SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

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

For the quarterly period ended June 30, ~~2021~~2022

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

For the transition period from

Commission File

No. 001-40609

1895 Bancorp of Wisconsin, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Maryland		61-1993378
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

7001 West Edgerton Avenue Greenfield, Wisconsin		53220
(Address of Principal Executive Offices)		(Zip Code)

(414)

421-8200

(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:


Title of each class	Trading Symbol(s)	Name of each exchange on on which registered
Common Stock, par value $0.01 per share	BCOW	The NASDAQ Stock Market, LLC

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

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). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act. (Check one)


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒


		Emerging growth company	☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). YES ☐ NO ☒

~~6,405,204~~6,372,641 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding as of ~~August 10, 2021.~~

July 28, 2022.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


							June 30, 2022			December 31, 2021
	June 30, 2021			December 31, 2020
	(unaudited)						(unaudited)
Assets
Cash and due from banks	$	144,491		$	87,977		$	19,102		$	65,300
Fed funds sold		1,326			4,549			1,119			1,503

Cash and cash equivalents		145,817			92,526			20,221			66,803
Marketable equity securities, stated at fair value		3,419			2,992			2,867			3,544
Available for sale securities, stated at fair value		91,406			58,703
Available-for-sale securities, stated at fair value								126,676			112,440
Loans held for sale		1,340			2,484			262			1,183
Loans, net		330,903			329,073
Loans, net of allowance for loan losses of $3,132 and $2,858 at June 30, 2022 and December 31, 2021, respectively								349,619			323,789
Premises and equipment, net		6,038			6,275			5,685			5,864
Mortgage servicing rights, net		2,109			1,806			1,939			2,036
Federal Home Loan Bank (FHLB) stock, at cost		3,032			3,032			3,032			3,032
Accrued interest receivable		879			912			1,027			948
Cash value of life insurance		13,686			13,485			14,101			13,892
Other assets		6,948			5,469			10,197			6,108

TOTAL ASSETS	$	605,577		$	516,757		$	535,626		$	539,639

Liabilities and Stockholders’ Equity
Deposits		466,184			379,848		$	383,062		$	384,501
Advance payments by borrowers for taxes and insurance		9,167			2,737			7,739			1,860
FHLB advances		63,423			68,398			57,435			55,442
Accrued interest payable		130			183			128			109
Other liabilities		6,373			5,583			6,296			6,834

Total liabilities		545,277			456,749
TOTAL LIABILITIES								454,660			448,746

Common stock (par value $0.01 per share) Authorized—90,000,000 shares at June 30, 2021 and December 31, 2020 Issued—4,967,271 at June 30, 2021 and 4,961,626 at December 31, 2020 (includes 79,394 and 84,949 unvested shares, respectively) Outstanding – 4,840,046 at June 30, 2021 and 4,834,401 at December 31, 2020 (includes 79,394 and 84,949 unvested shares, respectively)		49			49
Preferred stock, $0.01 par value, 10,000,000 shares authorized at June 30, 2022 and December 31, 2021								—			—
Common stock (par value $0.01 per share) Authorized – 90,000,000 shares at June 30, 2022 and December 31, 2021 Issued – 6,402,704 at June 30, 2022 and 6,402,571 at December 31, 2021 (includes 80,967 and 97,128 unvested shares, respectively) Outstanding – 6,372,641 at June 30, 2022 and 6,372,508 at December 31, 2021 (includes 80,967 and 97,128 unvested shares, respectively)								64			64
Additional paid-in capital		20,188			20,134			52,855			52,805
Unallocated common stock of Employee Stock Ownership Plan (ESOP), 157,976 and 161,486 shares at June 30, 2021 and December 31, 2020, respectively		(1,580	)		(1,615	)
Less treasury stock at cost, 127,225 shares at June 30, 2021 and December 31, 2020		(1,228	)		(1,228	)
Unallocated common stock of Employee Stock Ownership Plan (ESOP), 463,658 and 377,077 shares at June 30, 2022 and December 31, 2021, respectively								(4,401	)		(3,432	)
Less treasury stock at cost, 30,063 shares at June 30, 2022 and December 31, 2021								(301	)		(301	)
Retained earnings		42,000			41,530			41,319			41,615
Accumulated other comprehensive income, net of income taxes		871			1,138
Accumulated other comprehensive (loss) income, net of income taxes								(8,570	)		142

Total stockholders’ equity		60,300			60,008			80,966			90,893

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	605,577		$	516,757		$	535,626		$	539,639

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts) – Unaudited


	Three months ended June 30						Six months ended June 30					Three months ended June 30						Six months ended June 30
	2021			2020			2021		2020			2022			2021			2022			2021
Interest and dividend income:
Loans, including fees	$	3,125		$	3,197		$	6,418	$	6,610		$	3,009		$	3,125		$	6,299		$	6,418
Securities, taxable		335			381			603		788			566			335			1,114			603
Other		51			8			107		48			92			51			139			107

Total interest and dividend income		3,511			3,586			7,128		7,446			3,667			3,511			7,552			7,128

Interest expense:
Interest-bearing deposits		193			615			449		1,465			187			193			356			449
Borrowed funds		200			200			400		309			181			200			350			400
Other interest-bearing liabilities													2			—			4			—

Total interest expense		393			815			849		1,774			370			393			710			849

Net interest income		3,118			2,771			6,279		5,672			3,297			3,118			6,842			6,279
Provision for loan losses		0—			0—			0—		0—			105			—			210			—

Net interest income after provision for loan losses		3,118			2,771			6,279		5,672			3,192			3,118			6,632			6,279

Noninterest income:
Service charges and other fees		249			160			470		363			257			249			493			470
Loan servicing, net		193			(126	)		767		(139	)		171			193			348			767
Net gain on sale of loans		347			1,075			913		1,728			106			347			184			913
Net gain on sale of securities		0			0			12		7			—			—			—			12
Increase in cash surrender value of insurance		101			99			201		198			105			101			209			201
Unrealized gain on marketable equity securities		241			396			372		72
Unrealized (loss) gain on marketable equity securities													(522	)		241			(733	)		372
Other		3			19			8		0			1			3			7			8

Total noninterest income		1,134			1,623			2,743		2,229			118			1,134			508			2,743

Noninterest expense:
Salaries and employee benefits		2,698			2,403			5,153		4,087			2,034			2,698			4,318			5,153
Foreclosed assets, net		0			1			0		(8	)
Advertising and promotions		14			40			32		72			99			14			113			32
Data processing		208			184			405		367			209			208			410			405
Occupancy and equipment		361			324			734		697			330			361			684			734
FDIC assessment		35			31			68		50			36			35			62			68
Other		1,045			992			2,058		1,783			976			1,045			2,041			2,058

Total noninterest expense		4,361			3,975			8,450		7,048			3,684			4,361			7,628			8,450

(Loss) income before income taxes		(109	)		419			572		853			(374	)		(109	)		(488	)		572
Income tax (benefit) expense		(58	)		225			102		372			(133	)		(58	)		(192	)		102

Net (loss) income	$	(51	)	$	194		$	470	$	481		$	(241	)	$	(51	)	$	(296	)	$	470

Earnings per common share:
Basic	$	(0.01	)	$	0.04		$	0.10	$	0.11
(Loss) earnings per common share:
Basic (1)												$	(0.04	)	$	(0.01	)	$	(0.05	)	$	0.10

Diluted	$	(0.01	)	$	0.04		$	0.10	$	0.11
Diluted (1)												$	(0.04	)	$	(0.01	)	$	(0.05	)	$	0.10

Average common shares outstanding:
Basic		4,599,878			4,519,978			4,594,314		4,521,953
Diluted		4,682,634			4,553,546			4,656,037		4,555,295
Basic (1)													5,843,104			4,599,878			5,858,449			4,594,314
Diluted (1)													5,843,104			4,599,878			5,858,449			4,656,037

(1)

Amounts related to periods prior to the date of our July 14, 2021

mutual-to-stock

conversion (the “Conversion”) have not been restated to give the retroactive recognition to the exchange ratio applied to the previously outstanding shares in the Conversion (1.3163) (See Note 1). Refer to Note 14 Earnings

(

Loss)

Per Share for retroactive recognition given to the exchange ratio applied in the Conversion for the three months and six months ended June 30, 2021.

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands) - Unaudited

Three months ended

June 30

Six months ended

June 30


2021

2020

2021

2020

Net (loss) income
   $ (51 ) $ 194    $ 470 $ 481




Other comprehensive income (loss):

Unrealized holding gains (losses) arising during the period
   447 2,503    (354 ) 2,340
Reclassification adjustment for gains realized in net income
   0   0      (12 ) (7 )




Other comprehensive income (loss) before tax effect
   447 2,503    (366 ) 2,333
Tax effect of other comprehensive income (loss) items
   120 676    (99 ) 630




Other comprehensive income (loss), net of tax
   327 1,827    (267 ) 1,703




Comprehensive income
   $ 276 $ 2,021    $ 203 $ 2,184


	Three months ended June 30						Six months ended June 30
	2022			2021			2022			2021
Net (loss) income	$	(241	)	$	(51	)	$	(296	)	$	470

Other comprehensive (loss) income:
Unrealized holding (losses) gains arising during the period		(4,791	)		447			(11,934	)		(354	)
Reclassification adjustment for gains realized in net income		—			—			—			(12	)

Other comprehensive (loss) income before tax effect		(4,791	)		447			(11,934	)		(366	)
Tax effect of other comprehensive (loss) income items		1,294			(120	)		3,222			99

Other comprehensive (loss) income, net of tax		(3,497	)		327			(8,712	)		(267	)

Comprehensive (loss) income	$	(3,738	)	$	276		$	(9,008	)	$	203

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands) - Unaudited


	Common stock		Additional paid-in capital			Treasury Stock			Unallocated common stock of ESOP			Retained earnings			Accumulated other comprehensive income (loss)			Total			Common stock		Additional paid- in capital			Unallocated common stock of ESOP			Treasury Stock			Retained earnings			Accumulated other comprehensive income (loss)			Total
Balance as of January 1, 2020	$	49	$	19,981		$	—		$	(1,685	)	$	40,213		$	107		$	58,665
Net income		—		—			—			—			287			—			287
1895 Bancorp of Wisconsin, Inc. common stock held by PyraMax Bank reclassified to treasury stock		—		—			(175	)		—			—			—			(175	)
Balance as of March 31, 2022																					$	64	$	52,852		$	(3,900	)	$	(301	)	$	41,560		$	(5,073	)	$	85,202
Net loss																						—		—			—			—			(241	)		—			(241	)
Other comprehensive loss		—		—			—			—			—			(124	)		(124	)		—		—			—			—			—			(3,497	)		(3,497	)
ESOP shares committed to be released (1,755 shares)		—		1			—			17			—			—			18

Balance as of March 31, 2020	$	49	$	19,982		$		(175)	$	(1,668	)	$	40,500		$	(17	)	$	58,671

Net income		—		—			—			—			194			—			194
Other comprehensive income		—		—			—			—			—			1,827			1,827
Repurchase of 1895 Bancorp of Wisconsin, Inc. common stock (25,476 shares repurchased)		—		—			(231	)		—			—			—			(231	)
ESOP shares committed to be released (1,755 shares)		—		(4	)		—			18			—			—			14
ESOP shares committed to be released (9,865 shares)																						—		7			44			—			—			—			51
Purchase of ESOP shares																						—		—			(545	)		—			—			—			(545	)
Retirement of common stock																						—		(64	)		—			—			—			—			(64	)
Stock compensation expense		—		44			—			—			—			—			44			—		60			—			—			—			—			60

Balance as of June 30, 2020	$	49	$	20,022		$		(406)	$	(1,650	)	$	40,694		$	1,810		$	60,519
Balance as of June 30, 2022																					$	64	$	52,855		$	(4,401	)	$	(301	)	$	41,319		$	(8,570	)	$	80,966

Balance as of March 31, 2021																					$	49	$	20,180		$	(1,597	)	$	(1,228	)	$	42,051		$	544		$	59,999
Net loss																						—		—			—			—			(51	)		—			(51	)
Other comprehensive income																						—		—			—			—			—			327			327
ESOP shares committed to be released (1,755 shares) (1)																						—		13			17			—			—			—			30
Retirement of common stock																						—		(70	)		—			—			—			—			(70	)
Stock compensation expense																						—		65			—			—			—			—			65

Balance as of June 30, 2021																					$	49	$	20,188		$	(1,580	)	$	(1,228	)	$	42,000		$	871		$	60,300

Balance as of January 1, 2022																					$	64	$	52,805		$	(3,432	)	$	(301	)	$	41,615		$	142		$	90,893
Net loss																						—		—			—			—			(296	)		—			(296	)
Other comprehensive loss																						—		—			—			—			—			(8,712	)		(8,712	)
Reimbursement of stock offering costs																						—		1			—			—			—			—			1
Purchase of ESOP shares																						—		—			(1,062	)		—			—			—			(1,062	)
ESOP shares committed to be released (14,798 shares)																						—		8			93			—			—			—			101
Retirement of common stock																						—		(78	)		—			—			—			—			(78	)
Stock compensation expense																						—		119			—			—			—			—			119

Balance as of June 30, 2022																					$	64	$	52,855		$	(4,401	)	$	(301	)	$	41,319		$	(8,570	)	$	80,966

Balance as of January 1, 2021	$	49	$	20,134		$	(1,228	)	$	(1,615	)	$	41,530		$	1,138		$	60,008		$	49	$	20,134		$	(1,615	)	$	(1,228	)	$	41,530		$	1,138		$	60,008
Net income		—		—			—			—			521			—			521			—		—			—			—			470			—			470
Other comprehensive loss		—		—			—			—			—			(594	)		(594	)		—		—			—			—			—			(267	)		(267	)
Purchase of treasury stock		—		—			(15	)		—			—			—			(15	)		—		—			—			(15	)		—						(15	)
ESOP shares committed to be released (1,755 shares)		—		3			—			18			—			—			21
ESOP shares committed to be released (3,510 shares) (1)																						—		16			35			—			—			—			51
Issuance of treasury stock – stock compensation plan		—		(15	)		15			—			—			—			—			—		(15	)		—			15			—			—			—
Stock compensation expense		—		58			—			—			—			—			58

Balance as of March 31, 2021	$	49	$	20,180		$	(1,228	)	$	(1,597	)	$	42,051		$	544		$	59,999

Net loss		—		—			—			—			(51	)		—			(51	)
Other comprehensive income		—		—			—			—			—			327			327
ESOP shares committed to be released (1,755 shares)				13						17									30
Retirement of common stock		—		(70	)		—			—			—			—			(70	)		—		(70	)		—			—			—			—			(70	)
Stock compensation expense		—		65			—			—			—			—			65			—		123			—			—			—			—			123

Balance as of June 30, 2021	$	49	$	20,188		$	(1,228	)	$	(1,580	)	$	42,000		$	871		$	60,300		$	49	$	20,188		$	(1,580	)	$	(1,228	)	$	42,000		$	871		$	60,300

(1)	Amounts related to periods prior to the date of Conversion (July 2021) have not been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (1.3163) (See Note 1).

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) - Unaudited


	Six months ended June 30,						Six months ended June 30,
	2021			2020			2022			2021
	(unaudited)						(unaudited)
Cash flows from operating activities:
Net income	$	470		$	481
Adjustments to reconcile net income to net cash from operating activities:
Net (loss) income							$	(296	)	$	470
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net amortization of investment securities		15			134			90			15
Depreciation		331			329			310			331
Net loss on sale of premises and equipment		—			33
Change in fair value of marketable equity securities		(372	)		(72	)
Provision for loan losses								210			—
Net change in fair value of marketable equity securities								733			(372	)
Net gain on sale of available for sale securities		(12	)		(7	)		—			(12	)
Stock compensation expense		123			44			119			123
Adjustment to mortgage servicing rights valuation		(369	)		570			—			(369	)
Provision for deferred income tax		102			740
(Benefit from) provision for deferred income tax								(192	)		102
Originations of mortgage loans held for sale		(67,969	)		(103,968	)		(13,760	)		(67,969	)
Proceeds from sales of mortgage loans held for sale		70,026			100,783			14,865			70,026
Net gain on sale of mortgage loans held for sale		(913	)		(1,728	)		(184	)		(913	)
ESOP compensation		51			32			101			51
Net change in cash value of life insurance		(201	)		(198	)		(209	)		(201	)
Changes in operating assets and liabilities:
Mortgage servicing rights		66			15
Net change in mortgage servicing rights								97			66
Accrued interest receivable and other assets		(1,492	)		(764	)		(831	)		(1,492	)
Accrued interest payable and other liabilities		667			(744	)		(520	)		667

Net cash provided by (used in) operating activities		523			(4,320	)
Net cash provided by operating activities								533			523

Cash Flows From Investing Activities
Proceeds from sales of available for sale securities		1,018			279			—			1,018
Maturities, prepayments, and calls of available for sale securities		5,116			7,825			10,879			5,116
Purchases of available for sale securities		(39,218	)		—			(37,139	)		(39,218	)
Net change in marketable equity securities								(56	)		—
Net increase in loans		(1,830	)		(10,360	)		(26,040	)		(1,830	)
Net capital expenditures for premises and equipment		(94	)		(158	)		(131	)		(94	)
Net increase in Federal Home Loan Bank stock		—			(2,120	)

Net cash used in investing activities		(35,008	)		(4,534	)		(52,487	)		(35,008	)

Cash Flows From Financing Activities
Net increase in deposits		86,336			5,411
Net (decrease) increase in deposits								(1,439	)		86,336
Net increase in advance payments by borrowers for taxes and insurance		6,430			8,942			5,879			6,430
Proceeds from issuance of Federal Home Loan Bank advances		—			52,000			10,000			—
Principal payments on Federal Home Loan Bank advances		(4,975	)		(256	)		(8,007	)		(4,975	)
Reimbursement of stock offering costs								1			—
Purchases of treasury stock		(15	)		(231	)		—			(15	)
Purchase of ESOP shares								(1,062	)		—

Net cash provided by financing activities		87,776			65,866			5,372			87,776

Net increase in cash and cash equivalents		53,291			57,012
Net (decrease) increase in cash and cash equivalents								(46,582	)		53,219
Cash and cash equivalents at beginning of period		92,526			11,707			66,803			92,526

Cash and cash equivalents at end of period	$	145,817		$	68,719		$	20,221		$	145,817

Supplemental cash flow information:
Cash paid during the year for interest	$	902		$	1,843		$	691		$	902
Noncash activities:
Retirement of common stock	$	70		$	—		$	78		$	70
Loans transferred to loans held for sale		—			124
Issuance of treasury stock – stock compensation plans		15			—			—			15
1895 Bancorp of Wisconsin, Inc. common stock held by PyraMax Bank reclassified to treasury stock		—			175

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

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”~~, “we”, “our”~~ or “New 1895 Bancorp”), was formed to serve as the stock holding company for PyraMax Bank, FSB (the “Bank” ~~or “PyraMax 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 100% of the common stock being held by the public. The consolidated financial statements and other financial information contained in these consolidated financial statements are for New 1895 Bancorp.

The cost of the reorganization and the issuing of the common stock totaling $2.0 million were deferred and deducted from the sales proceeds of the offering.

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 ~~positions~~position, results of operations, changes in stockholder’s 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, ~~2020,~~2021, as filed with the Securities and Exchange Commission on March ~~31, 2021.~~29, 2022.

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. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the fair ~~values~~value of investment securities, financial instruments and mortgage servicing rights, and the valuation of deferred income tax assets. Actual results could differ from those estimates.

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.

Table of Contents

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)

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 ~~following~~ recent accounting standards in Note 2 reflect those that relate to

non-issuer

companies.

~~Impact of~~

~~COVID-19~~

~~On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus~~

~~(“COVID-19”)~~

as a global pandemic, which continues to spread throughout the United States and around the world. The declaration of a global pandemic indicates that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The outbreak of

~~COVID-19~~

could adversely impact a broad range of industries in which the Company’s customers operate and impair their ability to fulfill their financial obligations to the Company. On March 3, 2020, the Federal Open Market Committee reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%. This rate was further reduced to a target range of 0% to 0.25% on March 16, 2020. These reductions in interest rates and other effects of the

~~COVID-19~~

~~outbreak may adversely affect the Company’s financial condition and results of operations. As a result of the spread of the~~

~~COVID-19~~

~~coronavirus, economic uncertainties have arisen which may negatively impact our business, financial condition, results of operations and cash flows.~~

~~Table of Contents~~

~~NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)~~

Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this quarterly report on Form

10-Q

were issued.

~~1895 Bancorp~~On July 29, 2022, the Company announced the Board of ~~Wisconsin, Inc., a Maryland corporation (“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~~Directors of the ~~conversion, which occurred on July 14, 2021, 1895 Bancorp of Wisconsin, MHC and 1895 Bancorp of Wisconsin,~~Company had adopted a ~~federal corporation (“Old 1895 Bancorp”) ceased~~stock repurchase program. Under the repurchase program, the Company may repurchase up 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 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. The shares of Old 1895 Bancorp common stock owned by 1895 Bancorp of Wisconsin, MHC were canceled at that time. As of June 30, 2021, the conversion had not been completed, and, as of that date, New 1895 Bancorp had no assets or liabilities, and had not conducted any business other than that of an organizational nature. The conversion and offering were completed on July 14, 2021, and New 1895 Bancorp was organized as a fully public stock holding company, with 100%5% of the ~~common stock being held by the public. Accordingly, the financial statements and other information included in Part I of this Quarterly Report are for Old 1895 Bancorp.~~current outstanding shares. The program is subject to regulatory

non-objection.

There were no additional significant subsequent events for the quarter ended June 30, ~~2021~~2022 through the issuance date of these unaudited consolidated financial statements that warranted adjustment to or disclosure in the unaudited consolidated financial statements.

NOTE 2 – RECENT ACCOUNTING STANDARDS

The following Accounting Standards Updates ~~(ASUs)~~(“ASUs”) have been issued by the ~~FASB~~Financial Accounting Standards Board (“FASB”) and may impact the Company’s financial statements in future reporting periods:

ASU

2016-13,

Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326)

. ASU

2016-13

requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. OnIn November ~~15,~~ 2019, the FASB issued ASU

2019-10,

Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, amending the effective date for this standard. ASU

2016-13

will be effective for fiscal years beginning after December 15, 2022, and interim periods within ~~those~~ fiscal ~~years.~~years beginning after December 15, 2022. In March 2022, the FASB issued ASU

2022-02—Financial

Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for TDRs by creditors in Subtopic

310-40,

Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, ASU

2022-02

requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic

326-20,

Financial Instruments—Credit Losses—Measured at Amortized Cost in the vintage disclosures required by paragraph

326-20-50-6.

ASU

No. 2022-02

is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The amendments should be applied prospectively, however, an entity has the option to apply a modified retrospective transition method related to the recognition and measurement of TDRs, which would result in a cumulative effect adjustment to retained earnings in the period of adoption. Management has elected to defer adoption ~~to the new effective date~~of ASC

2016-13,

as well as ASU

2022-02,

until January 1, 2023. The Company has implemented and is currently testing and evaluating a third-party software solution to assist with the adoption of ASU

2016-13.

The impact of adopting ASU

2016-13

on the Company’s consolidated financial ~~statements.~~statements is still being quantified. Management will continue to progress on its implementation project plan and improve the Company’s approach throughout the deferral period.

ASU

2016-02,

Leases (Topic 842)

. This ASU affects any entity that enters into a lease and is intended to increase the transparency and comparability of financial reporting. The ASU requires, among other changes, a lessee to recognize on its balance sheet a lease asset and a lease liability for those leases previously classified as operating leases. The lease asset will represent the right to use the underlying asset for the lease term, and the lease liability will represent the discounted value of the required lease payments to the lessor. The ASU will also require entities to disclose key information about leasing arrangements. ASU

2016-02

is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted.

Table of Contents

NOTE 2 – RECENT ACCOUNTING STANDARDS (continued)

On November 15, 2019, the FASB issued ASU

2019-10,

Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, amending the effective date for this standard. On June 3, 2020, the FASB issued ASU

2020-05,

Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective ~~Dates~~D

ates for ~~Certain~~

Cert

ain Entities, updating the effective date for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. ~~Management has elected to defer adoption to the new effective date and is currently evaluating the~~The Company adopted ASC 842 on January 1, 2022. The cumulative effect did not have a material impact ~~of adopting ASU~~

~~2016-02~~

on the Company’s ~~consolidated financial statements.~~

~~Table~~statements of ~~Contents~~

~~NOTE 2 – RECENT ACCOUNTING STANDARDS (continued)~~

~~ASU~~

~~2020-04,~~

~~Facilitation of~~operations. Where the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative rates, such as SOFR. For instance, entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. ASU

~~2020-04~~

~~is effective March 12, 2020, through December 31, 2022. The~~ Company is ~~in the process of determining which optional expedients to elect, if any, as well as the timing and application of those elections. At this time,~~a lessee, the Company ~~does not expect any elections~~recorded an initial increase in both assets and liabilities of $529,000 to ~~have a significant impact on its financial statements.~~reflect the right of use asset and the lease liability.

NOTE 3 – ~~AVAILABLE FOR SALE~~

AVAILABLE-FOR-SALE

SECURITIES

The amortized costs and fair values of securities

available-for-sale

were as follows:


	June 30, 2021									June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
										(in thousands)
U.S. Treasury notes										$	29,555	$	—	$	(2,227	)	$	27,328
Obligations of states and political subdivisions	$	21,029	$	230	$	(172	)	$	21,087		21,418		17		(2,889	)		18,546
Government-sponsored mortgage-backed securities		60,091		1,087		(125	)		61,053		80,261		19		(6,579	)		73,701
Corporate collateralized mortgage obligations		763		1		—			764
Asset-backed securities		6,873		71		—			6,944		5,723		—		(71	)		5,652
Certificates of deposit		1,458		100		—			1,558		1,459		—		(10	)		1,449

Total	$	90,214	$	1,489	$	(297	)	$	91,406	$	138,416	$	36	$	(11,776	)	$	126,676


	December 31, 2020									December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
										(in thousands)
U.S. Treasury notes										$	19,501	$	8	$	(25	)	$	19,484
Obligations of states and political subdivisions	$	11,570	$	244	$	(11	)	$	11,803		20,758		207		(205	)		20,760
Government-sponsored mortgage-backed securities		36,886		1,165		(12	)		38,039		64,049		563		(463	)		64,149
Asset-backed securities		7,231		57		(7	)		7,281		6,479		45		(1	)		6,523
Certificates of deposit		1,458		122		—			1,580		1,459		65		—			1,524

Total	$	57,145	$	1,588	$	(30	)	$	58,703	$	112,246	$	888	$	(694	)	$	112,440

~~Available for sale~~

Available-for-sale

securities with a carrying value of ~~$1.7~~$4.1 million and ~~$2.0~~$1.8 million were pledged as collateral at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

The amortized costs and fair values of securities

available-for-sale,

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.

Table of Contents

NOTE 3 – ~~AVAILABLE FOR SALE~~

AVAILABLE-FOR-SALE

SECURITIES (continued)


					June 30, 2022
	June 30, 2021				Amortized Cost		Fair Value
	Amortized Cost		Fair Value
	(in thousands)				(in thousands)
Debt and other securities:
Due in one year or less	$	1,736	$	1,759	$	1,790	$	1,783
Due after one through 5 years		4,125		4,297		20,892		19,646
Due after 5 through 10 years		5,108		5,130		18,661		16,772
Due after 10 years		11,518		11,459		11,089		9,122

Total debt and other securities		22,487		22,645		52,432		47,323
Mortgage-related securities		60,854		61,817		80,261		73,701
Asset-backed securities		6,873		6,944		5,723		5,652

Total	$	90,214	$	91,406	$	138,416	$	126,676

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:


	June 30, 2021														June 30, 2022
	Less than 12 months					12 months or longer				Total					Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
															(in thousands)
U.S. Treasury notes															$	27,328	$	(2,227	)	$	—	$	—		$	27,328	$	(2,227	)
Obligations of states and political subdivisions	$	9,578	$	(172	)	$	—	$	—	$	9,578	$	(172	)		14,506		(2,102	)		3,433		(787	)		17,939		(2,889	)
Government-sponsored mortgage-backed securities		21,982		(125	)		—		—		21,982		(125	)		67,633		(5,849	)		4,724		(730	)		72,357		(6,579	)
Asset-backed securities																5,345		(71	)		—		—			5,345		(71	)
Certificates of deposit																1,234		(10	)		—		—			1,234		(10	)

Total	$	31,560	$	(297	)	$	—	$	—	$	31,560	$	(297	)	$	116,046	$	(10,259	)	$	8,157	$	(1,517	)	$	124,203	$	(11,776	)


	December 31, 2020															December 31, 2021
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
																(in thousands)
U.S. Treasury notes																$	12,971	$	(25	)	$	—	$	—		$	12,971	$	(25	)
Obligations of states and political subdivisions	$	4,235	$	(11	)	$	—	$	—		$	4,235	$	(11	)		5,414		(82	)		4,105		(123	)		9,519		(205	)
Government-sponsored mortgage-backed securities		4,984		(12	)		—		—			4,984		(12	)		39,392		(463	)		—		—			39,392		(463	)
Asset-backed securities		—		—			638		(7	)		638		(7	)		808		(1	)		—		—			808		(1	)

Total	$	9,219	$	(23	)	$	638	$	(7	)	$	9,857	$	(30	)	$	58,585	$	(571	)	$	4,105	$	(123	)	$	62,690	$	(694	)

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, the Company had 1190 and 524 debt securities with unrealized losses representing aggregate depreciation of approximately ~~0.9%~~9.3% and ~~0.3%~~1.1%, respectively, from their respective amortized cost ~~bases.~~basis. These unrealized losses relate principally to changes in interest rates and were not caused by changes in the financial condition of the issuers, the quality of any underlying assets or applicable credit enhancements. In analyzing whether unrealized losses on debt securities are other-than-temporary, management considers whether the securities are issued by a government body or agency, whether a rating agency has downgraded the securities, industry analysts’ reports, the financial condition and performance of the issuer and the quality of any underlying assets or credit enhancements. As management has the intent and ability to hold these debt securities to projected recovery, none of these declines are deemed to be other-than-temporary.

The following table provides a summary of the proceeds from sales of securities

available-for-sale,

as well as gross gains and losses, for the periods presented:


									Three months ended June 30,				Six months ended June 30,
	Three months ended June 30,				Six months ended June 30,				2022		2021		2022		2021
	2021		2020		2021		2020
	(in thousands)				(in thousands)				(in thousands)				(in thousands)
Proceeds from sales of securities available-for-sale	$	—	$	—	$	1,018	$	279	$	—	$	—	$	—	$	1,018

Gross realized gains		—		—		12		7	$	—	$	—	$	—	$	12
Gross realized losses		—		—		—		—		—		—		—		—

Net realized gains									$	—	$	—	$	—	$	12

Table of Contents

NOTE 4 – LOANS

Major classifications of loans are summarized as follows:

June 30,
2021

December 31,
2020


(in thousands)

Commercial:

Real estate
   $ 179,729    $ 189,291
Land development
   1,442    1,492
Other
   41,287    46,184
Residential real estate:

First mortgage
   88,564    68,968
Construction
   2,346    2,954
Consumer:

Home equity and lines of credit
   19,672    22,348
Other
   215    361




Subtotal
   333,255    331,598
Net deferred loan costs
   380    178
Allowance for loan losses
   (2,732 )    (2,703 )




Loans, net
   $ 330,903    $ 329,073


	June 30, 2022			December 31, 2021

	(in thousands)
Commercial:
Real estate	$	205,402		$	185,223
Land development		—			1,400
Other		42,858			38,160
Residential real estate:
First mortgage		83,165			80,661
Construction		3,726			3,388
Consumer:
Home equity and lines of credit		16,592			17,032
Other		145			128

Subtotal		351,888			325,992
Net deferred loan costs		863			655
Allowance for loan losses		(3,132	)		(2,858	)

Loans, net	$	349,619		$	323,789

Deposit accounts in an overdrawn position and reclassified as loans totaled $26,000 and $106,000 at June 30, 2022 and December 31, 2021, respectively.

The Company provides several types of loans to its customers, including commercial, residential, construction and consumer loans. Significant loan concentrations are considered to exist for a financial institution 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 the Company’s credit risks are geographically concentrated within the metropolitan Milwaukee, Wisconsin area, there are no concentrations with individual borrowers or groups of related borrowers.

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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, the Company had transferred ~~$32.4~~$34.9 million and ~~$29.6~~$32.1 million in participation loans which were eligible for sales treatment to other financial institutions, all of which ~~were being~~continue to be serviced by the Company.

An analysis of past due loans is presented below:


											June 30, 2022
	June 30, 2021										30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current Loans		Total Loans
	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
	(in thousands)										(in thousands)
Commercial:
Real estate	$	276	$	—	$	276	$	179,453	$	179,729	$	—	$	—	$	—	$	205,402	$	205,402
Land development		—		—		—		1,442		1,442		—		—		—		—		—
Other		—		—		—		41,287		41,287		—		—		—		42,858		42,858
Residential real estate:
First mortgage		292		—		292		88,272		88,564		69		—		69		83,096		83,165
Construction		—		—		—		2,346		2,346		—		—		—		3,726		3,726
Consumer:
Home equity and lines of credit		—		—		—		19,672		19,672		27		—		27		16,565		16,592
Other		—		—		—		215		215		—		—		—		145		145

Total	$	568	$	—	$	568	$	332,687	$	333,255	$	96	$	—	$	96	$	351,792	$	351,888

Table of Contents

NOTE 4 – LOANS (continued)

December 31, 2020


30-89 Days

Past Due

90 Days or
More Past
Due

Total Past
Due

Current

Total Loans


(in thousands)

Commercial:

Real estate
   $ 241    $ —      $ 241    $ 189,050    $ 189,291
Land development
   —      —      —      1,492    1,492
Other
   33    —      33    46,151    46,184
Residential real estate:

First mortgage
   684    137    821    68,147    68,968
Construction
   —      —      —      2,954    2,954
Consumer:

Home equity and lines of credit
   121    23    144    22,204    22,348
Other
   —      —      —      361    361










Total
   $ 1,079    $ 160    $ 1,239    $ 330,359    $ 331,598



	December 31, 2021
	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans

	(in thousands)
Commercial:
Real estate	$	—	$	—	$	—	$	185,223	$	185,223
Land development		—		—		—		1,400		1,400
Other		33		—		33		38,127		38,160
Residential real estate:
First mortgage		342		—		342		80,319		80,661
Construction		—		—		—		3,388		3,388
Consumer:
Home equity and lines of credit		—		—		—		17,032		17,032
Other		—		—		—		128		128

Total	$	375	$	—	$	375	$	325,617	$	325,992

There were 0no loans 90 days or more past due and accruing interest as of June 30, ~~2021~~2022 or December 31, ~~2020.~~2021, respectively.

A summary of activity in the allowance for loan losses for the three and six months ended June 30, ~~2021~~2022 and June 30, ~~2020~~2021, respectively, is presented below:


	Commercial		Residential		Consumer			Total			Commercial		Residential		Consumer			Total
	(in thousands)
Three months ended June 30, 2021
											(in thousands)
Three months ended June 30, 2022
Allowance for loan losses
Beginning balance	$	1,614	$	745	$	340		$	2,699		$	1,814	$	745	$	458		$	3,017
Provision (credit) for loan losses		0—		0—		0—			0—
Provision for loan losses												105		—		—			105
Loans charged-off		0—		0—		(1	)		(1	)		—		—		(1	)		(1	)
Recoveries		4		0—		30			34			5		—		6			11

Ending balance	$	1,618	$	745	$	369		$	2,732		$	1,924	$	745	$	463		$	3,132

Three months ended June 30, 2020
Three months ended June 30, 2021
Allowance for loan losses
Beginning balance	$	1,241	$	573	$	194		$	2,008		$	1,614	$	745	$	340		$	2,699
Provision (credit) for loan losses		0—		0—		0—			0—
Provision for loan losses												—		—		—			—
Loans charged-off		0—		0—		0—			0—			—		—		(1	)		(1	)
Recoveries		2		0—		104			106			4		—		30			34

Ending balance	$	1,243	$	573	$	298		$	2,114		$	1,618	$	745	$	369		$	2,732


	Commercial		Residential		Consumer			Total			Commercial		Residential		Consumer			Total
	(in thousands)
Six months ended June 30, 2021
											(in thousands)
Six months ended June 30, 2022
Allowance for loan losses
Beginning balance	$	1,609	$	745	$	349		$	2,703		$	1,657	$	745	$	456		$	2,858
Provision (credit) for loan losses		0—		0—		0—			0—
Provision for loan losses												210		—		—			210
Loans charged-off		0—		0—		(17	)		(17	)		—		—		(4	)		(4	)
Recoveries		9		0—		37			46			57		—		11			68

Ending balance	$	1,618	$	745	$	369		$	2,732		$	1,924	$	745	$	463		$	3,132

Six months ended June 30, 2020
Six months ended June 30, 2021
Allowance for loan losses
Beginning balance	$	1,235	$	573	$	192		$	2,000		$	1,609	$	745	$	349		$	2,703
Provision (credit) for loan losses		0—		0—		0—			0—
Provision for loan losses												—		—		—			—
Loans charged-off		0—		0—		(5	)		(5	)		—		—		(17	)		(17	)
Recoveries		8		0—		111			119			9		—		37			46

Ending balance	$	1,243	$	573	$	298		$	2,114		$	1,618	$	745	$	369		$	2,732

Table of Contents

NOTE 4 – LOANS (continued)

A summary of the allowance for loan losses for loans evaluated individually and collectively for impairment is presented below:


									June 30, 2022
	June 30, 2021								Commercial		Residential		Consumer		Total
	Commercial		Residential		Consumer		Total
	(in thousands)								(in thousands)
Loans:
Individually evaluated for impairment	$	7,840	$	614	$	—	$	8,454	$	4,009	$	1,192	$	35	$	5,236
Collectively evaluated for impairment		214,618		90,296		19,887		324,801		244,251		85,699		16,702		346,652

Total loans	$	222,458	$	90,910	$	19,887	$	333,255	$	248,260	$	86,891	$	16,737	$	351,888

Allowance for loan losses:
Individually evaluated for impairment	$	0—	$	0—	$	0—	$	0—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,618		745		369		2,732		1,924		745		463		3,132

Total allowance for loan losses	$	1,618	$	745	$	369	$	2,732	$	1,924	$	745	$	463	$	3,132


									December 31, 2021
	December 31, 2020								Commercial		Residential		Consumer		Total
	Commercial		Residential		Consumer		Total
	(in thousands)								(in thousands)
Loans:
Individually evaluated for impairment	$	10,573	$	411	$	21	$	11,005	$	4,833	$	1,357	$	37	$	6,227
Collectively evaluated for impairment		226,394		71,511		22,688		320,593		219,950		82,692		17,123		319,765

Total loans	$	236,967	$	71,922	$	22,709	$	331,598	$	224,783	$	84,049	$	17,160	$	325,992

Allowance for loan losses:
Individually evaluated for impairment	$	0—	$	0—	$	0—	$	0—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,609		745		349		2,703		1,657		745		456		2,858

Total allowance for loan losses	$	1,609	$	745	$	349	$	2,703	$	1,657	$	745	$	456	$	2,858

The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan losses. The credit quality indicators monitored differ depending on the class of loan.

Pass

ratings are assigned to loans with adequate collateral and debt service ability such that collectability of the contractual loan payments is highly probable.

Watch and Special Mention

ratings are assigned to loans where management has some concern that the collateral or debt service ability may not be adequate, though the collectability of the contractual loan payments is still probable.

Substandard

ratings are assigned to loans that do not have adequate collateral and/or debt service ability such that collectability of the contractual loan payments is no longer probable.

Doubtful

ratings are assigned to loans that do not have adequate collateral and/or debt service ability such that collectability of the contractual loan payments is unlikely.

Table of Contents

NOTE 4 – LOANS (continued)

A summary of the Company’s internal risk ratings of loans is presented below:


									June 30, 2022
	June 30, 2021								Pass		Watch and Special Mention		Substandard		Total
	Pass		Watch and Special Mention		Substandard		Total
	(in thousands)								(in thousands)
Commercial:
Real estate	$	160,088	$	14,401	$	5,241	$	179,729	$	196,641	$	5,188	$	3,573	$	205,402
Land development		—		—		1,442		1,442		—		—		—		—
Other		38,847		1,282		1,157		41,286		40,556		1,866		436		42,858

Total	$	198,935	$	15,683	$	7,840	$	222,458	$	237,197	$	7,054	$	4,009	$	248,260


									December 31, 2021
	December 31, 2020								Pass		Watch and Special Mention		Substandard		Total
	Pass		Watch and Special Mention		Substandard		Total
	(in thousands)								(in thousands)
Commercial:
Real estate	$	163,961	$	19,272	$	6,058	$	189,291	$	172,172	$	8,963	$	4,088	$	185,223
Land development		—		—		1,492		1,492		1,400		—		—		1,400
Other		37,675		5,705		2,804		46,184		37,414		1		745		38,160

Total	$	201,636	$	24,977	$	10,354	$	236,967	$	210,986	$	8,964	$	4,833	$	224,783

There were 0 loans rated Doubtful or Loss as of June 30, ~~2021~~2022 or December 31, ~~2020,~~2021, respectively.

Residential real estate and consumer loans are generally evaluated based on whether or not ~~loans are~~the loan is performing according to the contractual terms of the loan. Management determines that a loan is impaired or

non-performing

when it is probable at least a portion of the loan will not be collected in accordance with ~~their contractual terms.~~the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent. Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans is presented below:


							June 30, 2022
	June 30, 2021						Performing		Non Performing		Total
	Performing		Non Performing		Total
	(in thousands)						(in thousands)
Residential real estate:
First mortgage	$	87,595	$	969	$	88,564	$	82,383	$	782	$	83,165
Construction		2,346		—		2,346		3,726		—		3,726
Consumer:
Home equity and lines of credit		19,586		86		19,672		16,557		35		16,592
Other		215		—		215		145		—		145

Total	$	109,742	$	1,055	$	110,797	$	102,811	$	817	$	103,628

Table of Contents

NOTE 4 – LOANS (continued)


							December 31, 2021
	December 31, 2020						Performing		Non Performing		Total
	Performing		Non Performing		Total
	(in thousands)						(in thousands)
Residential real estate:
First mortgages	$	67,817	$	1,151	$	68,968
First mortgage							$	79,722	$	939	$	80,661
Construction		2,954		—		2,954		3,388		—		3,388
Consumer:
Home equity and lines of credit		22,212		136		22,348		16,954		78		17,032
Other		361		—		361		128		—		128

Total	$	93,344	$	1,287	$	94,631	$	100,192	$	1,017	$	101,209

Information regarding impaired loans is presented below:


											As of and for the Six Months Ended June 30, 2022
	As of and for the Six Months Ended June 30, 2021										Recorded Investment		Unpaid Principal		Reserve		Average Investment		Interest Recognized
	Recorded Investment		Unpaid Principal		Reserve		Average Investment		Interest Recognized
	(in thousands)										(in thousands)
Impaired loans with reserve:
Commercial:
Real estate	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Land development		—		—		—		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—		—		—
Residential real estate:
First mortgages		—		—		—		—		—
First mortgage												—		—		—		—		—
Construction		—		—		—		—		—		—		—		—		—		—
Consumer:
Home equity and lines of credit		—		—		—		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—		—		—

Total impaired loans with reserve		—		—		—		—		—		—		—		—		—		—

Impaired loans with no reserve:
Commercial:
Real estate		5,241		5,240		NA		6,193		118		3,573		3,573		NA		3,785		71
Land development		1,442		1,442		NA		1,468		33		—		—		NA		—		—
Other		1,157		1,209		NA		1,834		18		436		436		NA		505		62
Residential real estate:
First mortgages		614		702		NA		623		8
First mortgage												1,192		1,412		NA		1,271		32
Construction		—		—		NA		—		—		—		—		NA		—		—
Consumer:
Home equity and lines of credit		—		—		NA		14		22		35		40		NA		36		1
Other		—		—		NA		—		—		—		—		NA		—		—

Total impaired loans with no reserve		8,454		8,593		NA		10,132		199		5,236		5,461		NA		5,597		166

Total impaired loans	$	8,454	$	8,593	$	0	$	10,132	$	199	$	5,236	$	5,461	$	—	$	5,597	$	166

Table of Contents

NOTE 4 – LOANS (continued)


											As of and for the Year Ended December 31, 2021
	As of and for the Year Ended December 31, 2020										Recorded Investment		Unpaid Principal		Reserve		Average Investment		Interest Recognized
	Recorded Investment		Unpaid Principal		Reserve		Average Investment		Interest Recognized
	(in thousands)										(in thousands)
Impaired loans with reserve:
Commercial:
Real estate	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Land development		—		—		—		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—		—		—
Residential real estate:
First mortgages		—		—		—		36		—
First mortgage												—		—		—		—		—
Construction		—		—		—		—		—		—		—		—		—		—
Consumer:
Home equity and lines of credit		—		—		—		4		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—		—		—

Total impaired loans with reserve		—		—		—		40		—		—		—		—		—		—

Impaired loans with no reserve:
Commercial:
Real estate		6,277		6,277		NA		6,268		332		4,088		4,089		NA		5,615		213
Land development		1,492		1,492		NA		503		40		—		—		NA		734		33
Other		2,804		2,804		NA		2,301		138		745		796		NA		1,478		35
Residential real estate:
First mortgages		411		495		NA		568		261
First mortgage												1,357		1,572		NA		914		34
Construction		—		—		NA		—		—		—		—		NA		—		—
Consumer:
Home equity and lines of credit		21		51		NA		24		3		37		41		NA		17		22
Other		—		—		NA		—		—		—		—		NA		—		—

Total impaired loans with no reserve		11,005		11,119		NA		9,664		774		6,227		6,498		NA		8,758		337

Total impaired loans	$	11,005	$	11,119	$	0	$	9,704	$	774	$	6,227	$	6,498	$	—	$	8,758	$	337

Management regularly monitors impaired loan relationships. In the event facts and circumstances change, additional reserves may be necessary.

There were 0 additional funds committed to impaired loans as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021, respectively.

Nonperforming loans are as follows:


					June 30, 2022		December 31, 2021
	June 30, 2021		December 31, 2020
	(in thousands)				(in thousands)
Nonaccrual loans, other than troubled debt restructurings	$	861	$	1,068	$	630	$	826
Nonaccrual loans, troubled debt restructurings		194		219		187		191

Total nonperforming loans (NPLs)	$	1,055	$	1,287
Total nonperforming loans					$	817	$	1,017

Troubled debt restructurings, accruing	$	425	$	432	$	410	$	418

Table of Contents

NOTE 4 – LOANS (continued)

There were 0 loans modified as troubled debt restructurings during the six months ended June 30, ~~2021~~2022 and year ended December 31, ~~2020.~~2021, respectively.

The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to

COVID-19

made between March 1, 2020 and the earlier of (i) December 31, ~~2020~~2021 or (ii) 60 days after the end of the

COVID-19

national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The Company elected to adopt these provisions of the CARES Act. As of June 30, ~~2021,~~2022, the Company had 1 to 3 month deferrals of approximately ~~$399,000~~$251,000 in interest, escrow, and principal payments on ~~$17.1~~$5.7 million in outstanding loans.

The Company considers a troubled debt restructuring in default if it becomes past due more than 90 days. There were 0

troubled debt restructurings within the past twelve months for which there was a default during the six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

Information on

non-accrual

loans is presented below:


							June 30, 2022			December 31, 2021
	June 30, 2021			December 31, 2020
	(in thousands)						(in thousands)
Commercial:
Real estate	$	—		$	—		$	—		$	—
Land development		—			—			—			—
Other		—			—			—			—
Residential real estate:
First mortgages		969			1,151
First mortgage								782			939
Construction		—			—			—			—
Consumer:
Home equity and lines of credit		86			136			35			78
Other		—			—			—			—

Total non-accrual loans	$	1,055		$	1,287		$	817		$	1,017

Total non-accrual loans to total loans		0.32	%		0.39	%		0.23	%		0.31	%
Total non-accrual loans to total assets		0.17	%		0.25	%		0.15	%		0.19	%

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 ~~$337.5~~$317.5 million and ~~$345.1~~$332.9 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

A summary of activity in the Company’s mortgage servicing rights is presented below:


													Three Months Ended June 30, 2022			Three Months Ended June 30, 2021			Six Months Ended June 30, 2022			Six Months Ended June 30, 2021
	Three Months Ended June 30, 2021			Three Months Ended June 30, 2020			Six Months Ended June 30, 2021			Six Months Ended June 30, 2020
	(in thousands)						(in thousands)						(in thousands)						(in thousands)
Mortgage servicing rights beginning balance	$	2,147		$	1,936		$	1,806		$	2,172		$	1,988		$	2,147		$	2,036		$	1,806
Additions		117			247			320			346			20			117			47			320
Amortization		(155	)		(243	)		(386	)		(361	)		(69	)		(155	)		(144	)		(386	)
Increase (decrease) in valuation allowance		0			(353	)		369			(570	)
Decrease in valuation allowance														—			—			—			369

Mortgage servicing rights ending balance	$	2,109		$	1,587		$	2,109		$	1,587		$	1,939		$	2,109		$	1,939		$	2,109

Fair value at beginning of period	$	2,153		$	1,958		$	1,806		$	2,404		$	2,811		$	2,153		$	2,477		$	1,806
Fair value at end of period	$	2,361		$	1,587		$	2,361		$	1,587		$	3,273		$	2,361		$	3,273		$	2,361

Table of Contents

NOTE 5 – MORTGAGE SERVICING RIGHTS (continued)

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 June 30, 2022, the model used discount rates ranging from 9.5% to 13%, and prepayment speeds ranging from 11.3% to 26.8%, respectively, both of which were based on market data from independent organizations. As of June 30, 2021 the model used discount rates ranging from 10% to 13.5%, and prepayment speeds ranging from 12.8% to 35.8%, respectively, both of which were based on market data from independent organizations. As of June 30, 2020, the model used discount rates ranging from 10% to 13.5%, and prepayment speeds ranging from 19.4% to 46.4%, respectively, both of which were based on market data from independent organizations.

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 June 30, ~~2021.~~2022. 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.


	(in thousands)		(in thousands)
Estimated future amortization as of June 30, 2021:
2021	$	447
Estimated future amortization as of June 30, 2022:
2022		417	$	127
2023		390		234
2024		363		208
2025		332		186
2026				164
Thereafter		160		1,020

Total	$	2,109	$	1,939

NOTE 6 – DEPOSITS

The composition of deposits is summarized below:

June 30,
2021

December 31,
2020


(in thousands)

Non-interest
bearing checking
   $ 191,173    $ 98,970
Interest bearing checking
   32,990    30,630
Money market
   94,075    103,724
Statement savings
   66,685    58,895
Certificates of deposit1
   81,261    87,629




Total
   $ 466,184    $ 379,848

1	~~Included in these amounts are brokered deposits of $5.5 million at December 31, 2020. There were 0 brokered deposits at June 30, 2021.~~


	June 30, 2022		December 31, 2021

	(in thousands)
Non-interest bearing checking	$	102,998	$	106,664
Interest bearing checking		34,016		37,467
Money market		95,878		94,823
Statement savings		67,456		64,954
Certificates of deposit		82,714		80,593

Total	$	383,062	$	384,501

The Company held ~~$9.6~~$8.4 million and ~~$8.7~~$10.0 million in certificates of deposit which met or exceeded the FDIC insurance limit of $250,000 as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The Company did 0t hold any brokered deposits as of June 30, 2022 and December 31, 2021.

~~The~~As of June 30, 2022, the scheduled maturities of certificates of deposit for the annual periods are presented below:

June 30, 2021


(in thousands)

2021
   $ 35,847
2022
   42,800
2023
   892
2024
   926
2025
   619
Thereafter
   177


Total
   $ 81,261


	(in thousands)
2022	$	38,552
2023		33,484
2024		1,209
2025		8,823
2026		347
Thereafter		299

Total	$	82,714

Table of Contents

NOTE 7 – FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank advances consist of the following:


	June 30, 2021					December 31, 2020					June 30, 2022					December 31, 2021
	Rate			Amount		Rate			Amount		Rate			Amount		Rate			Amount
	(dollars in thousands)
Fixed rate, fixed term advance, maturing Jul 2021		1.41	%	$	7,000		1.41	%	$	7,000
											(dollars in thousands)
Fixed rate, fixed term advance, maturing Feb 2022		1.62	%		6,500		1.62	%		6,500		N/A		$	—		1.62	%	$	6,500
Fixed rate, fixed term advance, maturing Feb 2023		1.62	%		6,500		1.62	%		6,500		1.62	%		6,500		1.62	%		6,500
Putable advance, maturing Oct 2029 first put option date Nov 2020		1.03	%		10,000		1.03	%		10,000		1.03	%		10,000		1.03	%		10,000
Putable advance, maturing Feb 2030 first put option date Feb 2023		0.98	%		5,000		0.98	%		5,000		0.98	%		5,000		0.98	%		5,000
Putable advance, maturing Mar 2030 first put option date Mar 2025		0.89	%		10,000		0.89	%		10,000		0.89	%		10,000		0.89	%		10,000
Putable advance, maturing Mar 2032 first put option date Mar 2027												1.74	%		10,000		—			—
Advance structured note, payments due monthly, maturing Feb 2030		7.47	%		563		7.47	%		584		—			—		7.47	%		542
Advance structured note, payments due monthly, maturing April 2030		1.05	%		8,887		1.05	%		9,365		1.05	%		7,922		1.05	%		8,405
Advance structured note, payments due monthly, maturing May 2030		1.19	%		8,973		1.19	%		9,449		1.19	%		8,013		1.19	%		8,495
Fixed rate, COVID-19 Relief Advance, maturing May 2021		0			0		0	%		4,000

Total				$	63,423				$	68,398				$	57,435				$	55,442

The scheduled maturities and required principal payments of Federal Home Loan Bank advances are presented below:


	June 30, 2021					June 30, 2022
	Weighted Average Rate			Amount		Weighted Average Rate			Amount
	(dollars in thousands)
2021		1.26	%	$	7,981
						(dollars in thousands)
2022		1.54	%		8,481		1.12	%	$	971
2023		1.54	%		8,506		1.50	%		8,457
2024		1.28	%		2,032		1.12	%		1,979
2025		1.30	%		2,059		1.12	%		2,002
2026							1.12	%		2,024
Thereafter		1.07	%		34,364		1.17	%		42,002

Total				$	63,423				$	57,435

Actual maturities may differ from scheduled maturities due to call options on various Federal Home Loan Bank advances.

The Company maintains a master contract agreement with the Federal Home Loan Bank, which provides for borrowing up to the lesser of 22.22 times the value of the Federal Home Loan Bank stock owned, a determined percentage of the book value of the Company’s qualifying real estate loans, or a determined percentage of the Company’s assets. The Federal Home Loan Bank provides both fixed and floating rate advances. Floating rates are tied to short-term market rates of interest such as ~~the London InterBank Offered Rate,~~ federal funds or Treasury bill rates. Federal Home Loan Bank advances are subject to a prepayment penalty if they are repaid prior to maturity.

The Company has pledged ~~approximately $150.1~~qualifying loans of $232.5 million and ~~$149.1~~$232.7 million ~~of qualifying loans~~ as collateral for Federal Home Loan Bank advances as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Collateral values to borrow against were approximately $158.8 million and $147.5 million as of June 30, 2022 and December 31, 2021, respectively. Federal Home Loan Bank advances are also secured by approximately $3.0 million of Federal Home Loan Bank stock held by the Company as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company’s available and unused portion of this borrowing agreement totaled ~~$85.6~~$85.4 million and ~~$79.6~~$90.9 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Additional borrowing would require additional stock purchase.

Additionally, at June 30, ~~2021 we~~2022 the Company had a ~~$10.0~~$15.0 million federal funds rate line of credit with the BMO Harris Bank, none of which was drawn at June 30, ~~2021.~~2022. The Company also had a ~~$7.6~~$10.4 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately ~~$12.2~~$13.3 million at June 30, ~~2021.~~2022. The Company had 0t drawn on the Federal Reserve line as of June 30, ~~2021.~~2022.

Table of Contents

NOTE 8 – INCOME TAXES

Income tax (benefit) expense was ($~~58,000)~~133,000) and ~~$225,000~~($58,000) for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$102,000~~($192,000) and ~~$372,000~~$102,000 for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

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 June 30, ~~2021~~2022, and December 31, ~~2020,~~2021, the deferred tax valuation ~~allowances~~allowance was $934,000, reducing our net deferred tax asset to ~~$3.4~~$7.2 million and $3.8 million at each respective date.

Due to recent changes in market conditions and current events related to

COVID-19,

the board and management continue to assess their deferred tax assets including forecasted future projected income and available tax planning strategies. As such, there may be additional deferred tax asset impairment in subsequent periods.

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 material legal proceedings existed at June 30, ~~2021.~~2022.

In the normal course of business, the Company is party to financial instruments with

off-balance-sheet

risk 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.

The contractual amounts of

off-balance-sheet

credit-related financial instruments are summarized below:


							June 30, 2022
	June 30, 2021						Fixed Rate		Variable Rate		Total
	Fixed Rate		Variable Rate		Total
	(in thousands)						(in thousands)
Commitments to extend credit	$	17,101	$	46,019	$	63,120	$	16,740	$	62,575	$	79,315
Standby letters of credit		23		2,150		2,173		—		150		150
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program		1,110		—		1,110		1,309		—		1,309
Commitments to sell loans		17,632		—		17,632		3,012		—		3,012
Overdraft protection program commitments		4,047		—		4,047		3,932		—		3,932

December 31, 2020

Fixed Rate

Variable Rate

Total

(in thousands)

Commitments to extend credit
$ 12,084 $ 41,778 $ 53,862
Standby letters of credit
23 2,150 2,173
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program
1,087 —   1,087
Commitments to sell loans
53,847 —   53,847
Overdraft protection program commitments
4,104 —   4,104


	December 31, 2021
	Fixed Rate		Variable Rate		Total

	(in thousands)
Commitments to extend credit	$	21,586	$	56,921	$	78,507
Standby letters of credit		—		175		175
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program		1,214		—		1,214
Commitments to sell loans		5,410		—		5,410
Overdraft protection program commitments		3,993		—		3,993

Table of Contents

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 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 ~~$3.8~~$2.2 million of commitments to deliver loans through the Program as of June 30, ~~2021.~~2022. Once delivered to the Program, the Company provides a contractually agreed-upon credit enhancement and performs servicing of the loans. Under the credit enhancement, the Company is liable for losses on loans delivered through the Program after application of any mortgage insurance and a contractually agreed-upon credit enhancement provided by the Program, subject to an agreed-upon maximum. The Company receives a fee for this credit enhancement. The Company records a liability for expected losses in excess of anticipated credit enhancement fees. As of June 30, ~~2021~~2022, and December 31, ~~2020,~~2021, the Company had 0 liability outstanding related to the Program.

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.

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 the Reorganization,~~ effective January 1, ~~2019.~~2019, in connection with the mutual holding company reorganization and organization of Old 1895 Bancorp. Eligible employees become 20% vested in their accounts after 1 year of service, 40% vested after 2 years of service, 60% vested after 3 years of service, 80% vested after 4 years of service, and 100% vested after 5 or more years of service, or earlier, upon death, disability or attainment of normal retirement age.

~~The~~On January 8, 2019, the ESOP purchased 175,528 shares (231,047 shares adjusted for the conversion) of the Company’s common stock, which was funded by a loan from ~~the Company.~~Old 1895 Bancorp. Unreleased ESOP shares collateralize the loan payable, and the cost of the shares is recorded as contra-equity account in the stockholders’ equity of the Company. Shares are to be released as debt payments are made by the ESOP to the loan. The ESOP’s sources of repayment of the loan can ~~included~~include dividends, if any, on the unallocated stock held by the ESOP, and discretionary contributions from the Company to the ESOP and earnings thereon.

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 283,360 additional shares of common stock. During the six months ended June 30, 2022, the ESOP purchased 96,446 additional shares at an average price of $10.95. As of June 30, 2022, the ESOP had purchased 283,360 of the additional shares at an average price of $10.90.

Table of Contents

NOTE 10 – EMPLOYEE STOCK OWNERSHIP PLAN (continued)

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 sheet.

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 ~~$30,000~~$51,000 and ~~$18,000~~$30,000 in compensation expense for the three months ended June 30, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively, and ~~$51,000~~$101,000 and ~~$32,000~~$51,000 for the six months ended June 30, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively.

~~Table of Contents~~

~~NOTE 10 – EMPLOYEE STOCK OWNERSHIP PLAN (continued)~~

The following table provides the allocated and unallocated shares of common stock associated with the ESOP.


					June 30, 2022		December 31, 2021
	June 30, 2021		December 31, 2020
	(dollars in thousands)				(dollars in thousands)
Shares committed to be released		3,510		7,021		9,865		22,401
Total allocated shares		14,042		7,021		37,640		15,239
Total unallocated shares		157,976		161,486		463,658		377,077

Total ESOP shares		175,528		175,528		511,163		414,717

Fair value of unallocated shares (based on $15.03 and $9.96 share price as of June 30, 2021 and December 31, 2020, respectively)	$	2,374	$	1,608
Fair value of unallocated shares (based on $10.25 and $10.99 share price as of June 30, 2022 and December 31, 2021, respectively)					$	4,752	$	4,144

NOTE 11 – RELATED PARTY TRANSACTIONS

A summary of loans to directors, executive officers, and their affiliates follows:


							June 30, 2022			December 31, 2021
	June 30, 2021			December 31, 2020
	(in thousands)						(in thousands)
Beginning balance	$	1,034		$	1,172		$	932		$	1,034
Adjustments due to changes in directors, executive officers, and/or principal stockholders								—			202
New loans		32			512			4			53
Repayments		(270	)		(650	)		(56	)		(357	)

Ending balance	$	796		$	1,034		$	880		$	932

Deposits from directors, executive officers, and their affiliates totaled $1.1 million ~~and $940,000~~ at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

The Company utilizes the services of law firms in which certain of the Company’s directors are partners. Fees paid to the firms for these services were ~~$8,000 during~~immaterial for the three ~~months ended June 30, 2021~~ and ~~2020, respectively and $15,000 for the~~ six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

NOTE 12 – FAIR VALUE MEASUREMENTS

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).

Table of Contents

NOTE 12 – FAIR VALUE MEASUREMENTS (continued)

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.

~~Table of Contents~~

~~NOTE 12 – FAIR VALUE MEASUREMENTS (continued)~~

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.~~GAAP. Other assets and liabilities, such as impaired 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.

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 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.

Impaired loans

– ~~Loans are~~The Company does not ~~measured~~record loans at fair value on a recurring basis. However, ~~loans determined to be~~periodically, a loan is considered impaired ~~may be measured~~and is reported at fair value ~~on a nonrecurring basis. The fair value measurements of collateral-dependent impaired loans are based on the fair values~~ of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. Independent appraisals are obtained to determine the fair values of underlying collateral, and generally utilize one or more valuation methodologies, which typically ~~includes~~include 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 impaired 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.

Table of Contents

NOTE 12 – FAIR VALUE MEASUREMENTS (continued)

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.~~~~

~~Table of Contents~~

~~NOTE 12 – FAIR VALUE MEASUREMENTS (continued)~~


			Recurring Fair Value Measurements Using								Recurring Fair Value Measurements Using
	June 30, 2021		Level 1		Level 2		Level 3		June 30, 2022		Level 1		Level 2		Level 3
	(in thousands)
Marketable equity securities:	$	3,419	$	3,419	$	—	$	—
									(in thousands)
Marketable equity securities									$	2,867	$	2,867	$	—	$	—
Securities available-for-sale:
U.S. Treasury notes										27,328		—		27,328		—
Obligations of states and political subdivisions		21,087		—		21,087		—		18,546		—		18,546		—
Government-sponsored mortgage-backed securities		61,053		—		61,053		—		73,701		—		73,701		—
Corporate collateralized mortgage obligations		764		—		764		—
Asset-backed securities		6,944		—		6,944		—		5,652		—		5,652		—
Certificates of deposit		1,558		—		1,558		—		1,449		—		1,449		—

Total	$	94,825	$	3,419	$	91,406	$	—	$	129,543	$	2,867	$	126,676	$	—


			Recurring Fair Value Measurements Using								Recurring Fair Value Measurements Using
	December 31, 2020		Level 1		Level 2		Level 3		December 31, 2021		Level 1		Level 2		Level 3
	(in thousands)
Marketable equity securities:	$	2,992	$	2,992	$	—	$	—
									(in thousands)
Marketable equity securities									$	3,544	$	3,544	$	—	$	—
Securities available-for-sale:
U.S. Treasury notes										19,484		—		19,484		—
Obligations of states and political subdivisions		11,803		—		11,803		—		20,760		—		20,760		—
Government-sponsored mortgage-backed securities		38,039		—		38,039		—		64,149		—		64,149		—
Asset-backed securities		7,281		—		7,281		—		6,523		—		6,523		—
Certificates of deposit		1,580		—		1,580		—		1,524		—		1,524		—

Total	$	61,695	$	2,992	$	58,703	$	—	$	115,984	$	3,544	$	112,440	$	—

Impaired loans are measured at fair value on a

non-recurring

basis. There were 0 loans that were considered impaired with a specific valuation allowance as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Mortgage servicing rights are measured at fair value on a

non-recurring

basis. Mortgage servicing rights with a carrying value of $2.2 million were considered impaired and written down to their estimated fair value of $1.8 million as of December 31, 2020. As a result, the Company recognized a specific valuation allowance againstThere was 0impairment on mortgage servicing rights as of ~~$369,000 during the period~~June 30, 2022 and December 31, ~~2020. At June 30, 2021, there was 0 valuation allowance against mortgage servicing rights.~~

~~The carrying values and estimated fair values of financial instruments are presented below:~~

June 30, 2021


Carrying Value

Level 1

Level 2

Level 3


(in thousands)

Financial assets:

Cash and cash equivalents
   $ 145,817    $ 145,817    $ —      $ —
Available for sale securities
   91,406    —      91,406    —
Marketable equity securities
   3,419    3,419    —      —
Loans held for sale
   1,340    —      1,340    —
Loans
   330,903    —      —      332,871
Rate lock commitments
   123    —      —      123
Accrued interest receivable
   879    879    —      —
Federal Home Loan Bank stock
   3,032    —      —      3,032
Cash value of life insurance
   13,686    —      —      13,686
Financial liabilities:

Deposits
   466,184    384,924    —      81,340
Advance payments by borrowers for taxes and insurance
   9,167    9,167    —      —
Federal Home Loan Bank advances
   63,423    —      —      64,817
Accrued interest payable
   130    130    —      —

2021.

Table of Contents

NOTE 12 – FAIR VALUE MEASUREMENTS (continued)

December 31, 2020


Carrying Value

Level 1

Level 2

Level 3


(in thousands)

Financial assets:

Cash and cash equivalents
   $ 92,526    $ 92,526    $ —      $ —
Available for sale securities
   58,703    —      58,703    —
Marketable equity securities
   2,992    2,992    —      —
Loans held for sale
   2,484    —      2,484    —
Loans
   329,073    —      —      332,882
Rate lock commitments
   354    —      —      354
Accrued interest receivable
   912    912    —      —
Federal Home Loan Bank Stock
   3,032    —      —      3,032
Cash value of life insurance
   13,485    —      —      13,485
Financial liabilities:

Deposits
   379,848    292,219    —      87,884
Advance payments by borrowers for taxes and insurance
   2,737    2,737    —      —
Federal Home Loan Bank advances
   63,398    —      —      70,561
Accrued interest payable
   183    183    —      —

The carrying values and estimated fair values of financial instruments are presented below:


	June 30, 2022
	Carrying Value		Level 1		Level 2		Level 3

	(in thousands)
Financial assets:
Cash and cash equivalents	$	20,221	$	20,221	$	—	$	—
Available-for-sale securities		126,676		—		126,676		—
Marketable equity securities		2,867		2,867		—		—
Loans held for sale		262		—		262		—
Loans		349,619		—		—		331,153
Rate lock commitments		17		—		—		17
Accrued interest receivable		1,027		1,027		—		—
Federal Home Loan Bank stock		3,032		—		—		3,032
Cash value of life insurance		14,101		—		—		14,101
Financial liabilities:
Deposits		383,062		300,347		—		81,348
Advance payments by borrowers for taxes and insurance		7,739		7,739		—		—
Federal Home Loan Bank advances		57,435		—		—		54,130
Accrued interest payable		128		128		—		—


	December 31, 2021
	Carrying Value		Level 1		Level 2		Level 3

	(in thousands)
Financial assets:
Cash and cash equivalents	$	66,803	$	66,803	$	—	$	—
Available-for-sale securities		112,440		—		112,440		—
Marketable equity securities		3,544		3,544		—		—
Loans held for sale		1,183		—		1,183		—
Loans		323,789		—		—		323,182
Rate lock commitments		30		—		—		30
Accrued interest receivable		948		948		—		—
Federal Home Loan Bank Stock		3,032		—		—		3,032
Cash value of life insurance		13,892		—		—		13,892
Financial liabilities:
Deposits		384,501		303,908		—		80,473
Advance payments by borrowers for taxes and insurance		1,860		1,860		—		—
Federal Home Loan Bank advances		55,442		—		—		55,981
Accrued interest payable		109		109		—		—

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 todo 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.

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NOTE 12 – FAIR VALUE MEASUREMENTS (continued)

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 assets on the balance sheets. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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 financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, PyraMax Bank must meet specific capital guidelines that involve quantitative measures of 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.

~~Table of Contents~~

~~NOTE 13 – EQUITY AND REGULATORY MATTERS (continued)~~

The Company is exempt from consolidated capital requirements as those requirements do not apply to certain small bank holding companies with consolidated assets under $3 billion.

Quantitative measures established by regulation to ensure capital adequacy require PyraMax 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~~ PyraMax Bank met all applicable capital adequacy requirements as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021, respectively.

As of June 30, ~~2021~~2022, and December 31, ~~2020,~~2021, PyraMax Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, PyraMax Bank must maintain minimum regulatory capital ratios as set forth in the table below. PyraMax Bank’s actual and required capital amounts and ratios are presented below:

June 30, 2021


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)
   $ 50,739    9.7 % $ 20,933    4.0 % $ 26,167    5.0 %
Risk-based:

Common Equity Tier 1
   50,739    15.3 % 14,955    4.5 % 21,601    6.5 %
Tier 1
   50,739    15.3 % 19,940    6.0 % 26,586    8.0 %
Total
   53,471    16.1 % 26,586    8.0 % 33,233    10.0 %


	June 30, 2022
	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)	$	64,385		11.8	%	$	21,897		4.0	%	$	27,371		5.0	%
Risk-based:
Common Equity Tier 1		64,385		17.0	%		17,017		4.5	%		24,579		6.5	%
Tier 1		64,385		17.0	%		22,689		6.0	%		30,252		8.0	%
Total		67,516		17.9	%		30,252		8.0	%		37,814		10.0	%

December 31, 2020


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)
   $ 49,534    9.8 % $ 20,195    4.0 % $ 25,243    5.0 %
Risk-based:

Common Equity Tier 1
   49,534    15.1 % 14,725    4.5 % 21,269    6.5 %
Tier 1
   49,534    15.1 % 19,633    6.0 % 26,177    8.0 %
Total
   52,237    16.0 % 26,177    8.0 % 32,722    10.0 %


	December 31, 2021
	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)	$	65,179		11.9	%	$	21,838		4.0	%	$	27,298		5.0	%
Risk-based:
Common Equity Tier 1		65,179		19.4	%		15,124		4.5	%		21,846		6.5	%
Tier 1		65,179		19.4	%		20,166		6.0	%		26,888		8.0	%
Total		68,037		20.2	%		26,888		8.0	%		33,610		10.0	%

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NOTE 14 – EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per common 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, excluding outstanding participating securities. Participating securities include

non-vested

restricted stock awards and restricted stock units, though no actual shares of common stock related to restricted stock units are issued until the settlement of such units, to the extent holders of these securities receive

non-forfeitable

dividends or dividend equivalents at the same rate as holders of the Company’s common stock. 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.

~~Earnings per common share for~~ For the three and six months ended June 30, ~~2021~~2022, 169,167 and ~~2020 are presented in the following table.~~

Three months ended June 30,

Six months ended June 30,

2021

2020

2021

2020

(In thousands, except per share
amounts)

(In thousands, except per share
amounts)

Net (loss) income
$ (51 ) $ 194 $ 470 $ 481

Weighted shares outstanding for basic EPS

Weighted average shares outstanding
4,759 4,686 4,754 4,689
Less: Weighted average unallocated ESOP shares
159 166 160 167

Weighted average shares outstanding for basic EPS
4,600 4,520 4,594 4,522
Additional dilutive shares
83 34 62 33

Weighted average shares outstanding for dilutive EPS
4,683 4,554 4,656 4,555

Basic (loss) income per share
$ (0.01 ) $ 0.04 $ 0.10 $ 0.11
Diluted (loss) income per share
$ (0.01 ) $ 0.04 $ 0.10 $ 0.11

~~Average~~179,938 average shares, ~~of 11 and 4,~~respectively, were excluded from the computation of diluted EPS because the effect would be ~~antidilutive for~~antidilutive. For the three and six ~~and three~~ months ~~ending~~ended June 30, 2021, ~~respectively.~~149,020 and 11,436 (196,155 and 15,053 shares adjusted for conversion) average shares were excluded from the computation of diluted EPS because the effect would be antidilutive.

Earnings (loss) per common share for the three and six months ended June 30, 2022 and 2021 are presented in the following table.


	Three months ended June 30,
	2022			2021 (1)			2021 (2)

	(In thousands, except per share amounts)
Net (loss) income	$	(241	)	$	(51	)	$	(51	)

Weighted shares outstanding for basic EPS
Weighted average shares outstanding		6,289			4,759			6,264
Less: Weighted average unallocated ESOP shares		446			159			209

Weighted average shares outstanding for basic EPS		5,843			4,600			6,065
Additional dilutive shares		—			—			—

Weighted average shares outstanding for dilutive EPS		5,843			4,600			6,065

Basic (loss) income per share	$	(0.04	)	$	(0.01	)	$	(0.01	)

Diluted (loss) income per share	$	(0.04	)	$	(0.01	)	$	(0.01	)


	Six months ended June 30,
	2022			2021 (1)		2021 (2)

	(In thousands, except per share amounts)
Net (loss) income	$	(296	)	$	470	$	470

Weighted shares outstanding for basic EPS
Weighted average shares outstanding		6,282			4,754		6,247
Less: Weighted average unallocated ESOP shares		424			160		210

Weighted average shares outstanding for basic EPS		5,858			4,594		6,047
Additional dilutive shares		—			62		81

Weighted average shares outstanding for dilutive EPS		5,858			4,656		6,128

Basic (loss) income per share	$	(0.05	)	$	0.10	$	0.08

Diluted (loss) income per share	$	(0.05	)	$	0.10	$	0.08

(1)	Amounts related to periods prior to the date of Conversion (July 2021) have not been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (1.3163) (See Note 1).

(2)	Amounts related to periods prior to the date of Conversion (July 2021) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (1.3163) (See Note 1)

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NOTE 15 – STOCK BASED COMPENSATION

Stock-Based Compensation Plan

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 238,467 (313,894 stock options adjusted for the conversion) stock options and 95,387 (125,557 shares adjusted for the conversion) restricted shares were approved for award. The stock options granted to employees and

non-employee

directors under this plan vest in five installments with the first installment vesting on the first anniversary of the date of grant. The exercise price for all stock options granted is equal to the quoted NASDAQ market close price on the date that the awards were granted and expire ten years after the grant date, if not exercised. The restricted stock awards granted to employees and

non-employee

directors under this plan vest in five installments with the first installment vesting on the first anniversary of the date of grant.

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 ~~compensation, payroll taxes~~salaries and ~~other~~ employee benefits in the consolidated statements of operations. The following assumptions were used in estimating the fair value of options granted during the six months ended June 30, 2022 and June 30, 2021:

~~Table of Contents~~

~~NOTE 15 – STOCK BASED COMPENSATION (continued)~~


				For the Six Months Ended
	June 30, 2021			June 30, 2022			June 30, 2021
Dividend yield		0.00	%		0.00	%		0.00	%
Risk-free interest rate		0.96	%		3.06	%		0.96	%
Expected volatility		24.64	%		24.64	%		24.64	%
Weighted average expected life		6.5			6.5			6.5
Weighted average per share value of options	$	2.76		$	3.25		$	2.76

Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock options represent 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 life time period prior to issuance date. ~~The following assumptions were used in estimating the fair value~~

Table of ~~options granted during the period ended June 30, 2021:~~Contents

NOTE 15 – STOCK BASED COMPENSATION (continued)

A summary of the Company’s stock option activity for the ~~period~~six months ended June 30, ~~2021~~2022 is presented below.

Stock Options

Shares

Weighted
Average
Exercise Price

Weighted
Average
Remaining in
Contractual
Term (Years)

Aggregate
Intrinsic
Value

Outstanding December 31, 2020
�� 218,115    $ 7.89    9.30    451,154
Granted
(1)
   28,350    10.21    9.67    —
Exercised
   0      0      —      —
Forfeited
   0      0      —      —




Outstanding June 30, 2021
   246,465    8.16    8.98    1,654,221




Options exercisable at June 30, 2021
   43,625    7.89    8.88    304,434

~~(1)~~

~~Includes 7,998 shares granted as a nonqualified stock option inducement award to the Company’s President and Chief Operating Officer.~~


Stock Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining in Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding December 31, 2021		300,720	$	6.19		8.40	$	1,443,067
Granted		18,955		10.00		6.50		—
Exercised		—		—		—		—
Forfeited		—		—		—		—

Outstanding June 30, 2022		319,675		6.42		8.03	$	1,209,321

Options exercisable at June 30, 2022		112,824		6.09		7.86	$	463,999

The following table summarizes information about the Company’s nonvested stock option activity for the six months ended June 30, ~~2021:~~2022:

Stock Options

Shares

Weighted Average
Grant Date Fair
Value

Nonvested at December 31, 2020
   218,115    $ 1.98
Granted
(1)
   28,350    2.76
Vested
   (43,625 )    1.98
Forfeited
   0      0




Nonvested at June 30, 2021
   202,840    $ 2.09


Stock Options	Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2021		248,043		$	1.58
Granted		18,955			3.25
Vested (1)		(60,147	)		1.56
Forfeited		—			—

Nonvested at June 30, 2022		206,851		$	1.74

(1)	Includes ~~7,998~~2,105 shares ~~granted as~~vested under a nonqualified stock option inducement award to the Company’s President and Chief Operating Officer.

The Company amortizes the expense related to stock options as compensation expense over the vesting period. The Company recognized ~~$26,000~~$24,000 and ~~$17,000~~$26,000 in stock option expense during the three months ended June 30, ~~2021~~2022 and ~~2020, respectively.~~2021. Additionally, the Company recognized ~~$48,000~~$47,000 and ~~$17,000~~$48,000 in stock option expense during the six months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

At June 30, ~~2021,~~2022, the Company had ~~$400,000~~$337,000 in estimated unrecognized compensation costs related to outstanding stock options that is expected to be recognized over a weighted average period of ~~3.96~~3.33 years.

~~Table of Contents~~

~~NOTE 15 – STOCK BASED COMPENSATION (continued)~~

The following table summarizes information about the Company’s restricted stock activity for the six months ended June 30, ~~2021:~~2022:


Restricted Stock	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2020		84,949		$	7.87
Nonvested at December 31, 2021							97,128		$	6.25
Granted ~~(1)~~		11,436			10.21		7,371			10.00
Vested(2)		(16,991	)		7.87		(23,532	)		6.20
Forfeited		—			0		—			—

Nonvested at June 30, 2021		79,394		$	8.21
Nonvested at June 30, 2022							80,967		$	6.60

(1)	Includes ~~7,998~~263 shares ~~granted as~~vested under a ~~nonqualified~~restricted stock ~~option~~ inducement award to the Company’s President and Chief Operating Officer.

(2)	Includes 7,238 shares surrendered by employees to cover payroll tax costs related to the vested shares.

The Company amortizes the expense related to restricted stock awards as compensation expense over the vesting period. The Company recognized ~~$39,000~~$36,000 and ~~$27,000~~$39,000 in restricted stock expense during the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Additionally, the Company recognized ~~$75,000~~$72,000 and ~~$27,000~~$75,000 in restricted stock shares expense during the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. At June 30, ~~2021,~~2022, the Company had ~~$616,000~~$500,000 of unrecognized compensation expense related to restricted stock shares that is expected to be recognized over a weighted average period of ~~3.95~~3.26 years.

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NOTE 16 – LEASES

The Company has operating leases consisting primarily of real estate leases. The Company leases real estate property for bank branches and office space with terms extending through 2028. As of June 30, 2022, the Company reported $490,000 of

right-of-use

asset and $490,000 lease liability in its consolidated balance sheet under other assets and other liabilities, respectively. The Company’s average remaining maturity for its leases is 5.75 years and its average discount rate is 1.79%.

At June 30, 2022, the Company was obligated under noncancelable operating leases for office space and other commitments. Rent expense under operating leases, included in net occupancy and equipment expense, was $19,000 and $38,000 for the three and six months ended June 30, 2022, respectively, and $21,000 and $41,000 for the three and six months ended June 30, 2021, respectively.

Rent commitments were as follows as of June 30, 2022:


	(in thousands)
2022	$	43
2023		87
2024		89
2025		91
2026		93
Thereafter		112

Amounts representing interest		(25	)

Total	$	490

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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 June 30, ~~2021~~2022 and for the three and six months ended June 30, ~~2021~~2022 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,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

statements of our goals, intentions and expectations;

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

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

estimates of our risks and future costs and benefits.

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

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

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

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

the actual or anticipated impacts of military conflict, terrorism or other geopolitical events;

our ability to access cost-effective funding;

fluctuations in real estate values and both residential and commercial real estate market conditions;

demand for loans and deposits in our market area;

our ability to implement and change our business strategies;

competition among depository and other financial institutions;

inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made ~~and~~or will make;

adverse changes in the securities or secondary mortgage markets;

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;

the impact of the Dodd-Frank Act and the implementing regulations;

changes in the quality or composition of our loan or investment portfolios;

technological changes that may be more difficult or expensive than expected;

a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;

the inability of third-party providers to perform as expected;

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our ability to manage market risk, credit risk and operational risk in the current economic environment;

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

~~Table of Contents~~

our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;

changes in consumer spending, borrowing and savings habits;

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

our ability to retain key employees;

our compensation expense associated with equity allocated or awarded to our employees; and

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

Additionally, the outbreak of ~~Coronavirus Disease 2019~~

~~(“COVID-19”)~~COVID-19

will continue to adversely impact a broad range of industries in which the Company’s customers operate and will continue to impair their ability to fulfill their financial obligations to the Company. ~~The World Health Organization has declared~~

~~COVID-19~~

~~to be a global pandemic indicating that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections.~~

Notwithstanding any actions by national, state and local governments to mitigate the impact of

COVID-19

or by the Company to address the adverse impacts of

COVID-19,

there can be no assurance that any of the foregoing activities will be successful in mitigating or preventing significant adverse effects on the Company. Government action in response to the

COVID-19

pandemic, including restrictions on individual and business activities and vaccination mandates, may affect our business and operations, including our workforce, human capital resources and infrastructure. The Company may also incur additional costs to remedy damages caused by such disruptions, which could adversely affect its financial condition and results of operations. While it is not possible to know the full universe or extent of these impacts as of the date of this filing, we are disclosing potentially material items of which we are aware.

Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020 as a $2 trillion legislative package. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The package also includes extensive emergency funding for hospitals and providers. In addition to the general impact of

COVID-19,

certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to continue to have a material impact on our operations. ~~While it is not possible to know the full universe or extent of these impacts as of the date of this filing, we are disclosing potentially material items of which we are aware.~~

The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to

COVID-19

made between March 1, 2020 and the earlier of (i) December 31, ~~2020~~2021 or (ii) 60 days after the end of the

COVID-19

The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new loan program called the Paycheck Protection Program (“PPP”). As a qualified SBA lender, we were automatically authorized to originate PPP loans. The Company is actively participating in assisting our customers with applications for resources through the program. PPP loans will have: (a) an interest rate of 1.0%, (b)

two-year

and five-year loan terms to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP. As part of the first round of this program, ~~at June 30, 2021, we~~the Bank had funded 246 PPP loans totaling $30.3 million, with no outstanding balance remaining as of ~~which $29.8 million had been forgiven through~~ June 30, ~~2021.~~2022.

On December 27, 2020, the Relief Act became law and provided an additional $284 billion for the PPP, as well as extending the PPP through ~~March 31,~~June 30, 2021. ~~Among the changes to the~~As of June 30, 2022, we had funded 143 second round PPP loans totaling $10.5 million, of which $10.2 million had been forgiven as ~~a result~~ of the Relief Act include: (1) an opportunity for a second PPP forgivable loan for small businesses and nonprofits with 300 or fewer employees that can demonstrate a loss of 25% of gross receipts in any quarter during 2020 compared to the corresponding quarter in 2019 (or demonstrating a loss of 25% of gross receipts for the calendar year 2020 compared to calendar year 2019); (2) allowing qualified borrowers to apply for a PPP loan up to 2.5 times (or 3.5June 30, 2022.

3031

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~~times for small businesses in the restaurant and hospitality industries) the borrower’s average monthly payroll costs~~

~~in the one-year period prior~~

to the date on which the loan is made or calendar year 2019, limited to a maximum loan amount of $2.0 million; (3) the addition of personal protective equipment expenses, costs associated with outdoor dining, uninsured costs related to property damaged and vandalism or looting due to 2020 public disturbances, supplier costs and a broader category of operational expenses (including cloud computing services and other business software) as eligible and forgivable expenses; (4) simplifying the loan forgiveness process for loans of $150,000 or less; and (5) eliminating the requirement that EIDL Advances will reduce the borrower’s PPP loan forgiveness amount. Additionally, expenses paid with the proceeds of PPP loans that are forgiven (or are reasonably expected to be forgiven)

~~are now tax-deductible, reversing previous~~

guidance from the U.S. Department of the Treasury and the Internal Revenue Service, which did not allow deductions on expenses paid for with PPP loan proceeds which were forgiven (or reasonably expected to be forgiven). As of June 30, 2021, we have funded 143 second round PPP loans totaling $10.5 million, none of which had been forgiven as of June 30, 2021.

Because of the above 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 in our Annual Report on Form

10-K

under the heading “Risk Factors.”

Critical Accounting Policies

~~The discussion and analysis~~As a result of the ~~financial condition~~complex and ~~results~~dynamic nature of ~~operations are based on our financial statements, which are prepared~~the Company’s business, management must exercise judgment in ~~conformity~~selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with ~~generally accepted~~the current accounting principles ~~used~~generally accepted in the United States of ~~America. The preparation~~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 ~~these financial statements requires management~~the business have more significance than others due to ~~make~~the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates ~~and assumptions affecting~~affect the reported amounts of assets and liabilities ~~disclosure~~as well as disclosures of ~~contingent assets~~revenues and ~~liabilities, and~~expenses during the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances.reporting period. Actual results ~~may~~could meaningfully differ from these ~~estimates under different assumptions or conditions, resulting in a change~~estimates. Management believes that ~~could have a material impact on~~ the ~~carrying value of our assets and liabilities and our results of operations.~~

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

~~The following represent our~~ critical accounting ~~policies:~~

~~Allowance for Loan Losses~~

The allowance for loan losses is the estimated amount considered necessary to cover inherent, but unconfirmed, credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determiningestimates include the allowance for loan losses, ~~management makes significant estimates~~determination of fair value for financial instruments, and ~~has identified this policy as one~~valuation of ~~our most critical accounting policies.~~

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

The analysis has two components, specific and general allowances. The specific allowance is for unconfirmed losses related to loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral, adjusted for market conditions and selling expenses. If the fair value of the loan is less than the loan’s carrying value, a charge is recorded for the difference. The general allowance, which is for loans reviewed collectively, is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations.

~~Table of Contents~~

This analysis establishes historical loss percentages and qualitative factors that are applied to the loan groups to determine the amount of the allowance for loan losses necessary for loans that are reviewed collectively. The qualitative component is critical in determining the allowance for loan losses as certain trends may indicate the need for changes to the allowance for loan losses based on factors beyond the historical loss history. Not incorporating a qualitative component could misstate the allowance for loan losses. Actual loan losses may be significantly more than the allowances we have established which could result in a material negative effect on our financial results.

~~Fair Value~~

. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company estimates the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, the Company estimates fair value. These estimates are subjective in nature and any imprecision in estimating these factors can impact the amount of gain or loss recorded. A more detailed description of the fair values measured at each level of the fair value hierarchy and the methodology utilized by the Company can be founddisclosed in Note 121, “Summary of ~~the Notes to Financial Statements.~~

~~Deferred Tax Assets.~~

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable incomeSignificant Accounting Policies” in the ~~years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of~~most recent Form

10-K

(fiscal year ended December 31, 2021) filed with the ~~deferred tax asset will not be realized. We exercise significant judgment in evaluating the amount~~Securities and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewedExchange Commission (“SEC”) on ~~a regular basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to increase the valuation allowance against our deferred tax assets.~~March 29, 2022.

Comparison of Financial Condition at June 30, ~~2021~~2022 and December 31, ~~2020~~2021

Total Assets.

Total assets ~~increased $88.8~~decreased $4.0 million, or ~~17.2%~~0.7%, to ~~$605.6~~$535.6 million at June 30, ~~2021~~2022 from ~~$516.8~~$539.6 million at December 31, ~~2020. The increase~~2021. This decrease was primarily due to ~~an increase~~a $46.6 million decrease in cash and cash equivalents, ~~of $53.3~~partially offset by a $25.8 million ~~and an~~increase in loans held for investment, a $14.2 million increase in

available-for-sale

investment securities ~~of $32.7~~and a $4.1 million ~~during the six month period ended June 30, 2021. The~~ increase ~~was primarily due to the recent capital raise which generated $94.8 million of proceeds held at the Bank~~ in ~~anticipation of the stock offering.~~other assets.

Cash and Cash Equivalents.

Cash and cash equivalents ~~increased $53.3~~decreased $46.6 million, or ~~57.6%~~69.7%, to ~~$145.8~~$20.2 million at June 30, ~~2021~~2022 from ~~$92.5~~$66.8 million at December 31, ~~2020. The increase~~2021. This decrease was primarily due to the ~~recent capital raise which generated $94.8~~purchase of $37.1 million ~~of proceeds held at the Bank~~ in ~~anticipation of the stock offering. The balance of these proceeds held in the form of cash and cash equivalents were partially reduced to fund $39.2 million of additions to the~~

available-for-sale

securities, ~~portfolio.~~$26.0 million of net loan growth, $13.8 million in originations of loans held for sale and $8.0 million in principal payments on FHLB advances. These decreases were partially offset by $10.0 million from the issuance of an FHLB advance, $14.9 million from the sale of mortgage loans held for sale, $10.9 million from maturities, prepayments and calls of

available-for-sale

securities and a $5.9 million increase in advance payments by borrowers for taxes and insurance.

Available-for-Sale

Securities.

~~Available for sale~~

Available-for-sale

securities increased ~~$32.7~~$14.2 million, or ~~55.7%~~12.7%, to ~~$91.4~~$126.7 million at June 30, ~~2021,~~2022, from ~~$58.7~~$112.4 million at December 31, ~~2020.~~2021. The increase was primarily due to purchases of securities totaling ~~$39.2~~$37.1 million during the six months ~~ending~~ended June 30, ~~2021. These purchases were~~2022, partially offset by ~~$1 million of securities sales as well as~~ maturities, prepayments and calls of securities totaling ~~$5.1~~$10.9 million and a reduction in the unrealized gain held within the portfolio of ~~$366,000.~~$11.9 million, resulting in an unrealized loss of $11.7 million at June 30, 2022. The increase in securities purchases was the result of management’s strategy, implemented in the fourth quarter of 2021, to invest a significant portion of the Company’s liquidity that was held in cash and cash equivalents into securities with higher yields to increase future earnings, while maintaining a high degree of liquidity.

Loans Held for Sale.

Loans held for sale decreased ~~$1.1 million,~~$921,000, or ~~46.1%~~77.9%, to ~~$1.3 million~~$262,000 at June 30, ~~2021,~~2022, from ~~$2.4~~$1.2 million at December 31, ~~2020.~~2021. This decrease was due primarily to a decrease in the volume of first mortgage residential real estate loan originations to be sold into the secondary market as a result of the changing interest rate environment. Mortgage loan originations and sales were $13.8 million and $14.9 million, respectively, during the first six months of 2022 compared to $68.0 million and $70.0 million, respectively, for the same period in 2021.

Net Loans.

Net loans held for investment increased ~~$1.8~~$25.8 million, or ~~0.6%~~8.0%, to ~~$330.9~~$349.6 million at June 30, ~~2021,~~2022, from ~~$329.1~~$323.8 million at December 31, ~~2020.~~2021. The increase in loans is consistent with the Company’s long-term loan growth strategy.

Other Assets.

Other assets increased $4.1 million, or 66.9%, from $6.1 million at December 31, 2021 to $10.2 million at June 30, 2022. This increase was primarily due ~~primarily~~ to a ~~$19.0~~$3.4 million increase in ~~residential real estate loans~~deferred tax assets, which was primarily the result of the increase in unrealized losses on available for sale securities. Other assets also increased as ~~these types~~a result of ~~loans were retained within~~a $490,000 increase in right of use lease assets as a result of the ~~portfolio. This was partially offset by a $14.5 million decrease~~ adoption of ASU

2016-02

in ~~commercial loans~~the first quarter of 2022, and a ~~$2.8 million decrease~~$312,000 increase in ~~consumer loans~~prepaid expenses, which was primarily due to ~~normal~~the payment ~~and refinancing activity and forgiveness~~ of ~~PPP loans.~~annual insurance premiums in the first quarter of 2022.

Table of Contents

Deposits.

Deposits ~~increased $86.3~~decreased $1.4 million, or ~~22.7%~~0.4%, to ~~$466.2~~$383.1 million at June 30, ~~2021,~~2022, from ~~$379.9~~$384.5 million at December 31, ~~2020. The increase~~2021. This decrease was primarily due to ~~the recent capital raise which generated $94.8~~a $3.7 million ~~of proceeds which were held~~decrease in ~~the form of a~~ noninterest bearing checking accounts and a $3.5 million decrease in interest bearing checking accounts. ~~Noninterest checking accounts increased $92.2~~These decreases were partially offset by a $2.5 million ~~or 93.2%, to $191.2 million. Statement~~increase in statement savings accounts, ~~increased $7.8~~a $2.1 million ~~to $66.7~~increase in certificates of deposit and a $1.1 million ~~at June 30, 2021 from $58.9 million, and interest-bearing checking accounts increased $2.4 million to $33.0 million from $30.6 million. These increases were offset by decreases~~increase in money market accounts which declined $9.7 million to $94.1 million at June 30, 2021 from $103.7 million at December 31, 2020 and a $6.4 million decrease in certificates of deposits to $81.3 million from $87.6 million at December 31, 2020, including a decrease in brokered certificates of deposits of $5.5 million to $0 at June 30, 2021 from $5.5 million at December 31, 2020. We continued our marketing focus to concentrate on

~~non-maturing~~

~~deposits as these accounts carry lower interest rates and offer more flexibility in a changing rate environment.~~accounts.

Advance Payments by Borrowers for Taxes and Insurance.

Advance payments by borrowers for taxes and insurance increased ~~$6.4~~$5.9 million to ~~$9.2~~$7.7 million at June 30, ~~2021~~2022 from ~~$2.7~~$1.8 million at December 31, ~~2020.~~2021. The increase was due to normal seasonal activity.

Borrowings.

Borrowings, consisting entirely of FHLB advances, ~~decreased $5.0~~increased $2.0 million, or ~~7.3%~~3.6%, to ~~$63.4~~$57.4 million at June 30, ~~2021,~~2022, from ~~$68.4~~$55.4 million at December 31, ~~2020.~~2021. The ~~decrease~~increase was due to an advance of $10.0 million borrowed during the quarter ended June 30, 2022, partially offset by maturities and principal repayments on existing ~~advances.~~advances of $8.0 million.

Total Stockholders’ Equity.

Total stockholders’ equity ~~increased $292,000,~~decreased $9.9 million to ~~$60.3~~$81.0 million at June 30, ~~2021,~~2022, from ~~$60.0~~$90.9 million at December 31, ~~2020.~~2021. The ~~increase~~decrease was primarily due to an $11.9 million increase in net ~~income~~unrealized losses on

available-for-sale

securities, which net of ~~$470,000. This was partially offset by~~taxes, resulted in a ~~reduction~~$8.7 million decrease in stockholders’ equity. The increase in net unrealized losses on available-for-sale securities resulted primarily from changes in market interest rates.

Table of ~~other comprehensive income of $267,000 for the six months ending June 30, 2021 due to a reduction in the market value of available for sale securities.~~Contents

Average Balances and Yields

The following ~~tables present~~table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Nonaccrual loans are included in average balances only. Loan fees are included in interest income on loans and are not material.

Three Months Ended June 30,


2021

2020


Average
Outstanding
Balance

Interest and
Dividends

Yield/Cost
Rate

Average
Outstanding
Balance

Interest and
Dividends

Yield/Cost
Rate


(Dollars in thousands)

Interest-earning assets:

Loans
   $ 336,634    $ 3,125    3.72 % $ 328,948    $ 3,197    3.90 %
Securities
available-for-sale
   79,527    335    1.69 % 67,597    381    2.26 %
Other interest-earning assets
   73,231    51    0.28 % 46,246    8    0.07 %









Total interest-earning assets
   489,392    3,511    2.88 % 442,791    3,586    3.25 %
Non-interest-earning
assets
   37,690       37,616





Total assets
   $ 527,082       $ 480,407





Interest-earning liabilities:

NOW accounts
   $ 33,596    $ 10    0.12 % $ 26,112    $ 11    0.17 %
Money market accounts
   98,513    61    0.25 % 71,786    101    0.57 %
Savings accounts
   65,042    8    0.05 % 52,182    14    0.11 %
Certificates of deposit
   81,329    114    0.56 % 109,813    489    1.79 %









Total interest-bearing deposits
   278,480    193    0.28 % 259,893    615    0.95 %
Federal Home Loan Bank advances
   65,009    200    1.23 % 67,777    200    1.18 %
Other interest-bearing liabilities
   7,733    —      —   8,153    —      —









Total interest-bearing liabilities
   351,222    393    0.45 % 335,823    815    0.97 %
Non-interest-bearing
deposits
   114,195       87,551
Other
non-interest-bearing
liabilities
   5,697       4,170

~~Table of Contents~~


	Three Months Ended June 30,																Three Months Ended June 30,
	2021								2020								2022								2021
	Average Outstanding Balance			Interest and Dividends		Yield/Cost Rate			Average Outstanding Balance			Interest and Dividends		Yield/Cost Rate			Average Outstanding Balance			Interest and Dividends		Yield/Cost Rate			Average Outstanding Balance			Interest and Dividends		Yield/Cost Rate

																	(Dollars in thousands)
Interest-earning assets:
Loans (1)																	$	339,448		$	3,009		3.59	%	$	336,634		$	3,125		3.76	%
Securities available-for-sale																		128,204			566		1.79	%		79,527			335		1.71	%
Other interest-earning assets																		36,623			92		1.02	%		76,263			51		0.27	%

Total interest-earning assets																		504,275			3,667		2.95	%		492,424			3,511		2.89	%
Non-interest-earning assets																		35,778								34,658

Total assets																	$	540,053							$	527,082

Interest-earning liabilities:
NOW accounts																	$	36,367		$	9		0.10	%	$	33,596		$	10		0.12	%
Money market accounts																		96,782			73		0.31	%		98,513			61		0.25	%
Savings accounts																		67,690			8		0.05	%		65,042			8		0.05	%
Certificates of deposit																		84,240			97		0.47	%		81,329			114		0.57	%

Total interest-bearing deposits																		285,079			187		0.27	%		278,480			193		0.28	%
Federal Home Loan Bank advances																		57,802			181		1.27	%		65,009			200		1.25	%
Other interest-bearing liabilities																		7,144			2		0.12	%		7,733			—		—

Total interest-bearing liabilities																		350,025			370		0.43	%		351,222			393		0.45	%
Non-interest-bearing deposits																		103,148								90,099
Other non-interest-bearing liabilities																		6,142								7,733
	(Dollars in thousands)
Total liabilities		471,114								427,544								459,315								449,054
Total stockholders’ equity		55,968								52,863								80,738								78,028

Total liabilities and stockholders’ equity	$	527,082							$	480,407							$	540,053							$	527,082

Net interest income				$	3,118							$	2,771							$	3,297							$	3,118

Net interest-earning assets	$	138,170							$	106,968							$	154,250							$	141,202

Interest rate spread (1)							2.43	%							2.27	%
Net interest margin (2)							2.56	%							2.50	%
Interest rate spread (2)																							2.52	%							2.44	%
Net interest margin (3)																							2.65	%							2.57	%
Average interest-earning assets to average interest-bearing liabilities		139.34	%							131.85	%							144.07	%							140.20	%

(1)	Includes loan fees (expense) of $20,000 and ($8,000) for the three months ended June 30, 2022 and 2021, respectively.

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

~~(2)~~(3)

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


																	Six Months Ended June 30,
	Six Months Ended June 30,																2022								2021
	2021								2020								Average Outstanding Balance			Interest and Dividends		Yield/Cost Rate			Average Outstanding Balance			Interest and Dividends		Yield/Cost Rate
	Average Outstanding Balance			Interest and Dividends		Yield/Cost Rate			Average Outstanding Balance			Interest and Dividends		Yield/Cost Rate
	(Dollars in thousands)																(Dollars in thousands)
Interest-earning assets:
Loans	$	334,682		$	6,418		3.87	%	$	319,441		$	6,610		4.15	%
Loans (1)																	$	334,612		$	6,299		3.80	%	$	334,682		$	6,418		3.87	%
Securities available-for-sale		69,905			603		1.74	%		68,737			788		2.30	%		131,090			1,114		1.71	%		69,905			603		1.74	%
Other interest-earning assets		78,602			107		0.27	%		31,149			48		0.31	%		38,656			139		0.73	%		81,634			107		0.26	%

Total interest-earning assets		483,189			7,128		2.97	%		419,327			7,446		3.56	%		504,358			7,552		3.02	%		486,221			7,128		2.96	%
Non-interest-earning assets		36,569								36,285								34,700								33,537

Total assets	$	519,758							$	455,612							$	539,058							$	519,758

Interest-earning liabilities:
NOW accounts	$	32,720		$	19		0.12	%	$	25,859		$	30		0.23	%	$	36,430		$	16		0.09	%	$	32,720		$	19		0.11	%
Money market accounts		100,285			140		0.28	%		69,618			252		0.73	%		96,746			144		0.30	%		100,285			140		0.28	%
Savings accounts		63,532			18		0.06	%		50,037			30		0.12	%		67,049			17		0.05	%		63,532			18		0.06	%
Certificates of deposit		82,809			272		0.66	%		120,826			1,153		1.91	%		82,614			179		0.44	%		82,809			272		0.66	%

Total interest-bearing deposits		279,346			449		0.32	%		266,340			1,465		1.10	%		282,839			356		0.25	%		279,346			449		0.32	%
Federal Home Loan Bank advances		66,544			400		1.21	%		49,035			309		1.26	%		56,293			350		1.25	%		66,544			400		1.21	%
Other interest-bearing liabilities		6,480			—		—			5,986			—		—			5,424			4		0.17	%		6,480			—		—

Total interest-bearing liabilities		352,370			849		0.49	%		321,361			1,774		1.11	%		344,556			710		0.42	%		352,370			849		0.49	%
Non-interest-bearing deposits		106,114								77,146								104,585								76,819
Other non-interest-bearing liabilities		5,436								3,477								6,474								5,436

Total liabilities		463,920								401,984								455,615								434,625
Total stockholders’ equity		55,838								53,628								83,443								85,133

Total liabilities and stockholders’ equity	$	519,758							$	455,612							$	539,058							$	519,758

Net interest income				$	6,279							$	5,672							$	6,842							$	6,279

Net interest-earning assets	$	130,819							$	97,966							$	159,802							$	133,851

Interest rate spread (1)							2.48	%							2.45	%
Net interest margin (2)							2.62	%							2.71	%
Interest rate spread (2)																							2.60	%							2.47	%
Net interest margin (3)																							2.74	%							2.60	%
Average interest-earning assets to average interest-bearing liabilities		137.13	%							130.48	%							146.38	%							137.99	%

(1)	Includes loan fees (expense) of $124,000 and ($49,000) for the six months ended June 30, 2022 and 2021, respectively.

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

~~(2)~~(3)

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

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in 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. There were

no out-of-period items

Three Months Ended June 30,
2021 vs. 2020


Increase (Decrease) Due to

Total
Increase
(Decrease)


Volume

Rate


(Dollars in thousands)

Interest-earning assets:

Loans
   $ 78    (150 )    (72 )
Securities
   106    (152 )    (46 )
Other
   7    36    43






Total interest-earning assets
   191    (266 )    (75 )






Interest-bearing liabilities:

NOW
   (39 )    40    1
Money market deposits
   (79 )    119    40
Savings
   (6 )    12    6
Certificates of deposit
   103    272    375






Total interest-bearing deposits
   (21 )    443    422
Borrowings
   4    (4 )    —
Other
   —      —      —






Total interest-bearing liabilities
   (17 )    439    422






Change in net interest income
   $ 174    173    347

Six Months Ended June 30,
2021 vs. 2020


Increase (Decrease) Due to

Total
Increase
(Decrease)


Volume

Rate


(Dollars in thousands)

Interest-earning assets:

Loans
   $ 358    (550 )    (192 )
Securities
   14    (199 )    (185 )
Other
   64    (5 )    59






Total interest-earning assets
   436    (754 )    (318 )






Interest-bearing liabilities:

NOW
   (12 )    23    11
Money market deposits
   (284 )    396    112
Savings
   (13 )    25    12
Certificates of deposit
   286    595    881






Total interest-bearing deposits
   (23 )    1,039    1,016
Borrowings
   (105 )    14    (91 )
Other
   —      —      —






Total interest-bearing liabilities
   (128 )    1,053    925






Change in net interest income
   $ 308    299    607

or adjustments included within the following table.

Table of Contents


	Three Months Ended June 30, 2022 vs. 2021
	Increase (Decrease) Due to						Total Increase (Decrease)
	Volume			Rate			Total Increase (Decrease)

	(Dollars in thousands)
Interest-earning assets:
Loans	$	26		$	(142	)	$	(116	)
Securities		214			17			231
Other		(10	)		51			41

Total interest-earning assets		230			(74	)		156

Interest-bearing liabilities:
NOW		(1	)		2			1
Money market deposits		1			(13	)		(12	)
Savings		—			—			—
Certificates of deposit		(4	)		21			17

Total interest-bearing deposits		(4	)		10			6
Borrowings		23			(4	)		19
Other		—			(2	)		(2	)

Total interest-bearing liabilities		19			4			23

Change in net interest income	$	249			(70	)		179


	Six Months Ended June 30, 2022 vs. 2021
	Increase (Decrease) Due to						Total Increase (Decrease)
	Volume			Rate			Total Increase (Decrease)

	(Dollars in thousands)
Interest-earning assets:
Loans	$	(1	)	$	(118	)	$	(119	)
Securities		520			(9	)		511
Other		(14	)		46			32

Total interest-earning assets		505			(81	)		424

Interest-bearing liabilities:
NOW		(3	)		6			3
Money market deposits		5			(9	)		(4	)
Savings		(1	)		2			1
Certificates of deposit		1			92			93

Total interest-bearing deposits		2			91			93
Borrowings		64			(14	)		50
Other		—			(4	)		(4	)

Total interest-bearing liabilities		66			73			139

Change in net interest income	$	571		$	(8	)	$	563

Comparison of Operating Results for the Three Months Ended June 30, ~~2021~~2022 and ~~2020~~2021

~~General.~~Net Loss.

We recorded a net loss of ~~$51,000~~$241,000 for the three months ~~ending~~ended June 30, ~~2021, compared to~~2022, an increase of $190,000 from a net ~~income~~loss of ~~$194,000~~$51,000 recorded for the three months ~~ending~~ended June 30, ~~2020.~~2021. This ~~decrease~~increase was primarily due to a ~~$489,000~~$1.0 million decrease in

non-interest

income, ~~and a $386,000 increase in~~

~~non-interest~~

~~expense,~~ which was partially offset by a ~~$347,000~~$678,000 decrease in noninterest expense, a $74,000 increase in net interest income after provision for loan losses and a ~~$283,000 decrease~~$75,000 increase in income tax ~~expense.~~benefit.

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Interest and Dividend Income.

Interest and dividend income ~~decreased by $75,000,~~increased $156,000, or ~~2.1%~~4.4%, to $3.7 million for the three months ended June 30, 2022, from $3.5 million for the three months ~~ending~~ended June 30, ~~2021, from $3.6 million for the three months ending June 30, 2020.~~2021. The ~~decrease~~increase was due primarily to an increase in interest earned on taxable securities, which increased $231,000, or 69.0% from $335,000 in the ~~declining~~second quarter of 2021 to $566,000 in the second quarter of 2022. This increase was primarily due to the Company’s strategy to deploy excess liquidity into securities, which resulted in the average outstanding balance of securities increasing $48.7 million, or 61.3%, from $79.5 million for the second quarter of 2021 to $128.2 million for the second quarter of 2022. Offsetting the increase in interest ~~rate environment brought~~earned on bytaxable securities, was a $116,000 decrease in interest and fees earned on loans. This decrease was primarily due to a decrease in the

~~COVID-19~~

~~pandemic. As~~ yield earned on loans, which decreased from 3.76% in the second quarter of 2021 to 3.59% in the second quarter of 2022. The decrease in the loan yield was primarily due to a ~~result, interest income from~~decrease in fees collected on PPP loans ~~decreased by $72,000, or 2.3%, to $3.1 million, from $3.2 million.~~between the two periods.

Interest Expense.

Interest expense decreased ~~$422,000,~~$23,000, or ~~51.8%~~5.9%, to $370,000 for the three months ended June 30, 2022, from $393,000 for the three months ~~ending~~ended June 30, ~~2021, from $815,000 for the three months ending June 30, 2020, as rates on interest-bearing liabilities decreased 52 basis points~~2021. This decrease was primarily due to a decline in interest expense on FHLB advances, which declined $19,000 from $200,000 in the ~~declining interest rate environment.~~second quarter of 2021 to $181,000 in the second quarter of 2022. This decrease was primarily the result of a $7.2 million decrease in average FHLB advances outstanding.

Net Interest Income.

Net interest income increased ~~approximately $347,000,~~$179,000, or ~~12.5%~~5.7%, to ~~$3.1~~$3.3 million ~~for the three months ending June 30, 2021, from $2.8 million for the three months ending June 30, 2020. The rate for average interest-bearing liabilities decreased to 0.45%~~ for the three months ended June 30, ~~2021,~~2022, from ~~0.97%~~$3.1 million for the three months ended June 30, ~~2020.~~2021. This ~~52 basis point~~increase was due to a $156,000 increase in interest income and a $23,000 decrease in ~~the cost of funds came as the yield on interest-earning assets decreased by 37~~interest expense. Our net interest rate spread increased 8 basis points to ~~2.88%~~2.52% for the three months ended June 30, ~~2021,~~2022, from ~~3.25%~~2.44% for the three months ended June 30, ~~2020. Our net interest rate spread increased 16 basis points to 2.43% for the three months ended June 30, 2021, from 2.27% for the three months ended June 30, 2020.~~2021. Our net interest margin also increased 8 basis points to ~~2.56%~~2.65% from ~~2.50%~~2.57% over the same period.

Provision for Loan Losses.

~~We recorded no provision~~Provision for loan losses for ~~either~~ the three months ~~ending~~ended June 30, ~~2021 or~~2022 was $105,000 compared to no provision for the three months ~~ending~~ended June 30, ~~2020.~~2021. The allowance for loan losses was ~~$2.7~~$3.1 million, or ~~0.82%~~0.89%, of total loans (and ~~0.85%~~0.89% excluding PPP loans), at June 30, ~~2021,~~2022, compared to ~~$2.7~~$2.9 million, or ~~0.82%~~0.88% of total loans (and ~~0.86%~~0.89% excluding PPP loans), at December 31, ~~2020.~~2021. Nonaccrual loans constituted ~~0.32%~~0.23% of total gross loans (and ~~0.33%~~0.23% excluding PPP loans) at June 30, ~~2021,~~2022, compared to ~~0.39%~~0.31% of gross loans at December 31, ~~2020~~2021 (and ~~0.41%~~0.32% excluding PPP loans). Net recoveries for the three months ~~ending~~ended June 30, ~~2021~~2022 were ~~$33,000~~$10,000 compared to net ~~recoveries~~charge-offs of ~~$106,000~~$33,000 for the three months ~~ending~~ended June 30, ~~2020.~~2021. The increase in provision was primarily due to the increase in loans outstanding.

Non-interest

Income

Non-interest

income decreased ~~$489,000,~~$1.0 million, or ~~30.1%~~89.6%, to $118,000 for the three months ended June 30, 2022, from $1.1 million for the three months ~~ending~~ended June 30, ~~2021, from $1.6 million for the three months ending June 30, 2020.~~2021. The decrease was ~~due~~ primarily tothe result of a ~~$728,000~~$763,000 decline in the market value of marketable equity securities and a $241,000 decrease in net ~~gains~~gain on ~~the~~ sale of ~~loans and a $155,000 decrease in unrealized gain on marketable equity securities.~~loans. The decrease in ~~net gains on sale~~the market value of ~~loans was due to a reduction in mortgage activity and a lower volume of loan sales while the decrease in unrealized gain on~~ marketable equity securities was due to a decrease in the market value of mutual funds held in our ~~Rabbi Trust accounts. Partially offsetting these decreases~~deferred compensation plan. The decrease in the net gain on sale of loans was primarily due to the decrease in the sale of mortgage loans held for sale, which decreased $21.6 million, from $29.6 million in the second quarter of 2021 to $8.0 million in the second quarter of 2022.

Non-interest

Expense.

Non-interest

expense decreased $677,000, or 15.5%, to $3.7 million for the three months ended June 30, 2022 from $4.4 million for the three months ended June 30, 2021. This decrease was primarily due to a $664,000 decrease in salaries and employee benefits. The decrease in salaries and benefits was due primarily to a $763,000 decrease in the market value of mutual funds held in our deferred compensation plan, offset in part by a $94,000 increase in salaries.

Income Tax Benefit.

We recorded an income tax benefit of $133,000 for the three months ended June 30, 2022, compared to an income tax benefit of $58,000 for the three months ended June 30, 2021. The increase in income tax benefit was primarily due to a decrease in income before taxes during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Comparison of Operating Results for the Six Months Ended June 30, 2022 and 2021

Net (Loss) Income.

We recorded net loss of $296,000 for the six months ending June 30, 2022, compared to net income of $470,000 recorded for the six months ending June 30, 2021. This decrease was primarily due to a $2.2 million decrease in

non-interest

income, which was partially offset by an $822,000 decrease in noninterest expense, a $353,000 increase in net interest income after provision for loan losses and a $294,000 decrease in income tax expense.

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Interest and Dividend Income.

Interest and dividend income increased $424,000, or 5.9%, to $7.6 million for the six months ending June 30, 2022, from $7.1 million for the six months ending June 30, 2021. The increase was due primarily to an increase in interest earned on taxable securities, which increased $511,000, or 84.7% from $603,000 in the first six months of 2021 to $1.1 million in the first six months of 2022. This increase was primarily due to the Company’s strategy to deploy excess liquidity into securities, which resulted in the average outstanding balance of securities increasing $61.2 million, or 87.5%, from $69.9 million for the first six months of 2021 to $131.1 million for the same period of 2022. This increase was partially offset by a $119,000 decrease in interest and fees on loans. This decrease was primarily the result of a 7 basis point reduction in the yield earned on loans from 3.87% for the first six months of 2021 to 3.80% for the same period in 2022.

Interest Expense.

Interest expense decreased $139,000, or 16.4%, to $710,000 for the six months ended June 30, 2022, from $849,000 for the six months ended June 30, 2021. This decrease was primarily due to a decline in the cost of our interest-bearing deposits, which decreased 7 basis points from 0.32% for the first six months of 2021 to 0.25% for the same period in 2022. This decline was primarily due to the low interest rate environment.

Net Interest Income.

Net interest income increased $563,000, or 9.0%, to $6.8 million for the six months ended June 30, 2022 from $6.3 million for the six months ended June 30, 2021. Our net interest rate spread increased 13 basis points to 2.60% for the six months ended June 30, 2022, from 2.47% for the six months ended June 30, 2021 while our net interest margin increased 14 basis points to 2.74% from 2.60% over the same period.

Provision for Loan Losses.

Provision for loan losses for the six months ended June 30, 2022 was $210,000 compared to no provision for the six months ended June 30, 2021. Net recoveries for the six months ended June 30, 2022 were ~~increases~~$64,000 compared to net recoveries of $29,000 for the six months ended June 30, 2021. The increase in provision was primarily due to the increase in loans outstanding.

Non-interest

Income

Non-interest

income decreased $2.2 million, or 81.5%, to $508,000 for the six months ended June 30, 2022 from $2.7 million for the six months ended June 30, 2021. This decrease was due primarily to a $1.1 million decline in the market value of marketable equity securities, a $729,000 decrease in net gains on the sale of loans and a $419,000 decrease in loan servicing ~~fees of $319,000 and $89,000 in service charges and other~~ fees. The ~~increase~~decrease in the market value of marketable equity securities was due to a decrease in the market value of mutual funds held in our deferred compensation plan. The decrease in the net gain on sale of loans was primarily due to the decrease in the sale of mortgage loans held for sale, which decreased $55.1 million, from $70.0 million in the first six months of 2021 to $14.9 million in the same period of 2022. The decrease in loan servicing fees was primarily due to the reversal of a $369,000 impairment previously recorded against the value of mortgage servicing ~~rights.~~rights in the first six months of 2021. The value of mortgage servicing rights increased as a result of an increase in market interest rates. ~~The increase in service charges and other fees was due to waived service charges during the three months ended June 30, 2020 as part of our response to the pandemic.~~

Non-interest

Expense.

Non-interest

expense ~~increased $386,000,~~decreased $822,000, or 9.7%, to ~~$4.4~~$7.6 million for the ~~three~~six months ended June 30, ~~2021~~2022 from ~~$4.0~~$8.5 million for the ~~three~~six months ended June 30, ~~2020.~~2021. This decrease was primarily due to an $835,000 decrease in salaries and employee benefits. The ~~increase was due primarily to a $295,000 increase~~decrease in salaries and employee benefits ~~during~~primarily resulted from a $1.1 million decline in the ~~three months ended June 30, 2021 resulting from increases~~market value of marketable equity securities held in ~~discretionary~~our deferred compensation plan, offset in part by a $135,000 increase in incentive ~~pay.~~bonus expense and a $69,000 increase in salary expense.

Income Tax Expense.

We recorded an income tax benefit of ~~$58,000 for the three months ended June 30, 2021, compared to an income tax expense of $225,000 for the three months ended June 30, 2020.~~

~~Table of Contents~~

~~Comparison of Operating Results for the Six Months Ended June 30, 2021 and 2020~~

~~General.~~

We recorded net income of $470,000 for the six months ending June 30, 2021, compared to net income of $481,000 recorded for the six months ending June 30, 2020. This decrease was due to a $1.4 million increase in

~~non-interest~~

~~expense, which was partially offset by a $607,000 increase in net interest income and a $514,000 increase in noninterest income and a $270,000 decrease in income tax expense.~~

~~Interest and Dividend Income.~~

Interest and dividend income decreased $318,000, or 4.3%, to $7.1 million for the six months ending June 30, 2021, from $7.4 million for the six months ending June 30, 2020. The decrease was due primarily to the declining interest rate environment brought on by the

~~COVID-19~~

~~pandemic. As a result, interest income from loans decreased by~~ $192,000 or 2.9%, to $6.4 million for the six months ending June 30, 2021, from $6.6 million for the six months ending June 30, 2020. Interest income from securities and other assets decreased by $126,000, or 15.1%, to $710,000 for the six months ending June 30, 2021, from $836,000 for the six months ending June 30, 2020.

~~Interest Expense.~~

Interest expense decreased $925,000, or 52.1%, to $849,000 for the six months ending June 30, 2021, from $1.8 million for the six months June 30, 2020, as rates on interest-bearing liabilities decreased 62 basis points due to the declining interest rate environment.

~~Net Interest Income.~~

~~Net interest income increased $607,000, or 10.7%, to $6.3 million~~ for the six months ended June 30, 2021 from $5.7 million for the six months ended June 30, 2020. The rate for average interest-bearing liabilities decreased to 0.49% for the six months ended June 30, 2021, from 1.11% for the six months ended June 30, 2020. This 62 basis point decrease in the cost of funds came as the yield on interest-earning assets decreased by 59 basis points, to 2.97% for the six months ended June 30, 2021, from 3.56% for the six months ended June 30, 2020. Our net interest rate spread increased four basis points to 2.49% for the six months ended June 30, 2021, from 2.45% for the six months ended June 30, 2020 while and our net interest margin decreased nine basis points to 2.62% from 2.71% over the same period.

~~Provision for Loan Losses.~~

We recorded no provision for loan losses for the six months ended June 30, 2021 and 2020, respectively. The allowance for loan losses was $2.7 million, or 0.82%, of total loans (and 0.85% excluding PPP loans), at June 30, 2021,2022, compared to $2.7 million, or 0.82% of total loans (and 0.86% excluding PPP loans), at December 31, 2020. Nonaccrual loans constituted 0.32% of total gross loans (and 0.33% excluding PPP loans) at June 30, 2021, compared to 0.39% of gross loans at December 31, 2020 (and 0.41% excluding PPP loans). Net recoveries for the six months ended June 30, 2021 were $29,000 compared to net recoveries of $114,000 for the six months ended June 30, 2020.

~~Non-interest~~

~~Income~~

~~Non-interest~~

income increased $514,000, or 23.1%, to $2.7 million for the six months ended June 30, 2021 from $2.2 million for the six months ended June 30, 2020. The increase was due primarily to increases in loan servicing fees of $906,000 and $300,000 in unrealized gain on marketable equity securities. The increase in loan servicing fees was primarily due to the reversal of a $369,000 impairment previously recorded against the value of mortgage servicing rights. The value of mortgage servicing rights increased as a result of an ~~increase in market interest rates. The increase in other~~

~~non-interest~~

income was due to an increase in the market value of our Rabbi Trust accounts. The increase was partially offset by an $815,000 decrease in net gains on the sale of loans due to a reduction in mortgage activity and a lower volume of loan sales.

~~Non-interest~~

~~Expense.~~

~~Non-interest~~

expense increased $1.4 million, or 19.9%, to $8.5 million for the six months ended June 30, 2021 from $7.1 million for the six months ended June 30, 2020. The increases were due primarily due to an increase of $1.1 million in salaries and employee benefits. The increase in salaries and employee benefits resulted from increases in discretionary incentive pay and an increase in the market value of our Rabbi Trust accounts.

~~Income Tax Expense.~~

~~We recorded~~ income tax expense of $102,000 for the six months ended June 30, ~~2021, compared to an~~2021. The decrease in income tax expense ~~of $372,000 for~~was primarily due to a decrease in income before taxes during the six months ended June 30, ~~2020.~~2022 as compared to the six months ended June 30, 2021.

~~Table of Contents~~

Management of Market Risk

General

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

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

originating commercial real estate and commercial loans, which tend to have shorter terms and higher interest rates than owner occupied

one-

to four-family residential real estate loans, and which generate customer relationships that can result in larger

non-interest-bearing

checking accounts;

selling substantially all of our conforming and eligible jumbo, longer-term, fixed-rate

one-

to four-family residential real estate loans and retaining the

non-conforming

and shorter-term, fixed-rate and adjustable-rate

one-

to four-family residential real estate loans that we originate, subject to market conditions and periodic review of our asset/liability management needs; and

reducing our dependence on jumbo and brokered certificates of deposit to support lending and investment activities and increasing our reliance on core deposits, including checking accounts and savings accounts, which are less interest rate sensitive than certificates of deposit.

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 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 June 30, ~~2021,~~2022, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.


Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Level			Net Interest Income Year 1 Forecast		Year 1 Change from Level
	(Dollars in thousands)					(Dollars in thousands)
+400	$	17,003		42.92	%	$	13,815		4.48	%
+300		15,807		32.86	%		13,637		3.14	%
+200		14,533		22.15	%		13,472		1.88	%
+100		13,225		11.16	%		13,328		0.79	%
Level		11,897		—	%		13,223		—	%
-100		11,245		(5.49	)%		13,223		0.01	%

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

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 June 30, ~~2021,~~2022, 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.

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Table of Contents

Estimated Increase (Decrease) in EVE

Basis Point (“bp”) Change in
Interest Rates
(1)

Estimated EVE
(2)

Amount

Percent


(Dollars in thousands)

400
   $ 85,813    $ 18,848    28.15 %
300
   81,691    14,726    21.99 %
200
   77,899    10,934    16.33 %
100
   73,225    6,260    9.35 %
—
   66,965    —      —   %
(100)
   60,164    (6,801 )    (10.16 %)


			Estimated Increase (Decrease) in EVE
Basis Point (“bp”) Change in Interest Rates (1)	Estimated EVE (2)		Amount			Percent

	(Dollars in thousands)
+400	$	61,629	$	(9,188	)		(12.97	%)
+300		63,670		(7,147	)		(10.09	%)
+200		65,710		(5,107	)		(7.21	%)
+100		67,968		(2,849	)		(4.02	%)
Level		70,817		—			—	%
-100		70,850		33			0.05	%

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

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

The table above indicates that at June 30, ~~2021,~~2022, in the event of a

100-basis

point increase in interest rates, we would have experienced a ~~9.35% increase~~4.02% decrease in our EVE. In the event of a

200-basis

point increase in interest rates at June 30, ~~2021,~~2022, we would have experienced a ~~16.33% increase~~7.21% 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, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB. At June 30, ~~2021,~~2022, we had ~~$63.4~~$57.4 million outstanding in advances from the FHLB. At June 30, ~~2021,~~2022, we had ~~$85.6~~$85.4 million in additional borrowing capacity at the Federal Home Loan Bank of Chicago. Additionally, at June 30, ~~2021~~2022, we had a ~~$10.0~~$15.0 million federal funds ~~rate~~ line of credit with the BMO Harris Bank, none of which was drawn at June 30, ~~2021.~~2022. The Company also had a ~~$6.8~~$10.4 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately ~~$12.2~~$13.3 million at June 30, ~~2021.~~2022. The Company had not drawn on the Federal Reserve line as of June 30, ~~2021.~~2022.

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 ~~$593,000~~$533,000 for the six months ended June 30, ~~2021. Net~~2022, as compared to net cash ~~used in~~provided by operating activities ~~was $4.3 million~~of $523,000 for the six months ended June 30, ~~2020.~~2021. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of ~~available for sale~~

available-for-sale

securities, offset by proceeds from maturing securities and pay downs on securities, was ~~$35.0~~$52.5 million for the six months ended June 30, 2021. Net cash used in investing activities was $4.5 million for the six months ended June 30, 2020. Net cash provided by financing activities, consisting primarily of increases of $86.3 million in deposits, was $87.72022, as compared to $35.0 million for the six months ended June 30, 2021. Net cash provided by financing activities, consisting primarily of increases in borrowings and advance payments by borrowers for taxes and insurance, was ~~$65.9~~$5.4 million for the six months ended June 30, ~~2020, consisting primarily of $52~~2022, as compared to $87.8 million of ~~proceeds~~cash provided by financing activities during the six months ended June 30, 2021. The primary source of the difference in cash provided by financing activities was $94.8 million in initial subscriptions from ~~issuance~~the stock offering in 2021, of ~~Federal Home Loan Bank advances.~~which the Company retained $35.4 million.

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Table of Contents

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, to fund loan growth.

Capital

The Company’s Board of Directors authorized a stock repurchase plan in the first quarter of 2020 allowing the Company to repurchase up to 109,725 shares of stock. As of June 30, 2021, the Company had repurchased 109,725 shares at an average price of $9.60 under the approved stock repurchase plan.

At June 30, ~~2021, we~~2022, PyraMax Bank exceeded all of ~~our~~its regulatory capital requirements with a Tier 1 leverage capital level of ~~$50.7~~$64.5 million, or ~~9.7%~~11.8% of adjusted total assets, which is above the well-capitalized required level of ~~$26.2~~$27.4 million, or 5.0%~~, and~~. The Bank had total risk-based capital of ~~$53.5~~$67.6 million, or ~~16.1%~~17.9% of risk-weighted assets, which is above the well-capitalized required level of ~~$33.2~~$37.8 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.

June 30, 2021


Actual

For Capital Adequacy
Purposes

To Be Well Capitalized
Under Prompt
Corrective Action
Provisions


Amount

Ratio

Amount

Ratio

Amount

Ratio


(dollars in thousands)

Leverage (Tier 1)
   $ 50,739    9.7 % $ 20,933    4.0 % $ 26,167    5.0 %
Risk-based:

Common Tier 1
   50,739    15.3 % 14,955    4.5 % 21,601    6.5 %
Tier 1
   50,739    15.3 % 19,940    6.0 % 26,586    8.0 %
Total
   53,471    16.1 % 26,586    8.0 % 33,233    10.0 %

~~Table of Contents~~

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 accorded to 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.

~~The following tables present contractual obligations at June 30, 2021 and December 31, 2020.~~

Payments Due by Period

Contractual Obligations

Total

Less Than
One Year

One to Three
Years

Three to Five
Years

More Than
Five Years


(Dollars in thousands)

At June 30, 2021:

Long-term debt obligations
   $ 63,423    $ 15,469    $ 10,513    $ 4,118    $ 33,323
Operating lease obligations
   266    77    167    22    —










Total
   $ 63,689    $ 15,546    $ 10,680    $ 4,140    $ 33,323










At December 31, 2020:

Long-term debt obligations
   $ 68,398    $ 12,956    $ 16,987    $ 4,091    $ 34,364
Operating lease obligations
   20    20    —      —      —










Total
   $ 68,418    $ 12,976    $ 16,987    $ 4,091    $ 34,364

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.

Table of Contents

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 June 30, ~~2021.~~2022. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended June 30, ~~2021,~~2022, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~Table of Contents~~

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 June 30, ~~2021,~~2022, 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, ~~2020~~2021 Annual Report on Form

10-K

filed with the Securities and Exchange ~~Commission, as supplemented by our March 31, 2021 Quarterly Report on Form~~

~~10-Q.~~

Commission. There are no material changes from the risk factors included ~~within those reports.~~in the Annual Report on Form

10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Table of Contents

Item 6.

Exhibits


Exhibit Number		Description

3.1		Charter of 1895 Bancorp of Wisconsin, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1, as amended (Commission File No. ~~333-227223)~~333-254135))

3.2		Bylaws of 1895 Bancorp of Wisconsin, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1, as amended (Commission File No. ~~333-227223)~~333-254135))

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

101.0		The following materials for the quarter ended June 30, ~~2021,~~2022, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated ~~Statements of Financial Condition,~~Balance Sheets, (ii) the Consolidated Statements of ~~Income,~~Operations, (iii) Consolidated Statements of Comprehensive (Loss) Income, ~~(Loss),~~ (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and ~~(v)~~(vi) Notes to Consolidated Financial Statements *

~~104~~104.0		~~Cover Page Interactive Data File (formatted as Inline~~The cover page of this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, formatted in XBRL ~~and contained~~(contained in Exhibit ~~101)~~101.0) *

*	Furnished, not filed.

~~Table of Contents~~

SIGNATURES

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


						1895 BANCORP OF WISCONSIN, INC.

Date: August ~~13, 2021~~12, 2022						/s/ Richard B. Hurd
						Richard B. Hurd
						~~President and~~ Chief Executive Officer

Date: August ~~13, 2021~~12, 2022						/s/ ~~Richard J. Krier~~Steven T. Klitzing
						~~Richard J. Krier~~Steven T. Klitzing
						Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements		1

	Consolidated Balance Sheets at June 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021		1

	Consolidated Statements of Operations for the Three ~~Months~~ and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)		2

	Consolidated Statements of Comprehensive (Loss) Income for the Three ~~Months~~ and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)		3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)		4

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)		5

	Notes to Consolidated Financial Statements (unaudited)		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2930

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4243

Item 4.	Controls and Procedures		4243

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		43

Item 1A.	Risk Factors		43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43

Item 3.	Defaults Upon Senior Securities		43

Item 4.	Mine Safety Disclosures		43

Item 5.	Other Information		43

Item 6.	Exhibits		4344

	SIGNATURES		44


	Six Months Ended June 30, 2021 vs. 2020
	Increase (Decrease) Due to						Total Increase (Decrease)
	Volume			Rate			Total Increase (Decrease)
	(Dollars in thousands)
Interest-earning assets:
Loans	$	358			(550	)		(192	)
Securities		14			(199	)		(185	)
Other		64			(5	)		59

Total interest-earning assets		436			(754	)		(318	)

Interest-bearing liabilities:
NOW		(12	)		23			11
Money market deposits		(284	)		396			112
Savings		(13	)		25			12
Certificates of deposit		286			595			881

Total interest-bearing deposits		(23	)		1,039			1,016
Borrowings		(105	)		14			(91	)
Other		—			—			—

Total interest-bearing liabilities		(128	)		1,053			925

Change in net interest income	$	308			299			607


			Estimated Increase (Decrease) in EVE
Basis Point (“bp”) Change in Interest Rates (1)	Estimated EVE (2)		Amount			Percent
	(Dollars in thousands)
400	$	85,813	$	18,848			28.15	%
300		81,691		14,726			21.99	%
200		77,899		10,934			16.33	%
100		73,225		6,260			9.35	%
—		66,965		—			—	%
(100)		60,164		(6,801	)		(10.16	%)


			Payments Due by Period
Contractual Obligations	Total		Less Than One Year		One to Three Years		Three to Five Years		More Than Five Years
	(Dollars in thousands)
At June 30, 2021:
Long-term debt obligations	$	63,423	$	15,469	$	10,513	$	4,118	$	33,323
Operating lease obligations		266		77		167		22		—

Total	$	63,689	$	15,546	$	10,680	$	4,140	$	33,323

At December 31, 2020:
Long-term debt obligations	$	68,398	$	12,956	$	16,987	$	4,091	$	34,364
Operating lease obligations		20		20		—		—		—

Total	$	68,418	$	12,976	$	16,987	$	4,091	$	34,364