UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to
Commission File
1895 Bancorp of Wisconsin, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Maryland | 61-1993378 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
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 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.
YESYesNo
☒ 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(§ (§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
YesNo
☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
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 YES ☐ NO ☒
YesNo
6,621,077 shares
1895 Bancorp of Wisconsin, Inc.
Form
Table of Contents
Page | ||||||||
Item 1. | 1 | |||||||
Consolidated Balance Sheets at September 30, | 1 | |||||||
2 | ||||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 | ||||||
Item 3. | 43 | |||||||
Item 4. | 43 | |||||||
Item 1. | 43 | |||||||
Item 1A. | 43 | |||||||
Item 2. | 43 | |||||||
Item 3. | 43 | |||||||
Item 4. | 43 | |||||||
Item 5. | 43 | |||||||
Item 6. | 44 | |||||||
45 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
1895 BANCORP OF WISCONSIN, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30, 2021 | December 31, 2020 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Cash and due from banks | $ | 84,433 | $ | 87,977 | ||||
Fed funds sold | 2,423 | 4,549 | ||||||
Cash and cash equivalents | 86,856 | 92,526 | ||||||
Marketable equity securities, stated at fair value | 3,309 | 2,992 | ||||||
Available for sale securities, stated at fair value | 87,121 | 58,703 | ||||||
Loans held for sale | 1,927 | 2,484 | ||||||
Loans, net | 330,310 | 329,073 | ||||||
Premises and equipment, net | 5,972 | 6,275 | ||||||
Mortgage servicing rights, net | 2,082 | 1,806 | ||||||
Federal Home Loan Bank (FHLB) stock, at cost | 3,032 | 3,032 | ||||||
Accrued interest receivable | 896 | 912 | ||||||
Cash value of life insurance | 13,789 | 13,485 | ||||||
Other assets | 5,895 | 5,469 | ||||||
TOTAL ASSETS | $ | 541,189 | $ | 516,757 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Deposits | 374,314 | 379,848 | ||||||
Advance payments by borrowers for taxes and insurance | 11,982 | 2,737 | ||||||
FHLB advances | 55,934 | 68,398 | ||||||
Accrued interest payable | 113 | 183 | ||||||
Other liabilities | 6,638 | 5,583 | ||||||
TOTAL LIABILITIES | 448,981 | 456,749 | ||||||
Common stock (par value $0.01 per share) Authorized - 90,000,000 shares at September 30, 2021 and December 31, 2020 Issued – 6,405,204 at September 30, 2021 and 4,961,626 at December 31, 2020 (includes 104,499 and 84,949 unvested shares, respectively) (1) Outstanding – 6,374,141 at September 30, 2021 and 4,834,401 at December 31, 2020 (includes 104,499 and 84,949 unvested shares, respectively)(1) | 64 | 49 | ||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized at September 30, 2021 and December 31, 2020 | 0 | 0 | ||||||
Additional paid-in capital | 52,719 | 20,134 | ||||||
Unallocated common stock of Employee Stock Ownership Plan (ESOP), 337,361 and 161,486 shares at September 30, 2021 and December 31, 2020, respectively (1) | (2,991 | ) | (1,615 | ) | ||||
Less treasury stock at cost, 31,063 at September 30, 2021 and 127,225 December 31, 2020 (1) | (311 | ) | (1,228 | ) | ||||
Retained earnings | 41,885 | 41,530 | ||||||
Accumulated other comprehensive income, net of income taxes | 842 | 1,138 | ||||||
Total stockholders’ equity | 92,208 | 60,008 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 541,189 | $ | 516,757 | ||||
|
| September 30, |
|
| December 31, |
| ||
|
| (unaudited) |
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Cash and due from banks |
| $ | 13,002 |
|
| $ | 65,300 |
|
Fed funds sold |
|
| 2,700 |
|
|
| 1,503 |
|
Cash and cash equivalents |
|
| 15,702 |
|
|
| 66,803 |
|
|
|
|
|
|
|
| ||
Marketable equity securities, stated at fair value |
|
| 2,723 |
|
|
| 3,544 |
|
Available-for-sale securities, stated at fair value |
|
| 118,414 |
|
|
| 112,440 |
|
Loans held for sale |
|
| 365 |
|
|
| 1,183 |
|
Loans, net of allowance for loan losses of $3,180 and $2,858 at |
|
| 354,740 |
|
|
| 323,789 |
|
Premises and equipment, net |
|
| 5,562 |
|
|
| 5,864 |
|
Mortgage servicing rights, net |
|
| 1,890 |
|
|
| 2,036 |
|
Federal Home Loan Bank (FHLB) stock, at cost |
|
| 3,205 |
|
|
| 3,032 |
|
Accrued interest receivable |
|
| 1,106 |
|
|
| 948 |
|
Cash value of life insurance |
|
| 14,209 |
|
|
| 13,892 |
|
Other assets |
|
| 11,401 |
|
|
| 6,108 |
|
TOTAL ASSETS |
| $ | 529,317 |
|
| $ | 539,639 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
| ||
Deposits |
| $ | 379,298 |
|
| $ | 384,501 |
|
Advance payments by borrowers for taxes and insurance |
|
| 10,225 |
|
|
| 1,860 |
|
FHLB advances |
|
| 56,951 |
|
|
| 55,442 |
|
Accrued interest payable |
|
| 142 |
|
|
| 109 |
|
Other liabilities |
|
| 6,798 |
|
|
| 6,834 |
|
TOTAL LIABILITIES |
|
| 453,414 |
|
|
| 448,746 |
|
Preferred stock, $0.01 par value, 10,000,000 shares authorized at September 30, 2022 |
|
| — |
|
|
| — |
|
Common stock (par value $0.01 per share) Authorized - 90,000,000 shares at |
|
| 63 |
|
|
| 64 |
|
Additional paid-in capital |
|
| 50,943 |
|
|
| 52,805 |
|
Unallocated common stock of Employee Stock Ownership Plan (ESOP), 458,765 and |
|
| (4,354 | ) |
|
| (3,432 | ) |
Less treasury stock at cost, 30,063 shares at September 30, 2022 and December 31, 2021 |
|
| (301 | ) |
|
| (301 | ) |
Retained earnings |
|
| 41,443 |
|
|
| 41,615 |
|
Accumulated other comprehensive (loss) income, net of income taxes |
|
| (11,891 | ) |
|
| 142 |
|
Total stockholders’ equity |
|
| 75,903 |
|
|
| 90,893 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 529,317 |
|
| $ | 539,639 |
|
See accompanying notes to the unaudited consolidated financial statements.
1
1895 BANCORP OF WISCONSIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) – Unaudited
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Interest and dividend income: | ||||||||||||||||
Loans, including fees | $ | 2,939 | $ | 3,617 | $ | 9,357 | $ | 10,228 | ||||||||
Securities, taxable | 368 | 304 | 971 | 1,092 | ||||||||||||
Other | 74 | 17 | 181 | 65 | ||||||||||||
Total interest and dividend income | 3,381 | 3,938 | 10,509 | 11,385 | ||||||||||||
Interest expense: | ||||||||||||||||
Interest-bearing deposits | 171 | 480 | 620 | 1,946 | ||||||||||||
Borrowed funds | 178 | 207 | 579 | 516 | ||||||||||||
Total interest expense | 349 | 687 | 1,199 | 2,462 | ||||||||||||
Net interest income | 3,032 | 3,251 | 9,310 | 8,923 | ||||||||||||
Provision for loan losses | 30 | 500 | 30 | 500 | ||||||||||||
Net interest income after provision for loan losses | 3,002 | 2,751 | 9,280 | 8,423 | ||||||||||||
Noninterest income: | ||||||||||||||||
Service charges and other fees | 242 | 215 | 713 | 578 | ||||||||||||
Loan servicing, net | 204 | 252 | 971 | 112 | ||||||||||||
Net gain on sale of loans | 448 | 936 | 1,361 | 2,665 | ||||||||||||
Net gain on sale of securities | 0 | 1,014 | 12 | 1,022 | ||||||||||||
Increase in cash surrender value of insurance | 103 | 101 | 304 | 299 | ||||||||||||
Unrealized (loss) gain on marketable equity securities | (377 | ) | 198 | (5 | ) | 270 | ||||||||||
Other | 8 | 43 | 15 | 42 | ||||||||||||
Total noninterest income | 628 | 2,759 | 3,371 | 4,988 | ||||||||||||
Noninterest expense: | ||||||||||||||||
Salaries and employee benefits | 2,137 | 2,419 | 7,290 | 6,506 | ||||||||||||
Foreclosed assets, net | 0 | 0 | 0 | (8 | ) | |||||||||||
Advertising and promotions | 52 | 31 | 84 | 103 | ||||||||||||
Data processing | 206 | 206 | 611 | 573 | ||||||||||||
Occupancy and equipment | 341 | 319 | 1,076 | 1,016 | ||||||||||||
FDIC assessment | 38 | 31 | 105 | 81 | ||||||||||||
Other | 1,028 | 887 | 3,086 | 2,670 | ||||||||||||
Total noninterest expense | 3,802 | 3,893 | 12,252 | 10,941 | ||||||||||||
(Loss) income before income taxes | (172 | ) | 1,617 | 399 | 2,470 | |||||||||||
Income tax (benefit) expense | (57 | ) | 1,205 | 45 | 1,577 | |||||||||||
Net (loss) income | $ | (115 | ) | $ | 412 | $ | 354 | $ | 893 | |||||||
(Loss) earnings per common share: | ||||||||||||||||
Basic (1) | $ | (0.02 | ) | $ | 0.09 | $ | 0.06 | $ | 0.20 | |||||||
Diluted (1) | $ | (0.02 | ) | $ | 0.09 | $ | 0.06 | $ | 0.20 | |||||||
Average common shares outstanding: | ||||||||||||||||
Basic (1) | 6,011,247 | 4,481,625 | 6,035,289 | 4,494,234 | ||||||||||||
Diluted (1) | 6,220,755 | 4,519,626 | 6,262,722 | 4,529,967 |
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Interest and dividend income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans, including fees |
| $ | 3,563 |
|
| $ | 2,939 |
|
| $ | 9,862 |
|
| $ | 9,357 |
|
Securities, taxable |
|
| 613 |
|
|
| 368 |
|
|
| 1,727 |
|
|
| 971 |
|
Other |
|
| 139 |
|
|
| 74 |
|
|
| 279 |
|
|
| 181 |
|
Total interest and dividend income |
|
| 4,315 |
|
|
| 3,381 |
|
|
| 11,868 |
|
|
| 10,509 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing deposits |
|
| 196 |
|
|
| 171 |
|
|
| 551 |
|
|
| 620 |
|
Borrowed funds |
|
| 200 |
|
|
| 178 |
|
|
| 550 |
|
|
| 579 |
|
Other interest-bearing liabilities |
|
| 2 |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
Total interest expense |
|
| 398 |
|
|
| 349 |
|
|
| 1,108 |
|
|
| 1,199 |
|
Net interest income |
|
| 3,917 |
|
|
| 3,032 |
|
|
| 10,760 |
|
|
| 9,310 |
|
Provision for loan losses |
|
| — |
|
|
| 30 |
|
|
| 210 |
|
|
| 30 |
|
Net interest income after provision for loan losses |
|
| 3,917 |
|
|
| 3,002 |
|
|
| 10,550 |
|
|
| 9,280 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Service charges and other fees |
|
| 229 |
|
|
| 242 |
|
|
| 722 |
|
|
| 713 |
|
Loan servicing, net |
|
| 167 |
|
|
| 204 |
|
|
| 515 |
|
|
| 971 |
|
Net gain on sale of loans |
|
| 83 |
|
|
| 448 |
|
|
| 266 |
|
|
| 1,361 |
|
Net gain on sale of securities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12 |
|
Increase in cash surrender value of insurance |
|
| 108 |
|
|
| 103 |
|
|
| 317 |
|
|
| 304 |
|
Unrealized (loss) on marketable equity securities |
|
| (159 | ) |
|
| (377 | ) |
|
| (892 | ) |
|
| (5 | ) |
Other |
|
| 51 |
|
|
| 8 |
|
|
| 58 |
|
|
| 15 |
|
Total noninterest income |
|
| 479 |
|
|
| 628 |
|
|
| 986 |
|
|
| 3,371 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Salaries and employee benefits |
|
| 2,528 |
|
|
| 2,137 |
|
|
| 6,846 |
|
|
| 7,290 |
|
Advertising and promotions |
|
| 33 |
|
|
| 52 |
|
|
| 146 |
|
|
| 84 |
|
Data processing |
|
| 221 |
|
|
| 206 |
|
|
| 630 |
|
|
| 611 |
|
Occupancy and equipment |
|
| 326 |
|
|
| 341 |
|
|
| 1,010 |
|
|
| 1,076 |
|
FDIC assessment |
|
| 36 |
|
|
| 38 |
|
|
| 99 |
|
|
| 105 |
|
Other |
|
| 1,107 |
|
|
| 1,028 |
|
|
| 3,149 |
|
|
| 3,086 |
|
Total noninterest expense |
|
| 4,251 |
|
|
| 3,802 |
|
|
| 11,880 |
|
|
| 12,252 |
|
Income (loss) before income taxes |
|
| 145 |
|
|
| (172 | ) |
|
| (344 | ) |
|
| 399 |
|
Income tax expense (benefit) |
|
| 21 |
|
|
| (57 | ) |
|
| (172 | ) |
|
| 45 |
|
Net income (loss) |
| $ | 124 |
|
| $ | (115 | ) |
| $ | (172 | ) |
| $ | 354 |
|
Earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.02 |
|
| $ | (0.02 | ) |
| $ | (0.03 | ) |
| $ | 0.06 |
|
Diluted |
| $ | 0.02 |
|
| $ | (0.02 | ) |
| $ | (0.03 | ) |
| $ | 0.06 |
|
Average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 5,810,185 |
|
|
| 6,011,247 |
|
|
| 5,842,184 |
|
|
| 6,035,289 |
|
Diluted |
|
| 5,983,241 |
|
|
| 6,011,247 |
|
|
| 5,842,184 |
|
|
| 6,262,722 |
|
See accompanying notes to the unaudited consolidated financial statements.
2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands) - Unaudited
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net (loss) income | $ | (115 | ) | $ | 412 | $ | 354 | $ | 893 | |||||||
Other comprehensive (loss) income: | ||||||||||||||||
Unrealized holding (losses) gains arising during the period | (39 | ) | 233 | (392 | ) | 2,574 | ||||||||||
Reclassification adjustment for gains realized in net income | 0 | (1,014 | ) | (12 | ) | (1,022 | ) | |||||||||
Other comprehensive (loss) income before tax effect | (39 | ) | (781 | ) | (404 | ) | 1,552 | |||||||||
Tax effect of other comprehensive (loss) income items | (10 | ) | (211 | ) | (108 | ) | 419 | |||||||||
Other comprehensive (loss) income, net of tax | (29 | ) | (570 | ) | (296 | ) | 1,133 | |||||||||
Comprehensive (loss) income | $ | (144 | ) | $ | (158 | ) | $ | 58 | $ | 2,026 | ||||||
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income (loss) |
| $ | 124 |
|
| $ | (115 | ) |
| $ | (172 | ) |
| $ | 354 |
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized holding (losses) arising during the |
|
| (4,549 | ) |
|
| (39 | ) |
|
| (16,483 | ) |
|
| (392 | ) |
Reclassification adjustment for (gains) realized in net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12 | ) |
Other comprehensive (loss) before tax effect |
|
| (4,549 | ) |
|
| (39 | ) |
|
| (16,483 | ) |
|
| (404 | ) |
Tax effect of other comprehensive (loss) income items |
|
| 1,228 |
|
|
| 10 |
|
|
| 4,451 |
|
|
| 108 |
|
Other comprehensive (loss), net of tax |
|
| (3,321 | ) |
|
| (29 | ) |
|
| (12,032 | ) |
|
| (296 | ) |
Comprehensive (loss) income |
| $ | (3,197 | ) |
| $ | (144 | ) |
| $ | (12,204 | ) |
| $ | 58 |
|
See accompanying notes to the unaudited consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands) - Unaudited
Common stock (1) | Additional paid-in capital | Treasury Stock | Unallocated common of ESOP(1) | 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 | ) | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (124 | ) | (124 | ) | |||||||||||||||||||
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 | ||||||||||||||||||||
Stock compensation expense | — | 44 | — | — | — | — | 44 | |||||||||||||||||||||
Balance as of June 30, 2020 | $ | 49 | $ | 20,022 | $ | (406 | ) | $ | (1,650 | ) | $ | 40,694 | $ | 1,810 | $ | 60,519 | ||||||||||||
Net income | — | — | — | — | 412 | — | 412 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (570 | ) | (570 | ) | |||||||||||||||||||
Repurchase of 1895 Bancorp of Wisconsin, Inc. common stock (81,249 shares repurchased) | — | — | (793 | ) | — | — | — | (793 | ) | |||||||||||||||||||
ESOP shares committed to be released (1,755 shares) | — | (1 | ) | — | 18 | — | — | 17 | ||||||||||||||||||||
Stock compensation expense | — | 55 | — | — | — | — | 55 | |||||||||||||||||||||
Balance as of September 30, 2020 | $ | 49 | $ | 20,076 | $ | (1,199 | ) | $ | (1,632 | ) | $ | 41,106 | $ | 1,240 | $ | 59,640 | ||||||||||||
Balance as of January 1, 2021 | $ | 49 | $ | 20,134 | $ | (1,228 | ) | $ | (1,615 | ) | $ | 41,530 | $ | 1,138 | $ | 60,008 | ||||||||||||
Net income | — | — | — | — | 521 | — | 521 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (594 | ) | (594 | ) | |||||||||||||||||||
Purchase of treasury stock | — | — | (15 | ) | — | — | — | (15 | ) | |||||||||||||||||||
ESOP shares committed to be released (2,310 shares) | — | 3 | — | 18 | — | — | 21 | |||||||||||||||||||||
Issuance of treasury stock – stock compensation plan | — | (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 (2,310 shares) | 13 | 17 | 30 | |||||||||||||||||||||||||
Retirement of common stock | — | (70 | ) | — | — | — | — | (70 | ) | |||||||||||||||||||
Stock compensation expense | — | 65 | — | — | — | — | 65 | |||||||||||||||||||||
Balance as of June 30, 2021 | $ | 49 | $ | 20,188 | $ | (1,228 | ) | $ | (1,580 | ) | $ | 42,000 | $ | 871 | $ | 60,300 | ||||||||||||
Net loss | — | — | — | — | (115 | ) | — | (115 | ) | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (29 | ) | (29 | ) | |||||||||||||||||||
Purchase of treasury stock | — | — | (136 | ) | — | — | — | (136 | ) | |||||||||||||||||||
ESOP shares committed to be released (2,310 shares) | — | (10 | ) | — | 18 | — | — | 8 | ||||||||||||||||||||
Gross proceeds from stock offering | 15 | 35,505 | — | — | — | — | 35,520 | |||||||||||||||||||||
Stock offering costs | — | (1,976 | ) | — | — | — | — | (1,976 | ) | |||||||||||||||||||
Purchase of 131,727 shares by ESOP | — | — | — | (1,429 | ) | — | — | (1,429 | ) | |||||||||||||||||||
Retirement of treasury shares from stock offering | — | (1,053 | ) | 1,053 | — | — | — | — | ||||||||||||||||||||
Stock compensation expense | — | 65 | — | — | — | — | 65 | |||||||||||||||||||||
Balance as of September 30, 2021 | $ | 64 | $ | 52,719 | $ | (311 | ) | $ | (2,991 | ) | $ | 41,885 | $ | 842 | $ | 92,208 | ||||||||||||
| Common stock |
|
| Additional paid-in capital |
|
| Unallocated common stock of ESOP |
|
| Treasury Stock |
|
| Retained earnings |
|
| Accumulated other comprehensive income (loss) |
|
| Total |
| |||||||
Balance as of June 30, 2022 | $ | 64 |
|
| $ | 52,855 |
|
| $ | (4,401 | ) |
| $ | (301 | ) |
| $ | 41,319 |
|
| $ | (8,570 | ) |
| $ | 80,966 |
|
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 124 |
|
|
| — |
|
|
| 124 |
|
Other comprehensive loss |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,321 | ) |
|
| (3,321 | ) |
ESOP shares committed to be released (4,892 shares) |
| — |
|
|
| 2 |
|
|
| 47 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49 |
|
Repurchase and retirement of shares-stock repurchase program |
| (1 | ) |
|
| (1,994 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,995 | ) |
Stock compensation expense |
| — |
|
|
| 80 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 80 |
|
Balance as of September 30, 2022 | $ | 63 |
|
| $ | 50,943 |
|
| $ | (4,354 | ) |
| $ | (301 | ) |
| $ | 41,443 |
|
| $ | (11,891 | ) |
| $ | 75,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance as of June 30, 2021 | $ | 49 |
|
| $ | 20,188 |
|
| $ | (1,580 | ) |
| $ | (1,228 | ) |
| $ | 42,000 |
|
| $ | 871 |
|
| $ | 60,300 |
|
Net loss |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (115 | ) |
|
| — |
|
|
| (115 | ) |
Other comprehensive (loss) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (29 | ) |
|
| (29 | ) |
Purchase of treasury stock |
| — |
|
|
| — |
|
|
| — |
|
|
| (136 | ) |
|
| — |
|
|
| — |
|
|
| (136 | ) |
ESOP shares committed to be released (3,420 shares) |
| — |
|
|
| (10 | ) |
|
| 18 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
Gross proceeds from stock offering |
| 15 |
|
|
| 35,505 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35,520 |
|
Stock offering costs |
| — |
|
|
| (1,976 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,976 | ) |
Purchase of 131,727 shares by ESOP |
| — |
|
|
| — |
|
|
| (1,429 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,429 | ) |
Retirement of treasury shares from stock offering |
| — |
|
|
| (1,053 | ) |
|
| — |
|
|
| 1,053 |
|
|
| — |
|
|
| — |
|
|
| 0 |
|
Stock compensation expense |
| — |
|
|
| 65 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 65 |
|
Balance as of September 30, 2021 | $ | 64 |
|
| $ | 52,719 |
|
| $ | (2,991 | ) |
| $ | (311 | ) |
| $ | 41,885 |
|
| $ | 842 |
|
| $ | 92,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance as of January 1, 2022 | $ | 64 |
|
| $ | 52,805 |
|
| $ | (3,432 | ) |
| $ | (301 | ) |
| $ | 41,615 |
|
| $ | 142 |
|
| $ | 90,893 |
|
Net loss |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (172 | ) |
|
| — |
|
|
| (172 | ) |
Other comprehensive loss |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12,033 | ) |
|
| (12,033 | ) |
Reimbursement of stock offering costs |
| — |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
Purchase of 96,446 shares by ESOP |
| — |
|
|
| — |
|
|
| (1,062 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,062 | ) |
ESOP shares committed to be released (14,757 shares) |
| — |
|
|
| 11 |
|
|
| 140 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 151 |
|
Repurchase and retirement of shares-stock repurchase program |
| (1 | ) |
|
| (1,994 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,995 | ) |
Retirement of common stock |
| — |
|
|
| (81 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (81 | ) |
Stock compensation expense |
| — |
|
|
| 200 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 200 |
|
Balance as of September 30, 2022 | $ | 63 |
|
| $ | 50,943 |
|
| $ | (4,354 | ) |
| $ | (301 | ) |
| $ | 41,443 |
|
| $ | (11,891 | ) |
| $ | 75,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance as of January 1, 2021 | $ | 49 |
|
| $ | 20,134 |
|
| $ | (1,615 | ) |
| $ | (1,228 | ) |
| $ | 41,531 |
|
| $ | 1,138 |
|
| $ | 60,009 |
|
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 354 |
|
|
| — |
|
|
| 354 |
|
Other comprehensive loss |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (296 | ) |
|
| (296 | ) |
Purchase of treasury stock |
| — |
|
|
| — |
|
|
| — |
|
|
| (151 | ) |
|
| — |
|
|
|
|
|
| (151 | ) | |
ESOP shares committed to be released (6,930 shares) |
| — |
|
|
| 6 |
|
|
| 53 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 59 |
|
Gross proceeds from stock offering |
| 15 |
|
|
| 35,505 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35,520 |
|
Stock offering costs |
| — |
|
|
| (1,976 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,976 | ) |
Purchase of 131,727 shares by ESOP |
| — |
|
|
| — |
|
|
| (1,429 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,429 | ) |
Issuance of treasury stock – stock compensation plan |
| — |
|
|
| (15 | ) |
|
| — |
|
|
| 15 |
|
|
| — |
|
|
| — |
|
|
| 0 |
|
Retirement of common stock |
| — |
|
|
| (70 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (70 | ) |
Retirement of treasury shares from stock offering |
| — |
|
|
| (1,053 | ) |
|
| — |
|
|
| 1,053 |
|
|
| — |
|
|
| — |
|
|
| 0 |
|
Stock compensation expense |
| — |
|
|
| 188 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 188 |
|
Balance as of September 30, 2021 | $ | 64 |
|
| $ | 52,719 |
|
| $ | (2,991 | ) |
| $ | (311 | ) |
| $ | 41,885 |
|
| $ | 842 |
|
| $ | 92,208 |
|
See accompanying notes to the unaudited consolidated financial statements.
4
1895 BANCORP OF WISCONSIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) - Unaudited
Nine months ended September 30, | ||||||||
2021 | 2020 | |||||||
(unaudited) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 354 | $ | 893 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Net amortization of investment securities | 81 | 180 | ||||||
Depreciation | 497 | 494 | ||||||
Provision for loan losses | 30 | 500 | ||||||
Net loss on sale of premises and equipment | — | 33 | ||||||
Change in fair value of marketable equity securities | 5 | (315 | ) | |||||
Net gain on sale of available for sale securities | (12 | ) | (1,022 | ) | ||||
Stock compensation expense | 188 | 99 | ||||||
Adjustment to mortgage servicing rights valuation | (370 | ) | 575 | |||||
Provision for deferred income tax | 45 | 1,814 | ||||||
Originations of mortgage loans held for sale | (68,556 | ) | (158,442 | ) | ||||
Proceeds from sales of mortgage loans held for sale | 70,474 | 156,730 | ||||||
Net gain on sale of mortgage loans held for sale | (1,361 | ) | (2,665 | ) | ||||
ESOP compensation | 59 | 49 | ||||||
Net change in cash value of life insurance | (304 | ) | (299 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Mortgage servicing rights | 94 | (18 | ) | |||||
Accrued interest receivable and other assets | (655 | ) | (609 | ) | ||||
Accrued interest payable and other liabilities | 915 | (651 | ) | |||||
Net cash provided by (used in) operating activities | 1,484 | (2,654 | ) | |||||
Cash Flows From Investing Activities | ||||||||
Proceeds from sales of available for sale securities | 1,018 | 19,283 | ||||||
Maturities, prepayments, and calls of available for sale securities | 9,296 | 51,697 | ||||||
Purchases of available for sale securities | (39,218 | ) | (50,517 | ) | ||||
Net increase in loans | (1,267 | ) | (18,646 | ) | ||||
Net capital expenditures for premises and equipment | (194 | ) | (226 | ) | ||||
Net increase in Federal Home Loan Bank stock | — | (2,119 | ) | |||||
Net cash used in investing activities | (30,365 | ) | (528 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Net (decrease) increase in deposits | (5,534 | ) | 10,389 | |||||
Net increase in advance payments by borrowers for taxes and insurance | 9,245 | 9,747 | ||||||
Proceeds from issuance of Federal Home Loan Bank advances | — | 52,000 | ||||||
Principal payments on Federal Home Loan Bank advances | (12,464 | ) | (739 | ) | ||||
Gross proceeds from stock offering | 35,520 | — | ||||||
Stock offering costs | (1,976 | ) | — | |||||
Purchase of ESOP shares | (1,429 | ) | — | |||||
Purchases of treasury stock | (151 | ) | (1,024 | ) | ||||
Net cash provided by financing activities | 23,211 | 70,373 | ||||||
Net (decrease) increase in cash and cash equivalents | (5,670 | ) | 67,191 | |||||
Cash and cash equivalents at beginning of period | 92,526 | 11,707 | ||||||
Cash and cash equivalents at end of period | $ | 86,856 | $ | 78,898 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the year for interest | $ | 1,269 | $ | 2,639 | ||||
Noncash activities: | ||||||||
Retirement of common stock | $ | 70 | $ | — | ||||
Loans transferred to loans held for sale | — | 124 | ||||||
Issuance of treasury stock – stock compensation plans | 15 | — | ||||||
1895 Bancorp of Wisconsin, Inc. common stock held by PyraMax Bank reclassified to treasury stock | — | 175 | ||||||
Retirement of treasury stock | 1,053 | — | ||||||
Increase in net unsettled security purchases | — | 5,122 |
| Nine months ended September 30, |
| |||||
| 2022 |
|
| 2021 |
| ||
| (unaudited) |
| |||||
Cash flows from operating activities: |
|
|
|
|
| ||
Net (loss) income | $ | (172 | ) |
| $ | 354 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
| ||
Net amortization of investment securities |
| 121 |
|
|
| 81 |
|
Depreciation |
| 464 |
|
|
| 497 |
|
Provision for loan losses |
| 210 |
|
|
| 30 |
|
Net change in fair value of marketable equity securities |
| 892 |
|
|
| 5 |
|
Net gain on sale of available for sale securities |
| — |
|
|
| (12 | ) |
Stock compensation expense |
| 200 |
|
|
| 188 |
|
Adjustment to mortgage servicing rights valuation |
| — |
|
|
| (370 | ) |
(Benefit from) provision for deferred income tax |
| (172 | ) |
|
| 45 |
|
Originations of mortgage loans held for sale |
| (19,006 | ) |
|
| (90,869 | ) |
Proceeds from sales of mortgage loans held for sale |
| 20,416 |
|
|
| 102,235 |
|
Net gain on sale of mortgage loans held for sale |
| (266 | ) |
|
| (1,361 | ) |
ESOP compensation |
| 151 |
|
|
| 59 |
|
Net change in cash value of life insurance |
| (317 | ) |
|
| (304 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Net change in mortgage servicing rights |
| 146 |
|
|
| 94 |
|
Accrued interest receivable and other assets |
| (907 | ) |
|
| (568 | ) |
Accrued interest payable and other liabilities |
| (6 | ) |
|
| 915 |
|
Net cash provided by operating activities |
| 1,754 |
|
|
| 11,019 |
|
Cash flows from investing activities |
|
|
|
|
| ||
Proceeds from sales of available-for-sale securities |
| — |
|
|
| 1,018 |
|
Maturities, prepayments, and calls of available-for-sale securities |
| 14,561 |
|
|
| 9,296 |
|
Purchases of available-for-sale securities |
| (37,139 | ) |
|
| (39,218 | ) |
Purchase of marketable equity securities |
| (71 | ) |
|
| (87 | ) |
Net increase in loans |
| (31,486 | ) |
|
| (10,715 | ) |
Purchase of FHLB stock, net |
| (174 | ) |
|
| — |
|
Net capital expenditures for premises and equipment |
| (162 | ) |
|
| (194 | ) |
Net cash used in investing activities |
| (54,471 | ) |
|
| (39,900 | ) |
Cash flows from financing activities |
|
|
|
|
| ||
Net decrease in deposits |
| (5,203 | ) |
|
| (5,534 | ) |
Net increase in advance payments by borrowers for taxes and insurance |
| 8,365 |
|
|
| 9,245 |
|
Proceeds from issuance of Federal Home Loan Bank advances |
| 10,000 |
|
|
| — |
|
Principal payments on Federal Home Loan Bank advances |
| (8,491 | ) |
|
| (12,464 | ) |
Gross proceeds from stock offering |
| — |
|
|
| 35,520 |
|
Stock offering costs |
| — |
|
|
| (1,976 | ) |
Reimbursement of stock offering costs |
| 2 |
|
|
| — |
|
Repurchase of common stock for cancellation |
| (1,995 | ) |
|
| — |
|
Purchases of treasury stock |
| — |
|
|
| (151 | ) |
Purchase of ESOP shares |
| (1,062 | ) |
|
| (1,429 | ) |
Net cash provided by financing activities |
| 1,616 |
|
|
| 23,211 |
|
Net decrease in cash and cash equivalents |
| (51,101 | ) |
|
| (5,670 | ) |
Cash and cash equivalents at beginning of period |
| 66,803 |
|
|
| 92,526 |
|
Cash and cash equivalents at end of period | $ | 15,702 |
|
| $ | 86,856 |
|
Supplemental cash flow information: |
|
|
|
|
| ||
Cash paid during the year for interest | $ | 1,075 |
|
| $ | 1,269 |
|
Noncash activities: |
|
|
|
|
| ||
Retirement of common stock | $ | 78 |
|
| $ | 70 |
|
Loans transferred to held for sale |
| 325 |
|
|
| 9,448 |
|
Issuance of treasury stock - stock compensation plan |
| — |
|
|
| 15 |
|
Retirement of treasury stock |
| — |
|
|
| 1,053 |
|
See accompanying notes to the unaudited consolidated financial statements.
5
1895 BANCORP OF WISCONSIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
1895 Bancorp of Wisconsin, Inc., a Maryland corporation (“New(the “Company” or “New 1895 Bancorp”), was formed to serve as the stock holding company for PyraMax Bank, FSB (the “Bank”) as part of theBancorp.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%100% of the common stock being held by the public. The consolidated financial statements and other financial information includedcontained in Part I of this Quarterly Reportthese 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 positionsposition, results of operations, changes in stockholders' equity and cash flows as of and for the periods presented.
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 Form2020,2021, as filed with the Securities and Exchange Commission on March 31, 2021.
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 valuesvalue 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(the (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
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
6
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
There were no additional significant subsequent events for the quarter ended September 30, 20212022 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 FASBFinancial Accounting Standards Board (“FASB”) and may impact the Company’s financial statements in future reporting periods:
ASUOnIn November 15, 2019, the FASB issued ASUthose 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 dateof 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 ASUstatements.
ASU
On November 15, 2019, the FASB issued ASUManagement has elected to defer adoption to the new effective date and is currently evaluating theThe Company adopted ASC 842 on January 1, 2022. The cumulative effect did not have a material impact of adopting ASU2016-02Company’s consolidated financial statements.
7
NOTE 3 – AVAILABLE FOR SALEAVAILABLE-FOR-SALE SECURITIES
The amortized costs and fair values of securities
|
| September 30, 2022 |
| |||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
|
| (in thousands) |
| |||||||||||||
U.S. Treasury notes |
| $ | 29,576 |
|
| $ | — |
|
| $ | (3,241 | ) |
| $ | 26,335 |
|
Obligations of states and political subdivisions |
|
| 21,398 |
|
|
| 4 |
|
|
| (3,736 | ) |
|
| 17,666 |
|
Government-sponsored mortgage-backed securities |
|
| 77,048 |
|
|
| — |
|
|
| (9,266 | ) |
|
| 67,782 |
|
Asset-backed securities |
|
| 5,222 |
|
|
| — |
|
|
| (21 | ) |
|
| 5,201 |
|
Certificates of deposit |
|
| 1,459 |
|
|
| — |
|
|
| (29 | ) |
|
| 1,430 |
|
Total |
| $ | 134,703 |
|
| $ | 4 |
|
| $ | (16,293 | ) |
| $ | 118,414 |
|
|
| December 31, 2021 |
| |||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
|
| (in thousands) |
| |||||||||||||
U.S. Treasury notes |
| $ | 19,501 |
|
| $ | 8 |
|
| $ | (25 | ) |
| $ | 19,484 |
|
Obligations of states and political subdivisions |
|
| 20,758 |
|
|
| 207 |
|
|
| (205 | ) |
|
| 20,760 |
|
Government-sponsored mortgage-backed securities |
|
| 64,049 |
|
|
| 563 |
|
|
| (463 | ) |
|
| 64,149 |
|
Asset-backed securities |
|
| 6,479 |
|
|
| 45 |
|
|
| (1 | ) |
|
| 6,523 |
|
Certificates of deposit |
|
| 1,459 |
|
|
| 65 |
|
|
| — |
|
|
| 1,524 |
|
Total |
| $ | 112,246 |
|
| $ | 888 |
|
| $ | (694 | ) |
| $ | 112,440 |
|
September 30, 2021 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Obligations of states and political subdivisions | $ | 21,008 | $ | 287 | $ | (115 | ) | $ | 21,180 | |||||||
Government-sponsored mortgage-backed securities | 56,048 | 909 | (100 | ) | 56,857 | |||||||||||
Corporate collateralized mortgage obligations | 744 | 1 | — | 745 | ||||||||||||
Asset-backed securities | 6,708 | 90 | — | 6,798 | ||||||||||||
Certificates of deposit | 1,459 | 82 | — | 1,541 | ||||||||||||
Total | $ | 85,967 | $ | 1,369 | $ | (215 | ) | $ | 87,121 | |||||||
December 31, 2020 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Obligations of states and political subdivisions | $ | 11,570 | $ | 244 | $ | (11 | ) | $ | 11,803 | |||||||
Government-sponsored mortgage-backed securities | 36,886 | 1,165 | (12 | ) | 38,039 | |||||||||||
Asset-backed securities | 7,231 | 57 | (7 | ) | 7,281 | |||||||||||
Certificates of deposit | 1,458 | 122 | — | 1,580 | ||||||||||||
Total | $ | 57,145 | $ | 1,588 | $ | (30 | ) | $ | 58,703 | |||||||
Available-for-sale securities with a carrying value of $1.9$3.7 million and $2.0$1.8 million were pledged as collateral at September 30, 20212022 and December 31, 2020,2021, respectively.
The amortized costs and fair values of securities
|
| September 30, 2022 |
| |||||
|
| Amortized Cost |
|
| Fair Value |
| ||
|
| (in thousands) |
| |||||
Debt and other securities: |
|
|
|
|
|
| ||
Due in one year or less |
| $ | 1,788 |
|
| $ | 1,769 |
|
Due after one through 5 years |
|
| 21,397 |
|
|
| 19,497 |
|
Due after 5 through 10 years |
|
| 20,486 |
|
|
| 17,231 |
|
Due after 10 years |
|
| 8,762 |
|
|
| 6,934 |
|
Total debt and other securities |
|
| 52,433 |
|
|
| 45,431 |
|
Mortgage-related securities |
|
| 77,048 |
|
|
| 67,782 |
|
Asset-backed securities |
|
| 5,222 |
|
|
| 5,201 |
|
Total |
| $ | 134,703 |
|
| $ | 118,414 |
|
8
NOTE 3 – AVAILABLE FOR SALEAVAILABLE-FOR-SALE SECURITIES (continued)
September 30, 2021 | ||||||||
Amortized Cost | Fair Value | |||||||
(in thousands) | ||||||||
Debt and other securities: | ||||||||
Due in one year or less | $ | 1,735 | $ | 1,750 | ||||
Due after one through 5 years | 4,122 | 4,266 | ||||||
Due after 5 through 10 years | 5,101 | 5,135 | ||||||
Due after 10 years | 11,509 | 11,570 | ||||||
Total debt and other securities | 22,467 | 22,721 | ||||||
Mortgage-related securities | 56,792 | 57,602 | ||||||
Asset-backed securities | 6,708 | 6,798 | ||||||
Total | $ | 85,967 | $ | 87,121 | ||||
Gross unrealized losses on securities
|
| September 30, 2022 |
| |||||||||||||||||||||
|
| Less than 12 months |
|
| 12 months or longer |
|
| Total |
| |||||||||||||||
|
| Fair Value |
|
| Unrealized Loss |
|
| Fair Value |
|
| Unrealized Loss |
|
| Fair Value |
|
| Unrealized Loss |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
U.S. Treasury notes |
| $ | 26,335 |
|
| $ | (3,241 | ) |
| $ | — |
|
| $ | — |
|
| $ | 26,335 |
|
| $ | (3,241 | ) |
Obligations of states and political |
|
| 9,642 |
|
|
| (1,655 | ) |
|
| 7,602 |
|
|
| (2,081 | ) |
|
| 17,244 |
|
|
| (3,736 | ) |
Government-sponsored mortgage-backed |
|
| 47,967 |
|
|
| (5,414 | ) |
|
| 19,815 |
|
|
| (3,852 | ) |
|
| 67,782 |
|
|
| (9,266 | ) |
Asset-backed securities |
|
| 4,917 |
|
|
| (21 | ) |
|
| — |
|
|
| — |
|
|
| 4,917 |
|
|
| (21 | ) |
Certificates of deposit |
|
| 1,430 |
|
|
| (29 | ) |
|
| — |
|
|
| — |
|
|
| 1,430 |
|
|
| (29 | ) |
Total |
| $ | 90,291 |
|
| $ | (10,360 | ) |
| $ | 27,417 |
|
| $ | (5,933 | ) |
| $ | 117,708 |
|
| $ | (16,293 | ) |
|
| December 31, 2021 |
| |||||||||||||||||||||
|
| Less than 12 months |
|
| 12 months or longer |
|
| Total |
| |||||||||||||||
|
| Fair Value |
|
| Unrealized Loss |
|
| Fair Value |
|
| Unrealized Loss |
|
| Fair Value |
|
| Unrealized Loss |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
U.S. Treasury notes |
| $ | 12,971 |
|
| $ | (25 | ) |
| $ | — |
|
| $ | — |
|
| $ | 12,971 |
|
| $ | (25 | ) |
Obligations of states and political |
|
| 5,414 |
|
|
| (82 | ) |
|
| 4,105 |
|
|
| (123 | ) |
|
| 9,519 |
|
|
| (205 | ) |
Government-sponsored mortgage-backed |
|
| 39,392 |
|
|
| (463 | ) |
|
| — |
|
|
| — |
|
|
| 39,392 |
|
|
| (463 | ) |
Asset-backed securities |
|
| 808 |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| 808 |
|
|
| (1 | ) |
Total |
| $ | 58,585 |
|
| $ | (571 | ) |
| $ | 4,105 |
|
| $ | (123 | ) |
| $ | 62,690 |
|
| $ | (694 | ) |
September 30, 2021 | ||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Obligations of states and political subdivisions | $ | 5,338 | $ | (115 | ) | $ | — | $ | — | $ | 5,338 | $ | (115 | ) | ||||||||||
Government-sponsored mortgage-backed securities | 15,620 | (100 | ) | — | — | 15,620 | (100 | ) | ||||||||||||||||
Total | $ | 20,958 | $ | (215 | ) | $ | — | $ | — | $ | 20,958 | $ | (215 | ) | ||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Obligations of states and political subdivisions | $ | 4,235 | $ | (11 | ) | $ | — | $ | — | $ | 4,235 | $ | (11 | ) | ||||||||||
Government-sponsored mortgage-backed securities | 4,984 | (12 | ) | — | — | 4,984 | (12 | ) | ||||||||||||||||
Asset-backed securities | — | — | 638 | (7 | ) | 638 | (7 | ) | ||||||||||||||||
Total | $ | 9,219 | $ | (23 | ) | $ | 638 | $ | (7 | ) | $ | 9,857 | $ | (30 | ) | |||||||||
At September 30, 20212022 and December 31, 2020,2021, respectively, the Company had 993 and 524 debt securities with unrealized losses representing aggregate depreciation of approximately 1.0%12.2% and 0.3%1.1%, respectively, from their respective amortized cost 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.
9
NOTE 3 – AVAILABLE-FOR-SALE SECURITIES (continued)
The following table provides a summary of the proceeds from sales of securities
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Proceeds from sales of securities available-for-sale | $ | — | $ | 19,005 | $ | 1,018 | $ | 19,283 | ||||||||
Gross realized gains | — | 1,014 | 12 | 1,022 | ||||||||||||
Gross realized losses | — | — | — | — |
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Proceeds from sales of securities available-for-sale |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross realized gains |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 12 |
|
Gross realized losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net realized gains |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 12 |
|
NOTE 4 – LOANS
Major classifications of loans are summarized as follows:
|
| September 30, |
|
| December 31, |
| ||
|
| (in thousands) |
| |||||
Commercial: |
|
|
|
|
|
| ||
Real estate |
| $ | 207,714 |
|
| $ | 185,223 |
|
Land development |
|
| — |
|
|
| 1,400 |
|
Other |
|
| 45,074 |
|
|
| 38,160 |
|
Residential real estate: |
|
|
|
|
|
| ||
First mortgage |
|
| 83,900 |
|
|
| 80,661 |
|
Construction |
|
| 2,653 |
|
|
| 3,388 |
|
Consumer: |
|
|
|
|
|
| ||
Home equity and lines of credit |
|
| 17,601 |
|
|
| 17,032 |
|
Other |
|
| 115 |
|
|
| 128 |
|
Subtotal |
|
| 357,057 |
|
|
| 325,992 |
|
Net deferred loan costs |
|
| 863 |
|
|
| 655 |
|
Allowance for loan losses |
|
| (3,180 | ) |
|
| (2,858 | ) |
Loans, net |
| $ | 354,740 |
|
| $ | 323,789 |
|
September 30, 2021 | December 31, 2020 | |||||||
(in thousands) | ||||||||
Commercial: | ||||||||
Real estate | $ | 183,089 | $ | 189,291 | ||||
Land development | 1,426 | 1,492 | ||||||
Other | 43,311 | 46,184 | ||||||
Residential real estate: | ||||||||
First mortgage | 82,411 | 68,968 | ||||||
Construction | 3,732 | 2,954 | ||||||
Consumer: | ||||||||
Home equity and lines of credit | 18,563 | 22,348 | ||||||
Other | 160 | 361 | ||||||
Subtotal | 332,692 | 331,598 | ||||||
Net deferred loan costs | 406 | 178 | ||||||
Allowance for loan losses | (2,788 | ) | (2,703 | ) | ||||
Loans, net | $ | 330,310 | $ | 329,073 | ||||
Deposit accounts in an overdrawn position and reclassified as loans totaled $13,000 and $106,000 at September 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 September 30, 20212022 and December 31, 2020,2021, respectively, the Company had transferred $32.3$30.4 million and $29.6$32.1 million in participation loans which were eligible for sales treatment to other financial institutions, all of which continue to be serviced by the Company.
10
NOTE 4 – LOANS (continued)
An analysis of past due loans is presented below:
|
| September 30, 2022 |
| |||||||||||||||||
|
| 30-89 Days Past Due |
|
| 90 Days or More Past Due |
|
| Total Past Due |
|
| Current Loans |
|
| Total Loans |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Real estate |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 207,714 |
|
| $ | 207,714 |
|
Land development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,074 |
|
|
| 45,074 |
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
First mortgage |
|
| 339 |
|
|
| — |
|
|
| 339 |
|
|
| 83,561 |
|
|
| 83,900 |
|
Construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,653 |
|
|
| 2,653 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity and lines of credit |
|
| 27 |
|
|
| — |
|
|
| 27 |
|
|
| 17,574 |
|
|
| 17,601 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 115 |
|
|
| 115 |
|
Total |
| $ | 366 |
|
|
| — |
|
| $ | 366 |
|
| $ | 356,691 |
|
| $ | 357,057 |
|
|
| 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 |
|
September 30, 2021 | ||||||||||||||||||||
30-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Current | Total Loans | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Real estate | $ | 427 | $ | 276 | $ | 703 | $ | 182,386 | $ | 183,089 | ||||||||||
Land development | — | — | — | 1,426 | 1,426 | |||||||||||||||
Other | — | — | — | 43,311 | 43,311 | |||||||||||||||
Residential real estate: | ||||||||||||||||||||
First mortgage | 230 | — | 230 | 82,181 | 82,411 | |||||||||||||||
Construction | — | — | — | 3,732 | 3,732 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity and lines of credit | — | — | — | 18,563 | 18,563 | |||||||||||||||
Other | — | — | — | 160 | 160 | |||||||||||||||
Total | $ | 657 | $ | 276 | $ | 933 | $ | 331,759 | $ | 332,692 | ||||||||||
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 | ||||||||||
There were 0no loans 90 days or more past due and accruing interest as of September 30, 20212022 or December 31, 2020.
A summary of activity in the allowance for loan losses for the three and nine months ended September 30, 20212022 and September 30, 20202021, respectively, is presented below:
Commercial | Residential | Consumer | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Three months ended September 30, 2021 | ||||||||||||||||
Allowance for loan losses | ||||||||||||||||
Beginning balance | $ | 1,618 | $ | 745 | $ | 369 | $ | 2,732 | ||||||||
Provision (credit) for loan losses | 30 | 0 | 0 | 30 | ||||||||||||
Loans charged-off | 0— | 0— | (1 | ) | (1 | ) | ||||||||||
Recoveries | 4 | 0— | 23 | 27 | ||||||||||||
Ending balance | $ | 1,652 | $ | 745 | $ | 391 | $ | 2,788 | ||||||||
Three months ended September 30, 2020 | ||||||||||||||||
Allowance for loan losses | ||||||||||||||||
Beginning balance | $ | 1,243 | $ | 573 | $ | 298 | $ | 2,114 | ||||||||
Provision (credit) for loan losses | 360 | 100 | 40 | 500 | ||||||||||||
Loans charged-off | 0— | (060 | ) | (02 | ) | (62 | ) | |||||||||
Recoveries | 2 | 88 | 8 | 98 | ||||||||||||
Ending balance | $ | 1,605 | $ | 701 | $ | 344 | $ | 2,650 | ||||||||
Commercial | Residential | Consumer | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Nine months ended September 30, 2021 | ||||||||||||||||
Allowance for loan losses | ||||||||||||||||
Beginning balance | $ | 1,609 | $ | 745 | $ | 349 | $ | 2,703 | ||||||||
Provision (credit) for loan losses | 30 | 0 | 0 | 30 | ||||||||||||
Loans charged-off | 0— | 0— | (18 | ) | (18 | ) | ||||||||||
Recoveries | 13 | 0— | 60 | 73 | ||||||||||||
Ending balance | $ | 1,652 | $ | 745 | $ | 391 | $ | 2,788 | ||||||||
Nine months ended September 30, 2020 | ||||||||||||||||
Allowance for loan losses | ||||||||||||||||
Beginning balance | $ | 1,235 | $ | 573 | $ | 192 | $ | 2,000 | ||||||||
Provision (credit) for loan losses | 360 | 100 | 40 | 500 | ||||||||||||
Loans charged-off | 0— | (060 | ) | (7 | ) | (67 | ) | |||||||||
Recoveries | 10 | 088 | 119 | 217 | ||||||||||||
Ending balance | $ | 1,605 | $ | 701 | $ | 344 | $ | 2,650 | ||||||||
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Total |
| ||||
|
| (in thousands) |
| |||||||||||||
Three months ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | 1,924 |
|
| $ | 745 |
|
| $ | 463 |
|
| $ | 3,132 |
|
Provision for loan losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Loans charged-off |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
Recoveries |
|
| 4 |
|
|
| — |
|
|
| 45 |
|
|
| 49 |
|
Ending balance |
| $ | 1,928 |
|
| $ | 745 |
|
| $ | 507 |
|
| $ | 3,180 |
|
Three months ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | 1,618 |
|
| $ | 745 |
|
| $ | 369 |
|
| $ | 2,732 |
|
Provision for loan losses |
|
| 30 |
|
|
| — |
|
|
| — |
|
|
| 30 |
|
Loans charged-off |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
Recoveries |
|
| 4 |
|
|
| — |
|
|
| 23 |
|
|
| 27 |
|
Ending balance |
| $ | 1,652 |
|
| $ | 745 |
|
| $ | 391 |
|
| $ | 2,788 |
|
11
NOTE 4 – LOANS (continued)
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Total |
| ||||
|
| (in thousands) |
| |||||||||||||
Nine months ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | 1,657 |
|
| $ | 745 |
|
| $ | 456 |
|
| $ | 2,858 |
|
Provision for loan losses |
|
| 210 |
|
|
| — |
|
|
| — |
|
|
| 210 |
|
Loans charged-off |
|
| — |
|
|
| — |
|
|
| (5 | ) |
|
| (5 | ) |
Recoveries |
|
| 61 |
|
|
| — |
|
|
| 56 |
|
|
| 117 |
|
Ending balance |
| $ | 1,928 |
|
| $ | 745 |
|
| $ | 507 |
|
| $ | 3,180 |
|
Nine months ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | 1,609 |
|
| $ | 745 |
|
| $ | 349 |
|
| $ | 2,703 |
|
Provision for loan losses |
|
| 30 |
|
|
| — |
|
|
| — |
|
|
| 30 |
|
Loans charged-off |
|
| — |
|
|
| — |
|
|
| (18 | ) |
|
| (18 | ) |
Recoveries |
|
| 13 |
|
|
| — |
|
|
| 60 |
|
|
| 73 |
|
Ending balance |
| $ | 1,652 |
|
| $ | 745 |
|
| $ | 391 |
|
| $ | 2,788 |
|
A summary of the allowance for loan losses for loans evaluated individually and collectively for impairment is presented below:
|
| September 30, 2022 |
| |||||||||||||
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Total |
| ||||
|
| (in thousands) |
| |||||||||||||
Loans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Individually evaluated for impairment |
| $ | 6,198 |
|
| $ | 1,132 |
|
| $ | 34 |
|
| $ | 7,364 |
|
Collectively evaluated for impairment |
|
| 246,590 |
|
|
| 85,421 |
|
|
| 17,682 |
|
|
| 349,693 |
|
Total loans |
| $ | 252,788 |
|
| $ | 86,553 |
|
| $ | 17,716 |
|
| $ | 357,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Individually evaluated for impairment |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Collectively evaluated for impairment |
|
| 1,928 |
|
|
| 745 |
|
|
| 507 |
|
|
| 3,180 |
|
Total allowance for loan losses |
| $ | 1,928 |
|
| $ | 745 |
|
| $ | 507 |
|
| $ | 3,180 |
|
|
| December 31, 2021 |
| |||||||||||||
|
| Commercial |
|
| Residential |
|
| Consumer |
|
| Total |
| ||||
|
| (in thousands) |
| |||||||||||||
Loans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Individually evaluated for impairment |
| $ | 4,833 |
|
| $ | 1,357 |
|
| $ | 37 |
|
| $ | 6,227 |
|
Collectively evaluated for impairment |
|
| 219,950 |
|
|
| 82,692 |
|
|
| 17,123 |
|
|
| 319,765 |
|
Total loans |
| $ | 224,783 |
|
| $ | 84,049 |
|
| $ | 17,160 |
|
| $ | 325,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Individually evaluated for impairment |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Collectively evaluated for impairment |
|
| 1,657 |
|
|
| 745 |
|
|
| 456 |
|
|
| 2,858 |
|
Total allowance for loan losses |
| $ | 1,657 |
|
| $ | 745 |
|
| $ | 456 |
|
| $ | 2,858 |
|
September 30, 2021 | ||||||||||||||||
Commercial | Residential | Consumer | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Loans: | ||||||||||||||||
Individually evaluated for impairment | $ | 6,510 | $ | 880 | $ | — | $ | 7,390 | ||||||||
Collectively evaluated for impairment | 221,316 | 85,263 | 18,723 | 325,302 | ||||||||||||
Total loans | $ | 227,826 | $ | 86,143 | $ | 18,723 | $ | 332,692 | ||||||||
Allowance for loan losses: | ||||||||||||||||
Individually evaluated for impairment | $ | 0— | $ | 0— | $ | 0— | $ | 0— | ||||||||
Collectively evaluated for impairment | 1,652 | 745 | 391 | 2,788 | ||||||||||||
Total allowance for loan losses | $ | 1,652 | $ | 745 | $ | 391 | $ | 2,788 | ||||||||
December 31, 2020 | ||||||||||||||||
Commercial | Residential | Consumer | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Loans: | ||||||||||||||||
Individually evaluated for impairment | $ | 10,573 | $ | 411 | $ | 21 | $ | 11,005 | ||||||||
Collectively evaluated for impairment | 226,394 | 71,511 | 22,688 | 320,593 | ||||||||||||
Total loans | $ | 236,967 | $ | 71,922 | $ | 22,709 | $ | 331,598 | ||||||||
Allowance for loan losses: | ||||||||||||||||
Individually evaluated for impairment | $ | 0— | $ | 0— | $ | 0— | $ | 0— | ||||||||
Collectively evaluated for impairment | 1,609 | 745 | 349 | 2,703 | ||||||||||||
Total allowance for loan losses | $ | 1,609 | $ | 745 | $ | 349 | $ | 2,703 | ||||||||
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
Watch and Special Mention
Substandard
12
NOTE 4 – LOANS (continued)
Doubtful
A summary of the Company’s internal risk ratings of loans is presented below:
|
| September 30, 2022 |
| |||||||||||||
|
| Pass |
|
| Watch and Special Mention |
|
| Substandard |
|
| Total |
| ||||
|
| (in thousands) |
| |||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Real estate |
| $ | 199,479 |
|
| $ | 4,059 |
|
| $ | 4,176 |
|
| $ | 207,714 |
|
Land development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| 42,290 |
|
|
| 762 |
|
|
| 2,022 |
|
|
| 45,074 |
|
Total |
| $ | 241,769 |
|
| $ | 4,821 |
|
| $ | 6,198 |
|
| $ | 252,788 |
|
|
| December 31, 2021 |
| |||||||||||||
|
| Pass |
|
| Watch and Special Mention |
|
| Substandard |
|
| Total |
| ||||
|
| (in thousands) |
| |||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Real estate |
| $ | 172,172 |
|
| $ | 8,963 |
|
| $ | 4,088 |
|
| $ | 185,223 |
|
Land development |
|
| 1,400 |
|
|
| — |
|
|
| — |
|
|
| 1,400 |
|
Other |
|
| 37,414 |
|
|
| 1 |
|
|
| 745 |
|
|
| 38,160 |
|
Total |
| $ | 210,986 |
|
| $ | 8,964 |
|
| $ | 4,833 |
|
| $ | 224,783 |
|
September 30, 2021 | ||||||||||||||||
Pass | Watch and Special Mention | Substandard | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Commercial: | ||||||||||||||||
Real estate | $ | 164,407 | $ | 13,253 | $ | 5,428 | $ | 183,089 | ||||||||
Land development | 1,426 | — | 0 | 1,426 | ||||||||||||
Other | 41,459 | 568 | 1,284 | 43,311 | ||||||||||||
Total | $ | 207,292 | $ | 13,821 | $ | 6,712 | $ | 227,826 | ||||||||
December 31, 2020 | ||||||||||||||||
Pass | Watch and Special Mention | Substandard | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Commercial: | ||||||||||||||||
Real estate | $ | 163,961 | $ | 19,272 | $ | 6,058 | $ | 189,291 | ||||||||
Land development | — | — | 1,492 | 1,492 | ||||||||||||
Other | 37,675 | 5,705 | 2,804 | 46,184 | ||||||||||||
Total | $ | 201,636 | $ | 24,977 | $ | 10,354 | $ | 236,967 | ||||||||
There were 0no loans rated Doubtful or Loss as of September 30, 20212022 or December 31, 2020,2021, respectively.
Residential real estate and consumer loans are generally evaluated based on whether or not loans arethe 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:
September 30, 2021 | ||||||||||||
Performing | Non Performing | Total | ||||||||||
(in thousands) | ||||||||||||
Residential real estate: | ||||||||||||
First mortgage | $ | 81,457 | $ | 954 | $ | 82,411 | ||||||
Construction | 3,733 | — | 3,733 | |||||||||
Consumer: | ||||||||||||
Home equity and lines of credit | 18,479 | 84 | 18,563 | |||||||||
Other | 160 | — | 160 | |||||||||
Total | $ | 103,829 | $ | 1,038 | $ | 104,867 | ||||||
|
| September 30, 2022 |
| |||||||||
|
| Performing |
|
| Non Performing |
|
| Total |
| |||
|
| (in thousands) |
| |||||||||
Residential real estate: |
|
|
|
|
|
|
|
|
| |||
First mortgage |
| $ | 83,175 |
|
| $ | 725 |
|
| $ | 83,900 |
|
Construction |
|
| 2,653 |
|
|
| — |
|
|
| 2,653 |
|
Consumer: |
|
|
|
|
|
|
|
|
| |||
Home equity and lines of credit |
|
| 17,567 |
|
|
| 34 |
|
|
| 17,601 |
|
Other |
|
| 115 |
|
|
| — |
|
|
| 115 |
|
Total |
| $ | 103,510 |
|
| $ | 759 |
|
| $ | 104,269 |
|
13
NOTE 4 – LOANS (continued)
|
| December 31, 2021 |
| |||||||||
|
| Performing |
|
| Non Performing |
|
| Total |
| |||
|
| (in thousands) |
| |||||||||
Residential real estate: |
|
|
|
|
|
|
|
|
| |||
First mortgage |
| $ | 79,722 |
|
| $ | 939 |
|
| $ | 80,661 |
|
Construction |
|
| 3,388 |
|
|
| — |
|
|
| 3,388 |
|
Consumer: |
|
|
|
|
|
|
|
|
| |||
Home equity and lines of credit |
|
| 16,954 |
|
|
| 78 |
|
|
| 17,032 |
|
Other |
|
| 128 |
|
|
| — |
|
|
| 128 |
|
Total |
| $ | 100,192 |
|
| $ | 1,017 |
|
| $ | 101,209 |
|
December 31, 2020 | ||||||||||||
Performing | Non Performing | Total | ||||||||||
(in thousands) | ||||||||||||
Residential real estate: | ||||||||||||
First mortgages | $ | 67,817 | $ | 1,151 | $ | 68,968 | ||||||
Construction | 2,954 | — | 2,954 | |||||||||
Consumer: | ||||||||||||
Home equity and lines of credit | 22,212 | 136 | 22,348 | |||||||||
Other | 361 | — | 361 | |||||||||
Total | $ | 93,344 | $ | 1,287 | $ | 94,631 | ||||||
Information regarding impaired loans is presented below:
As of and for the Nine Months Ended September 30, 2021 | ||||||||||||||||||||
Recorded Investment | Unpaid Principal | Reserve | Average Investment | Interest Recognized | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Impaired loans with reserve: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Real estate | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Land development | — | — | — | — | — | |||||||||||||||
Other | — | — | — | — | — | |||||||||||||||
Residential real estate: | ||||||||||||||||||||
First mortgages | — | — | — | — | — | |||||||||||||||
Construction | — | — | — | — | — | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity and lines of credit | — | — | — | — | — | |||||||||||||||
Other | — | — | — | — | — | |||||||||||||||
Total impaired loans with reserve | — | — | — | — | — | |||||||||||||||
Impaired loans with no reserve: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Real estate | 5,226 | 5,226 | NA | 5,872 | 161 | |||||||||||||||
Land development | 0 | 0 | NA | 979 | 32 | |||||||||||||||
Other | 1,284 | 1,335 | NA | 1,611 | 24 | |||||||||||||||
Residential real estate: | ||||||||||||||||||||
First mortgages | 880 | 964 | NA | 734 | 18 | |||||||||||||||
Construction | — | — | NA | — | — | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity and lines of credit | — | — | NA | 10 | 22 | |||||||||||||||
Other | — | — | NA | — | — | |||||||||||||||
Total impaired loans with no reserve | 7,390 | 7,525 | NA | 9,206 | 257 | |||||||||||||||
Total impaired loans | $ | 7,390 | $ | 7,525 | $ | 0 | $ | 9,206 | $ | 257 | ||||||||||
|
| As of and for the Nine Months Ended September 30, 2022 |
| |||||||||||||||||
|
| Recorded Investment |
|
| Unpaid Principal |
|
| Reserve |
|
| Average Investment |
|
| Interest Recognized |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Impaired loans with reserve: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Real estate |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Land development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
First mortgage |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity and lines of credit |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total impaired loans |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Impaired loans with no reserve: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Real estate |
| $ | 4,176 |
|
| $ | 4,176 |
|
| NA |
|
| $ | 3,897 |
|
| $ | 111 |
| |
Land development |
|
| — |
|
|
| — |
|
| NA |
|
|
| — |
|
|
| — |
| |
Other |
|
| 2,022 |
|
|
| 2,022 |
|
| NA |
|
|
| 1,009 |
|
|
| 86 |
| |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
First mortgage |
|
| 1,132 |
|
|
| 1,349 |
|
| NA |
|
|
| 1,231 |
|
|
| 50 |
| |
Construction |
|
| — |
|
|
| — |
|
| NA |
|
|
| — |
|
|
| — |
| |
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity and lines of credit |
|
| 34 |
|
|
| 39 |
|
| NA |
|
|
| 35 |
|
|
| 1 |
| |
Other |
|
| — |
|
|
| — |
|
| NA |
|
|
| — |
|
|
| — |
| |
Total impaired loans |
|
| 7,364 |
|
|
| 7,586 |
|
| NA |
|
|
| 6,172 |
|
|
| 248 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total impaired loans |
| $ | 7,364 |
|
| $ | 7,586 |
|
| $ | — |
|
| $ | 6,172 |
|
| $ | 248 |
|
14
NOTE 4 – LOANS (continued)
|
| As of and for the Year Ended December 31, 2021 |
| |||||||||||||||||||
|
| Recorded Investment |
|
|
| Unpaid Principal |
|
| Reserve |
|
| Average Investment |
|
| Interest Recognized |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||
Impaired loans with reserve: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate |
| $ | — |
|
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| |
Land development |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |
Other |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
First mortgage |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |
Construction |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity and lines of credit |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |
Other |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |
Total impaired loans |
| $ | — |
|
| — |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Impaired loans with no reserve: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate |
| $ | 4,088 |
|
|
| $ | 4,089 |
|
| NA |
|
| $ | 5,615 |
|
| $ | 213 |
| ||
Land development |
|
| — |
|
|
|
| — |
|
| NA |
|
|
| 734 |
|
|
| 33 |
| ||
Other |
|
| 745 |
|
|
|
| 796 |
|
| NA |
|
|
| 1,478 |
|
|
| 35 |
| ||
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
First mortgage |
|
| 1,357 |
|
|
|
| 1,572 |
|
| NA |
|
|
| 914 |
|
|
| 34 |
| ||
Construction |
|
| — |
|
|
|
| — |
|
| NA |
|
|
| — |
|
|
| — |
| ||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity and lines of credit |
|
| 37 |
|
|
|
| 41 |
|
| NA |
|
|
| 17 |
|
|
| 22 |
| ||
Other |
|
| — |
|
|
|
| — |
|
| NA |
|
|
| — |
|
|
| — |
| ||
Total impaired loans |
|
| 6,227 |
|
|
|
| 6,498 |
|
| NA |
|
|
| 8,758 |
|
|
| 337 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total impaired loans |
| $ | 6,227 |
|
|
| $ | 6,498 |
|
| $ | — |
|
| $ | 8,758 |
|
| $ | 337 |
|
As of and for the Year Ended December 31, 2020 | ||||||||||||||||||||
Recorded Investment | Unpaid Principal | Reserve | Average Investment | Interest Recognized | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Impaired loans with reserve: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Real estate | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Land development | — | — | — | — | — | |||||||||||||||
Other | — | — | — | — | — | |||||||||||||||
Residential real estate: | ||||||||||||||||||||
First mortgages | — | — | — | 36 | — | |||||||||||||||
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 | |||||||||||||||
Land development | 1,492 | 1,492 | NA | 503 | 40 | |||||||||||||||
Other | 2,804 | 2,804 | NA | 2,301 | 138 | |||||||||||||||
Residential real estate: | ||||||||||||||||||||
First mortgages | 411 | 495 | NA | 568 | 261 | |||||||||||||||
Construction | — | — | NA | — | — | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity and lines of credit | 21 | 51 | NA | 24 | 3 | |||||||||||||||
Other | — | — | NA | — | — | |||||||||||||||
Total impaired loans with no reserve | 11,005 | 11,119 | NA | 9,664 | 774 | |||||||||||||||
Total impaired loans | $ | 11,005 | $ | 11,119 | $ | 0 | $ | 9,704 | $ | 774 | ||||||||||
There were 0no additional funds committed to impaired loans as of September 30, 20212022 and December 31, 2020.
Nonperforming loans are as follows:
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||
|
| (in thousands) |
| |||||
Nonaccrual loans, other than troubled debt restructurings |
| $ | 575 |
|
| $ | 826 |
|
Nonaccrual loans, troubled debt restructurings |
|
| 184 |
|
|
| 191 |
|
Total nonperforming loans |
| $ | 759 |
|
| $ | 1,017 |
|
Troubled debt restructurings, accruing |
| $ | 406 |
|
| $ | 418 |
|
September 30, 2021 | December 31, 2020 | |||||||
(in thousands) | ||||||||
Nonaccrual loans, other than troubled debt restructurings | $ | 1,120 | $ | 1,068 | ||||
Nonaccrual loans, troubled debt restructurings | 193 | 219 | ||||||
Total nonperforming loans (NPLs) | $ | 1,313 | $ | 1,287 | ||||
Troubled debt restructurings, accruing | $ | 421 | $ | 432 | ||||
There were 0no loans modified as troubled debt restructurings during the nine months ended September 30, 20212022 and year ended December 31, 2020,2021, respectively.
The provisions of the CARES Act and related legislation included an electionoption to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related tothe earlier of (i) December 31, 2020 or (ii) 60 days after the end of theCOVID-19national emergency.2021. The relief cancould 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 September 30, 2021,2022, the Company had 1 to 3 month deferrals of approximately $444,000$245,000 in interest, escrow, and principal payments on $14.7$4.6 million in outstanding loans.
15
NOTE 4 – LOANS (continued)
The Company considers a troubled debt restructuring in default if it becomes past due more than 90 days. There were 020212022 and 2020.
Information on
|
| September 30, |
|
| December 31, |
| ||
|
| (in thousands) |
| |||||
Commercial: |
|
|
|
|
|
| ||
Real estate |
| $ | — |
|
| $ | — |
|
Land development |
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
Residential real estate: |
|
|
|
|
|
| ||
First mortgage |
|
| 725 |
|
|
| 939 |
|
Construction |
|
| — |
|
|
| — |
|
Consumer: |
|
|
|
|
|
| ||
Home equity and lines of credit |
|
| 34 |
|
|
| 78 |
|
Other |
|
| — |
|
|
| — |
|
Total non-accrual loans |
| $ | 759 |
|
| $ | 1,017 |
|
Total non-accrual loans to total loans |
|
| 0.21 | % |
|
| 0.31 | % |
Total non-accrual loans to total assets |
|
| 0.14 | % |
|
| 0.19 | % |
September 30, 2021 | December 31, 2020 | |||||||
(in thousands) | ||||||||
Commercial: | ||||||||
Real estate | $ | 275 | $ | — | ||||
Land development | — | — | ||||||
Other | — | — | ||||||
Residential real estate: | ||||||||
First mortgages | 954 | 1,151 | ||||||
Construction | — | — | ||||||
Consumer: | ||||||||
Home equity and lines of credit | 84 | 136 | ||||||
Other | — | — | ||||||
Total non-accrual loans | $ | 1,313 | $ | 1,287 | ||||
Total non-accrual loans to total loans | 0.40 | % | 0.39 | % | ||||
Total non-accrual loans to total assets | 0.24 | % | 0.25 | % |
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 $339.3$309.6 million and $345.1$332.9 million as of September 30, 20212022 and December 31, 2020,2021, respectively.
A summary of activity in the Company’s mortgage servicing rights is presented below:
|
| Three Months Ended September 30, 2022 |
|
| Three Months Ended September 30, 2021 |
|
| Nine Months Ended September 30, 2022 |
|
| Nine Months Ended September 30, 2021 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Mortgage servicing rights beginning balance |
| $ | 1,939 |
|
| $ | 2,109 |
|
| $ | 2,036 |
|
| $ | 1,806 |
|
Additions |
|
| 10 |
|
|
| 137 |
|
|
| 57 |
|
|
| 457 |
|
Amortization |
|
| (59 | ) |
|
| (164 | ) |
|
| (203 | ) |
|
| (551 | ) |
Decrease in valuation allowance |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 370 |
|
Mortgage servicing rights ending balance |
| $ | 1,890 |
|
| $ | 2,082 |
|
| $ | 1,890 |
|
| $ | 2,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fair value at beginning of period |
| $ | 3,273 |
|
| $ | 2,361 |
|
| $ | 2,477 |
|
| $ | 1,806 |
|
Fair value at end of period |
| $ | 3,335 |
|
| $ | 2,285 |
|
| $ | 3,335 |
|
| $ | 2,285 |
|
Three Months Ended September 30, 2021 | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Mortgage servicing rights beginning balance | $ | 2,109 | $ | 1,587 | $ | 1,806 | $ | 2,172 | ||||||||
Additions | 137 | 232 | 457 | 578 | ||||||||||||
Amortization | (164 | ) | (199 | ) | (551 | ) | (560 | ) | ||||||||
Increase (decrease) in valuation allowance | 0 | (5 | ) | 370 | (575 | ) | ||||||||||
Mortgage servicing rights ending balance | $ | 2,082 | $ | 1,615 | $ | 2,082 | $ | 1,615 | ||||||||
Fair value at beginning of period | $ | 2,361 | $ | 1,587 | $ | 1,806 | $ | 2,404 | ||||||||
Fair value at end of period | $ | 2,285 | $ | 1,615 | $ | 2,285 | $ | 1,615 |
The estimated fair value of mortgage servicing rights was determined using a valuation model that calculates the present value of expected future servicing and ancillary income, net of expected servicing costs. The model incorporates various assumptions such as discount rates, prepayment speeds and ancillary income and servicing costs. As of September 30, 2021,2022, the model used discount rates ranging from 10%9.5% to 13.5%13%, and prepayment speeds ranging from 12.5%7.7% to 39.7%38.2%, respectively, both of which were based on market data from independent organizations. As of September 30, 2020, 2021the model used discount rates ranging from 10%10% to 13.5%13.5%, and prepayment speeds ranging from 20.9%12.5% to 46.9%39.7%, respectively, both of which were based on market data from independent organizations.
16
NOTE 5 – MORTGAGE SERVICING RIGHTS (continued)
The following table summarizes the estimated future amortization expense for mortgage servicing rights for the annual periods indicated. The projections of amortization expense are based on existing asset balances as of September 30, 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.
Estimated future amortization as of September 30, 2022: |
| (in thousands) |
| |
2022 |
| $ | 82 |
|
2023 |
|
| 229 |
|
2024 |
|
| 207 |
|
2025 |
|
| 185 |
|
2026 |
|
| 163 |
|
Thereafter |
|
| 1,024 |
|
Total |
| $ | 1,890 |
|
(in thousands) | ||||
Estimated future amortization as of September 30, 2021 : | ||||
2021 | $ | 440 | ||
2022 | 412 | |||
2023 | 385 | |||
2024 | 359 | |||
2025 | 328 | |||
Thereafter | 158 | |||
Total | $ | 2,082 | ||
NOTE 6 – DEPOSITS
The composition of deposits is summarized below:
|
| September 30, |
|
| December 31, 2021 |
| ||
|
| (in thousands) |
| |||||
Non-interest bearing checking |
| $ | 109,280 |
|
| $ | 106,664 |
|
Interest bearing checking |
|
| 35,444 |
|
|
| 37,467 |
|
Money market |
|
| 88,137 |
|
|
| 94,823 |
|
Statement savings |
|
| 68,275 |
|
|
| 64,954 |
|
Certificates of deposit |
|
| 78,162 |
|
|
| 80,593 |
|
Total |
| $ | 379,298 |
|
| $ | 384,501 |
|
September 30, 2021 | December 31, 2020 | |||||||
(in thousands) | ||||||||
Non-interest bearing checking | $ | 100,018 | $ | 98,970 | ||||
Interest bearing checking | 34,387 | 30,630 | ||||||
Money market | 93,110 | 103,724 | ||||||
Statement savings | 66,653 | 58,895 | ||||||
Certificates of deposit 1 | 80,146 | 87,629 | ||||||
Total | $ | 374,314 | $ | 379,848 | ||||
The Company held $9.5$7.9 million and $8.7$10.0 million in certificates of deposit which met or exceeded the FDIC insurance limit of $250,000$250,000 as of September 30, 20212022 and December 31, 2020,2021, respectively.
As of September 30, (in thousands) 2022 $ 22,992 2023 43,226 2024 1,365 2025 9,950 2026 350 Thereafter 279 Total $ 78,162 2021,2022, the scheduled maturities of certificates of deposit for the annual periods are presented below:below:
(in thousands) | ||||
2021 | $ | 21,164 | ||
2022 | 55,902 | |||
2023 | 1,078 | |||
2024 | 1,237 | |||
2025 | 585 | |||
Thereafter | 180 | |||
Total | $ | 80,146 | ||
17
NOTE 7 – FEDERAL HOME LOAN BANK ADVANCES
Federal Home Loan Bank advances consist of the following:
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||
|
| Rate |
|
| Amount |
|
| Rate |
|
| Amount |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fixed rate, fixed term advance, maturing Feb 2022 |
|
| — |
|
| $ | — |
|
|
| 1.62 | % |
| $ | 6,500 |
|
Fixed rate, fixed term advance, maturing Feb 2023 |
|
| 1.62 | % |
|
| 6,500 |
|
|
| 1.62 | % |
|
| 6,500 |
|
Fixed rate, fixed term advance, maturing July 2027 |
|
| 2.90 | % |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing Oct 2029 first put option date Nov 2020 |
|
| — |
|
|
| — |
|
|
| 1.03 | % |
|
| 10,000 |
|
Putable advance, maturing Feb 2030 first put option date Feb 2023 |
|
| 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 |
|
Putable advance, maturing Mar 2032 first put option date Mar 2027 |
|
| 1.74 | % |
|
| 10,000 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing July 2029 first put option date January 2023 |
|
| 1.68 | % |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
Advance structured note, payments due monthly, maturing Feb 2030 |
|
| — |
|
|
| — |
|
|
| 7.47 | % |
|
| 542 |
|
Advance structured note, payments due monthly, maturing April 2030 |
|
| 1.05 | % |
|
| 7,679 |
|
|
| 1.05 | % |
|
| 8,405 |
|
Advance structured note, payments due monthly, maturing May 2030 |
|
| 1.19 | % |
|
| 7,772 |
|
|
| 1.19 | % |
|
| 8,495 |
|
Total |
|
|
|
| $ | 56,951 |
|
|
|
|
| $ | 55,442 |
|
September 30, 2021 | December 31, 2020 | |||||||||||||||
Rate | Amount | Rate | Amount | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Fixed rate, fixed term advance, maturing Jul 2021 | 0 | 0 | 1.41 | % | $ | 7,000 | ||||||||||
Fixed rate, fixed term advance, maturing Feb 2022 | 1.62 | % | 6,500 | 1.62 | % | 6,500 | ||||||||||
Fixed rate, fixed term advance, maturing Feb 2023 | 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 | ||||||||||
Putable advance, maturing Feb 2030 first put option date Feb 2023 | 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 | ||||||||||
Advance structured note, payments due monthly, maturing Feb 2030 | 7.47 | % | 553 | 7.47 | % | 584 | ||||||||||
Advance structured note, payments due monthly, maturing April 2030 | 1.05 | % | 8,646 | 1.05 | % | 9,365 | ||||||||||
Advance structured note, payments due monthly, maturing May 2030 | 1.19 | % | 8,735 | 1.19 | % | 9,449 | ||||||||||
Fixed rate, COVID-19 Relief Advance, maturing May 2021 | 0 | 0 | 0 | % | 4,000 | |||||||||||
Total | $ | 55,934 | $ | 68,398 | ||||||||||||
The scheduled maturities and required principal payments of Federal Home Loan Bank advances are presented below:
|
| September 30, 2022 |
| |||||
|
| Weighted Average Rate |
|
| Amount |
| ||
|
| (dollars in thousands) |
| |||||
2022 |
|
| 1.12 | % |
| $ | 486 |
|
2023 |
|
| 1.50 | % |
|
| 8,457 |
|
2024 |
|
| 1.12 | % |
|
| 1,980 |
|
2025 |
|
| 1.12 | % |
|
| 2,002 |
|
2026 |
|
| 1.12 | % |
|
| 2,024 |
|
Thereafter |
|
| 0.93 | % |
|
| 42,002 |
|
Total |
|
|
|
| $ | 56,951 |
|
September 30, 2021 | ||||||||
Weighted Average Rate | Amount | |||||||
(dollars in thousands) | ||||||||
2021 | 1.26 | % | $ | 491 | ||||
2022 | 1.54 | % | 8,481 | |||||
2023 | 1.54 | % | 8,507 | |||||
2024 | 1.28 | % | 2,032 | |||||
2025 | 1.30 | % | 2,059 | |||||
Thereafter | 1.07 | % | 34,364 | |||||
Total | $ | 55,934 | ||||||
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 $150.1qualifying loans of $251.4 million and $149.1$232.7 million of qualifying loans as collateral for Federal Home Loan Bank advances as of September 30, 20212022 and December 31, 2020,2021, respectively. Collateral values to borrow against were approximately $171.0 million and $147.5 million as of September 30, 2022 and December 31, 2021, respectively. Federal Home Loan Bank advances arewere also secured by approximately $3.0$3.2 million and $3.0 million of Federal Home Loan Bank stock held by the Company as of September 30, 20212022 and December 31, 2020.2021, respectively. The Company’s available and unused portion of this borrowing agreement totaled $93.6$112.6 million and $79.6$90.9 million as of September 30, 20212022 and December 31, 2020,2021, respectively. Additional borrowing would require additional stock purchase.
Additionally, at September 30, 2021 we2022 the Company had a $15.0$15.0 million federal funds rate line of credit with the BMO Harris Bank, none of which was drawn at September 30, 2021.2022. The Company also had a $6.2$10.0 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $9.2$13.2 million at September 30, 2021.2022. The Company had 0tnot drawn on the Federal Reserve line as of September 30, 2021.2022.
18
NOTE 8 – INCOME TAXES
Income tax expense (benefit) expense was ($57,000)$21,000 and $1.2 million($57,000) for the three months ended September 30, 20212022 and 2020,2021, respectively, and $45,000($172,000) and $1.6 million$45,000 for the nine months ended September 30, 2022 and 2021, and 2020, 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 September 30, 2021,2022, and December 31, 2020,2021, the deferred tax valuation allowancesallowance was $934,000,$934,000, reducing our net deferred tax asset to $3.4$8.4 million and $3.8 million at each respective date.
The board and management continue to assess theirthe deferred tax assets includingin light of recent changes in market conditions, forecasted future projected income and available tax planning strategies. As such, there may be additional deferred tax asset impairment in subsequent periods.
19
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 September 30, 2021.
In the normal course of business, the Company is party to financial instruments with
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
The contractual amounts of
|
| September 30, 2022 |
| |||||||||
|
| Fixed Rate |
|
| Variable Rate |
|
| Total |
| |||
|
| (in thousands) |
| |||||||||
Commitments to extend credit |
| $ | 12,257 |
|
| $ | 72,300 |
|
| $ | 84,557 |
|
Standby letters of credit |
|
| — |
|
|
| 150 |
|
|
| 150 |
|
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program |
|
| 1,365 |
|
|
| — |
|
|
| 1,365 |
|
Commitments to sell loans |
|
| 2,184 |
|
|
| — |
|
|
| 2,184 |
|
Overdraft protection program commitments |
|
| 3,933 |
|
|
| — |
|
|
| 3,933 |
|
|
| 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 |
|
September 30, 2021 | ||||||||||||
Fixed Rate | Variable Rate | Total | ||||||||||
(in thousands) | ||||||||||||
Commitments to extend credit | $ | 8,215 | $ | 54,658 | $ | 62,873 | ||||||
Standby letters of credit | 23 | 250 | 273 | |||||||||
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program | 1,200 | — | 1,200 | |||||||||
Commitments to sell loans | 14,404 | — | 14,404 | |||||||||
Overdraft protection program commitments | 4,027 | — | 4,027 |
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 |
20
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 $2.5 million$711,000 of commitments to deliver loans through the Program as of September 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 September 30, 2021,2022, and December 31, 2020,2021, the Company had 0no 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.
21
NOTE 10 – EMPLOYEE STOCK OWNERSHIP PLAN
The Company established a tax qualified Employee Stock Ownership Plan (“ESOP”) for the benefit of its employees, effective January 1, 2019, in connection with the mutual holding company reorganization and organization of Old 1895 Bancorp. Eligible employees become 20%20% vested in their accounts after 1 year of service, 40%40% vested after 2 years of service, 60%60% vested after 3 years of service, 80%80% vested after 4 years of service, and 100%100% vested after 5 or more years of service, or earlier, upon death, disability or attainment of normal retirement age.
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 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 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 theAs ofDuring the nine months ended September 30, 2021,2022, the ESOP had purchased 131,727 of thean additional96,446 shares at an average price of $10.79.
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 $10,000$49,000 and $17,000$10,000 in compensation expense for the three months ended September 30, 20212022 and September 30, 2020,2021, respectively, and $59,000$151,000 and $49,000$61,000 for the nine months ended September 30, 20212022 and September 30, 2020,2021, respectively.
The following table provides the allocated and unallocated shares of common stock associated with the ESOP.
|
| September 30, |
|
| December 31, |
| ||
|
| (dollars in thousands) |
| |||||
Shares committed to be released |
|
| 14,757 |
|
|
| 22,401 |
|
Total allocated shares |
|
| 37,641 |
|
|
| 15,239 |
|
Total unallocated shares |
|
| 458,765 |
|
|
| 377,077 |
|
Total ESOP shares |
|
| 511,163 |
|
|
| 414,717 |
|
Fair value of unallocated shares (based on $10.58 and $10.99 share |
| $ | 4,854 |
|
| $ | 4,144 |
|
22
September 30, 2021 | December 31, 2020 (1) | |||||||
(dollars in thousands) | ||||||||
Shares committed to be released | 6,930 | 7,021 | ||||||
Total allocated shares | 18,480 | 7,021 | ||||||
Total unallocated shares | 337,361 | 161,486 | ||||||
Total ESOP shares | 362,771 | 175,528 | ||||||
Fair value of unallocated shares (based on $10.92 and $9.96 share price as of September 30, 2021 and December 31, 2020, respectively) | $ | 3,684 | $ | 1,608 | ||||
NOTE 11 – RELATED PARTY TRANSACTIONS
A summary of loans to directors, executive officers, and their affiliates follows:
|
| September 30, |
|
| December 31, 2021 |
| ||
|
| (in thousands) |
| |||||
Beginning balance |
| $ | 932 |
|
| $ | 1,034 |
|
Adjustments due to changes in directors, executive officers, and/or principal |
|
| — |
|
|
| 202 |
|
New loans |
|
| 4 |
|
|
| 53 |
|
Repayments |
|
| (71 | ) |
|
| (357 | ) |
Ending balance |
| $ | 865 |
|
| $ | 932 |
|
September 30, 2021 | December 31, 2020 | |||||||
(in thousands) | ||||||||
Beginning balance | $ | 1,034 | $ | 1,172 | ||||
New loans | 32 | 512 | ||||||
Repayments | (287 | ) | (650 | ) | ||||
Ending balance | $ | 779 | $ | 1,034 | ||||
Deposits from directors, executive officers, and their affiliates totaled $1.1$759,000 and $1.1 million and $940,000 at September 30, 20212022 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 $7,000 and $6,000 duringimmaterial for the three months ended September 30, 2021 and 2020, respectively, and $21,000 for the nine months ended September 30, 2022 and 2021, and 2020, respectively.
NOTE 12 – FAIR VALUE MEASUREMENTS
ASC Topic 820,
the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels.
Level 1 inputs – In general, fair values determined by Level 1 inputs use quoted market prices in active markets for identical assets or liabilities that we have the ability to access.
Level 2 inputs – Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets where there are few transactions and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs – Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Some assets and liabilities, such as securitiesaccounting 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.
23
NOTE 12 – FAIR VALUE MEASUREMENTS (continued)
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
Impaired loans
Rate lock commitments – Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in other assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements for fixed-rate commitments and also considers the difference between current levels of interest rates and the committed rates. While there are Level 2 and 3 inputs used in the valuation models, the Company has determined that one or more of the inputs significant in the valuation of both of the mortgage banking derivatives fall within Level 3 of the fair value hierarchy. The change in fair value is recorded through an adjustment to the statement of operations, within mortgage banking income.
Mortgage servicing rights
Assets measured at fair value on a recurring basis are summarized below, along with the level of the fair value hierarchy of the inputs utilized to determine such fair value.
|
|
|
|
| Recurring Fair Value Measurements Using |
| ||||||||||
|
| September 30, |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
| (in thousands) |
| |||||||||||||
Marketable equity securities |
| $ | 2,723 |
|
| $ | 2,723 |
|
| $ | — |
|
| $ | — |
|
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury notes |
|
| 26,336 |
|
|
| — |
|
|
| 26,335 |
|
|
| — |
|
Obligations of states and political subdivisions |
|
| 17,665 |
|
|
| — |
|
|
| 17,666 |
|
|
| — |
|
Government-sponsored mortgage-backed securities |
|
| 67,782 |
|
|
| — |
|
|
| 67,782 |
|
|
| — |
|
Asset-backed securities |
|
| 5,201 |
|
|
| — |
|
|
| 5,201 |
|
|
| — |
|
Certificates of deposit |
|
| 1,430 |
|
|
| — |
|
|
| 1,430 |
|
|
| — |
|
Total |
| $ | 121,137 |
|
| $ | 2,723 |
|
| $ | 118,414 |
|
| $ | — |
|
24
NOTE 12 – FAIR VALUE MEASUREMENTS (continued)
|
|
|
|
| Recurring Fair Value Measurements Using |
| ||||||||||
|
| December 31, |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
| (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 |
|
| 20,760 |
|
|
| — |
|
|
| 20,760 |
|
|
| — |
|
Government-sponsored mortgage-backed securities |
|
| 64,149 |
|
|
| — |
|
|
| 64,149 |
|
|
| — |
|
Asset-backed securities |
|
| 6,523 |
|
|
| — |
|
|
| 6,523 |
|
|
| — |
|
Certificates of deposit |
|
| 1,524 |
|
|
| — |
|
|
| 1,524 |
|
|
| — |
|
Total |
| $ | 115,984 |
|
| $ | 3,544 |
|
| $ | 112,440 |
|
| $ | — |
|
Recurring Fair Value Measurements Using | ||||||||||||||||
September 30, 2021 | Level 1 | Level 2 | Level 3 | |||||||||||||
(in thousands) | ||||||||||||||||
Marketable equity securities: | $ | 3,309 | $ | 3,309 | $ | — | $ | — | ||||||||
Securities available-for-sale: | ||||||||||||||||
Obligations of states and political subdivisions | 21,180 | — | 21,180 | — | ||||||||||||
Government-sponsored mortgage-backed securities | 56,857 | — | 56,857 | — | ||||||||||||
Corporate collateralized mortgage obligations | 745 | — | 745 | — | ||||||||||||
Asset-backed securities | 6,798 | — | 6,798 | — | ||||||||||||
Certificates of deposit | 1,541 | — | 1,541 | — | ||||||||||||
Total | $ | 90,430 | $ | 3,309 | $ | 87,121 | $ | — | ||||||||
Recurring Fair Value Measurements Using | ||||||||||||||||
December 31, 2020 | Level 1 | Level 2 | Level 3 | |||||||||||||
(in thousands) | ||||||||||||||||
Marketable equity securities: | $ | 2,992 | $ | 2,992 | $ | — | $ | — | ||||||||
Securities available-for-sale: | ||||||||||||||||
Obligations of states and political subdivisions | 11,803 | — | 11,803 | — | ||||||||||||
Government-sponsored mortgage-backed securities | 38,039 | — | 38,039 | — | ||||||||||||
Asset-backed securities | 7,281 | — | 7,281 | — | ||||||||||||
Certificates of deposit | 1,580 | — | 1,580 | — | ||||||||||||
Total | $ | 61,695 | $ | 2,992 | $ | 58,703 | $ | — | ||||||||
Impaired loans are measured at fair value on a0no loans that were considered impaired with a specific valuation allowance as of September 30, 20212022 and December 31, 2020.
Mortgage servicing rights are measured at fair value on aMortgage 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 no impairment on mortgage servicing rights as of $369,000 during the periodSeptember 30, 2022 and December 31, 2020. At September 30, 2021, there was 0 valuation allowance against mortgage servicing rights.
The carrying values and estimated fair values of financial instruments are presented below:
September 30, 2021 | ||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | |||||||||||||
(in thousands) | ||||||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents | $ | 86,856 | $ | 86,856 | $ | — | $ | — | ||||||||
Available for sale securities | 87,121 | — | 87,121 | — | ||||||||||||
Marketable equity securities | 3,309 | 3,309 | — | — | ||||||||||||
Loans held for sale | 1,927 | — | 1,927 | — | ||||||||||||
Loans | 330,310 | — | — | 332,175 | ||||||||||||
Rate lock commitments | 116 | — | — | 116 | ||||||||||||
Accrued interest receivable | 896 | 896 | — | — | ||||||||||||
Federal Home Loan Bank stock | 3,032 | — | — | 3,032 | ||||||||||||
Cash value of life insurance | 13,789 | — | — | 13,789 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Deposits | 374,314 | 294,168 | — | 80,186 | ||||||||||||
Advance payments by borrowers for taxes and insurance | 11,982 | 11,982 | — | — | ||||||||||||
Federal Home Loan Bank advances | 55,934 | — | — | 57,133 | ||||||||||||
Accrued interest payable | 113 | 113 | — | — |
|
| September 30, 2022 |
| |||||||||||||
|
| Carrying Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
| (in thousands) |
| |||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 15,702 |
|
| $ | 15,702 |
|
| $ | — |
|
| $ | — |
|
Available-for-sale securities |
|
| 118,414 |
|
|
| — |
|
|
| 118,414 |
|
|
| — |
|
Marketable equity securities |
|
| 2,723 |
|
|
| 2,723 |
|
|
| — |
|
|
| — |
|
Loans held for sale |
|
| 365 |
|
|
| — |
|
|
| 365 |
|
|
| — |
|
Loans |
|
| 354,740 |
|
|
| — |
|
|
| — |
|
|
| 333,696 |
|
Rate lock commitments |
|
| 10 |
|
|
| — |
|
|
| — |
|
|
| 10 |
|
Accrued interest receivable |
|
| 1,106 |
|
|
| 1,106 |
|
|
| — |
|
|
| — |
|
Federal Home Loan Bank stock |
|
| 3,205 |
|
|
| — |
|
|
| — |
|
|
| 3,205 |
|
Cash value of life insurance |
|
| 14,209 |
|
|
| — |
|
|
| — |
|
|
| 14,209 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Deposits |
|
| 379,298 |
|
|
| 301,137 |
|
|
| — |
|
|
| 77,102 |
|
Advance payments by borrowers for taxes and insurance |
|
| 10,225 |
|
|
| 10,225 |
|
|
| — |
|
|
| — |
|
Federal Home Loan Bank advances |
|
| 56,951 |
|
|
| — |
|
|
| — |
|
|
| 58,085 |
|
Accrued interest payable |
|
| 142 |
|
|
| 142 |
|
|
| — |
|
|
| — |
|
25
NOTE 12 – FAIR VALUE MEASUREMENTS (continued)
|
| 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 |
|
|
| — |
|
|
| — |
|
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 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
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.
26
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
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 September 30, 20212022 and December 31, 2020.
As of September 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:
September 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) | $ | 49,513 | 9.1 | % | $ | 21,762 | 4.0 | % | $ | 27,203 | 5.0 | % | ||||||||||||
Risk-based: | ||||||||||||||||||||||||
Common Equity Tier 1 | 49,513 | 14.6 | % | 15,264 | 4.5 | % | 22,048 | 6.5 | % | |||||||||||||||
Tier 1 | 49,513 | 14.6 | % | 20,352 | 6.0 | % | 27,136 | 8.0 | % | |||||||||||||||
Total | 47,457 | 14.0 | % | 27,136 | 8.0 | % | 33,920 | 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 | % |
|
| September 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) |
| $ | 64,937 |
|
|
| 11.9 | % |
| $ | 21,761 |
|
|
| 4.0 | % |
| $ | 27,201 |
|
|
| 5.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Risk-based: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Common Equity Tier 1 |
|
| 64,937 |
|
|
| 16.9 | % |
|
| 17,325 |
|
|
| 4.5 | % |
|
| 25,025 |
|
|
| 6.5 | % |
Tier 1 |
|
| 64,937 |
|
|
| 16.9 | % |
|
| 23,100 |
|
|
| 6.0 | % |
|
| 30,800 |
|
|
| 8.0 | % |
Total |
|
| 68,117 |
|
|
| 17.7 | % |
|
| 30,800 |
|
|
| 8.0 | % |
|
| 38,501 |
|
|
| 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 | % |
On July 29, 2022, the Company adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to 5% of Contents
27
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
Earnings (loss) per common share for the three and nine months ended September 30, 20212022 and 20202021 are presented in the following table.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2021 | 2020 (1) | 2021 | 2020 (1) | |||||||||||||
(In thousands, except per share amounts) | (In thousands, except per share amounts) | |||||||||||||||
Net (loss) income | $ | (115 | ) | $ | 412 | $ | 354 | $ | 893 | |||||||
Weighted shares outstanding for basic EPS | ||||||||||||||||
Weighted average shares outstanding | 6,269 | 4,647 | 6,261 | 4,660 | ||||||||||||
Less: Weighted average unallocated ESOP shares | 250 | 165 | 226 | 166 | ||||||||||||
Weighted average shares outstanding for basic EPS | 6,011 | 4,482 | 6,035 | 4,494 | ||||||||||||
Additional dilutive shares | 210 | 38 | 228 | 36 | ||||||||||||
Weighted average shares outstanding for dilutive EPS | 6,221 | 4,520 | 6,263 | 4,530 | ||||||||||||
Basic (loss) income per share | $ | (0.02 | ) | $ | 0.09 | $ | 0.06 | $ | 0.20 | |||||||
Diluted (loss) income per share | $ | (0.02 | ) | $ | 0.09 | $ | 0.06 | $ | 0.20 | |||||||
|
| Three months ended September 30, | |||||||
|
| 2022 |
|
| 2021 |
|
| ||
|
| (In thousands, except per share amounts) | |||||||
|
|
|
|
|
|
|
| ||
Net income (loss) |
| $ | 124 |
|
| $ | (115 | ) |
|
|
|
|
|
|
|
|
| ||
Weighted shares outstanding for basic EPS |
|
|
|
|
|
|
| ||
Weighted average shares outstanding |
|
| 6,271 |
|
|
| 6,269 |
|
|
Less: Weighted average unallocated ESOP shares |
|
| 461 |
|
|
| 258 |
|
|
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding for basic EPS |
|
| 5,810 |
|
|
| 6,011 |
|
|
Additional dilutive shares |
|
| 173 |
|
|
| — |
|
|
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding for dilutive EPS |
|
| 5,983 |
|
|
| 6,011 |
|
|
|
|
|
|
|
|
|
| ||
Basic income (loss) per share |
| $ | 0.02 |
|
| $ | (0.02 | ) |
|
Diluted income (loss) per share |
| $ | 0.02 |
|
| $ | (0.02 | ) |
|
|
| Nine months ended September 30, | |||||||
|
| 2022 |
|
| 2021 |
|
| ||
|
| (In thousands, except per share amounts) | |||||||
|
|
|
|
|
|
|
| ||
Net (loss) income |
| $ | (172 | ) |
| $ | 354 |
|
|
|
|
|
|
|
|
|
| ||
Weighted shares outstanding for basic EPS |
|
|
|
|
|
|
| ||
Weighted average shares outstanding |
|
| 6,279 |
|
|
| 6,261 |
|
|
Less: Weighted average unallocated ESOP shares |
|
| 437 |
|
|
| 226 |
|
|
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding for basic EPS |
|
| 5,842 |
|
|
| 6,035 |
|
|
Additional dilutive shares |
|
| — |
|
|
| 228 |
|
|
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding for dilutive EPS |
|
| 5,842 |
|
|
| 6,263 |
|
|
|
|
|
|
|
|
|
| ||
Basic (loss) income per share |
| $ | (0.03 | ) |
| $ | 0.06 |
|
|
Diluted (loss) income per share |
| $ | (0.03 | ) |
| $ | 0.06 |
|
|
28 |
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. As of September 30, 2022, no shares of common stock remained available for grant as stock options, restricted stock or restricted stock units under the 2020 Equity Incentive Plan. The stock options granted to employees and
On August 26, 2022, the Company’s stockholders approved the 1895 Bancorp of Wisconsin, Inc. 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”). A total of 354,200 stock options and 141,680 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.
Upon approval of the 2022 Equity Incentive Plan, if awards under the 2020 Equity Incentive Plan are forfeited and again become available for grant, no further awards will be granted under the 2020 Equity Incentive Plan. However, any restricted stock or stock options outstanding under the 2020 Equity Incentive Plan on the approval date of the 2022 Equity Incentive Plan will remain outstanding and subject to the terms and conditions of the 2020 Equity Incentive Plan.
Accounting for Stock-Based Compensation Plan
The fair val
|
| For the Nine Months Ended |
| |||||
|
| September 30, |
|
| September 30, |
| ||
|
|
|
|
|
|
| ||
Dividend yield |
|
| 0.00 | % |
|
| 0.00 | % |
Risk-free interest rate |
|
| 3.13 | % |
|
| 0.96 | % |
Expected volatility |
|
| 24.64 | % |
|
| 24.64 | % |
Weighted average expected life |
|
| 6.5 |
|
|
| 6.5 |
|
Weighted average per share value of options |
| $ | 3.25 |
|
| $ | 2.10 |
|
For the Nine Months Ended September 30, 2021 | ||||
Dividend yield | 0.00 | % | ||
Risk-free interest rate | 0.96 | % | ||
Expected volatility | 24.64 | % | ||
Weighted average expected life | 6.5 | |||
Weighted average per share value of options | $ | 2.10 |
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.
29
NOTE 15 – STOCK BASED COMPENSATION (continued)
A summary of the Company’s stock option activity for the periodnine months ended September 30, 20212022 is presented below.
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 |
|
| 107,505 |
|
|
| 9.93 |
|
|
| 6.50 |
|
|
| — |
|
Exercised |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Outstanding September 30, 2022 |
|
| 408,225 |
|
|
| 7.17 |
|
|
| 8.24 |
|
| $ | 1,557,498 |
|
Options exercisable at September 30, 2022 |
|
| 112,824 |
|
|
| 6.09 |
|
|
| 7.61 |
|
| $ | 553,129 |
|
Stock Options | Shares (1) | Weighted Average Exercise Price | Weighted Average Remaining in Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||||||
Outstanding December 31, 2020 | 287,097 | $ | 5.99 | 9.30 | 593,838 | |||||||||||
Granted (2) | 37,316 | 7.76 | 9.41 | — | ||||||||||||
Exercised | 0 | 0 | — | — | ||||||||||||
Forfeited | 0 | 0 | — | — | ||||||||||||
Outstanding September 30, 2021 | 324,413 | 6.20 | 8.65 | 1,532,089 | ||||||||||||
Options exercisable at September 30, 2021 | 57,415 | 5.99 | 8.55 | 282,833 | ||||||||||||
The following table summarizes information about the Company’s nonvested stock option activity for the nine months ended September 30, 2021:2022:
Stock Options |
| Shares |
|
| Weighted Average Grant Date Fair Value |
| ||
Nonvested at December 31, 2021 |
|
| 248,043 |
|
| $ | 1.58 |
|
Granted |
|
| 107,505 |
|
|
| 3.25 |
|
Vested(1) |
|
| (60,147 | ) |
|
| 1.56 |
|
Forfeited |
|
| — |
|
|
| — |
|
Nonvested at September 30, 2022 |
|
| 295,401 |
|
| $ | 2.19 |
|
Stock Options | Shares (1) | Weighted Average Grant Date Fair Value | ||||||
Nonvested at December 31, 2020 | 287,097 | $ | 1.98 | |||||
Granted (2) | 37,316 | 2.10 | ||||||
Vested | (57,415 | ) | 1.50 | |||||
Forfeited | 0 | 0 | ||||||
Nonvested at September 30, 2021 | 266,998 | $ | 2.09 | |||||
The Company amortizes the expense related to stock options as compensation expense over the vesting period. The Company recognized $26,000$33,000 and $22,000$26,000 in stock option expense during the three months ended September 30, 20212022 and 2020, respectively.2021. Additionally, the Company recognized $74,000$80,000 and $39,000$74,000 in stock option expense during the nine months ended September 30, 2022 and 2021, and 2020, respectively.
At September 30, 2021,2022, the Company had $374,000$593,000 in estimated unrecognized compensation costs related to outstanding stock options that is expected to be recognized over a weighted average period of 3.713.96 years.
The following table summarizes information about the Company’s restricted stock activity for the nine months ended September 30, 2021:2022:
Restricted Stock |
| Shares |
|
| Weighted Average Grant Date Fair Value |
| ||
Nonvested at December 31, 2021 |
|
| 97,128 |
|
| $ | 6.25 |
|
Granted |
|
| 42,791 |
|
|
| 9.93 |
|
Vested(1)(2) |
|
| (23,532 | ) |
|
| 6.20 |
|
Forfeited |
|
| — |
|
|
| — |
|
Nonvested at September 30, 2022 |
|
| 116,387 |
|
| $ | 7.61 |
|
Restricted Stock | Shares (1) | Weighted Average Grant Date Fair Value | ||||||
Nonvested at December 31, 2020 | 111,802 | $ | 5.98 | |||||
Granted (2) | 15,052 | 7.76 | ||||||
Vested ( 3 ) | (22,355 | ) | 5.98 | |||||
Forfeited | — | 0 | ||||||
Nonvested at September 30, 2021 | 104,499 | $ | 6.23 | |||||
The Company amortizes the expense related to restricted stock awards as compensation expense over the vesting period. The Company recognized $39,000$47,000 and $33,000$39,000 in restricted stock expense during the three months ended September 30, 20212022 and 2020,2021, respectively. Additionally, the Company recognized $114,000$120,000 and $60,000$114,000 in restricted stock shares expense during the nine months ended September 30, 20212022 and 2020,2021, respectively. At September 30, 2021,2022, the Company had $577,000$804,000 of unrecognized compensation expense related to restricted stock shares that is expected to be recognized over a weighted average period of 3.703.83 years.
30
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 September 30, 2022, the Company reported $471,000 of right-of-use asset and $471,000 lease liability in its consolidated balance sheet under other assets and other liabilities, respectively. The Company’s average remaining maturity for its leases is 5.5 years and its average discount rate is 1.79%.
At September 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 $57,000 for the three and nine months ended September 30, 2022, respectively, and $21,000 and $62,000 for the three and nine months ended September 30, 2021, respectively.
Rent commitments were as follows as of September 30, 2022:
|
| (in thousands) |
| |
2022 |
| $ | 21 |
|
2023 |
|
| 87 |
|
2024 |
|
| 89 |
|
2025 |
|
| 91 |
|
2026 |
|
| 94 |
|
Thereafter |
|
| 112 |
|
Amounts representing interest |
|
| (23 | ) |
Total |
| $ | 471 |
|
31
General
Management’s discussion and analysis of financial condition and results of operations at September 30, 20212022 and for the three and nine months ended September 30, 20212022 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
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:
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:
32
Additionally, the outbreak ofwill may 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 declaredCOVID-19to 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.
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
The provisions of the CARES Act and related legislation included an electionoption to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related tothe earlier of (i) December 31, 2020 or (ii) 60 days after the end of theCOVID-19national emergency.2021. The relief cancould 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 September 30, 2021,2022, the Company had 1 to 3 month deferrals of approximately $444,000$245,000 in interest, escrow, and principal payments on $14.7$4.6 million in outstanding loans.
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-yearand 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 September 30, 2021, wethe Bank had funded 246 PPP loans totaling $30.3 million, of which all but $2,000 had been forgivenwith no outstanding balance remaining as of September 30, 2021.
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 PPP 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 3.5 times for small businesses in the restaurant and hospitality industries) the borrower’s average monthly payroll costsin the one-year period priorto 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 Economic Injury Disaster Loan (“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 previousguidance 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 September 30, 2021,2022, we had funded 143 second round PPP loans totaling $10.5 million, none of which $10.2 million had been forgiven as of September 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
Critical Accounting Policies
As a result of the financial conditioncomplex and resultsdynamic nature of operations are based on our financial statements, which are preparedthe Company’s business, management must exercise judgment in conformityselecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with generally acceptedthe current accounting principles usedgenerally accepted in the United States of America. The preparationAmerica (“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 managementthe business have more significance than others due to makethe relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates and assumptions affectingaffect the reported amounts of assets and liabilities disclosureas well as disclosures of contingent assetsrevenues and liabilities, andexpenses 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 maycould meaningfully differ from these estimates under different assumptions or conditions, resulting in a changeestimates. Management believes that could have a material impact on the carrying value of our assets and liabilities and our results of operations.
33
Comparison of Financial Condition at September 30, 20212022 and December 31, 2020
Total Assets.
Cash and Cash Equivalents.
Available-for-Sale Securities. Available-for-sale securities increased $28.4$6.0 million, or 48.4%5.3%, to $87.1$118.4 million at September 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 nine months ended September 30, 2021,2022, partially offset in part by $1.0 million of securities sales as well as maturities, prepayments and calls of securities totaling $9.3$14.6 million and a reduction in the unrealized gain held within the portfolio of $404,000.
Loans Held for Sale.
Net Loans.
Other Assets. Other assets increased $5.3 million, or 1.5%86.7%, from $6.1 million at December 31, 2021 to $374.3$11.4 million at September 30, 2021,2022. This increase was primarily due to a $4.6 million increase in deferred tax assets, which was primarily the result of the increase in unrealized losses on available-for-sale securities. Other assets also increased as a result of a $471,000 increase in right of use lease assets as a result of the adoption of ASU 2016-02 in the first quarter of 2022, and a $189,000 increase in prepaid expenses, which was primarily due to the payment of annual insurance premiums in the first quarter of 2022.
Deposits. Deposits decreased $5.2 million, or 1.4%, to $379.3 million at September 30, 2022, from $379.8$384.5 million at December 31, 2020. Noninterest checking accounts increased $1.02021. This decrease was primarily due to a $6.7 million or 1.1%, to $100.0 million. Statement savings accounts increased $7.8 million to $66.7 million at September 30, 2021 from $58.9 million, and interest-bearing checking accounts increased $3.8 million to $34.4 million from $30.6 million. These increases were offset by decreasesdecrease in money market accounts, of $10.6 million to $93.1 million at September 30, 2021 from $103.7 million at December 31, 2020 and a $7.5$2.4 million decrease in certificates of deposits to $80.1deposit and a $2.0 million from $87.6 million at December 31, 2020, including a decrease in brokered certificates of deposits to none at September 30, 2021 from $5.5interest bearing checking accounts. These decreases were partially offset by a $3.3 million at December 31, 2020. We continued our marketing focus on attractingnon-maturingdeposits as theseincrease in statement savings accounts carry lower interest rates and offer more flexibilitya $2.6 million increase in a changing rate environment.
Advance Payments by Borrowers for Taxes and Insurance.
Borrowings.
Total Stockholders’ Equity.
34
repurchase of these shares resulted in a $2.0 million decrease in stockholders' equity. See "Note 13 - Equity and Regulatory Matters" for additional information regarding the Company's stock repurchase program. The increase in unallocated common shares held by the ESOP, plan forwas the result of additional shares purchased by the ESOP during the nine months ended September 30, 2021 due to the expansion of the ESOP plan. In addition, treasury stock declined $917,000 as2022, which resulted in a result of the July 2021 stock offering.
Average Balances and Yields
The following tables presenttable 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 September 30, |
| |||||||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||
|
| Average |
|
| Interest and |
|
| Yield/Cost |
|
| Average |
|
| Interest and |
|
| Yield/Cost |
| ||||||
|
| (Dollars in thousands) |
| |||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans(1) |
| $ | 352,651 |
|
| $ | 3,563 |
|
|
| 4.01 | % |
| $ | 330,353 |
|
| $ | 2,939 |
|
|
| 3.53 | % |
Securities available-for-sale |
|
| 124,578 |
|
|
| 613 |
|
|
| 1.95 | % |
|
| 89,748 |
|
|
| 368 |
|
|
| 1.63 | % |
Other interest-earning assets |
|
| 22,264 |
|
|
| 139 |
|
|
| 2.48 | % |
|
| 95,316 |
|
|
| 74 |
|
|
| 0.31 | % |
Total interest-earning |
|
| 499,493 |
|
|
| 4,315 |
|
|
| 3.43 | % |
|
| 515,417 |
|
|
| 3,381 |
|
|
| 2.60 | % |
Non-interest-earning assets |
|
| 35,090 |
|
|
|
|
|
|
|
|
| 32,739 |
|
|
|
|
|
|
| ||||
Total assets |
| $ | 534,583 |
|
|
|
|
|
|
|
| $ | 548,156 |
|
|
|
|
|
|
| ||||
Interest-earning liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
NOW accounts |
| $ | 35,186 |
|
| $ | 10 |
|
|
| 0.12 | % |
| $ | 34,134 |
|
| $ | 9 |
|
|
| 0.10 | % |
Money market accounts |
|
| 93,344 |
|
|
| 79 |
|
|
| 0.34 | % |
|
| 93,554 |
|
|
| 60 |
|
|
| 0.25 | % |
Savings accounts |
|
| 67,977 |
|
|
| 9 |
|
|
| 0.05 | % |
|
| 66,416 |
|
|
| 8 |
|
|
| 0.05 | % |
Certificates of deposit |
|
| 80,213 |
|
|
| 98 |
|
|
| 0.49 | % |
|
| 80,046 |
|
|
| 94 |
|
|
| 0.47 | % |
Total interest-bearing deposits |
|
| 276,720 |
|
|
| 196 |
|
|
| 0.28 | % |
|
| 274,150 |
|
|
| 171 |
|
|
| 0.25 | % |
Federal Home Loan Bank advances |
|
| 57,435 |
|
|
| 200 |
|
|
| 1.38 | % |
|
| 57,002 |
|
|
| 178 |
|
|
| 1.24 | % |
Other interest-bearing liabilities |
|
| 9,910 |
|
|
| 2 |
|
|
| 0.08 | % |
|
| 10,851 |
|
| ― |
|
| ― |
| ||
Total interest-bearing |
|
| 344,065 |
|
|
| 398 |
|
|
| 0.46 | % |
|
| 342,003 |
|
|
| 349 |
|
|
| 0.41 | % |
Non-interest-bearing deposits |
|
| 105,359 |
|
|
|
|
|
|
|
|
| 97,151 |
|
|
|
|
|
|
| ||||
Other non-interest-bearing liabilities |
|
| 6,597 |
|
|
|
|
|
|
|
|
| 6,500 |
|
|
|
|
|
|
| ||||
Total liabilities |
|
| 456,021 |
|
|
|
|
|
|
|
|
| 445,654 |
|
|
|
|
|
|
| ||||
Total stockholders’ equity |
|
| 78,562 |
|
|
|
|
|
|
|
|
| 102,502 |
|
|
|
|
|
|
| ||||
Total liabilities and |
| $ | 534,583 |
|
|
|
|
|
|
|
| $ | 548,156 |
|
|
|
|
|
|
| ||||
Net interest income |
|
|
|
| $ | 3,917 |
|
|
|
|
|
|
|
| $ | 3,032 |
|
|
|
| ||||
Net interest-earning assets |
| $ | 155,428 |
|
|
|
|
|
|
|
| $ | 173,414 |
|
|
|
|
|
|
| ||||
Interest rate spread(2) |
|
|
|
|
|
|
|
| 2.97 | % |
|
|
|
|
|
|
|
| 2.19 | % | ||||
Net interest margin(3) |
|
|
|
|
|
|
|
| 3.11 | % |
|
|
|
|
|
|
|
| 2.33 | % | ||||
Average interest-earning assets to |
|
| 145.17 | % |
|
|
|
|
|
|
|
| 150.71 | % |
|
|
|
|
|
|
Three Months Ended September 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 | $ | 330,353 | $ | 2,939 | 3.53 | % | $ | 328,550 | $ | 3,617 | 4.37 | % | ||||||||||||
Securities available-for-sale | 89,748 | 368 | 1.63 | % | 61,059 | 304 | 1.97 | % | ||||||||||||||||
Other interest-earning assets | 92,284 | 74 | 0.32 | % | 68,616 | 17 | 0.10 | % | ||||||||||||||||
Total interest-earning assets | 512,385 | 3,381 | 2.62 | % | 458,225 | 3,938 | 3.42 | % | ||||||||||||||||
Non-interest-earning assets | 35,771 | 37,044 | ||||||||||||||||||||||
Total assets | $ | 548,156 | $ | 495,269 | ||||||||||||||||||||
Interest-earning liabilities: | ||||||||||||||||||||||||
NOW accounts | $ | 34,134 | $ | 9 | 0.10 | % | $ | 28,417 | $ | 8 | 0.11 | % | ||||||||||||
Money market accounts | 93,554 | 60 | 0.25 | % | 82,041 | 103 | 0.50 | % | ||||||||||||||||
Savings accounts | 66,416 | 8 | 0.05 | % | 55,683 | 14 | 0.10 | % | ||||||||||||||||
Certificates of deposit | 80,046 | 94 | 0.47 | % | 97,355 | 355 | 1.45 | % | ||||||||||||||||
Total interest-bearing deposits | 274,150 | 171 | 0.25 | % | 263,496 | 480 | 0.72 | % | ||||||||||||||||
Federal Home Loan Bank advances | 57,002 | 178 | 1.24 | % | 69,049 | 207 | 1.19 | % | ||||||||||||||||
Other interest-bearing liabilities | 10,851 | — | — | 10,886 | — | — | ||||||||||||||||||
Total interest-bearing liabilities | 342,003 | 349 | 0.41 | % | 343,431 | 687 | 0.80 | % | ||||||||||||||||
Non-interest-bearing deposits | 143,007 | 91,485 | ||||||||||||||||||||||
Other non-interest-bearing liabilities | 6,500 | 4,768 | ||||||||||||||||||||||
Total liabilities | 491,510 | 439,684 | ||||||||||||||||||||||
Total stockholders’ equity | 56,646 | 55,585 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 548,156 | $ | 495,269 | ||||||||||||||||||||
Net interest income | $ | 3,032 | $ | 3,251 | ||||||||||||||||||||
Net interest-earning assets | $ | 170,382 | $ | 114,794 | ||||||||||||||||||||
Interest rate spread (1) | 2.21 | % | 2.62 | % | ||||||||||||||||||||
Net interest margin (2) | 2.37 | % | 2.82 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 149.82 | % | 133.43 | % |
(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. |
35
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||
|
| Average |
|
| Interest and |
|
| Yield/Cost |
|
| Average |
|
| Interest and |
|
| Yield/Cost |
| ||||||
|
| (Dollars in thousands) |
| |||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans(1) |
| $ | 340,626 |
|
| $ | 9,862 |
|
|
| 3.87 | % |
| $ | 333,235 |
|
| $ | 9,357 |
|
|
| 3.75 | % |
Securities available-for-sale |
|
| 128,920 |
|
|
| 1,727 |
|
|
| 1.79 | % |
|
| 76,520 |
|
|
| 971 |
|
|
| 1.70 | % |
Other interest-earning assets |
|
| 33,193 |
|
|
| 279 |
|
|
| 1.12 | % |
|
| 86,195 |
|
|
| 181 |
|
|
| 0.28 | % |
Total interest-earning |
|
| 502,739 |
|
|
| 11,868 |
|
|
| 3.16 | % |
|
| 495,950 |
|
|
| 10,509 |
|
|
| 2.83 | % |
Non-interest-earning assets |
|
| 34,827 |
|
|
|
|
|
|
|
|
| 33,274 |
|
|
|
|
|
|
| ||||
Total assets |
| $ | 537,566 |
|
|
|
|
|
|
|
| $ | 529,224 |
|
|
|
|
|
|
| ||||
Interest-earning liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
NOW accounts |
| $ | 36,016 |
|
| $ | 26 |
|
|
| 0.10 | % |
| $ | 33,191 |
|
| $ | 27 |
|
|
| 0.11 | % |
Money market accounts |
|
| 95,612 |
|
|
| 223 |
|
|
| 0.31 | % |
|
| 98,041 |
|
|
| 200 |
|
|
| 0.27 | % |
Savings accounts |
|
| 67,358 |
|
|
| 25 |
|
|
| 0.05 | % |
|
| 64,493 |
|
|
| 27 |
|
|
| 0.06 | % |
Certificates of deposit |
|
| 81,813 |
|
|
| 277 |
|
|
| 0.45 | % |
|
| 81,888 |
|
|
| 366 |
|
|
| 0.60 | % |
Total interest-bearing deposits |
|
| 280,799 |
|
|
| 551 |
|
|
| 0.26 | % |
|
| 277,613 |
|
|
| 620 |
|
|
| 0.30 | % |
Federal Home Loan Bank advances |
|
| 56,673 |
|
|
| 550 |
|
|
| 1.30 | % |
|
| 63,363 |
|
|
| 579 |
|
|
| 1.22 | % |
Other interest-bearing liabilities |
|
| 6,919 |
|
|
| 7 |
|
|
| 0.13 | % |
|
| 7,937 |
|
|
| — |
|
| ― |
| |
Total interest-bearing |
|
| 344,391 |
|
|
| 1,108 |
|
|
| 0.43 | % |
|
| 348,913 |
|
|
| 1,199 |
|
|
| 0.46 | % |
Non-interest-bearing deposits |
|
| 104,787 |
|
|
|
|
|
|
|
|
| 96,056 |
|
|
|
|
|
|
| ||||
Other non-interest-bearing |
|
| 6,515 |
|
|
|
|
|
|
|
|
| 5,791 |
|
|
|
|
|
|
| ||||
Total liabilities |
|
| 455,693 |
|
|
|
|
|
|
|
|
| 450,760 |
|
|
|
|
|
|
| ||||
Total stockholders’ equity |
|
| 81,873 |
|
|
|
|
|
|
|
|
| 78,464 |
|
|
|
|
|
|
| ||||
Total liabilities and |
| $ | 537,566 |
|
|
|
|
|
|
|
| $ | 529,224 |
|
|
|
|
|
|
| ||||
Net interest income |
|
|
|
| $ | 10,760 |
|
|
|
|
|
|
|
| $ | 9,310 |
|
|
|
| ||||
Net interest-earning assets |
| $ | 158,348 |
|
|
|
|
|
|
|
| $ | 147,037 |
|
|
|
|
|
|
| ||||
Interest rate spread(2) |
|
|
|
|
|
|
|
| 2.73 | % |
|
|
|
|
|
|
|
| 2.37 | % | ||||
Net interest margin(3) |
|
|
|
|
|
|
|
| 2.86 | % |
|
|
|
|
|
|
|
| 2.51 | % | ||||
Average interest-earning |
|
| 145.98 | % |
|
|
|
|
|
|
|
| 142.14 | % |
|
|
|
|
|
|
Nine Months Ended September 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 | $ | 333,234 | $ | 9,357 | 3.75 | % | $ | 322,480 | $ | 10,228 | 4.24 | % | ||||||||||||
Securities available-for-sale | 76,520 | 971 | 1.70 | % | 66,177 | 1,092 | 2.20 | % | ||||||||||||||||
Other interest-earning assets | 83,163 | 181 | 0.29 | % | 43,638 | 65 | 0.20 | % | ||||||||||||||||
Total interest-earning assets | 492,917 | 10,509 | 2.85 | % | 432,295 | 11,385 | 3.52 | % | ||||||||||||||||
Non-interest-earning assets | 36,307 | 36,536 | ||||||||||||||||||||||
Total assets | $ | 529,224 | $ | 468,831 | ||||||||||||||||||||
Interest-earning liabilities: | ||||||||||||||||||||||||
NOW accounts | $ | 33,191 | $ | 27 | 0.11 | % | $ | 26,712 | $ | 39 | 0.19 | % | ||||||||||||
Money market accounts | 98,041 | 200 | 0.27 | % | 73,759 | 355 | 0.64 | % | ||||||||||||||||
Savings accounts | 64,493 | 27 | 0.06 | % | 51,919 | 44 | 0.11 | % | ||||||||||||||||
Certificates of deposit | 81,888 | 366 | 0.60 | % | 113,004 | 1,508 | 1.78 | % | ||||||||||||||||
Total interest-bearing deposits | 277,613 | 620 | 0.30 | % | 265,394 | 1,946 | 0.98 | % | ||||||||||||||||
Federal Home Loan Bank advances | 63,363 | 579 | 1.22 | % | 55,706 | 516 | 1.24 | % | ||||||||||||||||
Other interest-bearing liabilities | 7,937 | — | — | 7,619 | — | — | ||||||||||||||||||
Total interest-bearing liabilities | 348,913 | 1,199 | 0.46 | % | 328,719 | 2,462 | 1.00 | % | ||||||||||||||||
Non-interest-bearing deposits | 118,412 | 81,926 | ||||||||||||||||||||||
Other non-interest-bearing liabilities | 5,791 | 3,907 | ||||||||||||||||||||||
Total liabilities | 473,116 | 414,552 | ||||||||||||||||||||||
Total stockholders’ equity | 56,108 | 54,279 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 529,224 | $ | 468,831 | ||||||||||||||||||||
Net interest income | $ | 9,310 | $ | 8,923 | ||||||||||||||||||||
Net interest-earning assets | $ | 144,004 | $ | 103,576 | ||||||||||||||||||||
Interest rate spread (1) | 2.39 | % | 2.52 | % | ||||||||||||||||||||
Net interest margin (2) | 2.53 | % | 2.76 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 141.27 | % | 131.51 | % |
36
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.
Three Months Ended September 30, 2021 vs. 2020 | ||||||||||||
Increase (Decrease) Due to | Total Increase (Decrease) | |||||||||||
Volume | Rate | |||||||||||
(Dollars in thousands) | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans | $ | 20 | (698 | ) | (678 | ) | ||||||
Securities | 103 | (39 | ) | 64 | ||||||||
Other | 7 | 50 | 57 | |||||||||
Total interest-earning assets | 130 | (687 | ) | (557 | ) | |||||||
Interest-bearing liabilities: | ||||||||||||
NOW | (1 | ) | 1 | — | ||||||||
Money market deposits | (17 | ) | 60 | 43 | ||||||||
Savings | (4 | ) | 9 | 5 | ||||||||
Certificates of deposit | 54 | 207 | 261 | |||||||||
Total interest-bearing deposits | 32 | 277 | 309 | |||||||||
Borrowings | 39 | (10 | ) | 29 | ||||||||
Other | — | — | — | |||||||||
Total interest-bearing liabilities | 71 | 267 | 338 | |||||||||
Change in net interest income | $ | 201 | (420 | ) | (219 | ) | ||||||
Nine Months Ended September 30, 2021 vs. 2020 | ||||||||||||
Increase (Decrease) Due to | Total Increase (Decrease) | |||||||||||
Volume | Rate | |||||||||||
(Dollars in thousands) | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans | $ | 357 | (1,228 | ) | (871 | ) | ||||||
Securities | 253 | (374 | ) | (121 | ) | |||||||
Other | 76 | 40 | 116 | |||||||||
Total interest-earning assets | 686 | (1,562 | ) | (876 | ) | |||||||
Interest-bearing liabilities: | ||||||||||||
NOW | (15 | ) | 26 | 11 | ||||||||
Money market deposits | (207 | ) | 363 | 156 | ||||||||
Savings | (16 | ) | 33 | 17 | ||||||||
Certificates of deposit | 334 | 808 | 1,142 | |||||||||
Total interest-bearing deposits | 96 | 1,230 | 1,326 | |||||||||
Borrowings | (70 | ) | 7 | (63 | ) | |||||||
Other | — | — | — | |||||||||
Total interest-bearing liabilities | 26 | 1,237 | 1,263 | |||||||||
Change in net interest income | $ | 712 | (325 | ) | 387 | |||||||
|
| Three Months Ended September 30, |
| |||||||||
|
| Increase (Decrease) Due to |
|
|
|
| ||||||
|
| Volume |
|
| Rate |
|
| Total |
| |||
|
| (Dollars in thousands) |
| |||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
| |||
Loans |
| $ | 207 |
|
| $ | 417 |
|
| $ | 624 |
|
Securities |
|
| 162 |
|
|
| 83 |
|
|
| 245 |
|
Other |
|
| (8 | ) |
|
| 73 |
|
|
| 65 |
|
Total interest-earning assets |
|
| 361 |
|
|
| 573 |
|
|
| 934 |
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
| |||
NOW |
| ― |
|
|
| (1 | ) |
|
| (1 | ) | |
Money market deposits |
| ― |
|
|
| (19 | ) |
|
| (19 | ) | |
Savings |
|
| (1 | ) |
| ― |
|
|
| (1 | ) | |
Certificates of deposit |
| ― |
|
|
| (4 | ) |
|
| (4 | ) | |
Total interest-bearing deposits |
|
| (1 | ) |
|
| (24 | ) |
|
| (25 | ) |
Borrowings |
|
| (2 | ) |
|
| (20 | ) |
|
| (22 | ) |
Other |
| ― |
|
|
| (2 | ) |
|
| (2 | ) | |
Total interest-bearing liabilities |
|
| (3 | ) |
|
| (46 | ) |
|
| (49 | ) |
Change in net interest income |
| $ | 358 |
|
| $ | 527 |
|
| $ | 885 |
|
|
| Nine Months Ended September 30, |
| |||||||||
|
| Increase (Decrease) Due to |
|
|
|
| ||||||
|
| Volume |
|
| Rate |
|
| Total |
| |||
|
| (Dollars in thousands) |
| |||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
| |||
Loans |
| $ | 210 |
|
| $ | 295 |
|
| $ | 505 |
|
Securities |
|
| 699 |
|
|
| 57 |
|
|
| 756 |
|
Other |
|
| (25 | ) |
|
| 123 |
|
|
| 98 |
|
Total interest-earning assets |
|
| 884 |
|
|
| 475 |
|
|
| 1,359 |
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
| |||
NOW |
|
| (3 | ) |
|
| 4 |
|
|
| 1 |
|
Money market deposits |
|
| 5 |
|
|
| (28 | ) |
|
| (23 | ) |
Savings |
|
| (1 | ) |
|
| 3 |
|
|
| 2 |
|
Certificates of deposit |
| ― |
|
|
| 89 |
|
|
| 89 |
| |
Total interest-bearing deposits |
|
| 1 |
|
|
| 68 |
|
|
| 69 |
|
Borrowings |
|
| 70 |
|
|
| (41 | ) |
|
| 29 |
|
Other |
| ― |
|
|
| (7 | ) |
|
| (7 | ) | |
Total interest-bearing liabilities |
|
| 71 |
|
|
| 20 |
|
|
| 91 |
|
Change in net interest income |
| $ | 955 |
|
| $ | 495 |
|
| $ | 1,450 |
|
37
Comparison of Operating Results for the Three Months Ended September 30, 20212022 and 2020
Net Income (Loss). We recorded a net lossincome of $115,000$124,000 for the three months ended September 30, 2021, compared to2022, an increase of $239,000 from a net incomeloss of $412,000$115,000 recorded for the three months ended September 30, 2020.2021. This decreaseincrease was primarily due to a $2.1$915,000 million decrease innon-interestincome, which was partially offset by a $91,000 decrease innon-interestexpense, a $251,000 increase in net interest income after provision for loan losses, which was partially offset by a $449,000 increase in noninterest expense, a $149,000 decrease in noninterest income and a $1.3 million decrease$78,000 increase in income tax expense.
Interest and Dividend Income.
Interest Expense. Interest expense increased $49,000, or 14.0%, to $398,000 for the three months ended September 30, 2022, from $349,000 for the three months ended September 30, 2021. This increase was primarily due to an increase in interest expense on FHLB advances and money market accounts. Interest expense on FHLB advances increased $22,000, or 12.4%, from $178,000 for the third quarter of 2021 to $200,000 for the third quarter of 2022. This increase was primarily due to a 14 basis point increase in the average rate paid on the advances from 1.24% in the third quarter of 2021 to 1.38% in the third quarter of 2022. Interest expense on money market accounts increased $19,000, or 31.6%, from $60,000 in the third quarter of 2021 to $79,000 in the third quarter of 2022. This increase was primarily the result of a 9 basis point increase in the average rate paid on money market accounts, from 0.25% in the third quarter of 2021 to 0.34% in the third quarter of 2022.
Net Interest Income. Net interest income increased $885,000, or 29.2%, to $3.9 million for the three months ended September 30, 2020. The decrease was due primarily to the declining interest rate environment brought on by theCOVID-19pandemic. The average rate paid on loans declined to 3.53% for the three months ended September 30, 2021 compared to 4.37% for the three months ended September 30, 2020. As a result, interest income2022, from loans decreased by $678,000, or 18.7%, to $2.9 million, from $3.6 million. Interest earned on loans was also impacted by a $66,000 decrease in PPP loan fees recognized as interest during the three months ended September 30, 2021. We recognized $31,000 PPP loan fees as interest during the three months ended September 30, 2021, compared to $97,000 of PPP loan fees recognized as interest during the three months ended September 30, 2020.
Provision for Loan Losses. The Company did not make any provision for loan losses during the three months ended September 30, 2022, compared to a $30,000 provision for the three months ended September 30, 2020. This 39 basis point decrease in the cost of funds came as the yield on interest-earning assets decreased by 80 basis points, to 2.62% for the three months ended September 30, 2021, from 3.42% for the three months ended September 30, 2020. Accordingly, our net interest rate spread decreased 41 basis points to 2.21% for the three months ended September 30, 2021, from 2.62% for the three months ended September 30, 2020. Our net interest margin also decreased to 2.37% from 2.82% over the same period.
Non-interest
Non-interest Expense. Non-interest expense increased $449,000, or 11.8%, to $4.3 million for the three months ended September 30, 2020. The decrease was due primarily to a $1.0 million decrease in net gains realized on the sale of securities and a $488,000 decrease in net gains on the sale of loans due to a reduction in mortgage activity and a lower level of loan sales. In addition, we recognized a $575,000 decrease in the market value of equity securities in our Rabbi trust accounts. Loan servicing fees decreased $48,000. Service charges and other fees increased $27,000, or 12.6% to $242,000 for the three months ended September 30, 2021,2022 from $215,000 for the three months ended September 30, 2020. The increase in service charges and other fees was due to waived service charges during the three months ended September 30, 2020 as part of our initial response to the pandemic.
38
Income Tax (Benefit) Expense. We recorded an income tax expense of $21,000 for the three months ended September 30, 2020. The decrease was due primarily2022, compared to a $282,000 decrease in salaries and employee benefits during the three months ended September 30, 2021 resulting from decreases in discretionary incentive pay.
Comparison of Operating Results for the Nine Months Ended September 30, 20212022 and 2020
Net (Loss) Income. We recorded a net incomeloss of $354,000$172,000 for the nine months ended September 30, 2021,2022, compared to net income of $893,000$354,000 recorded for the nine months ended September 30, 2020.2021. This decrease was primarily due to a $1.6$2.4 million decrease in and a $1.3 million increase innon-interestexpense, which was partially offset by a $387,000$1.3 million increase in net interest income a $470,000 decrease in theafter provision for loan losses, a $372,000 decrease in noninterest expense and a $1.5 million$217,000 decrease in income tax expense.
Interest and Dividend Income.
Interest Expense. Interest expense decreased $91,000, or 7.6%, to $1.1 million for the nine months ended September 30, 2020. The decrease was due primarily to the declining interest rate environment brought on by theCOVID-19pandemic. The average rate paid on loans declined to 3.75% for the nine months ended September 30, 2021 compared to 4.24% for the nine months ended September 30, 2020. As a result, interest income2022, from loans decreased by $871,000, or 8.5%, to $9.4 million for the nine months ended September 30, 2021, from $10.2 million for the nine months ended September 30, 2020. The reduction in interest earned on loans was partially offset by $482,000 of PPP loan fees recognized as interest during the nine months ended September 30, 2021, from $97,000 for the nine months ended September 30, 2020.
Net Interest Income. Net interest income increased $1.5 million, or 15.6%, to $10.8 million for the nine months ended September 30, 2020, as rates on interest-bearing liabilities decreased 54 basis points due to the declining interest rate environment.
Provision for Loan Losses. Provision for loan losses for the nine months ended September 30, 2020. This 54 basis point decrease in the cost of funds came as the yield on interest-earning assets decreased by 67 basis points, to 2.85% for the nine months ended September 30, 2021, from 3.52% for the nine months ended September 30, 2020. Accordingly, our net interest rate spread decreased 13 basis points to 2.39% for the nine months ended September 30, 2021, from 2.52% for the nine months ended September 30, 2020. Our net interest margin decreased 23 basis points to 2.53% from 2.76% over the same period.
Non-interest
Non-interest
Income Tax (Benefit) Expense.
39
expense was primarily due to a decrease in income before taxes and an increase to our deferred tax valuation allowance of $934,000 for the nine months ended September 30, 2020, compared to none during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.
Management of Market Risk
General
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:
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 September 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 |
| Net Interest Income |
|
| Year 1 Change |
| ||
|
| (Dollars in thousands) |
|
|
|
| ||
+400 |
| $ | 16,863 |
|
|
| 15.03 | % |
+300 |
|
| 16,231 |
|
|
| 10.72 | % |
+200 |
|
| 15,611 |
|
|
| 6.49 | % |
+100 |
|
| 15,179 |
|
|
| 3.54 | % |
Level |
|
| 14,660 |
|
|
| — | % |
-100 |
|
| 14,237 |
|
|
| (2.88 | )% |
-200 |
|
| 13,800 |
|
|
| (5.86 | )% |
Change in Interest Rates (basis points) (1) | Net Interest Income Year 1 Forecast | Year 1 Change from Level | ||||||
(Dollars in thousands) | ||||||||
+400 | $ | 14,678 | 24.71 | % | ||||
+300 | 14,047 | 19.35 | % | |||||
+200 | 13,317 | 13.15 | % | |||||
+100 | 12,576 | 6.85 | % | |||||
Level | 11,769 | — | % | |||||
-100 | 11,135 | (5.39 | )% |
Economic Value of Equity
40
assumed changes in market interest rates. The quarterly reports developed in the simulation model assist us in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance within our policy guidelines.
The table below sets forth, as of September 30, 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.
|
|
|
|
| Estimated Increase (Decrease) in EVE |
| ||||||
Basis Point (“bp”) Change in Interest Rates(1) |
| Estimated EVE(2) |
|
| Amount |
|
| Percent |
| |||
|
| (Dollars in thousands) |
| |||||||||
+400 |
| $ | 74,095 |
|
| $ | (8,389 | ) |
|
| (10.17 | )% |
+300 |
|
| 75,768 |
|
|
| (6,716 | ) |
|
| (8.14 | )% |
+200 |
|
| 77,525 |
|
|
| (4,959 | ) |
|
| (6.01 | )% |
+100 |
|
| 79,923 |
|
|
| (2,561 | ) |
|
| (3.10 | )% |
Level |
|
| 82,484 |
|
|
| — |
|
|
| — |
|
-100 |
|
| 83,160 |
|
|
| 676 |
|
|
| 0.82 | % |
-200 |
|
| 82,783 |
|
|
| 299 |
|
|
| 0.36 | % |
Estimated Increase (Decrease) in EVE | ||||||||||||
Basis Point (“bp”) Change in Interest Rates (1) | Estimated EVE (2) | Amount | Percent | |||||||||
(Dollars in thousands) | ||||||||||||
400 | $ | 73,695 | $ | 8,060 | 12.28 | % | ||||||
300 | 72,163 | 6,528 | 9.95 | % | ||||||||
200 | 70,980 | 5,345 | 8.14 | % | ||||||||
100 | 69,116 | 3,481 | 5.30 | % | ||||||||
— | 65,635 | — | — | % | ||||||||
(100) | 61,083 | (4,552 | ) | (6.94 | %) |
The table above indicates that at September 30, 2021,2022, in the event of a5.30% increase3.10% decrease in our EVE. In the event of a2021,2022, we would have experienced a 8.14% increase6.01% 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 September 30, 2021,2022, we had $55.9$57.0 million outstanding in advances from the FHLB. At September 30, 2021,2022, we had $93.6$112.6 million in additional borrowing capacity at the Federal Home Loan Bank of Chicago. Additionally, at September 30, 20212022, we had a $15.0 million federal funds rate line of credit with the BMO Harris Bank, none of which was drawn at September 30, 2021.2022. The Company also had a $6.2$10.0 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $9.2$13.2 million at September 30, 2021.2022. The Company had not drawn on the Federal Reserve line as of September 30, 2021.
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
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 $1.5$1.8 million for the nine months ended September 30, 2021. Net2022, as
41
compared to net cash used inprovided by operating activities was $2.7of $11.0 million for the nine months ended September 30, 2020.2021. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of available for saleavailable-for-sale securities, offset by proceeds from maturing securities and pay
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
At September 30, 2021, we2022, PyraMax Bank exceeded all of ourits regulatory capital requirements with a Tier 1 leverage capital level of $49.5$64.9 million, or 9.1%11.9% of adjusted total assets, which is above the well-capitalized required level of $27.2 million, or 5.0%, and. The Bank had total risk-based capital of $47.5$68.1 million, or 14.0%17.7% of risk-weighted assets, which is above the well-capitalized required level of $33.9$38.5 million, or 10.0%. Management is not aware of any conditions or events since the most recent notification that would change our category. For additional information, see Note 13 of the Notes to Financial Statements.
September 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) | $ | 49,513 | 9.1 | % | $ | 21,762 | 4.0 | % | $ | 27,203 | 5.0 | % | ||||||||||||
Risk-based: | ||||||||||||||||||||||||
Common Tier 1 | 49,513 | 14.6 | % | 15,264 | 4.5 | % | 22,048 | 6.5 | % | |||||||||||||||
Tier 1 | 49,513 | 14.6 | % | 20,352 | 6.0 | % | 27,136 | 8.0 | % | |||||||||||||||
Total | 47,457 | 14.0 | % | 27,136 | 8.0 | % | 33,920 | 10.0 | % |
Off-Balance
Commitments.
Contractual Obligations.
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 September 30, 2021: | ||||||||||||||||||||
Long-term debt obligations | $ | 55,934 | $ | 8,475 | $ | 10,526 | $ | 4,131 | $ | 32,802 | ||||||||||
Operating lease obligations | 245 | 77 | 168 | — | — | |||||||||||||||
Total | $ | 56,179 | $ | 8,552 | $ | 10,694 | $ | 4,131 | $ | 32,802 | ||||||||||
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.
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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 Rule2021.2022. 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 September 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.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at September 30, 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 Form20202021 Annual Report on Form
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information regarding shares of our common stock repurchased during the third quarter of 2022.
Period |
| Total Number of Shares (or Units) Purchased (1) |
| Weighted Average Price Paid per Share (or Unit) |
| Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
| Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
July 1 to July 31, 2022 |
| — |
| $ — |
| — |
| 319,766 |
August 1 to August 31, 2022 |
| — |
| — |
| — |
| 319,766 |
September 1 to September 30, 2022 |
| 184,270 |
| 10.78 |
| 184,270 |
| 135,496 |
(1) On July 29, 2022, the Board of Directors of the Company adopted a stock repurchase program. Regulatory non-objection was received on August 26, 2022. Under the repurchase program, the Company may repurchase up to 319,766 shares of its common stock, or approximately 5% of its outstanding shares of common stock at the time regulatory non-objection was sought. Shares may be repurchased from time to time in open market or private transactions, through block trades, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The repurchase program has no expiration date.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit | ||
Number | Description | |
3.1 | ||
3.2 | ||
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
10.6 | ||
10.7 | ||
10.8 | ||
10.9 | ||
31.1 | Certification of Chief Executive Officer Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002 | |
32.1 | ||
101.0 | ||
The following materials for the quarter ended September 30, | ||
104.0 | The cover page of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022, formatted in XBRL (contained in Exhibit 101.0) * |
_____________
* Furnished, not filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
1895 BANCORP OF WISCONSIN, INC. | ||||
Date: November | /s/ | |||
David R. Ball | ||||
President and Chief Executive Officer | ||||
Date: November | /s/ Steven T. Klitzing | |||
Steven T. Klitzing | ||||
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
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