend income |
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Interest expense: |
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Interest-bearing deposits |
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Borrowed funds |
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Other interest-bearing funds |
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Total interest expense |
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Net interest income |
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Provision for credit losses |
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Net interest income after provision for credit losses |
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Noninterest income: |
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Service charges and other fees |
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Loan servicing, net |
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Net gain on sale of loans |
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Net (loss) on sale of securities |
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— |
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— |
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Increase in cash surrender value of insurance |
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Unrealized gain (loss) on marketable equity securities |
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Other |
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Total noninterest income |
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Noninterest expense: |
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Salaries and employee benefits |
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Unrealized gain (loss) on marketable equity securities |
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Advertising and promotions |
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Data processing |
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Occupancy and equipment |
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FDIC assessment |
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Other |
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Total noninterest expense |
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Loss before income taxes |
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Income tax expense (benefit) |
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( |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Loss per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted(1) |
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$ |
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$ |
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$ |
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$ |
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Average common shares outstanding: |
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Basic |
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Diluted(1) |
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See accompanying notes to the unaudited consolidated financial statements.
(1)
2
1895 Bancorp of Wisconsin, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands) - Unaudited
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Three months ended |
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Nine months ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Net loss |
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$ |
( |
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$ |
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$ |
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Other comprehensive income (loss): |
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Unrealized holding gains (losses) arising during the |
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Net realized losses on available-for-sale securities included in income |
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Other comprehensive income (loss) before tax effect |
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Tax effect of other comprehensive income (loss) items |
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( |
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Other comprehensive income (loss), net of tax |
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( |
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Comprehensive income (loss) |
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$ |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
3
1895 Bancorp of Wisconsin, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands) - Unaudited
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Common Stock |
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Additional Paid-In Capital |
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Unallocated Common Stock of ESOP |
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Treasury Stock |
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Retained Earnings |
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Accumulated Other Comprehensive Income (Loss) |
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Total Stockholders' Equity |
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Balance as of June 30, 2023 |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Other comprehensive (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
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ESOP shares committed to be released ( |
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— |
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— |
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— |
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— |
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Repurchase and cancellation of shares-stock repurchase program ( |
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— |
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— |
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— |
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— |
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— |
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( |
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Stock options exercised ( |
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— |
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— |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balance as of September 30, 2023 |
$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Balance as of June 30, 2024 |
$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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ESOP shares committed to be released ( |
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— |
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( |
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— |
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— |
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— |
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Repurchase and cancellation of shares-stock repurchase program ( |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
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Stock options exercised ( |
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— |
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— |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balance as of September 30, 2024 |
$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Balance as of January 1, 2023 |
$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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ESOP shares committed to be released ( |
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— |
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( |
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— |
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— |
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— |
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Repurchase and cancellation of shares-stock repurchase program ( |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
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Sale of common stock by Rabbi Trust |
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— |
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— |
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— |
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— |
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— |
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Retirement of common stock |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
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Stock options exercised ( |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balance as of September 30, 2023 |
$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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|
|
|
|
|
|
|
|
|||||||
Balance as of January 1, 2024 |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Stock options exercised ( |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
ESOP shares committed to be released ( |
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Repurchase and cancellation of shares-stock repurchase program ( |
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Retirement of common stock |
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Stock compensation expense |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance as of September 30, 2024 |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
See accompanying notes to the unaudited consolidated financial statements.
4
1895 BANCORP OF WISCONSIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) - Unaudited
|
Nine months ended September 30, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities |
|
|
|
|
|
||
Net loss |
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash from operating activities |
|
|
|
|
|
||
Net amortization of investment securities |
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
||
Gain on sale of other real estate owned |
|
— |
|
|
|
( |
) |
Provision for credit losses |
|
|
|
|
|
||
Net gain on insurance proceeds from premises and equipment |
|
( |
) |
|
|
— |
|
Net change in fair value of marketable equity securities |
|
( |
) |
|
|
( |
) |
Net loss on sale of available-for-sale securities |
|
— |
|
|
|
|
|
Stock compensation expense |
|
|
|
|
|
||
Deferred income tax (benefit) expense |
|
( |
) |
|
|
|
|
Originations of mortgage loans held for sale |
|
( |
) |
|
|
( |
) |
Proceeds from sales of mortgage loans held for sale |
|
|
|
|
|
||
Net gain on sale of mortgage loans held for sale |
|
( |
) |
|
|
( |
) |
ESOP compensation |
|
|
|
|
|
||
Net change in cash value of life insurance |
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities |
|
|
|
|
|
||
Mortgage servicing rights |
|
|
|
|
|
||
Accrued interest receivable and other assets |
|
( |
) |
|
|
|
|
Accrued interest payable and other liabilities |
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
|
|
|
( |
) |
|
Cash flows from investing activities |
|
|
|
|
|
||
Proceeds from sales of available-for-sale securities |
|
— |
|
|
|
|
|
Maturities, payments, and calls of available-for-sale securities |
|
|
|
|
|
||
Purchases of available-for-sale securities |
|
( |
) |
|
|
( |
) |
Purchase of marketable equity securities |
|
( |
) |
|
|
( |
) |
Net increase in loans |
|
( |
) |
|
|
( |
) |
Net increase in FHLB stock |
|
( |
) |
|
|
( |
) |
Proceeds from insurance claim from premises and equipment |
|
|
|
|
— |
|
|
Proceeds from cash value life insurance death benefits |
|
— |
|
|
|
|
|
Proceeds from sale of other real estate owned |
|
— |
|
|
|
|
|
Distribution of marketable equity securities |
|
|
|
|
|
||
Net capital expenditures for premises and equipment |
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) investing activities |
|
|
|
|
( |
) |
|
Cash flows from financing activities |
|
|
|
|
|
||
Net decrease in deposits |
|
( |
) |
|
|
( |
) |
Net increase in advance payments by borrowers for taxes and insurance |
|
|
|
|
|
||
Proceeds from the issuance of Federal Home Loan Bank advances |
|
|
|
|
|
||
Principal payments on Federal Home Loan Bank advances |
|
( |
) |
|
|
( |
) |
Stock options exercised |
|
|
|
|
|
||
Repurchase and cancellation of common stock |
|
( |
) |
|
|
( |
) |
Retirement of common stock |
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
||
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
( |
) |
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
||
Cash and cash equivalents at end of period |
$ |
|
|
$ |
|
||
Supplemental cash flow information |
|
|
|
|
|
||
Cash paid during the year for interest |
$ |
|
|
$ |
|
||
Noncash activities |
|
|
|
|
|
||
Receivable for insurance claim proceeds from premises and equipment |
$ |
|
|
$ |
— |
|
|
See accompanying notes to the unaudited consolidated financial statements.
5
1895 BANCORP OF WISCONSIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
1895 Bancorp of Wisconsin, Inc., a Maryland corporation (the “Company” or “New 1895 Bancorp”) was formed to serve as the stock holding company for PyraMax Bank, FSB (the “Bank”) as part of the mutual-to-stock conversion of 1895 Bancorp of Wisconsin, MHC. Upon completion of the conversion, which occurred on July 14, 2021, 1895 Bancorp of Wisconsin, MHC and 1895 Bancorp of Wisconsin, a federal corporation (“Old 1895 Bancorp”), ceased to exist and New 1895 Bancorp became the successor corporation to Old 1895 Bancorp. The conversion was accomplished by the merger of 1895 Bancorp of Wisconsin, MHC with and into Old 1895 Bancorp followed by the merger of Old 1895 Bancorp with and into New 1895 Bancorp. The shares of New 1895 Bancorp common stock that were offered for sale in connection with the conversion represented the majority ownership interest in Old 1895 Bancorp owned by 1895 Bancorp of Wisconsin, MHC. On July 14, 2021, public stockholders of Old 1895 Bancorp received 1.3163 shares of common stock of New 1895 Bancorp in exchange for each of their shares of Old 1895 Bancorp common stock. The shares of Old 1895 Bancorp common stock owned by 1895 Bancorp of Wisconsin, MHC were canceled at that time. The conversion and offering were completed on July 14, 2021, and New 1895 Bancorp was organized as a fully public stock holding company, with
The cost of the reorganization and the issuing of the common stock totaling $
PyraMax Bank is a stock savings bank headquartered in Greenfield, Wisconsin. PyraMax Bank operates as a full-service financial institution, providing a full range of financial services, including the granting of commercial, residential, and consumer loans and acceptance of deposits from individual customers and small businesses in the metropolitan Milwaukee, Wisconsin area. PyraMax Bank is subject to competition from other financial and nonfinancial institutions providing financial products. In addition, PyraMax Bank is subject to the regulations of certain regulatory agencies and undergoes periodic examination by those regulatory agencies.
The accompanying unaudited interim consolidated financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position, results of operations, changes in stockholders' equity and cash flows as of and for the periods presented. Certain amounts from prior periods have been reclassified to conform with current period presentation.
The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the audited annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on March 29, 2024.
In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, mortgage servicing rights, the fair value of financial instruments and the valuation of deferred income tax assets.
On April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies and define an “emerging growth company.” As an emerging growth company, the Company may delay adoption of new or revised financial accounting standards until such date that the standards are required to be adopted by non-issuer companies. If such standards would not apply to non-issuer companies, no deferral would be applicable. The Company intends to take advantage of the benefits of the extended transition periods allowed under the JOBS Act.
Accordingly, the Company’s financial statements may not be comparable to those of public companies that adopt new or revised financial accounting standards as of an earlier date. The effective dates of the recent accounting standards in Note 2 reflect those that relate to non-issuer companies.
6
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)
Subsequent Events
Management has reviewed the Company's operations for potential disclosure or financial statement impacts related to events occurring after September 30, 2024, but prior to the release of the unaudited consolidated financial statements contained in this quarterly report on Form 10-Q were issued.
There were no additional subsequent event disclosures or financial statement impacts related to events occurring after September 30, 2024 that warranted adjustment to or disclosure in these unaudited consolidated financial statements.
NOTE 2 – RECENT ACCOUNTING STANDARDS
The following Accounting Standards Updates (“ASUs”) have been issued by the Financial Accounting Standards Board (the “FASB”) and may impact the Company’s consolidated financial statements in future reporting periods:
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, that requires presentation of specific categories of reconciling items, as well reconciling items that meet a quantitative threshold, in the reconciliation between the income tax provision and the income tax provision using statutory tax rates. The standard also requires disclosure of income taxes paid disaggregated by jurisdiction with separate disclosure of income taxes paid to individual jurisdictions that meet a quantitative threshold. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2024, on a prospective basis. Early adoption and retrospective application are permitted. We do not expect the adoption of this accounting standard to have an impact on our Consolidated Financial Statements but will require certain additional disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, that requires disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker and included within each reported measure of segment profit or loss. The standard also requires disclosure of the composition of other segment items included in the measure of segment profit or loss that are not separately disclosed. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We do not expect the adoption of this accounting standard to have an impact on our Consolidated Financial Statements.
7
NOTE 3 – AVAILABLE-FOR-SALE SECURITIES
The amortized costs and fair values of available-for-sale securities were as follows:
|
|
September 30, 2024 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Obligations of states and political subdivisions |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Government-sponsored mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Asset-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
December 31, 2023 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Obligations of states and political subdivisions |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Government-sponsored mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Asset-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The fair value of available-for-sale securities that were pledged as collateral at September 30, 2024 and December 31, 2023, were $
The amortized costs and fair values of available-for-sale securities, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. In addition, expected maturities will differ from contractual maturities for mortgage-backed securities and asset-backed securities, as the expected repayment terms may be less than the underlying mortgage pool contractual maturities. Therefore, these securities are not included in the maturity categories in the maturity summary below.
|
|
September 30, 2024 |
|
|||||
|
|
Amortized Cost |
|
|
Fair Value |
|
||
|
|
(in thousands) |
|
|||||
Debt and other securities: |
|
|
|
|
|
|
||
Due in one year or less |
|
$ |
|
|
$ |
|
||
Due after one through 5 years |
|
|
|
|
|
|
||
Due after 5 through 10 years |
|
|
|
|
|
|
||
Total debt and other securities |
|
|
|
|
|
|
||
Mortgage-related securities |
|
|
|
|
|
|
||
Asset-backed securities |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
8
NOTE 3 – AVAILABLE-FOR-SALE SECURITIES (continued)
Gross unrealized losses on securities available-for-sale and the fair values of the related securities, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position were as follows:
|
|
September 30, 2024 |
|
|||||||||||||||||||||
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
|||||||||||||||
|
|
Fair Value |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
Unrealized Loss |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Obligations of states and political |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||||
Government-sponsored mortgage-backed |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||||
|
|
December 31, 2023 |
|
|||||||||||||||||||||
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
|||||||||||||||
|
|
Fair Value |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
Unrealized Loss |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Obligations of states and political |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||||
Government-sponsored mortgage-backed |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Asset-backed securities |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
The following table presents the number of debt securities in an unrealized loss position and the aggregate depreciation from their unamortized cost basis, by security type, as of September 30, 2024 and December 31, 2023.
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Number of Securities |
|
|
Aggregate Depreciation |
|
|
Number of Securities |
|
|
Aggregate Depreciation |
|
||||
Obligations of states and political subdivisions |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Government-sponsored mortgage-backed securities |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Asset-backed securities |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
% |
||||
Total |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
The Company does not consider these unrealized losses to be attributable to credit-related factors, as the unrealized losses in each category have occurred as a result of changes in noncredit-related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration. As a result,
9
NOTE 4 – LOANS
Major classifications of loans, reported at amortized cost, are summarized as follows:
|
|
September 30, |
|
|
December 31, |
|
||
|
|
(in thousands) |
|
|||||
Commercial: |
|
|
|
|
|
|
||
Real estate |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
Residential real estate: |
|
|
|
|
|
|
||
First mortgage |
|
|
|
|
|
|
||
Construction |
|
|
|
|
|
|
||
Consumer: |
|
|
|
|
|
|
||
Home equity and lines of credit |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Subtotal (1) |
|
|
|
|
|
|
||
Net deferred loan costs |
|
|
|
|
|
|
||
Allowance for credit losses for loans |
|
|
( |
) |
|
|
( |
) |
Loans, net |
|
$ |
|
|
$ |
|
||
(1)
Deposit accounts in an overdrawn position and reclassified as loans totaled $
The Company provides several types of loans to its customers, including commercial, residential, construction and consumer loans. Significant loan concentrations are considered to exist when there are amounts loaned to one borrower, or to multiple borrowers engaged in similar activities, that would cause them to be similarly impacted by economic or other conditions. While credit risks tend to be geographically concentrated in the Company's metropolitan Milwaukee market area, and while a significant portion of the Company’s loan portfolio is secured by commercial and residential real estate, there are no significant concentrations whose primary sources of repayment are reliant upon an individual or group of related borrowers.
The Company also purchases loan participations from other financial institutions. The outstanding balance of loans purchased are included in the totals above and totaled $
During the normal course of business, the Company may transfer a portion of a loan as a participation loan to another financial institution in order to manage portfolio risk. In order to be eligible for sales treatment, all cash flows from the loan must be divided proportionately, and rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties, and no loan holder can have the right to pledge or exchange the entire loan. As of September 30, 2024 and December 31, 2023, the outstanding balance of participation loans transferred to other financial institutions and which were eligible for sales treatment totaled $
10
NOTE 4 – LOANS (continued)
A summary of activity in the allowance for credit losses for loans and the allowance for credit losses for unfunded loan commitments for the three and nine months ended September 30, 2024 and September 30, 2023, is presented below:
|
|
Commercial |
|
|
Residential |
|
|
Consumer |
|
|
Total |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Three months ended September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowance for credit losses for loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans charged-off |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowance for credit losses for unfunded loan commitments(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Allowance for credit losses for loans and unfunded loan commitments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Three months ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowance for credit losses for loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loans charged-off |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowance for credit losses for unfunded loan commitments(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Allowance for credit losses for loans and unfunded loan commitments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
11
NOTE 4 – LOANS (continued)
|
|
Commercial |
|
|
Residential |
|
|
Consumer |
|
|
Total |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Nine months ended September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowance for credit losses for loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans charged-off |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowance for credit losses for unfunded loan commitments(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Allowance for credit losses for loans and unfunded loan commitments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nine months ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowance for credit losses for loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
CECL Adoption Adjustment(2) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Loans charged-off |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowance for credit losses for unfunded loan commitments(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
CECL Adoption Adjustment(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Allowance for credit losses for loans and unfunded loan commitments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1)
(2)
12
NOTE 4 – LOANS (continued)
The provision for credit losses is determined by the Company as the amount that is to be added to the allowance for credit losses accounts to bring the allowance to a level that, in management's judgment, is necessary to absorb expected credit losses over the lives of the respective financial instruments.
|
|
Three months ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Provision for credit losses for: |
|
|
|
|
|
|
||
Loans |
|
$ |
|
|
$ |
( |
) |
|
Unfunded loan commitments |
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
$ |
|
||
|
|
Nine months ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Provision for credit losses for: |
|
|
|
|
|
|
||
Loans |
|
$ |
|
|
$ |
( |
) |
|
Unfunded loan commitments |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance for credit losses. The credit quality indicators monitored differ depending on the class of loan. The credit quality indicators for commercial real estate and other commercial loans are based on the following ratings:
Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing or in nonaccrual status. Refer to Note 1 to the Consolidated Financial Statements in our 2023 Annual Report on Form 10-K, filed with the SEC on March 29, 2024, for additional information on our nonaccrual policy.
13
NOTE 4 – LOANS (continued)
The following tables presents the amortized cost basis of our loans by credit quality indicator and origination year, at September 30, 2024 and December 31, 2023:
|
|
September 30, 2024 |
|
|||||||||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 and Prior |
|
|
Revolving Lines of Credit |
|
|
Revolving Lines of Credit Converted to Term Loans |
|
|
Total Loans |
|
|||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
||||||||
Watch and special mention |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Substandard |
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Total commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
||||||||
Other commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
||||||||
Watch and special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||||||
Substandard |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||||
Total other commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
||||||||
Total commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
||||||||
Residential real estate - first mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total residential real estate - first mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Residential real estate - construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total residential real estate - construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Consumer - home equity and lines of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total consumer - home equity and lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Consumer - other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total consumer - other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
14
NOTE 4 – LOANS (continued)
|
|
December 31, 2023 |
|
|||||||||||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 and Prior |
|
|
Revolving Lines of Credit |
|
|
Revolving Lines of Credit Converted to Term Loans |
|
|
Total Loans |
|
|||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Watch and special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Other commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Watch and special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Substandard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total other commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Residential real estate - first mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total residential real estate - first mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Residential real estate - construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total residential real estate - construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Consumer - home equity and lines of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total consumer - home equity and lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Consumer - other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total consumer - other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
There were
15
NOTE 4 – LOANS (continued)
The following tables present gross charge-offs of our loans for each portfolio class, by origination year, that occurred during the three and nine months ended September 30, 2024 and three and nine months ended September 30, 2023. Refer to Note 1 to the Consolidated Financial Statements in our 2023 Annual Report on Form 10-K for additional information on our charge-off policy.
|
|
For the three months ended September 30, 2024 |
|
|||||||||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 and Prior |
|
|
Revolving Lines of Credit |
|
|
Revolving Lines of Credit Converted to Term Loans |
|
|
Total Loans |
|
|||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Real estate |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total commercial loans |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
First mortgage |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Construction |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total residential real estate |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Home equity and lines of credit |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Total consumer |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Total current period charge-offs |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||||
|
|
For the three months ended September 30, 2023 |
|
|||||||||||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 and Prior |
|
|
Revolving Lines of Credit |
|
|
Revolving Lines of Credit Converted to Term Loans |
|
|
Total Loans |
|
|||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Real estate |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total commercial loans |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
First mortgage |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Construction |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total residential real estate |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Home equity and lines of credit |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total consumer |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total current period charge-offs |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
16
NOTE 4 – LOANS (continued)
|
|
For the nine months ended September 30, 2024 |
|
|||||||||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 and Prior |
|
|
Revolving Lines of Credit |
|
|
Revolving Lines of Credit Converted to Term Loans |
|
|
Total Loans |
|
|||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Real estate |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Land development |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Total commercial loans |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
First mortgage |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Construction |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total residential real estate |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Home equity and lines of credit |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Total consumer |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Total current period charge-offs |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
For the nine months ended September 30, 2023 |
|
|||||||||||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 and Prior |
|
|
Revolving Lines of Credit |
|
|
Revolving Lines of Credit Converted to Term Loans |
|
|
Total Loans |
|
|||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Real estate |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Land development |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total commercial loans |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
First mortgage |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Construction |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total residential real estate |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Home equity and lines of credit |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||||
Total consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||||
Total current period charge-offs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||||||
17
NOTE 4 – LOANS (continued)
An analysis of past due loans, net of amortized costs, is presented below:
|
|
September 30, 2024 |
|
|||||||||||||||||
|
|
Loans Past Due 30-89 Days |
|
|
Loans Past Due 90+ Days |
|
|
Total Past Due |
|
|
Current Loans |
|
|
Total Loans |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
First mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Home equity and lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
December 31, 2023 |
|
|||||||||||||||||
|
|
Loans Past Due 30-89 Days |
|
|
Loans Past Due 90+ Days |
|
|
Total Past Due |
|
|
Current Loans |
|
|
Total Loans |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
First mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Home equity and lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
There were
18
NOTE 4 – LOANS (continued)
The following table presents the amortized cost of our loans on nonaccrual status as of September 30, 2024 and December 31, 2023. All loans that were 90 days or more past due were on nonaccrual status as of September 30, 2024 and December 31, 2023.
|
|
September 30, |
|
|
December 31, |
|
||
|
|
(in thousands) |
|
|||||
Commercial: |
|
|
|
|
|
|
||
Real estate |
|
$ |
— |
|
|
$ |
|
|
Other |
|
|
— |
|
|
|
— |
|
Residential real estate: |
|
|
|
|
|
|
||
First mortgage |
|
|
|
|
|
|
||
Construction |
|
|
— |
|
|
|
— |
|
Consumer: |
|
|
|
|
|
|
||
Home equity and lines of credit |
|
|
|
|
|
|
||
Other |
|
|
— |
|
|
|
— |
|
Total nonaccrual loans |
|
$ |
|
|
$ |
|
||
Total nonaccrual loans to total loans |
|
|
% |
|
|
% |
||
Total nonaccrual loans to total assets |
|
|
% |
|
|
% |
||
The Company had $
At September 30, 2024 and December 31, 2023, the Company held loans that were individually evaluated for impairment due to financial difficulties experienced by the borrower and for which the repayment, on the basis of our assessment, is expected to be provided substantially through the sale or operation of the collateral. The allowance for these collateral dependent loans is primarily based on the fair value of the underlying collateral at the reporting date. The following describes the type of collateral that secure collateral dependent loans:
The table below summarizes collateral dependent loans and the related allowance at September 30, 2024 and December 31, 2023 for which the borrower is experiencing financial difficulty:
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Loans |
|
|
Allowance |
|
|
Loans |
|
|
Allowance |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Real estate |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Other |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
First mortgage |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Home equity and lines of credit |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
19
NOTE 5 – MORTGAGE SERVICING RIGHTS
Loans serviced for others are not included in the Company’s consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $
A summary of activity in the Company’s mortgage servicing rights is presented below:
|
|
Three Months Ended September 30, 2024 |
|
|
Three Months Ended September 30, 2023 |
|
|
Nine Months Ended September 30, 2024 |
|
|
Nine Months Ended September 30, 2023 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Mortgage servicing rights beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Mortgage servicing rights ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair value at beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Fair value at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
There was
The estimated fair value of mortgage servicing rights was determined using a valuation model that calculates the present value of expected future servicing and ancillary income, net of expected servicing costs. The model incorporates various assumptions such as discount rates, prepayment speeds and ancillary income and servicing costs. As of September 30, 2024, the model used discount rates ranging from
The following table summarizes the estimated future amortization expense for mortgage servicing rights for the annual periods indicated. The projections of amortization expense are based on existing asset balances as of September 30, 2024. The actual amortization expense the Company recognizes in any given period may vary significantly depending on changes in interest rates, market conditions and regulatory requirements.
Estimated future amortization as of September 30, 2024: |
|
(in thousands) |
|
|
2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
20
NOTE 6 – DEPOSITS
The composition of deposits is summarized below:
|
|
September 30, |
|
|
December 31, 2023 |
|
||
|
|
(in thousands) |
|
|||||
Non-interest bearing checking |
|
$ |
|
|
$ |
|
||
Interest bearing checking |
|
|
|
|
|
|
||
Money market |
|
|
|
|
|
|
||
Statement savings |
|
|
|
|
|
|
||
Certificates of deposit |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Certificates of deposit that met or exceeded the FDIC insurance limit of $
As of September 30, 2024, the scheduled maturities of certificates of deposit for the annual periods are presented below:
|
|
(in thousands) |
|
|
2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
21
NOTE 7 – FEDERAL HOME LOAN BANK ADVANCES
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Open line of credit |
|
|
— |
|
|
$ |
— |
|
|
|
% |
|
$ |
|
||
Fixed rate, fixed term advance, maturing July 2027 |
|
|
% |
|
|
|
|
|
% |
|
|
|
||||
Putable advance, maturing January 2028, first option date January 2024 |
|
|
— |
|
|
|
— |
|
|
|
% |
|
|
|
||
Putable advance, maturing February 2028, first option date February 2024 |
|
|
— |
|
|
|
— |
|
|
|
% |
|
|
|
||
Putable advance, maturing March 2028, first option date March 2024 |
|
|
— |
|
|
|
— |
|
|
|
% |
|
|
|
||
Putable advance, maturing May 2026, first option date May 2024 |
|
|
— |
|
|
|
— |
|
|
|
% |
|
|
|
||
Putable advance, maturing May 2028, first option date May 2024 |
|
|
— |
|
|
|
— |
|
|
|
% |
|
|
|
||
Putable advance, maturing January 2029, first option date January 2025 |
|
|
% |
|
|
|
|
|
— |
|
|
|
— |
|
||
Putable advance, maturing February 2029, first option date February 2025 |
|
|
% |
|
|
|
|
|
— |
|
|
|
— |
|
||
Putable advance, maturing February 2029, first option date February 2026 |
|
|
% |
|
|
|
|
|
— |
|
|
|
— |
|
||
Putable advance, maturing March 2029, option expired September 2024 |
|
|
% |
|
|
|
|
|
— |
|
|
|
— |
|
||
Putable advance, maturing March 2029, next option date December 2024 |
|
|
% |
|
|
|
|
|
— |
|
|
|
— |
|
||
Putable advance, maturing March 2030, first put option date March 2025 |
|
|
% |
|
|
|
|
|
% |
|
|
|
||||
Putable advance, maturing March 2032, first put option date March 2027 |
|
|
% |
|
|
|
|
|
% |
|
|
|
||||
Putable advance, maturing July 2029 first option date January 2025 |
|
|
% |
|
|
|
|
|
— |
|
|
|
— |
|
||
Putable advance, maturing August 2029 first option date February 2025 |
|
|
% |
|
|
|
|
|
— |
|
|
|
— |
|
||
Advance structured note, payments due monthly, maturing April 2030 |
|
|
% |
|
|
|
|
|
% |
|
|
|
||||
Advance structured note, payments due monthly, maturing May 2030 |
|
|
% |
|
|
|
|
|
% |
|
|
|
||||
Fixed rate, fixed term community small business advance, maturing June 2031 |
|
|
% |
|
|
|
|
|
— |
|
|
|
— |
|
||
SOFR Floater advance, maturing October 2024 |
|
|
% |
|
|
|
|
|
% |
|
|
|
||||
Total |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The scheduled maturities and required principal payments of Federal Home Loan Bank advances are presented below:
|
|
September 30, 2024 |
|
|||||
|
|
Weighted Average Rate |
|
|
Amount |
|
||
|
|
(dollars in thousands) |
|
|||||
2024 |
|
|
% |
|
$ |
|
||
2025 |
|
|
% |
|
|
|
||
2026 |
|
|
% |
|
|
|
||
2027 |
|
|
% |
|
|
|
||
2028 |
|
|
% |
|
|
|
||
Thereafter |
|
|
% |
|
|
|
||
Total |
|
|
% |
|
$ |
|
||
Actual maturities may differ from scheduled maturities due to call options on various FHLB advances.
Additionally, at September 30, 2024 we had a $
22
NOTE 8 – INCOME TAXES
The Company recorded an income tax benefit of $
On July 5, 2023, the Wisconsin legislature enacted 2023 Wisconsin Act 19 (the "Act"). The Act contained a provision that provides financial institutions with a state tax-exemption for interest, fees and penalties earned on qualifying loans. For the exemption to apply, the loan must be $
Deferred tax assets are deferred tax consequences attributable to deductible temporary differences and carryforwards. After the deferred tax asset has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance. A valuation allowance is needed when, based on the weight of the available evidence, it is more likely than not that some portion of the deferred asset will not be realized. As required by generally accepted accounting principles, available evidence is weighted heavily on cumulative losses, with less weight placed on future projected profitability. The realization of deferred tax assets is dependent on the existence of taxable income of the appropriate character (e.g., ordinary or capital) within the carry-back and carry-forward periods available under tax law, which would consider future reversals of existing taxable temporary differences and available tax planning strategies. As of September 30, 2024, and December 31, 2023, the deferred tax valuation allowance was $
The board and management continue to assess the deferred tax assets in light of recent changes in market conditions, forecasted future projected income and available tax planning strategies. As such, there may be additional deferred tax asset impairment in subsequent periods.
23
NOTE 9 – COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company may be involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial statements. No legal proceedings existed at September 30, 2024, that would have a material adverse effect on the Company’s consolidated financial statements.
The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These instruments include commitments to extend credit and commitments to sell loans. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the balance sheets.
The Company’s exposure to credit losses is represented by the contractual, or notional, amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments. As some of the commitments are expected to expire without being drawn upon, and some of the commitments may not be drawn upon to the total extent of the commitment, the notional amount of these commitments does not necessarily represent future cash requirements of the Company.
ASU 2016-13 requires that we establish an allowance for credit losses for off-balance sheet credit exposures, including unfunded loan commitments, that meet certain requirements. The allowance for credit losses for off-balance sheet credit exposures is estimated by portfolio segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, also taking into consideration management’s assumption of the likelihood that funding will occur. The allowance for credit losses for off-balance sheet credit exposures is included in other liabilities on the Company’s Consolidated Balance Sheets. Additional provisions for expected losses occur through a charge to the provision for credit losses. At September 30, 2024, the allowance for credit losses for unfunded commitments was $
The contractual amounts of credit-related financial instruments are summarized below:
|
|
September 30, 2024 |
|
|||||||||
|
|
Fixed Rate |
|
|
Variable Rate |
|
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||||
Commitments to extend credit |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Standby letters of credit |
|
|
— |
|
|
|
|
|
|
|
||
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program |
|
|
|
|
|
— |
|
|
|
|
||
Commitments to sell loans |
|
|
|
|
|
— |
|
|
|
|
||
Overdraft protection program commitments |
|
|
|
|
|
— |
|
|
|
|
||
|
|
December 31, 2023 |
|
|||||||||
|
|
Fixed Rate |
|
|
Variable Rate |
|
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||||
Commitments to extend credit |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Standby letters of credit |
|
|
— |
|
|
|
|
|
|
|
||
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program |
|
|
|
|
|
— |
|
|
|
|
||
Commitments to sell loans |
|
|
|
|
|
— |
|
|
|
|
||
Overdraft protection program commitments |
|
|
|
|
|
— |
|
|
|
|
||
24
NOTE 9 – COMMITMENTS AND CONTINGENCIES (continued)
Commitments to extend credit are agreements to lend to a customer at fixed or variable rates, as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The amount of collateral obtained upon extension of credit is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable; inventory; property, plant and equipment; real estate; and stocks and bonds. Commitments to sell loans represent commitments obtained by the Company from a secondary market agency to purchase mortgages from the Company at specified interest rates and within specified periods of time.
Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, all standby letters of credit have expiration dates within one year. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting these commitments. Standby letters of credit are not reflected in the financial statements, since recording the fair value of these guarantees would not have a significant impact on the consolidated financial statements.
The Company participates in the Federal Home Loan Bank of Chicago Mortgage Partnership Finance Program (the “Program”). In addition to entering into forward commitments to sell mortgage loans to a secondary market agency, the Company enters into firm commitments to deliver loans to the Federal Home Loan Bank of Chicago through the Program. Under the Program, loans are funded by the Federal Home Loan Bank of Chicago, and the Company receives an agency fee reported as a component of gain on sale of loans. The Company had $
Unfunded commitments under overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit may or may not require collateral and may or may not contain a specific maturity date.
25
NOTE 10 – EMPLOYEE STOCK OWNERSHIP PLAN
The Company established a tax qualified Employee Stock Ownership Plan (“ESOP”) for the benefit of its employees, in conjunction with our 2019 reorganization. Eligible employees become
On January 8, 2019, the ESOP purchased
As part of the mutual-to-stock conversion and stock offering completed on July 14, 2021, the ESOP refinanced the aforementioned loan with New 1895 Bancorp, enabling the ESOP to purchase an aggregate of
Compensation expense for the ESOP is recorded at an amount equal to the shares allocated by the ESOP multiplied by the average fair market value of the shares during the period. The Company recognizes compensation expense ratably over the year based upon the Company’s estimate of the number of shares expected to be allocated by the ESOP. Unearned compensation applicable to the ESOP is reflected as a reduction of stockholders’ equity in the consolidated balance sheets. The difference between the average fair market value and the cost of the shares allocated by the ESOP is recorded as an adjustment to stockholders’ equity. The Company recognized $
The following table provides the allocated and unallocated shares of common stock associated with the ESOP.
|
|
September 30, |
|
|
December 31, |
|
||
|
|
(dollars in thousands) |
|
|||||
Shares committed to be released |
|
|
|
|
|
|
||
Total allocated shares |
|
|
|
|
|
|
||
Total unallocated shares |
|
|
|
|
|
|
||
Total ESOP shares |
|
|
|
|
|
|
||
Fair value of unallocated shares (based on $ |
|
$ |
|
|
$ |
|
||
26
NOTE 11 – RELATED PARTY TRANSACTIONS
A summary of loans to directors, executive officers, and their affiliates follows:
|
|
September 30, |
|
|
December 31, 2023 |
|
||
|
|
(in thousands) |
|
|||||
Beginning balance |
|
$ |
|
|
$ |
|
||
Adjustments due to changes in directors, executive officers, and/or principal |
|
|
— |
|
|
|
( |
) |
New loans |
|
|
— |
|
|
|
|
|
Repayments |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
$ |
|
||
Deposits from directors, executive officers, and their affiliates totaled $
The Company utilizes the services of law firms in which certain of the Company’s directors are partners. Fees paid to these firms for services were immaterial for the three and nine months ended September 30, 2024 and 2023, respectively.
NOTE 12 – FAIR VALUE
ASC Topic 820, Fair Value Measurements and Disclosures defines fair values, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This accounting standard applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements. The standard also emphasizes that fair value (i.e., the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. When considering the assumptions that market participants would use in pricing an asset or liability, this accounting standard establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels.
Level 1 inputs – In general, fair values determined by Level 1 inputs use quoted market prices in active markets for identical assets or liabilities that we have the ability to access.
Level 2 inputs – Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets where there are few transactions and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs – Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Some assets and liabilities, such as securities available for sale, are measured at fair value on a recurring basis under accounting principles generally accepted in the United States. Other assets and liabilities, such as collateral dependent loans, may be measured at fair value on a nonrecurring basis.
Following is a description of the Company’s valuation methodology and significant inputs used for each asset and liability measured at fair value on a recurring or nonrecurring basis, as well as the classification of the asset or liability within the fair value hierarchy.
Securities – Marketable equity securities and securities available-for-sale may be classified as Level 1 or Level 2 measurements within the fair value hierarchy. Level 1 securities include equity securities traded on a national exchange. The fair value measurements of Level 1 securities are based on the quoted market price of those securities. Level 2 securities include U.S. Treasury notes, U.S. government and agency securities, obligations of states and political subdivisions, corporate debt securities and mortgage-related securities. The fair value
27
NOTE 12 – FAIR VALUE (continued)
measurements of Level 2 securities are obtained from independent pricing services and are based on recent sales of similar securities and other observable market data.
Collateral dependent loans – Loans are not measured at fair value on a recurring basis. However, loans determined to be collateral dependent may be measured at fair value on a nonrecurring basis. The fair value measurements of collateral-dependent loans are based on the fair values of the underlying collateral. Independent appraisals are obtained to determine the fair values of underlying collateral, and generally utilize one or more valuation methodologies, typically includes comparable sales and income approaches. Management routinely evaluates the fair value measurements of independent appraisers and adjusts those valuations based on differences noted between actual selling prices of collateral and the most recently appraised value. Such adjustments are usually significant, which results in a Level 3 classification. All other collateral dependent loan measurements are based on the present value of expected future cash flows discounted at the applicable effective interest rate and are not considered fair value measurements.
Rate lock commitments—Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in other assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements for fixed-rate commitments and also considers the difference between current levels of interest rates and the committed rates. While there are Level 2 and 3 inputs used in the valuation models, the Company has determined that one or more of the inputs significant in the valuation of both of the mortgage banking derivatives fall within Level 3 of the fair value hierarchy. The change in fair value is recorded through an adjustment to the statement of operations, within mortgage banking income.
Mortgage servicing rights – The Company utilizes an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of mortgage servicing rights. The model utilizes prepayment assumptions to project cash flows related to the mortgage servicing rights based upon the current interest rate environment, which is then discounted to estimate an expected fair value of the mortgage servicing rights. The model considers characteristics specific to the underlying mortgage portfolio, such as: contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges and costs to service. Given the significance of the unobservable inputs utilized in the estimation process, mortgage servicing rights are classified as Level 3 within the fair value hierarchy. The Company records the mortgage servicing rights at the lower of amortized cost or fair value.
Assets measured at fair value on a recurring basis are summarized below, along with the level of the fair value hierarchy of the inputs utilized to determine such fair value.
|
|
|
|
|
Recurring Fair Value Measurements Using |
|
||||||||||
|
|
September 30, |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Marketable equity securities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of states and political subdivisions |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Government-sponsored mortgage-backed securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Asset-backed securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
|
|
|
|
|
Recurring Fair Value Measurements Using |
|
||||||||||
|
|
December 31, |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Marketable equity securities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of states and political subdivisions |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Government-sponsored mortgage-backed securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Asset-backed securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Certificates of deposit |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
28
NOTE 12 – FAIR VALUE (continued)
There were
There was
The Company estimates fair value of all financial instruments regardless of whether such instruments are measured at fair value. The following methods and assumptions were used by the Company to estimate fair value of financial instruments not previously discussed.
Cash and cash equivalents — Fair value approximates the carrying value.
Loans held for sale — Fair value is based on commitments on hand from investors or prevailing market prices.
Loans — Fair value of variable rate loans that reprice frequently is based on carrying values. Fair value of other loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings. Fair value of collateral dependent and other non-performing loans is estimated using discounted expected future cash flows or the fair value of the underlying collateral, if applicable.
FHLB stock — Fair value is the redeemable (carrying) value based on the redemption provisions of the Federal Home Loan Bank.
Accrued interest receivable and payable — Fair value approximates the carrying value.
Cash value of life insurance — Fair value is based on reported values of the assets.
Deposits and advance payments by borrowers for taxes and insurance — Fair value of deposits with no stated maturity, such as demand deposits, savings, and money market accounts, including advance payments by borrowers for taxes and insurance, by definition, is the amount payable on demand on the reporting date. Fair value of fixed rate time deposits is estimated using discounted cash flows applying interest rates currently being offered on similar time deposits.
FHLB Advances — Fair value of fixed rate, fixed term borrowings is estimated by discounting future cash flows using the current rates at which similar borrowings would be made. Fair value of borrowings with variable rates or maturing within 90 days approximates the carrying value of those borrowings.
The carrying value and estimated fair value of financial instruments are presented below:
|
|
September 30, 2024 |
|
|||||||||||||
|
|
Carrying Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Available-for-sale securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Marketable equity securities |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Loans held for sale |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Loans, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Rate lock commitments (1) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Accrued interest receivable |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Federal Home Loan Bank Stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Cash value of life insurance |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposits |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Advance payments by borrowers for taxes and insurance |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Federal Home Loan Bank advances |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Accrued interest payable |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
(1)
29
NOTE 12 – FAIR VALUE (continued)
|
|
December 31, 2023 |
|
|||||||||||||
|
|
Carrying Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Available-for-sale securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Marketable equity securities |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Loans held for sale |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Loans, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Rate lock commitments (1) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Accrued interest receivable |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Federal Home Loan Bank Stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Cash value of life insurance |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposits |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Advance payments by borrowers for taxes and insurance |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Federal Home Loan Bank advances |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Accrued interest payable |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
(1)
Limitations — The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based on quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters that could affect the estimates. Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business. Deposits with no stated maturities are defined as having a fair value equivalent to the amount payable on demand. This prohibits adjusting fair value derived from retaining those deposits for an expected future period of time. This component, commonly referred to as a deposit base intangible, is neither considered in the above amounts, nor is it recorded as an intangible asset on the balance sheets. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
30
NOTE 13 – EQUITY AND REGULATORY MATTERS
PyraMax Bank is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance-sheet items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about their components, risk weightings and other factors. The Company is exempt from consolidated capital requirements as those requirements do not apply to certain small bank holding companies with consolidated assets under $
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 Common Equity Tier 1, Tier 1 and Total capital to risk-weighted assets, and of Tier 1 capital to average assets. It is management's opinion that the Bank met all applicable capital adequacy requirements as of September 30, 2024 and December 31, 2023.
As of September 30, 2024, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum regulatory capital ratios as set forth in the table below. There are no conditions or events since September 30, 2024 that management believes have changed the capital category of the Bank.
The Bank’s actual and required capital amounts and ratios are presented below:
|
|
September 30, 2024 |
|
|||||||||||||||||||||
|
|
Actual |
|
|
For Capital Adequacy Purposes |
|
|
To Be Well Capitalized Under Prompt Corrective Action Provisions |
|
|||||||||||||||
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
|
|
(dollars in thousands) |
|
|||||||||||||||||||||
PyraMax Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Leverage (Tier 1) |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Risk-based: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common Equity Tier 1 |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Tier 1 |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Total |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
|
|
December 31, 2023 |
|
|||||||||||||||||||||
|
|
Actual |
|
|
For Capital Adequacy Purposes |
|
|
To Be Well Capitalized Under Prompt Corrective Action Provisions |
|
|||||||||||||||
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
|
|
(dollars in thousands) |
|
|||||||||||||||||||||
PyraMax Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Leverage (Tier 1) |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Risk-based: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common Equity Tier 1 |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Tier 1 |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Total |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
On July 29, 2022, the Company adopted a stock repurchase program. On August 26, 2022, the Company received a non-objection letter from the Federal Reserve Bank of Chicago ("FRB") permitting the Company to repurchase
On April 28, 2023, the Company adopted a second stock repurchase program. On June 9, 2023, the Company received a non-objection letter from the FRB permitting the Company to repurchase
31
NOTE 14 – EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding, adjusted for weighted average unallocated ESOP shares, during the applicable period. Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. Antidilutive options are disregarded in earnings per share calculations. For the three and nine months ended September 30, 2024,
Earnings (loss) per common share for the three and nine months ended September 30, 2024 and 2023 are presented in the following tables.
|
|
Three months ended September 30, |
|||||||
|
|
2024 |
|
|
2023 |
|
|
||
|
|
(In thousands, except per share amounts) |
|||||||
|
|
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
||
Weighted shares outstanding for basic EPS |
|
|
|
|
|
|
|
||
Weighted average shares outstanding |
|
|
|
|
|
|
|
||
Less: Weighted average unallocated ESOP shares |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Weighted average shares outstanding for basic EPS |
|
|
|
|
|
|
|
||
Additional dilutive shares(1) |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Weighted average shares outstanding for dilutive EPS |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Basic loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
Diluted loss per share(1) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
Nine months ended September 30, |
|||||||
|
|
2024 |
|
|
2023 |
|
|
||
|
|
(In thousands, except per share amounts) |
|||||||
|
|
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
||
Weighted shares outstanding for basic EPS |
|
|
|
|
|
|
|
||
Weighted average shares outstanding |
|
|
|
|
|
|
|
||
Less: Weighted average unallocated ESOP shares |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Weighted average shares outstanding for basic EPS |
|
|
|
|
|
|
|
||
Additional dilutive shares (1) |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Weighted average shares outstanding for dilutive EPS |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Basic loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
Diluted loss per share (1) |
|
$ |
( |
) |
|
$ |
( |
) |
|
(1)
32
NOTE 15 – STOCK BASED COMPENSATION
Stock-Based Compensation Plans
On March 27, 2020, the Company’s stockholders approved the 1895 Bancorp of Wisconsin, Inc. 2020 Equity Incentive Plan (the “2020 Equity Incentive Plan”). A total of
On August 26, 2022, the Company’s shareholders approved the 1895 Bancorp of Wisconsin, Inc. 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”). A total of
Accounting for Stock-Based Compensation Plan
The fair value of stock options granted is estimated on the grant date using a Black-Scholes pricing model. The fair value of restricted shares is equal to the quoted NASDAQ market closing price on the date of grant. The fair value of stock grants is recognized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense is included in salaries and employee benefits in the consolidated statements of operations.
Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock options represents the period of time that the options are expected to be outstanding and is based on the historical results from the previous awards. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the actual volatility of 1895 Bancorp of Wisconsin, Inc. stock for the weighted average lifetime period prior to issuance date.
|
|
For the Nine Months Ended |
|
|||
|
|
September 30, |
|
September 30, |
|
|
|
|
|
|
|
|
|
Dividend yield |
|
N/A(1) |
|
|
% |
|
Risk-free interest rate |
|
N/A(1) |
|
|
% |
|
Expected volatility |
|
N/A(1) |
|
|
% |
|
Weighted average expected life (years) |
|
N/A(1) |
|
|
|
|
Weighted average per share value of options |
|
N/A(1) |
|
$ |
|
|
(1) There were
33
NOTE 15 – STOCK BASED COMPENSATION (continued)
A summary of the Company’s stock option activity for the nine months ended September 30, 2024 is presented below.
Stock Options |
|
Shares |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining in Contractual Term (Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
— |
|
|
|
— |
|
|
N/A |
|
|
N/A |
|
||
Exercised |
|
|
( |
) |
|
|
|
|
N/A |
|
|
|
||||
Forfeited |
|
|
( |
) |
|
|
|
|
N/A |
|
|
N/A |
|
|||
Vested shares expired |
|
|
( |
) |
|
|
|
|
N/A |
|
|
N/A |
|
|||
Outstanding September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
||||||
Options exercisable at September 30, 2024 |
|
|
|
$ |
|
|
|
|
$ |
|
||||||
The following table summarizes information about the Company’s nonvested stock option activity for the nine months ended September 30, 2024:
Stock Options |
|
Shares |
|
|
Weighted Average Grant Date Fair Value |
|
||
Nonvested at December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
— |
|
|
|
|
|
Vested(1) |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Nonvested at September 30, 2024 |
|
|
|
|
$ |
|
||
The Company amortizes the expense related to stock options as compensation expense over the vesting period. The Company recognized $
At September 30, 2024, the Company had $
The following table summarizes information about the Company’s restricted stock activity for the nine months ended September 30, 2024:
Restricted Stock |
|
Shares |
|
|
Weighted Average Grant Date Fair Value |
|
||
Nonvested at December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
— |
|
|
|
— |
|
Vested(1)(2) |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Nonvested at September 30, 2024 |
|
|
|
|
$ |
|
||
The Company amortizes the expense related to restricted stock awards as compensation expense over the vesting period. The Company recognized $
34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
Management’s discussion and analysis of financial condition and results of operations at September 30, 2024 and for the three and nine months ended September 30, 2024 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 consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:
These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
35
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Additional factors that may affect our results are discussed under the heading "Risk Factors" in our most recent Annual Report on Form 10-K (fiscal year ended December 31, 2023) filed with the Securities and Exchange Commission (“SEC”) on March 29, 2024, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events. Accordingly, you should not place undue reliance on forward-looking statements.
Critical Accounting Policies
As a result of the complex and dynamic nature of the Company’s business, management must exercise judgment in selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with the current accounting principles generally accepted in the United States of America (“GAAP”), but also reflects management’s discretion with regard to choosing the most suitable methodology for reporting the Company’s financial performance. It is management’s opinion that the accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates affect the reported amounts of assets and liabilities as well as disclosures of revenues and expenses during the reporting period. Actual results could meaningfully differ from these estimates. Management believes that the critical accounting estimates include the allowance for credit losses, determination of fair value for financial instruments, and valuation of deferred income taxes.
A summary of the accounting policies used by management is disclosed in Note 1, “Summary of Significant Accounting Policies” in the Company's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on March 29, 2024.
During 2024, we did not substantively change any material aspect of our overall methodologies and processes used in developing the remaining critical accounting estimates from those described in the Consolidated Financial Statements in our 2023 Annual Report on Form 10-K.
Comparison of Financial Condition at September 30, 2024 and December 31, 2023
Total Assets. Total assets increased $6.9 million, or 1.2%, to $564.5 million at September 30, 2024 from $557.6 million at December 31, 2023. This increase was primarily due to a $12.4 million net increase in cash and cash equivalents and a $3.0 million increase in loans, partially offset by a $9.3 million decrease in available-for-sale securities.
Cash and Cash Equivalents. Cash and cash equivalents increased $12.4 million, or 93.2%, to $25.7 million at September 30, 2024 from $13.3 million at December 31, 2023. This increase was primarily due to a $4.8 million net increase in FHLB advances, a $8.6 million increase in advance payments by borrowers for taxes and insurance and $13.6 million from maturities, payments and calls of available-for-sale securities, partially offset by an $8.4 million decrease in deposits, a $3.0 million increase in loans and the purchase of $2.0 million in available-for-sale securities.
Available-for-Sale Securities. Available-for-sale securities decreased $9.3 million, or 8.5%, to $100.3 million at September 30, 2024, from $109.6 million at December 31, 2023. This decrease was primarily due to maturities, payments and calls of securities totaling $13.6 million, partially offset by and a $2.4 million decrease in the net unrealized loss on available-for-sale securities and the
36
purchase of $2.0 million of available-for-sale securities. The net unrealized loss on available-for-sale securities held in the portfolio was $7.1 million at September 30, 2024.
Loans. Loans held for investment, net of deferred costs, increased $3.0 million, or 0.8%, to $401.6 million at September 30, 2024, from $398.6 million at December 31, 2023. This increase was primarily the result of a $2.4 million increase in commercial loans and a $2.0 million increase in commercial real estate loans, partially offset by a $1.5 million decrease in first mortgage residential real estate loans.
Allowance for Credit Losses. The allowance for credit losses for loans was $4.0 million, or 0.99%, of loans, net of deferred costs, at September 30, 2024 compared to an allowance for credit losses for loans of $3.7 million, or 0.94% of loans, net of deferred costs, at December 31, 2023. During the first nine months of 2024, we recorded a $121,000 provision for credit losses and $111,000 in net recoveries. The allowance for credit losses for unfunded loan commitments was $979,000 at September 30, 2024, compared to $875,000 at December 31, 2023. The increase in the allowance for credit losses for unfunded loan commitments was the result of a $104,000 provision for credit losses. Nonaccrual loans represented 0.23% of total loans at September 30, 2024 and 0.28% at December 31, 2023.
FHLB Stock. FHLB stock increased $400,000, or 9.5%, from $4.2 million at December 31, 2023 to $4.6 million at September 30, 2024. This increase was primarily due to the requirement by the FHLB to hold additional stock as a result of the increased level of advances.
Deposits. Deposits decreased $8.4 million, or 2.1%, to $395.3 million at September 30, 2024, from $403.7 million at December 31, 2023. During this period, noninterest bearing checking accounts decreased $7.1 million, or 9.0%, interest bearing checking accounts decreased $1.8 million, or 6.2%, money market accounts increased $7.1 million, or 8.0%, and savings accounts decreased $6.5 million million, or 14.0%. Certificates of deposit were relatively unchanged, at $161.1 million at both periods.
Advance Payments by Borrowers for Taxes and Insurance. Advance payments by borrowers for taxes and insurance increased $8.6 million to $9.8 million at September 30, 2024 from $1.2 million at December 31, 2023. The increase was due to normal seasonal activity.
FHLB Advances. FHLB advances increased $4.8 million, or 6.8%, to $75.8 million at September 30, 2024, from $71.0 million at December 31, 2023. The level of FHLB advances was increased to fund cash outflows related to loans and deposits.
Total Stockholders’ Equity. Total stockholders’ equity increased $413,000 to $73.2 million at September 30, 2024, from $72.8 million at December 31, 2023. The increase was primarily due to other comprehensive income of $1.7 million as a result of a decrease in the net unrealized loss on available-for-sale securities, and $504,000 as a result of the equity impact of stock compensation expense, partially offset by a net loss of $981,000 and the Company's purchase of $1.0 million of its common stock under its stock repurchase plan.
37
Average Balances and Yields
The following tables set forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances but are reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred costs, premiums and discounts that are amortized or accreted to interest income or interest expense.
|
|
Three Months Ended September 30, |
|
|||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest and |
|
|
Yield/Cost |
|
|
Average |
|
|
Interest and |
|
|
Yield/Cost |
|
||||||
|
|
(Dollars in thousands) |
|
|||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans(1) |
|
$ |
402,170 |
|
|
$ |
4,800 |
|
|
|
4.75 |
% |
|
$ |
384,328 |
|
|
$ |
4,423 |
|
|
|
4.57 |
% |
Securities available-for-sale |
|
|
102,554 |
|
|
|
946 |
|
|
|
3.67 |
% |
|
|
106,003 |
|
|
|
656 |
|
|
|
2.45 |
% |
Other interest-earning assets |
|
|
17,946 |
|
|
|
273 |
|
|
|
6.05 |
% |
|
|
20,136 |
|
|
|
292 |
|
|
|
5.75 |
% |
Total interest-earning |
|
|
522,670 |
|
|
|
6,019 |
|
|
|
4.58 |
% |
|
|
510,467 |
|
|
|
5,371 |
|
|
|
4.17 |
% |
Non-interest-earning assets |
|
|
35,168 |
|
|
|
|
|
|
|
|
|
36,860 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
557,838 |
|
|
|
|
|
|
|
|
$ |
547,327 |
|
|
|
|
|
|
|
||||
Interest-earning liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
NOW accounts |
|
$ |
27,438 |
|
|
$ |
91 |
|
|
|
1.33 |
% |
|
$ |
29,328 |
|
|
$ |
67 |
|
|
|
0.90 |
% |
Money market accounts |
|
|
91,013 |
|
|
|
542 |
|
|
|
2.37 |
% |
|
|
89,069 |
|
|
|
473 |
|
|
|
2.11 |
% |
Savings accounts |
|
|
40,886 |
|
|
|
5 |
|
|
|
0.05 |
% |
|
|
50,037 |
|
|
|
5 |
|
|
|
0.04 |
% |
Certificates of deposit |
|
|
165,297 |
|
|
|
1,883 |
|
|
|
4.53 |
% |
|
|
135,141 |
|
|
|
1,287 |
|
|
|
3.78 |
% |
Total interest-bearing deposits |
|
|
324,634 |
|
|
|
2,521 |
|
|
|
3.09 |
% |
|
|
303,575 |
|
|
|
1,832 |
|
|
|
2.39 |
% |
Federal Home Loan Bank advances |
|
|
73,797 |
|
|
|
491 |
|
|
|
2.65 |
% |
|
|
82,537 |
|
|
|
586 |
|
|
|
2.82 |
% |
Other interest-bearing liabilities |
|
|
9,133 |
|
|
|
2 |
|
|
|
0.07 |
% |
|
|
9,843 |
|
|
|
1 |
|
|
|
0.05 |
% |
Total interest-bearing |
|
|
407,564 |
|
|
|
3,014 |
|
|
|
2.94 |
% |
|
|
395,955 |
|
|
|
2,419 |
|
|
|
2.42 |
% |
Non-interest-bearing deposits |
|
|
69,980 |
|
|
|
|
|
|
|
|
|
72,289 |
|
|
|
|
|
|
|
||||
Other non-interest-bearing liabilities |
|
|
10,091 |
|
|
|
|
|
|
|
|
|
8,287 |
|
|
|
|
|
|
|
||||
Total liabilities |
|
|
487,635 |
|
|
|
|
|
|
|
|
|
476,531 |
|
|
|
|
|
|
|
||||
Total stockholders’ equity |
|
|
70,203 |
|
|
|
|
|
|
|
|
|
70,796 |
|
|
|
|
|
|
|
||||
Total liabilities and |
|
$ |
557,838 |
|
|
|
|
|
|
|
|
$ |
547,327 |
|
|
|
|
|
|
|
||||
Net interest income |
|
|
|
|
$ |
3,005 |
|
|
|
|
|
|
|
|
$ |
2,952 |
|
|
|
|
||||
Net interest-earning assets |
|
$ |
115,106 |
|
|
|
|
|
|
|
|
$ |
114,512 |
|
|
|
|
|
|
|
||||
Interest rate spread(2) |
|
|
|
|
|
|
|
|
1.64 |
% |
|
|
|
|
|
|
|
|
1.75 |
% |
||||
Net interest margin(3) |
|
|
|
|
|
|
|
|
2.29 |
% |
|
|
|
|
|
|
|
|
2.29 |
% |
||||
Average interest-earning assets to |
|
|
128.24 |
% |
|
|
|
|
|
|
|
|
128.92 |
% |
|
|
|
|
|
|
||||
38
|
|
Nine Months Ended September 30, |
|
|||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest and |
|
|
Yield/Cost |
|
|
Average |
|
|
Interest and |
|
|
Yield/Cost |
|
||||||
|
|
(Dollars in thousands) |
|
|||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans(1) |
|
$ |
400,201 |
|
|
$ |
14,535 |
|
|
|
4.85 |
% |
|
$ |
375,817 |
|
|
$ |
12,487 |
|
|
|
4.44 |
% |
Securities available-for-sale |
|
|
105,079 |
|
|
|
2,993 |
|
|
|
3.81 |
% |
|
|
110,193 |
|
|
|
1,847 |
|
|
|
2.24 |
% |
Other interest-earning assets |
|
|
16,051 |
|
|
|
729 |
|
|
|
6.07 |
% |
|
|
17,393 |
|
|
|
767 |
|
|
|
5.89 |
% |
Total interest-earning |
|
|
521,331 |
|
|
|
18,257 |
|
|
|
4.68 |
% |
|
|
503,403 |
|
|
|
15,101 |
|
|
|
4.01 |
% |
Non-interest-earning assets |
|
|
35,145 |
|
|
|
|
|
|
|
|
|
36,935 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
556,476 |
|
|
|
|
|
|
|
|
$ |
540,338 |
|
|
|
|
|
|
|
||||
Interest-earning liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
NOW accounts |
|
$ |
28,387 |
|
|
$ |
272 |
|
|
|
1.28 |
% |
|
$ |
30,709 |
|
|
$ |
178 |
|
|
|
0.78 |
% |
Money market accounts |
|
|
86,874 |
|
|
|
1,523 |
|
|
|
2.34 |
% |
|
|
102,209 |
|
|
|
1,545 |
|
|
|
2.02 |
% |
Savings accounts |
|
|
42,799 |
|
|
|
16 |
|
|
|
0.05 |
% |
|
|
54,055 |
|
|
|
20 |
|
|
|
0.05 |
% |
Certificates of deposit |
|
|
165,672 |
|
|
|
5,607 |
|
|
|
4.52 |
% |
|
|
104,948 |
|
|
|
2,368 |
|
|
|
3.02 |
% |
Total interest-bearing deposits |
|
|
323,732 |
|
|
|
7,418 |
|
|
|
3.06 |
% |
|
|
291,921 |
|
|
|
4,111 |
|
|
|
1.88 |
% |
Federal Home Loan Bank advances |
|
|
77,281 |
|
|
|
1,605 |
|
|
|
2.78 |
% |
|
|
84,436 |
|
|
|
1,733 |
|
|
|
2.74 |
% |
Other interest-bearing liabilities |
|
|
6,254 |
|
|
|
5 |
|
|
|
0.10 |
% |
|
|
6,502 |
|
|
|
4 |
|
|
|
0.09 |
% |
Total interest-bearing |
|
|
407,267 |
|
|
|
9,028 |
|
|
|
2.96 |
% |
|
|
382,859 |
|
|
|
5,848 |
|
|
|
2.04 |
% |
Non-interest-bearing deposits |
|
|
70,125 |
|
|
|
|
|
|
|
|
|
77,321 |
|
|
|
|
|
|
|
||||
Other non-interest-bearing |
|
|
9,357 |
|
|
|
|
|
|
|
|
|
7,441 |
|
|
|
|
|
|
|
||||
Total liabilities |
|
|
486,749 |
|
|
|
|
|
|
|
|
|
467,621 |
|
|
|
|
|
|
|
||||
Total stockholders’ equity |
|
|
69,727 |
|
|
|
|
|
|
|
|
|
72,717 |
|
|
|
|
|
|
|
||||
Total liabilities and |
|
$ |
556,476 |
|
|
|
|
|
|
|
|
$ |
540,338 |
|
|
|
|
|
|
|
||||
Net interest income |
|
|
|
|
$ |
9,229 |
|
|
|
|
|
|
|
|
$ |
9,253 |
|
|
|
|
||||
Net interest-earning assets |
|
$ |
114,064 |
|
|
|
|
|
|
|
|
$ |
120,544 |
|
|
|
|
|
|
|
||||
Interest rate spread(2) |
|
|
|
|
|
|
|
|
1.72 |
% |
|
|
|
|
|
|
|
|
1.97 |
% |
||||
Net interest margin(3) |
|
|
|
|
|
|
|
|
2.36 |
% |
|
|
|
|
|
|
|
|
2.46 |
% |
||||
Average interest-earning |
|
|
128.01 |
% |
|
|
|
|
|
|
|
|
131.49 |
% |
|
|
|
|
|
|
||||
39
Rate/Volume Analysis
The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in average rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior period average rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
Increase (Decrease) Due to |
|
|
|
|
||||||
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|||
|
|
(Dollars in thousands) |
|
|||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|||
Loans |
|
$ |
210 |
|
|
$ |
167 |
|
|
$ |
377 |
|
Securities |
|
|
(21 |
) |
|
|
311 |
|
|
|
290 |
|
Other |
|
|
(35 |
) |
|
|
16 |
|
|
|
(19 |
) |
Total interest-earning assets |
|
|
154 |
|
|
|
494 |
|
|
|
648 |
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|||
NOW |
|
|
4 |
|
|
|
(28 |
) |
|
|
(24 |
) |
Money market deposits |
|
|
(10 |
) |
|
|
(59 |
) |
|
|
(69 |
) |
Savings |
|
|
2 |
|
|
|
(2 |
) |
|
|
— |
|
Certificates of deposit |
|
|
(317 |
) |
|
|
(279 |
) |
|
|
(596 |
) |
Total interest-bearing deposits |
|
|
(321 |
) |
|
|
(368 |
) |
|
|
(689 |
) |
Borrowings |
|
|
60 |
|
|
|
35 |
|
|
|
95 |
|
Other |
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Total interest-bearing liabilities |
|
|
(261 |
) |
|
|
(334 |
) |
|
|
(595 |
) |
Change in net interest income |
|
$ |
(107 |
) |
|
$ |
160 |
|
|
$ |
53 |
|
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
Increase (Decrease) Due to |
|
|
|
|
||||||
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|||
|
|
(Dollars in thousands) |
|
|||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|||
Loans |
|
$ |
841 |
|
|
$ |
1,207 |
|
|
$ |
2,048 |
|
Securities |
|
|
(82 |
) |
|
|
1,228 |
|
|
|
1,146 |
|
Other |
|
|
(62 |
) |
|
|
24 |
|
|
|
(38 |
) |
Total interest-earning assets |
|
|
697 |
|
|
|
2,459 |
|
|
|
3,156 |
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|||
NOW |
|
|
12 |
|
|
|
(106 |
) |
|
|
(94 |
) |
Money market deposits |
|
|
(330 |
) |
|
|
352 |
|
|
|
22 |
|
Savings |
|
|
5 |
|
|
|
(1 |
) |
|
|
4 |
|
Certificates of deposit |
|
|
(1,738 |
) |
|
|
(1,501 |
) |
|
|
(3,239 |
) |
Total interest-bearing deposits |
|
|
(2,051 |
) |
|
|
(1,256 |
) |
|
|
(3,307 |
) |
Borrowings |
|
|
149 |
|
|
|
(21 |
) |
|
|
128 |
|
Other |
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Total interest-bearing liabilities |
|
|
(1,902 |
) |
|
|
(1,278 |
) |
|
|
(3,180 |
) |
Change in net interest income |
|
$ |
(1,205 |
) |
|
$ |
1,181 |
|
|
$ |
(24 |
) |
40
Comparison of Operating Results for the three months ended September 30, 2024 and 2023
Net Loss. We recorded a net loss of $159,000 for the three months ended September 30, 2024, compared to a net loss of $3.6 million for the three months ended September 30, 2023. The decrease in net loss was primarily due to a $1.9 million net loss on sale of securities during the three months ended September 30, 2023, a $1.7 million decrease in income tax expense and a $358,000 increase in other noninterest income (excluding net loss on sale of securities) in the current quarter, partially offset by a $577,000 increase in noninterest expenses.
Interest and Dividend Income. Interest and dividend income increased $648,000, or 12.0%, to $6.0 million for the three months ended September 30, 2024 from $5.4 million for the three months ended September 30, 2023. The increase was due primarily to a $377,000 increase in interest and fees on loans and a $290,000 increase in interest income on securities. The increase in interest and fees earned on loans was primarily due to a $17.9 million increase in the average amount of loans outstanding, from $384.3 million in the third quarter of 2023 to $402.2 million in the third quarter of 2024, and an 18 basis point increase in the yield earned on loans, from 4.57% for the third quarter of 2023 to 4.75% in the third quarter of 2024. The increase in the yield earned on loans during the third quarter of 2024 was primarily due to higher yields on new loans and existing loans that have repriced at higher rates since the third quarter of 2023, as a result of higher market interest rates. The increase in loans outstanding is consistent with the Company's strategy to grow the loan portfolio. The increase in interest on securities was primarily due to a 122 basis point increase in the yield earned on securities, from 2.45% for the third quarter of 2023 to 3.67% in the third quarter of 2024, partially offset by a $3.4 million decrease in the average amount of securities outstanding. The increase in yield and interest income on securities was primarily due to the previously disclosed balance sheet repositioning strategies that the Company implemented during 2023.
Interest Expense. Interest expense increased $595,000, or 24.8%, to $3.0 million for the three months ended September 30, 2024, from $2.4 million for the three months ended September 30, 2023. This increase was primarily due to a $689,000 increase in interest expense on deposits, partially offset by a $95,000 decrease in interest expense on FHLB advances. The increase in interest expense on deposits was primarily due to a 70 basis point increase in the average rate paid on deposits and a $21.1 million increase in average interest-bearing deposits outstanding from the third quarter of 2023 to the third quarter of 2024. The increase in interest expense on deposits was primarily due to the increase in market rates of interest and a shift in our deposit mix. As market rates increased, many of our deposit customers transferred funds from noninterest bearing checking accounts and lower rate deposit accounts into higher rate certificates of deposit. During this period, the average balance of noninterest bearing checking accounts decreased $2.3 million, or 3.2%, NOW accounts decreased $1.9 million, or 6.4% and savings accounts decreased $9.2 million, or 18.3%. During the same period, the average balance of certificates of deposits increased $30.2 million, or 22.3% and money market accounts increased $1.9 million, or 21.8%. Interest expense on certificates of deposit increased $596,000 from the third quarter of 2023 to the third quarter of 2024 as a result of the increase in average balance and a 75 basis point increase in the average rate paid on these accounts.
Net Interest Income. Net interest income increased $53,000, or 1.8%, to $3.0 million for the three months ended September 30, 2024. This increase was primarily due to a $648,000 increase in interest income partially offset by a $595,000 increase in interest expense. Our net interest rate spread decreased 11 basis points to 1.64% for the three months ended September 30, 2024, from 1.75% for the three months ended September 30, 2023. Our net interest margin was 2.29% for the three months ended September 30, 2024 and the three months ended September 30, 2023.
Provision for Credit Losses. The provision for credit losses was $75,000 for each of the three months ended September 30, 2024 and the three months ended September 30, 2023. The provision in each period was primarily due to an increase in average loans outstanding in each of the respective periods.
Noninterest Income. Noninterest income increased $2.3 million, from negative $1.4 million for the three months ended September 30, 2023 to $900,000 for the three months ended September 30, 2024. The increase was primarily due to a $1.9 million net loss on sale of securities during the three months ended September 30, 2023 and a $406,000 increase in the unrealized gain (loss) on marketable equity securities. The loss on sale of securities was a result of the balance sheet repositioning strategies that the Company implemented during 2023. The increase in unrealized gains on marketable equity securities was due to an increase in the market value of mutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market value of equity securities in noninterest expense.
Noninterest Expense. Noninterest expense increased $577,000, or 15.6%, to $4.3 million for the three months ended September 30, 2024 from $3.7 million for the three months ended September 30, 2023. This increase was primarily due to a $281,000 increase in salaries and benefits expense and a $406,000 increase in unrealized gains on marketable equity securities. The increase in salaries and benefits was primarily due to a $199,000 increase in bonus expense and a $64,000 increase in deferred compensation
41
expense. During 2023, we adjusted our bonus program, which resulted in no bonus expense for the third quarter of 2023. The increase in deferred compensation expense was as a result of an increase in the value of our stock held in the deferred compensation plan. The Company continues to implement cost savings initiatives, including the review of all open positions prior to rehiring. This initiative has resulted in a reduction in the number of full-time equivalent employees from 106 at September 30, 2022, to 88 at September 30, 2024. The increase in unrealized gains on marketable equity securities was due to an increase in the market value of mutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market value of equity securities in noninterest income.
Income Tax Expense. We recorded an income tax benefit of $298,000 for the three months ended September 30, 2024, compared to income tax expense of $1.4 million for the three months ended September 30, 2023. The change in income tax expense (benefit) was primarily due to the impact of the change in Wisconsin tax law in July 2023, retroactive to January 2023. As a result of this change in tax law, we did not record any income tax benefit for Wisconsin state taxes for the three months ended September 30, 2024. In addition, during the second quarter of 2023, this tax law change resulted in a $1.8 million increase in the valuation allowance for deferred tax assets and the recording of a $98,000 reduction in tax benefits previously booked for the six months ended June 30, 2023.
Comparison of Operating Results for the nine months ended September 30, 2024 and 2023
Net Loss. We recorded a net loss of $981,000 for the nine months ended September 30, 2024, compared to a net loss of $4.5 million for the nine months ended September 30, 2023. The decrease in net loss was primarily due to a $2.3 million increase in noninterest income and a $1.6 million decrease in income tax expense (benefit), partially offset by a $319,000 increase in noninterest expenses.
Interest and Dividend Income. Interest and dividend income increased $3.2 million, or 21.2%, to $18.3 million for the nine months ended September 30, 2024, from $15.1 million for the nine months ended September 30, 2023. The increase was due primarily to a $2.0 million increase in interest and fees on loans and an $1.1 million increase in interest income on securities. The increase in interest and fees earned on loans was primarily due to a $24.4 million increase in the average amount of loans outstanding, from $375.8 million in the first nine months of 2023 to $400.2 million in the first nine months of 2024, and a 41 basis point increase in the yield earned on loans, from 4.44% for the first nine months of 2023 to 4.85% in the first nine months of 2024. The increase in the yield earned on loans during the first nine months of 2024 was primarily due to higher yields on new loans and existing loans that have repriced at higher rates since the first nine months of 2023, as a result of higher market interest rates. The increase in loans is consistent with the Company's strategy to grow the loan portfolio. The increase in interest on securities was primarily due to a 157 basis point increase in the yield earned on securities, from 2.24% for the first nine months of 2023 to 3.81% in the first nine months of 2024. The increase in yield was primarily due to the balance sheet repositioning strategies that the Company implemented during 2023.
Interest Expense. Interest expense increased $3.2 million, or 55.2%, to $9.0 million for the nine months ended September 30, 2024, from $5.8 million for the nine months ended September 30, 2023. This increase was primarily due to a $3.3 million increase in interest expense on deposits. The increase in interest expense on deposits was primarily due to a 118 basis point increase in the average rate paid on deposits and a $31.8 million increase in average interest-bearing deposits outstanding from the first nine months of 2023 to the first nine months of 2024. The increase in interest expense on deposits was primarily due to the increase in market rates of interest and a shift in our deposit mix. As market rates increased, many of our deposit customers transferred funds from noninterest bearing checking accounts and lower rate deposit accounts into higher rate certificates of deposit. The average balance of noninterest bearing checking accounts decreased $7.2 million, or 9.3%, NOW accounts decreased $2.3 million, or 7.6%, savings accounts decreased $11.3 million, or 20.8%, and money market accounts decreased $15.3 million, or 15.0%, respectively, from the first nine months of 2023 to the first nine months of 2024. During the same period, the average balance of certificates of deposits increased $60.7 million, or 57.9%. Interest expense on certificates of deposit increased $3.2 million from the first nine months of 2023 to the first nine months of 2024 as a result of the increase in average balance and also a 150 basis point increase in the average rate paid on these accounts.
Net Interest Income. Net interest income decreased $24,000, or 0.3%, to $9.2 million for the nine months ended September 30, 2024. This decrease was primarily due to a $3.2 million increase in interest expense, partially offset by a $3.2 million increase in interest and dividend income. Our net interest rate spread decreased 25 basis points to 1.72% for the nine months ended September 30, 2024, from 1.97% for the nine months ended September 30, 2023. Our net interest margin decreased 10 basis points to 2.36%, from 2.46% over the same period.
Provision for Credit Losses. The provision for credit losses was $225,000 for the nine months ended September 30, 2024 and the nine months ended September 30, 2023, respectively. The provision was primarily due to an increase in average loans outstanding for the nine months ended September 30, 2024 and an increase in average loans outstanding and loan commitments that are expected to fund for the nine months ended September 30, 2024 and the nine months ended September 30, 2023.
42
Noninterest Income. Noninterest income increased $2.3 million, to $2.6 million for the nine months ended September 30, 2024, from $306,000 for the nine months ended September 30, 2023. The increase was primarily due to a $1.9 million net loss on sale of securities during the nine months ended September 30, 2023, a $439,000 increase in the unrealized gain on marketable equity securities and a $184,000 increase in net gain on sale of loans, partially offset by a $230,000 decrease in other noninterest income. The loss on sale of securities was a result of the balance sheet repositioning strategies that the Company implemented during 2023. The increase in unrealized gains on marketable equity securities was due to an increase in the market value of mutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market value of equity securities in noninterest expense. The increase in net gain on sale of loans is primarily due to an increase in the origination and sale of mortgage loans, which increased to $17.1 million and $17.6 million, respectively during the first nine months of 2024, compared to $8.9 million and $8.8 million, respectively, during the first nine months of 2023. The decrease in other noninterest income was primarily due to a $157,000 gain from the collection of benefits from a bank owned life insurance policy received in the second quarter of 2023 and a $110,000 gain on the sale of our former branch facility in West Allis in the third quarter of 2023.
Noninterest Expense. Noninterest expense increased $319,000, or 2.5%, to $13.1 million for the nine months ended September 30, 2024 from $12.8 million for the nine months ended September 30, 2023. The increase was primarily due to a $439,000 increase in unrealized gains on marketable equity securities and a $374,000 increase in other noninterest expenses, partially offset by a $332,000 decrease in salaries and benefits expense. The increase in unrealized gains on marketable equity securities was due to an increase in the market value of mutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market value of equity securities in noninterest income. The increase in other noninterest expense was primarily due to $358,000 in professional fees related to the renegotiation and renewal of our core data processing contract. The renegotiation of this contract is expected to result in a $1.5 million reduction in data processing expenses over the term of the contract. The decrease in salaries and benefits expense was primarily the result of cost savings initiatives implemented by the Company, including the review of all open positions prior to rehiring and a reduction-in-force ("RIF") implemented in April 2023. These actions have resulted in a reduction in the number of full-time equivalent employees from 106 at September 30, 2022, to 88 at September 30, 2024. The positive impact of these initiatives was partially offset by a $176,000 increase in deferred compensation expense as a result of an increase in the value of our stock held in the deferred compensation plan during this period.
Income Tax Expense. We recorded an income tax benefit of $557,000 for the nine months ended September 30, 2024, compared to income tax expense of $1.0 million for the nine months ended September 30, 2023. The change in income tax expense (benefit) was primarily due to the impact of the change in Wisconsin tax law in July 2023. As a result of this change in tax law, we did not record any income tax benefit for Wisconsin state taxes for the nine months ended September 30, 2024. In addition, during the second quarter of 2023, this tax law change resulted in a $1.8 million increase in the valuation allowance for deferred tax assets and the recording of a $98,000 reduction in tax benefits previously booked for the six months ended June 30, 2023.
Management of Market Risk
General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset/Liability Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors.
Our asset/liability management strategy attempts to manage the impact of changes in interest rates on net interest income, our primary source of earnings. Among the techniques we use to manage interest rate risk are:
43
Our board of directors is responsible for the review and oversight of our executive management team and other essential operational staff which are responsible for our asset/liability analysis. These officers act as an asset/liability committee and are charged with developing and implementing an asset/liability management plan, and they meet at least quarterly to review pricing and liquidity needs and assess our interest rate risk. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.
We do not engage in material hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities.
The table below sets forth, as of September 30, 2024, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the U.S. Treasury yield curve.
Change in Interest |
|
Net Interest Income |
|
|
Year 1 Change |
|
||
|
|
(Dollars in thousands) |
|
|
|
|
||
+400 |
|
$ |
12,925 |
|
|
|
(4.87 |
)% |
+300 |
|
|
13,174 |
|
|
|
(3.04 |
)% |
+200 |
|
|
13,431 |
|
|
|
(1.15 |
)% |
+100 |
|
|
13,471 |
|
|
|
(0.85 |
)% |
Level |
|
|
13,587 |
|
|
|
— |
% |
-100 |
|
|
13,476 |
|
|
|
(0.82 |
)% |
-200 |
|
|
13,242 |
|
|
|
(2.54 |
)% |
-300 |
|
|
13,488 |
|
|
|
(0.73 |
)% |
-400 |
|
|
13,478 |
|
|
|
(0.80 |
)% |
Economic Value of Equity. We also monitor interest rate risk through the use of a simulation model that estimates the amounts by which the fair value of our assets and liabilities (our economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. The quarterly reports developed in the simulation model assist us in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance within our policy guidelines.
The table below sets forth, as of September 30, 2024, the estimated changes in our EVE that would result from the designated instantaneous changes in market interest rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.
|
|
|
|
|
Estimated Increase (Decrease) in EVE |
|
||||||
Basis Point (“bp”) Change in Interest Rates(1) |
|
Estimated EVE(2) |
|
|
Amount |
|
|
Percent |
|
|||
|
|
(Dollars in thousands) |
|
|||||||||
+400 |
|
$ |
63,018 |
|
|
$ |
(4,942 |
) |
|
|
(7.27 |
)% |
+300 |
|
|
64,993 |
|
|
|
(2,967 |
) |
|
|
(4.37 |
)% |
+200 |
|
|
66,942 |
|
|
|
(1,018 |
) |
|
|
(1.50 |
)% |
+100 |
|
|
68,428 |
|
|
|
468 |
|
|
|
0.69 |
% |
Level |
|
|
67,960 |
|
|
|
— |
|
|
|
— |
|
-100 |
|
|
68,000 |
|
|
|
40 |
|
|
|
0.06 |
% |
-200 |
|
|
66,772 |
|
|
|
(1,188 |
) |
|
|
(1.75 |
)% |
-300 |
|
|
63,421 |
|
|
|
(4,539 |
) |
|
|
(6.68 |
)% |
-400 |
|
|
60,275 |
|
|
|
(7,685 |
) |
|
|
(11.31 |
)% |
44
The table above indicates that at September 30, 2024, in the event of a 100-basis point increase in interest rates, we would have experienced a 0.69% increase in our EVE and in the event of a 100-basis point decrease in interest rates, we would have experienced a 0.06% increase in our EVE. In the event of a 200-basis point increase in interest rates at September 30, 2024, we would have experienced a 1.50% decrease in our EVE and in the event of a 200-basis point decrease in interest rates, we would have experienced a 1.75% decrease in our EVE.
Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in EVE require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the EVE table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the EVE table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and will differ from actual results. EVE calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.
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, FHLB advances, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. At September 30, 2024, we had $75.8 million outstanding in FHLB advances. At September 30, 2024, we had $92.5 million in additional borrowing capacity at the Federal Home Loan Bank of Chicago, based on the level of qualifying real estate loans currently pledged to the FHLB. Additionally, at September 30, 2024, we had a $12.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at September 30, 2024. The Company also had an $11.3 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $13.7 million at September 30, 2024. The Company had not drawn on the Federal Reserve line as of September 30, 2024.
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 cash equivalents and available-for-sale investment securities. 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 $342,000 for the nine months ended September 30, 2024, as compared to cash used in operating activities of $324,000 for the nine months ended September 30, 2023. Net cash provided by operating activities for the nine months ended September 30, 2024 primarily consisted of $17.6 million in proceeds from the sale of mortgage loans held for sale and a $1.4 million increase in accrued interest payable and other liabilities, partially offset by the origination of $17.1 million in mortgage loans held for sale, a $981,000 net loss and a $726,000 increase in the fair value of marketable equity securities. Net cash used in operating activities for the nine months ended September 30, 2023 primarily consisted of the origination of $8.9 million in mortgage loans held for sale and a $4.5 million net loss, partially offset by $8.8 million in proceeds from the sale of mortgage loans held for sale, a $1.9 million net loss on sale of available-for-sale securities and deferred income tax expense of $1.0 million. Net cash provided by investing activities was $8.1 million for the nine months ended September 30, 2024, as compared to net cash used in investing activities of $16.4 million for the nine months ended September 30, 2023. Net cash provided by investing activities during the nine months ended September 30, 2024 consisted primarily of $13.6 million from maturities, calls and payments on available-for-sale securities, partially offset by a $2.9 million increase in loans and $2.0 million in purchases of available-for-sale securities. Net cash used in investing activities during the nine months ended September 30, 2023 consisted primarily of a $23.5 million increase in loans, the purchase of $21.4 million of available-for-sale securities and a $1.4 million increase in FHLB stock, partially offset by $19.5 million in proceeds from sales of available-for-sale securities and $9.7 million from maturities, calls and payments on available-for-sale securities. Net cash provided by financing activities was $4.0 million for the nine months ended September 30, 2024, as compared to $15.0 million for the nine months ended September 30, 2023. Net cash provided by financing activities for the first nine months of 2024 primarily resulted from borrowings of $72.0 million of FHLB advances and an $8.5 million increase in advance payments by borrowers for taxes and insurance, partially offset by $67.2 million in principal payments on FHLB advances, an $8.4 million decrease in deposits and $1.0 million in stock repurchases. Net cash provided by financing activities for the first nine months of 2023 primarily resulted from $100.5 million of FHLB advances and a $9.2 million increase in advance payments by borrowers for taxes and insurance, partially offset by $93.5 million in principal payments on FHLB advances and a $748,000 decrease in deposits.
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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 current strategy to increase core deposits, along with the continued use of FHLB advances, as well as brokered certificates of deposit as needed.
Capital
At September 30, 2024, PyraMax Bank exceeded all of its regulatory capital requirements with a Tier 1 leverage capital level of $63.1 million, or 11.2% of adjusted total assets, which is above the well-capitalized required level of $28.2 million, or 5.0%. The Bank had total risk-based capital of $68.1 million, or 16.0% of risk-weighted assets, which is above the well-capitalized required level of $42.5 million, or 10.0%. Management is not aware of any conditions or events since the most recent notification that would change our category. For additional information, see Note 13 of the Notes to Financial Statements.
Off-Balance Sheet Arrangements and 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 potential 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 as the loans we make. For additional information, see Note 9 of the Notes to Financial Statements.
Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment, agreements with respect to borrowings and deposits, and agreements with respect to securities.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles in the United States of America which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2024. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
There were no changes in the Company’s internal control over financial reporting in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the third quarter of 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at September 30, 2024, 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
In addition to the other information set forth in the Form 10-Q, you should carefully consider the risk factors that appeared under Item 1A “Risk Factors” disclosed in the Company’s December 31, 2023 Annual Report on Form 10-K as filed with the Securities and Exchange Commission.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Common Stock Repurchases. The following table presents information regarding shares of our common stock repurchased during the three months ended September 30, 2024.
Period |
|
Total Number of Shares (or Units) Purchases (1) |
|
|
Weighted Average Price Paid per Share (or Unit) |
|
|
Total Number of Shares (or Units) Purchased as Part of a Publicly Announced Plans or Programs |
|
|
Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
|
||||
|
|
|
|
|
|
|
|
|
|
|||||||
July 1 to July 31, 2024 |
|
|
2,047 |
|
|
|
8.11 |
|
|
|
2,047 |
|
|
|
438,375 |
|
August 1 to August 31, 2024 |
|
|
4,557 |
|
|
|
8.75 |
|
|
|
4,557 |
|
|
|
433,818 |
|
September 1 to September 30, 2024 |
|
|
10,932 |
|
|
|
9.16 |
|
|
|
10,932 |
|
|
|
422,886 |
|
On July 29, 2022, the Company adopted a stock repurchase program. On August 26, 2022, the Company received a non-objection letter from the FRB permitting the Company to repurchase 319,766 shares of its common stock, which represented 5% of the shares outstanding at the time discussions were held with the FRB. The Company began purchasing shares on September 1, 2022 and as of June 7, 2023, the Company had repurchased all 319,766 shares for a total purchase price of $3.4 million.
On April 28, 2023, the Company adopted a second stock repurchase program. On June 9, 2023, the Company received a non-objection letter from the FRB permitting the Company to repurchase 621,522 shares of its common stock, which represented 10% of the shares outstanding at the time discussions were held with the FRB. The Company began purchasing shares on June 15, 2023 and as of September 30, 2024, the Company had repurchased 198,636 shares for a total purchase price of $1.5 million.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers.
During the three and nine months ended September 30, 2024, none of our directors or executive officers
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Item 6. Exhibits
Exhibit |
|
|
Number |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
31.1 |
|
Certification of Chief Executive Officer Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2 |
|
Certification of Chief Financial Officer Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.1 |
|
|
101.0 |
|
The following materials for the quarter ended September 30, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive (Loss) Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements * |
104.0 |
|
The cover page of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, formatted in iXBRL (contained in Exhibit 101.0) * |
_____________
* Furnished, not filed.
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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.
|
|
1895 BANCORP OF WISCONSIN, INC. |
|
|
|
|
|
|
Date: November 8, 2024 |
|
/s/ David R. Ball |
|
|
David R. Ball |
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
Date: November 8, 2024 |
|
/s/ Steven T. Klitzing |
|
|
Steven T. Klitzing |
|
|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
49