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 June 30, 2022
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 Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
7001 West Edgerton Avenue Greenfield, Wisconsin | 53220 | |
(Address of Principal Executive Offices) | (Zip Code) |
(414) 421-8200
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on 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.
YESYes ☒ 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 ☒ NO ☐
YesNo
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
6,155,077 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding as of July 28, 2022.
1895 Bancorp of Wisconsin, Inc.
Form
Table of Contents
Page | ||||||
Item 1. | 1 | |||||
Consolidated Balance Sheets at June 30, | 1 | |||||
2 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 38 | ||||
Item 3. | 50 | |||||
Item 4. | 50 | |||||
Item 1. | 50 | |||||
Item 1A. | 50 | |||||
Item 2. | 50 | |||||
Item 3. | 50 | |||||
Item 4. | 50 | |||||
Item 5. | 50 | |||||
Item 6. | 51 | |||||
52 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
1895 BANCORP OF WISCONSIN, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
June 30, 2022 | December 31, 2021 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Cash and due from banks | $ | 19,102 | $ | 65,300 | ||||
Fed funds sold | 1,119 | 1,503 | ||||||
Cash and cash equivalents | 20,221 | 66,803 | ||||||
Marketable equity securities, stated at fair value | 2,867 | 3,544 | ||||||
Available-for-sale | 126,676 | 112,440 | ||||||
Loans held for sale | 262 | 1,183 | ||||||
Loans, net of allowance for loan losses of $3,132 and $2,858 at June 30, 2022 and December 31, 2021, respectively | 349,619 | 323,789 | ||||||
Premises and equipment, net | 5,685 | 5,864 | ||||||
Mortgage servicing rights, net | 1,939 | 2,036 | ||||||
Federal Home Loan Bank (FHLB) stock, at cost | 3,032 | 3,032 | ||||||
Accrued interest receivable | 1,027 | 948 | ||||||
Cash value of life insurance | 14,101 | 13,892 | ||||||
Other assets | 10,197 | 6,108 | ||||||
TOTAL ASSETS | $ | 535,626 | $ | 539,639 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Deposits | $ | 383,062 | $ | 384,501 | ||||
Advance payments by borrowers for taxes and insurance | 7,739 | 1,860 | ||||||
FHLB advances | 57,435 | 55,442 | ||||||
Accrued interest payable | 128 | 109 | ||||||
Other liabilities | 6,296 | 6,834 | ||||||
TOTAL LIABILITIES | 454,660 | 448,746 | ||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized at June 30, 2022 and December 31, 2021 | — | — | ||||||
Common stock (par value $0.01 per share) Authorized – 90,000,000 shares at June 30, 2022 and December 31, 2021 Issued – 6,402,704 at June 30, 2022 and 6,402,571 at December 31, 2021 (includes 80,967 and 97,128 unvested shares, respectively) Outstanding – 6,372,641 at June 30, 2022 and 6,372,508 at December 31, 2021 (includes 80,967 and 97,128 unvested shares, respectively) | 64 | 64 | ||||||
Additional paid-in capital | 52,855 | 52,805 | ||||||
Unallocated common stock of Employee Stock Ownership Plan (ESOP), 463,658 and 377,077 shares at June 30, 2022 and December 31, 2021, respectively | (4,401 | ) | (3,432 | ) | ||||
Less treasury stock at cost, 30,063 shares at June 30, 2022 and December 31, 2021 | (301 | ) | (301 | ) | ||||
Retained earnings | 41,319 | 41,615 | ||||||
Accumulated other comprehensive (loss) income, net of income taxes | (8,570 | ) | 142 | |||||
Total stockholders’ equity | 80,966 | 90,893 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 535,626 | $ | 539,639 | ||||
|
| June 30, |
|
| December 31, |
| ||
| (unaudited) |
|
|
|
| |||
Assets |
|
|
|
|
|
| ||
Cash and due from banks |
| $ | 18,782 |
|
| $ | 26,029 |
|
Fed funds sold |
|
| 4,013 |
|
|
| 2,315 |
|
Cash and cash equivalents |
|
| 22,795 |
|
|
| 28,344 |
|
|
|
|
|
|
|
| ||
Marketable equity securities, stated at fair value |
|
| 3,416 |
|
|
| 2,924 |
|
Available-for-sale securities, stated at fair value |
|
| 107,631 |
|
|
| 114,492 |
|
Loans held for sale |
|
| — |
|
|
| 125 |
|
Loans, net of deferred costs |
|
| 384,159 |
|
|
| 362,777 |
|
Allowance for credit losses for loans |
|
| (3,643 | ) |
|
| (3,203 | ) |
Total loans, net of deferred loan costs and allowance for credit losses |
|
| 380,516 |
|
|
| 359,574 |
|
Premises and equipment, net |
|
| 5,308 |
|
|
| 5,451 |
|
Mortgage servicing rights, net |
|
| 1,777 |
|
|
| 1,860 |
|
Federal Home Loan Bank (FHLB) stock, at cost |
|
| 4,870 |
|
|
| 3,429 |
|
Accrued interest receivable |
|
| 1,266 |
|
|
| 1,257 |
|
Cash value of life insurance |
|
| 13,813 |
|
|
| 14,316 |
|
Other assets |
|
| 11,983 |
|
|
| 11,244 |
|
TOTAL ASSETS |
| $ | 553,375 |
|
| $ | 543,016 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
| ||
Deposits |
| $ | 371,190 |
|
| $ | 387,721 |
|
Advance payments by borrowers for taxes and insurance |
|
| 8,141 |
|
|
| 1,029 |
|
FHLB advances |
|
| 91,488 |
|
|
| 71,464 |
|
Accrued interest payable |
|
| 698 |
|
|
| 291 |
|
Other liabilities |
|
| 7,732 |
|
|
| 7,149 |
|
TOTAL LIABILITIES |
|
| 479,249 |
|
|
| 467,654 |
|
Preferred stock, $0.01 par value, 10,000,000 shares authorized at June 30, 2023 |
|
| — |
|
|
| — |
|
Common stock (par value $0.01 per share) Authorized - 90,000,000 shares at |
|
| 62 |
|
|
| 62 |
|
Additional paid-in capital |
|
| 49,964 |
|
|
| 49,931 |
|
Unallocated common stock of Employee Stock Ownership Plan (ESOP), 444,010 and |
|
| (4,214 | ) |
|
| (4,307 | ) |
Less treasury stock at cost, 29,518 shares at June 30, 2023 and 30,063 shares at December 31, 2022 |
|
| (295 | ) |
|
| (301 | ) |
Retained earnings |
|
| 39,816 |
|
|
| 41,468 |
|
Accumulated other comprehensive (loss) income, net of income taxes |
|
| (11,207 | ) |
|
| (11,491 | ) |
Total stockholders’ equity |
|
| 74,126 |
|
|
| 75,362 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 553,375 |
|
| $ | 543,016 |
|
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 June 30 | Six months ended June 30 | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Interest and dividend income: | ||||||||||||||||
Loans, including fees | $ | 3,009 | $ | 3,125 | $ | 6,299 | $ | 6,418 | ||||||||
Securities, taxable | 566 | 335 | 1,114 | 603 | ||||||||||||
Other | 92 | 51 | 139 | 107 | ||||||||||||
Total interest and dividend income | 3,667 | 3,511 | 7,552 | 7,128 | ||||||||||||
Interest expense: | ||||||||||||||||
Interest-bearing deposits | 187 | 193 | 356 | 449 | ||||||||||||
Borrowed funds | 181 | 200 | 350 | 400 | ||||||||||||
Other interest-bearing liabilities | 2 | — | 4 | — | ||||||||||||
Total interest expense | 370 | 393 | 710 | 849 | ||||||||||||
Net interest income | 3,297 | 3,118 | 6,842 | 6,279 | ||||||||||||
Provision for loan losses | 105 | — | 210 | — | ||||||||||||
Net interest income after provision for loan losses | 3,192 | 3,118 | 6,632 | 6,279 | ||||||||||||
Noninterest income: | ||||||||||||||||
Service charges and other fees | 257 | 249 | 493 | 470 | ||||||||||||
Loan servicing, net | 171 | 193 | 348 | 767 | ||||||||||||
Net gain on sale of loans | 106 | 347 | 184 | 913 | ||||||||||||
Net gain on sale of securities | — | — | — | 12 | ||||||||||||
Increase in cash surrender value of insurance | 105 | 101 | 209 | 201 | ||||||||||||
Unrealized (loss) gain on marketable equity securities | (522 | ) | 241 | (733 | ) | 372 | ||||||||||
Other | 1 | 3 | 7 | 8 | ||||||||||||
Total noninterest income | 118 | 1,134 | 508 | 2,743 | ||||||||||||
Noninterest expense: | ||||||||||||||||
Salaries and employee benefits | 2,034 | 2,698 | 4,318 | 5,153 | ||||||||||||
Advertising and promotions | 99 | 14 | 113 | 32 | ||||||||||||
Data processing | 209 | 208 | 410 | 405 | ||||||||||||
Occupancy and equipment | 330 | 361 | 684 | 734 | ||||||||||||
FDIC assessment | 36 | 35 | 62 | 68 | ||||||||||||
Other | 976 | 1,045 | 2,041 | 2,058 | ||||||||||||
Total noninterest expense | 3,684 | 4,361 | 7,628 | 8,450 | ||||||||||||
(Loss) income before income taxes | (374 | ) | (109 | ) | (488 | ) | 572 | |||||||||
Income tax (benefit) expense | (133 | ) | (58 | ) | (192 | ) | 102 | |||||||||
Net (loss) income | $ | (241 | ) | $ | (51 | ) | $ | (296 | ) | $ | 470 | |||||
(Loss) earnings per common share: | ||||||||||||||||
Basic (1) | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.10 | |||||
Diluted (1) | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.10 | |||||
Average common shares outstanding: | ||||||||||||||||
Basic (1) | 5,843,104 | 4,599,878 | 5,858,449 | 4,594,314 | ||||||||||||
Diluted (1) | 5,843,104 | 4,599,878 | 5,858,449 | 4,656,037 |
| Three months ended |
|
| Six months ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Interest and dividend income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans, including fees |
| $ | 4,238 |
|
| $ | 3,009 |
|
| $ | 8,064 |
|
| $ | 6,299 |
|
Securities, taxable |
|
| 588 |
|
|
| 566 |
|
|
| 1,191 |
|
|
| 1,114 |
|
Other |
|
| 191 |
|
|
| 92 |
|
|
| 476 |
|
|
| 139 |
|
Total interest and dividend income |
|
| 5,017 |
|
|
| 3,667 |
|
|
| 9,731 |
|
|
| 7,552 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing deposits |
|
| 1,296 |
|
|
| 187 |
|
|
| 2,278 |
|
|
| 356 |
|
Borrowed funds |
|
| 654 |
|
|
| 181 |
|
|
| 1,148 |
|
|
| 350 |
|
Other interest-bearing funds |
|
| 1 |
|
|
| 2 |
|
|
| 3 |
|
|
| 4 |
|
Total interest expense |
|
| 1,951 |
|
|
| 370 |
|
|
| 3,429 |
|
|
| 710 |
|
Net interest income |
|
| 3,066 |
|
|
| 3,297 |
|
|
| 6,302 |
|
|
| 6,842 |
|
Provision for credit losses |
|
| 75 |
|
|
| 105 |
|
|
| 150 |
|
|
| 210 |
|
Net interest income after provision for credit losses |
|
| 2,991 |
|
|
| 3,192 |
|
|
| 6,152 |
|
|
| 6,632 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Service charges and other fees |
|
| 239 |
|
|
| 257 |
|
|
| 464 |
|
|
| 493 |
|
Loan servicing, net |
|
| 157 |
|
|
| 171 |
|
|
| 330 |
|
|
| 348 |
|
Net gain on sale of loans |
|
| 30 |
|
|
| 106 |
|
|
| 68 |
|
|
| 184 |
|
Increase in cash surrender value of insurance |
|
| 110 |
|
|
| 105 |
|
|
| 217 |
|
|
| 209 |
|
Unrealized gain (loss) on marketable equity securities |
|
| 225 |
|
|
| (522 | ) |
|
| 444 |
|
|
| (733 | ) |
Other |
|
| 159 |
|
|
| 1 |
|
|
| 165 |
|
|
| 7 |
|
Total noninterest income |
|
| 920 |
|
|
| 118 |
|
|
| 1,688 |
|
|
| 508 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Salaries and employee benefits |
|
| 3,060 |
|
|
| 2,034 |
|
|
| 5,973 |
|
|
| 4,318 |
|
Advertising and promotions |
|
| 21 |
|
|
| 99 |
|
|
| 71 |
|
|
| 113 |
|
Data processing |
|
| 222 |
|
|
| 209 |
|
|
| 446 |
|
|
| 410 |
|
Occupancy and equipment |
|
| 299 |
|
|
| 330 |
|
|
| 637 |
|
|
| 684 |
|
FDIC assessment |
|
| 85 |
|
|
| 36 |
|
|
| 121 |
|
|
| 62 |
|
Other |
|
| 1,005 |
|
|
| 976 |
|
|
| 1,885 |
|
|
| 2,041 |
|
Total noninterest expense |
|
| 4,692 |
|
|
| 3,684 |
|
|
| 9,133 |
|
|
| 7,628 |
|
Loss before income taxes |
|
| (781 | ) |
|
| (374 | ) |
|
| (1,293 | ) |
|
| (488 | ) |
Income tax (benefit) |
|
| (273 | ) |
|
| (133 | ) |
|
| (424 | ) |
|
| (192 | ) |
Net loss |
| $ | (508 | ) |
| $ | (241 | ) |
| $ | (869 | ) |
| $ | (296 | ) |
Loss per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | (0.09 | ) |
| $ | (0.04 | ) |
| $ | (0.16 | ) |
| $ | (0.05 | ) |
Diluted(1) |
| $ | (0.09 | ) |
| $ | (0.04 | ) |
| $ | (0.16 | ) |
| $ | (0.05 | ) |
Average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 5,545,335 |
|
|
| 5,843,104 |
|
|
| 5,548,562 |
|
|
| 5,858,449 |
|
Diluted(1) |
|
| 5,545,335 |
|
|
| 5,843,104 |
|
|
| 5,548,562 |
|
|
| 5,858,449 |
|
See accompanying notes to the unaudited consolidated financial statements.
(1) Diluted loss per share and average shares outstanding excludes all common shares if their effect is anti-dilutive.
2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) INCOME
(In thousands) - Unaudited
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net (loss) income | $ | (241 | ) | $ | (51 | ) | $ | (296 | ) | $ | 470 | |||||
Other comprehensive (loss) income: | ||||||||||||||||
Unrealized holding (losses) gains arising during the period | (4,791 | ) | 447 | (11,934 | ) | (354 | ) | |||||||||
Reclassification adjustment for gains realized in net income | — | — | — | (12 | ) | |||||||||||
Other comprehensive (loss) income before tax effect | (4,791 | ) | 447 | (11,934 | ) | (366 | ) | |||||||||
Tax effect of other comprehensive (loss) income items | 1,294 | (120 | ) | 3,222 | 99 | |||||||||||
Other comprehensive (loss) income, net of tax | (3,497 | ) | 327 | (8,712 | ) | (267 | ) | |||||||||
Comprehensive (loss) income | $ | (3,738 | ) | $ | 276 | $ | (9,008 | ) | $ | 203 | ||||||
| Three months ended |
|
| Six months ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Net loss |
| $ | (508 | ) |
| $ | (241 | ) |
| $ | (869 | ) |
| $ | (296 | ) |
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized holding (losses) gains arising during the |
|
| (1,841 | ) |
|
| (4,791 | ) |
|
| 388 |
|
|
| (11,934 | ) |
Other comprehensive (loss) income before tax effect |
|
| (1,841 | ) |
|
| (4,791 | ) |
|
| 388 |
|
|
| (11,934 | ) |
Tax effect of other comprehensive (loss) income items |
|
| 497 |
|
|
| 1,294 |
|
|
| (104 | ) |
|
| 3,222 |
|
Other comprehensive (loss) income, net of tax |
|
| (1,344 | ) |
|
| (3,497 | ) |
|
| 284 |
|
|
| (8,712 | ) |
Comprehensive (loss) |
| $ | (1,852 | ) |
| $ | (3,738 | ) |
| $ | (585 | ) |
| $ | (9,008 | ) |
See accompanying notes to the unaudited consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands) - Unaudited
Common stock | Additional paid- in capital | Unallocated common stock of ESOP | Treasury Stock | Retained earnings | Accumulated other comprehensive income (loss) | Total | ||||||||||||||||||||||
Balance as of March 31, 2022 | $ | 64 | $ | 52,852 | $ | (3,900 | ) | $ | (301 | ) | $ | 41,560 | $ | (5,073 | ) | $ | 85,202 | |||||||||||
Net loss | — | — | — | — | (241 | ) | — | (241 | ) | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (3,497 | ) | (3,497 | ) | |||||||||||||||||||
ESOP shares committed to be released (9,865 shares) | — | 7 | 44 | — | — | — | 51 | |||||||||||||||||||||
Purchase of ESOP shares | — | — | (545 | ) | — | — | — | (545 | ) | |||||||||||||||||||
Retirement of common stock | — | (64 | ) | — | — | — | — | (64 | ) | |||||||||||||||||||
Stock compensation expense | — | 60 | — | — | — | — | 60 | |||||||||||||||||||||
Balance as of June 30, 2022 | $ | 64 | $ | 52,855 | $ | (4,401 | ) | $ | (301 | ) | $ | 41,319 | $ | (8,570 | ) | $ | 80,966 | |||||||||||
Balance as of March 31, 2021 | $ | 49 | $ | 20,180 | $ | (1,597 | ) | $ | (1,228 | ) | $ | 42,051 | $ | 544 | $ | 59,999 | ||||||||||||
Net loss | — | — | — | — | (51 | ) | — | (51 | ) | |||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 327 | 327 | |||||||||||||||||||||
ESOP shares committed to be released (1,755 shares) (1) | — | 13 | 17 | — | — | — | 30 | |||||||||||||||||||||
Retirement of common stock | — | (70 | ) | — | — | — | — | (70 | ) | |||||||||||||||||||
Stock compensation expense | — | 65 | — | — | — | — | 65 | |||||||||||||||||||||
Balance as of June 30, 2021 | $ | 49 | $ | 20,188 | $ | (1,580 | ) | $ | (1,228 | ) | $ | 42,000 | $ | 871 | $ | 60,300 | ||||||||||||
Balance as of January 1, 2022 | $ | 64 | $ | 52,805 | $ | (3,432 | ) | $ | (301 | ) | $ | 41,615 | $ | 142 | $ | 90,893 | ||||||||||||
Net loss | — | — | — | — | (296 | ) | — | (296 | ) | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (8,712 | ) | (8,712 | ) | |||||||||||||||||||
Reimbursement of stock offering costs | — | 1 | — | — | — | — | 1 | |||||||||||||||||||||
Purchase of ESOP shares | — | — | (1,062 | ) | — | — | — | (1,062 | ) | |||||||||||||||||||
ESOP shares committed to be released (14,798 shares) | — | 8 | 93 | — | — | — | 101 | |||||||||||||||||||||
Retirement of common stock | — | (78 | ) | — | — | — | — | (78 | ) | |||||||||||||||||||
Stock compensation expense | — | 119 | — | — | — | — | 119 | |||||||||||||||||||||
Balance as of June 30, 2022 | $ | 64 | $ | 52,855 | $ | (4,401 | ) | $ | (301 | ) | $ | 41,319 | $ | (8,570 | ) | $ | 80,966 | |||||||||||
Balance as of January 1, 2021 | $ | 49 | $ | 20,134 | $ | (1,615 | ) | $ | (1,228 | ) | $ | 41,530 | $ | 1,138 | $ | 60,008 | ||||||||||||
Net income | — | — | — | — | 470 | — | 470 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (267 | ) | (267 | ) | |||||||||||||||||||
Purchase of treasury stock | — | — | — | (15 | ) | — | (15 | ) | ||||||||||||||||||||
ESOP shares committed to be released (3,510 shares) (1) | — | 16 | 35 | — | — | — | 51 | |||||||||||||||||||||
Issuance of treasury stock – stock compensation plan | — | (15 | ) | — | 15 | — | — | — | ||||||||||||||||||||
Retirement of common stock | — | (70 | ) | — | — | — | — | (70 | ) | |||||||||||||||||||
Stock compensation expense | — | 123 | — | — | — | — | 123 | |||||||||||||||||||||
Balance as of June 30, 2021 | $ | 49 | $ | 20,188 | $ | (1,580 | ) | $ | (1,228 | ) | $ | 42,000 | $ | 871 | $ | 60,300 | ||||||||||||
Common Stock |
|
| Additional Paid-In Capital |
|
| Unallocated Common Stock of ESOP |
|
| Treasury Stock |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Total Stockholders' Equity |
| ||||||||
Balance as of March 31, 2022 | $ | 64 |
|
| $ | 52,852 |
|
| $ | (3,900 | ) |
| $ | (301 | ) |
| $ | 41,560 |
|
| $ | (5,073 | ) |
| $ | 85,202 |
|
Net loss |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (241 | ) |
|
| — |
|
|
| (241 | ) |
Other comprehensive (loss) income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,497 | ) |
|
| (3,497 | ) |
Purchase of 50,757 shares by ESOP |
| — |
|
|
| — |
|
|
| (545 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (545 | ) |
ESOP shares committed to be released (9,865 shares) |
| — |
|
|
| 7 |
|
|
| 44 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 51 |
|
Purchase and retirement of common stock |
| — |
|
|
| (64 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (64 | ) |
Stock compensation expense |
| — |
|
|
| 60 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 60 |
|
Balance as of June 30, 2022 | $ | 64 |
|
| $ | 52,855 |
|
| $ | (4,401 | ) |
| $ | (301 | ) |
| $ | 41,319 |
|
| $ | (8,570 | ) |
| $ | 80,966 |
|
Balance as of March 31,2023 | $ | 62 |
|
| $ | 49,977 |
|
| $ | (4,260 | ) |
| $ | (301 | ) |
| $ | 40,324 |
|
| $ | (9,863 | ) |
| $ | 75,939 |
|
Net loss |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (508 | ) |
|
| — |
|
|
| (508 | ) |
Other comprehensive (loss) income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,344 | ) |
|
| (1,344 | ) |
ESOP shares committed to be released (4,918 shares) |
| — |
|
|
| (16 | ) |
|
| 46 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 30 |
|
Repurchase and cancellation of common stock-stock repurchase program (14,400 shares) |
| — |
|
|
| (103 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (103 | ) | ||||
Sale of common stock by Rabbi Trust |
|
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
|
|
|
| 6 |
| |||||
Purchase and retirement of common stock |
| — |
|
|
| (43 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (43 | ) |
Stock compensation expense |
| — |
|
|
| 149 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 149 |
|
Balance as of June 30, 2023 | $ | 62 |
|
| $ | 49,964 |
|
| $ | (4,214 | ) |
| $ | (295 | ) |
| $ | 39,816 |
|
| $ | (11,207 | ) |
| $ | 74,126 |
|
Balance as of January 1, 2022 | $ | 64 |
|
| $ | 52,805 |
|
| $ | (3,432 | ) |
| $ | (301 | ) |
| $ | 41,615 |
|
| $ | 142 |
|
| $ | 90,893 |
|
Net loss |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (296 | ) |
|
| — |
|
|
| (296 | ) |
Other comprehensive (loss) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,712 | ) |
|
| (8,712 | ) |
Reimbursement of stock offering costs |
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
Purchase of 96,446 shares by ESOP |
| — |
|
|
| — |
|
|
| (1,062 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,062 | ) |
ESOP shares committed to be released (14,798 shares) |
| — |
|
|
| 8 |
|
|
| 93 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 101 |
|
Purchase and retirement of common stock |
| — |
|
|
| (78 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (78 | ) |
Stock compensation expense |
| — |
|
|
| 119 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 119 |
|
Balance as of June 30, 2022 | $ | 64 |
|
| $ | 52,855 |
|
| $ | (4,401 | ) |
| $ | (301 | ) |
| $ | 41,319 |
|
| $ | (8,570 | ) |
| $ | 80,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance as of January 1, 2023 | $ | 62 |
|
| $ | 49,931 |
|
| $ | (4,307 | ) |
| $ | (301 | ) |
| $ | 41,468 |
|
| $ | (11,491 | ) |
| $ | 75,362 |
|
Net loss |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (869 | ) |
|
| — |
|
|
| (869 | ) |
Other comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 284 |
|
|
| 284 |
|
Cumulative effect of change in accounting principle due to adoption of ASU 2016-13 |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (783 | ) |
|
| — |
|
|
| (783 | ) |
ESOP shares committed to be released (9,782 shares) |
| — |
|
|
| (16 | ) |
|
| 93 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 77 |
|
Repurchase and cancellation of common stock-stock repurchase program (27,303 shares) |
| — |
|
|
| (232 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (232 | ) | ||||
Sale of common stock by Rabbi Trust |
| — |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
|
|
|
|
|
|
|
| 6 |
| ||
Purchase and retirement of common stock |
| — |
|
|
| (56 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (56 | ) |
Stock compensation expense |
| — |
|
|
| 337 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 337 |
|
Balance as of June 30, 2023 | $ | 62 |
|
| $ | 49,964 |
|
| $ | (4,214 | ) |
| $ | (295 | ) |
| $ | 39,816 |
|
| $ | (11,207 | ) |
| $ | 74,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
4
1895 BANCORP OF WISCONSIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) - Unaudited
Six months ended June 30, | ||||||||
2022 | 2021 | |||||||
(unaudited) | ||||||||
Cash flows from operating activities: | ||||||||
Net (loss) income | $ | (296 | ) | $ | 470 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Net amortization of investment securities | 90 | 15 | ||||||
Depreciation | 310 | 331 | ||||||
Provision for loan losses | 210 | — | ||||||
Net change in fair value of marketable equity securities | 733 | (372 | ) | |||||
Net gain on sale of available for sale securities | — | (12 | ) | |||||
Stock compensation expense | 119 | 123 | ||||||
Adjustment to mortgage servicing rights valuation | — | (369 | ) | |||||
(Benefit from) provision for deferred income tax | (192 | ) | 102 | |||||
Originations of mortgage loans held for sale | (13,760 | ) | (67,969 | ) | ||||
Proceeds from sales of mortgage loans held for sale | 14,865 | 70,026 | ||||||
Net gain on sale of mortgage loans held for sale | (184 | ) | (913 | ) | ||||
ESOP compensation | 101 | 51 | ||||||
Net change in cash value of life insurance | (209 | ) | (201 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Net change in mortgage servicing rights | 97 | 66 | ||||||
Accrued interest receivable and other assets | (831 | ) | (1,492 | ) | ||||
Accrued interest payable and other liabilities | (520 | ) | 667 | |||||
Net cash provided by operating activities | 533 | 523 | ||||||
Cash Flows From Investing Activities | ||||||||
Proceeds from sales of available for sale securities | — | 1,018 | ||||||
Maturities, prepayments, and calls of available for sale securities | 10,879 | 5,116 | ||||||
Purchases of available for sale securities | (37,139 | ) | (39,218 | ) | ||||
Net change in marketable equity securities | (56 | ) | — | |||||
Net increase in loans | (26,040 | ) | (1,830 | ) | ||||
Net capital expenditures for premises and equipment | (131 | ) | (94 | ) | ||||
Net cash used in investing activities | (52,487 | ) | (35,008 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Net (decrease) increase in deposits | (1,439 | ) | 86,336 | |||||
Net increase in advance payments by borrowers for taxes and insurance | 5,879 | 6,430 | ||||||
Proceeds from issuance of Federal Home Loan Bank advances | 10,000 | — | ||||||
Principal payments on Federal Home Loan Bank advances | (8,007 | ) | (4,975 | ) | ||||
Reimbursement of stock offering costs | 1 | — | ||||||
Purchases of treasury stock | — | (15 | ) | |||||
Purchase of ESOP shares | (1,062 | ) | — | |||||
Net cash provided by financing activities | 5,372 | 87,776 | ||||||
Net (decrease) increase in cash and cash equivalents | (46,582 | ) | 53,219 | |||||
Cash and cash equivalents at beginning of period | 66,803 | 92,526 | ||||||
Cash and cash equivalents at end of period | $ | 20,221 | $ | 145,817 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the year for interest | $ | 691 | $ | 902 | ||||
Noncash activities: | ||||||||
Retirement of common stock | $ | 78 | $ | 70 | ||||
Issuance of treasury stock – stock compensation plans | — | 15 |
Six months ended June 30, |
| ||||||
2023 |
|
| 2022 |
| |||
Cash flows from operating activities |
|
|
|
|
| ||
Net loss | $ | (869 | ) |
| $ | (296 | ) |
Adjustments to reconcile net loss to net cash from operating activities |
|
|
|
|
| ||
Net amortization of investment securities |
| 37 |
|
|
| 90 |
|
Depreciation |
| 252 |
|
|
| 310 |
|
Provision for credit losses |
| 150 |
|
|
| 210 |
|
Net change in fair value of marketable equity securities |
| (444 | ) |
|
| 733 |
|
Stock compensation expense |
| 337 |
|
|
| 119 |
|
(Benefit from) deferred income tax |
| (424 | ) |
|
| (192 | ) |
Originations of mortgage loans held for sale |
| (4,043 | ) |
|
| (13,760 | ) |
Proceeds from sales of mortgage loans held for sale |
| 4,236 |
|
|
| 14,865 |
|
Net gain on sale of mortgage loans held for sale |
| (68 | ) |
|
| (184 | ) |
ESOP compensation |
| 77 |
|
|
| 101 |
|
Net change in cash value of life insurance |
| (217 | ) |
|
| (209 | ) |
Changes in operating assets and liabilities |
|
|
|
|
| ||
Net change in mortgage servicing rights |
| 83 |
|
|
| 97 |
|
Accrued interest receivable and other assets |
| (135 | ) |
|
| (753 | ) |
Accrued interest payable and other liabilities |
| 192 |
|
|
| (520 | ) |
Net cash (used in) provided by operating activities |
| (836 | ) |
|
| 611 |
|
Cash flows from investing activities |
|
|
|
|
| ||
Maturities, prepayments, and calls of available-for-sale securities |
| 7,212 |
|
|
| 10,879 |
|
Purchases of available-for-sale securities |
| — |
|
|
| (37,139 | ) |
Purchase of marketable equity securities |
| (54 | ) |
|
| (56 | ) |
Net (increase) in loans |
| (21,371 | ) |
|
| (26,040 | ) |
Net (increase) in FHLB stock, net |
| (1,441 | ) |
|
| — |
|
Proceeds from cash value life insurance death benefits |
| 720 |
|
|
| — |
|
Distribution of marketable equity securities |
| 12 |
|
|
| — |
|
Net capital expenditures for premises and equipment |
| (108 | ) |
|
| (131 | ) |
Net cash used in investing activities |
| (15,030 | ) |
|
| (52,487 | ) |
Cash flows from financing activities |
|
|
|
|
| ||
Net (decrease) increase in deposits |
| (16,531 | ) |
|
| (1,439 | ) |
Net increase in advance payments by borrowers for taxes and insurance |
| 7,112 |
|
|
| 5,879 |
|
Proceeds from the issuance of Federal Home Loan Bank advances |
| 99,500 |
|
|
| 10,000 |
|
Principal payments on Federal Home Loan Bank advances |
| (79,476 | ) |
|
| (8,007 | ) |
Reimbursement of stock offering costs |
| — |
|
|
| 1 |
|
Repurchase and cancellation of common stock |
| (232 | ) |
|
| — |
|
Purchase and retirement of common stock |
| (56 | ) |
|
| (78 | ) |
Purchases of ESOP shares |
| — |
|
|
| (1,062 | ) |
Net cash provided by financing activities |
| 10,317 |
|
|
| 5,294 |
|
Net increase (decrease) in cash and cash equivalents |
| (5,549 | ) |
|
| (46,582 | ) |
Cash and cash equivalents at beginning of period |
| 28,344 |
|
|
| 66,803 |
|
Cash and cash equivalents at end of period | $ | 22,795 |
|
| $ | 20,221 |
|
Supplemental cash flow information |
|
|
|
|
| ||
Cash paid during the year for interest | $ | 3,022 |
|
| $ | 691 |
|
See accompanying notes to the unaudited consolidated financial statements.
5
1895 BANCORP OF WISCONSIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
1895 Bancorp of Wisconsin, Inc., a Maryland corporation (the “Company” or “New 1895 Bancorp”) was formed to serve as the stock holding company for PyraMax Bank, FSB (the “Bank”) as part of the100%100% of the common stock being held by the public. The consolidated financial statements and other financial information contained in these consolidated financial statements are for New 1895 Bancorp.
The cost of the reorganization and the issuing of the common stock totaling $2.0$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 position, results of operations, changes in stockholder’sstockholders' equity and cash flows as of and for the periods presented. Certain amounts from prior periods have been reclassified to conform with current period presentation.
The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the audited annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form2021,2022, as filed with the Securities and Exchange Commission on March 29, 2022.
In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loancredit losses, the fair value of investment securities, financial instruments and mortgage servicing rights, and the valuation of deferred income tax assets. Actual results could differ from those estimates.
On April 5, 2012, the(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 recent accounting standards in Note 2 reflect those that relate to
6
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)
Subsequent Events
Management has evaluated subsequent eventsreviewed the Company's operations for potential recognition and/disclosure or disclosure throughfinancial statement impacts related to events occurring after June 30, 2023, but prior to the daterelease of the unaudited consolidated financial statements includedcontained in this quarterly report on Form
There were no additional significant subsequent event disclosures or financial statement impacts related to events for the quarter endedoccurring after June 30, 2022 through the issuance date of these unaudited consolidated financial statements2023 that warranted adjustment to or disclosure in thethese unaudited consolidated financial statements.
NOTE 2 – RECENTSIGNIFICANT ACCOUNTING STANDARDS
On January 1, 2023, we adopted ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), using the modified retrospective approach, as further described in the section below titled Recently Adopted Accounting Standards Updates. Adoption of the standard resulted in changes to our available-for-sale securities and allowance for credit losses policies, as presented below. Refer to Note 1 to the Consolidated Financial Statements in our 2022 Annual Report on Form 10-K regarding additional significant accounting policies, including accounting policies in effect prior to the adoption of ASU 2016-13.
Credit Losses for Available-for-Sale Debt Securities
For available-for-sale ("AFS") debt securities where fair value is less than amortized cost, the security is considered impaired when amounts are deemed uncollectible or when the Company intends, or more likely than not will be required, to sell the AFS debt security before recovery of the amortized cost basis.
On a quarterly basis the Company evaluates the AFS debt securities for impairment. Securities that are in an unrealized loss position are reviewed to determine if a securities credit loss exists based on certain quantitative and qualitative factors. The primary factors considered in evaluating whether an impairment exists include: (a) the extent to which the fair value is less than the amortized cost basis, (b) the financial condition, credit rating and future prospects of the issuer, (c) whether the debtor is current on contractually obligated interest and principal payments, and (d) whether the Company intends to sell the security and whether it is more likely than not that the Company will not be required to sell the security.
If a determination is made that an AFS debt security is impaired, the Company will estimate the amount of the unrealized loss that is attributable to credit and all other non-credit related factors. The credit related component will be recognized as a provision for credit losses on securities through an allowance for credit losses. The provision for credit losses on securities will be limited to the difference between the security’s amortized cost basis and fair value. Any future changes may be reversed, limited to the amount previously expensed, in the period they occur. The non-credit related component will be recorded as an adjustment to accumulated other comprehensive income, net of tax.
Allowance for Credit Losses
Under the current expected credit loss (“ASUs”CECL”) have been issuedmodel, the allowance for credit losses ("ACL") on financial assets is a valuation allowance estimated at each balance sheet date in accordance with GAAP that is deducted from the financial assets’ amortized cost basis to present the net amount expected to be collected on the financial assets. The CECL model also applies to certain off-balance sheet credit exposures.
The Company estimates the allowance for credit losses on loans based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to write-off accrued interest receivable by reversing interest income at the time of this determination. Therefore, the Company has made a policy election to exclude accrued interest from the amortized cost basis and therefore excludes it from the measurement of the allowance for credit losses.
7
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)
Expected credit losses are reflected in the allowance for credit losses through a charge to provision for credit losses. The Company’s estimate of the allowance for credit losses reflects credit losses currently expected over the remaining contractual life of the assets. When the Company deems all or a portion of a financial asset to be uncollectible, the appropriate amount is written off and the allowance for credit losses is reduced by the same amount. The Company applies judgment to determine when a financial asset is deemed uncollectible. When available information confirms that specific financial assets, or portions thereof, are uncollectible, these amounts are charged off against the allowance for credit losses. Subsequent recoveries, if any, are credited to the allowance for credit losses when received.
The Company measures the allowance for credit losses of financial assets on a collective portfolio segment basis when the financial assets share similar risk characteristics. The Company has identified the following portfolio segments of financial assets with similar risk characteristics for measuring expected credit losses: commercial real estate, residential real estate – first mortgage, residential real estate – construction, consumer – home equity and lines of credit and other consumer loans. The Company further segments the commercial loan portfolios by risk rating and the residential and consumer loan portfolios by delinquency.
The Company utilizes the weighted average maturity (WARM) methodology to measure the ACL. This methodology incorporates both quantitative and qualitative information to assess lifetime expected credit losses at the portfolio segment level. The quantitative component includes the calculation of loss rates that are based on historical lookback periods. The Company calculates a loss rate based on historical loan level loss experience for portfolio segments with similar risk characteristics. The historical loss rate is adjusted for select macroeconomic variables that consider both historical trends as well as forecasted trends. The Company measures expected credit losses of these financial assets by applying loss rates to the amortized cost basis of each asset taking into consideration amortization, prepayment and default assumptions.
The Company considers qualitative adjustments to expected credit loss estimates for information not already captured in the loss estimation process. Qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses. Adjustments will not be made for information that has already been considered and included in the quantitative component. Qualitative loss factors are based on management's judgment of company, market, industry or business specific data, changes in loan composition, performance trends, regulatory changes, uncertainty of macroeconomic forecasts, and other asset specific risk characteristics.
Collateral Dependent Financial Assets
For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable and where the borrower is experiencing financial difficulty, the allowance for credit losses is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. Fair value is generally calculated based on the value of the underlying collateral less estimated costs to sell.
Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
Financial assets include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The Company’s exposure to loan credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.
The Company records an allowance for credit losses on off-balance sheet credit exposures through a charge to provision for loan losses for off-balance sheet credit exposures. The allowance for credit losses on off-balance sheet credit exposures is estimated by portfolio segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration management’s assumption of the likelihood that funding will occur, and is included in other liabilities on the Company’s Consolidated Balance Sheets.
8
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Adopted Accounting Standards Board (“FASB”) and may impact the Company’s financial statements in future reporting periods:
ASUThe guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. In November 2019, the FASB issued ASU2019-10,Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, amending the effective date for this standard. ASU2016-13will be effective for fiscal years beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2022. In March 2022, the FASB issued ASU2022-02— 2022-02, FinancialTDRstroubled debt restructurings by creditors, in Subtopic310-40,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, ASULosses—Measured at Amortized Cost inLosses. The Company adopted ASU 2016-13 and ASU 2022-02 as of January 1, 2023 using the vintage disclosures required by paragraph326-20-50-6.ASUNo. 2022-02is 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 recognitionfor all financial assets measured at amortized cost and measurement of TDRs, which would result in a cumulative effect adjustment to retained earnings in the period of adoption. Management has elected to deferoff-balance sheet credit exposures. The adoption of ASC2016-13,as well as ASU2022-02,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 ASU2016-13.The impact of adopting ASU2016-13on the Company’s consolidated financial statements is still being quantified. Management will continue to progress on its implementation project plan and improve the Company’s approach throughout the deferral period.
9
NOTE 3 – AVAILABLE-FOR-SALE SECURITIES
The amortized costs and fair values of securities
| June 30, 2023 |
| ||||||||||||||
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| |||||
| (in thousands) |
| ||||||||||||||
U.S. Treasury notes |
| $ | 29,639 |
|
| $ | — |
|
| $ | (2,913 | ) |
| $ | 26,726 |
|
Obligations of states and political subdivisions |
|
| 19,864 |
|
|
| 2 |
|
|
| (3,329 | ) |
|
| 16,537 |
|
Government-sponsored mortgage-backed securities |
|
| 68,497 |
|
|
| — |
|
|
| (9,032 | ) |
|
| 59,465 |
|
Asset-backed securities |
|
| 3,990 |
|
|
| — |
|
|
| (48 | ) |
|
| 3,942 |
|
Certificates of deposit |
|
| 994 |
|
|
| — |
|
|
| (33 | ) |
|
| 961 |
|
Total |
| $ | 122,984 |
|
| $ | 2 |
|
| $ | (15,355 | ) |
| $ | 107,631 |
|
| December 31, 2022 |
| ||||||||||||||
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| |||||
| (in thousands) |
| ||||||||||||||
U.S. Treasury notes |
| $ | 29,597 |
|
| $ | — |
|
| $ | (2,970 | ) |
| $ | 26,627 |
|
Obligations of states and political subdivisions |
|
| 21,379 |
|
|
| 6 |
|
|
| (3,729 | ) |
|
| 17,656 |
|
Government-sponsored mortgage-backed securities |
|
| 73,235 |
|
| $ | — |
|
|
| (8,968 | ) |
|
| 64,267 |
|
Asset-backed securities |
|
| 4,563 |
|
| $ | — |
|
|
| (46 | ) |
|
| 4,517 |
|
Certificates of deposit |
|
| 1,459 |
|
| $ | — |
|
|
| (34 | ) |
|
| 1,425 |
|
Total |
| $ | 130,233 |
|
| $ | 6 |
|
| $ | (15,747 | ) |
| $ | 114,492 |
|
June 30, 2022 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
U.S. Treasury notes | $ | 29,555 | $ | — | $ | (2,227 | ) | $ | 27,328 | |||||||
Obligations of states and political subdivisions | 21,418 | 17 | (2,889 | ) | 18,546 | |||||||||||
Government-sponsored mortgage-backed securities | 80,261 | 19 | (6,579 | ) | 73,701 | |||||||||||
Asset-backed securities | 5,723 | — | (71 | ) | 5,652 | |||||||||||
Certificates of deposit | 1,459 | — | (10 | ) | 1,449 | |||||||||||
Total | $ | 138,416 | $ | 36 | $ | (11,776 | ) | $ | 126,676 | |||||||
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 | |||||||
The fair value of $4.1 million and $1.8 millionavailable-for-sale securities that were pledged as collateral at June 30, 20222023 and December 31, 2021,2022, were $8.9 million and $3.6 million, respectively.
The amortized costs and fair values of available-for-sale securities,available-for-sale,
| June 30, 2023 |
| ||||||
| Amortized Cost |
|
| Fair Value |
| |||
| (in thousands) |
| ||||||
Debt and other securities: |
|
|
|
|
|
| ||
Due in one year or less |
| $ | 1,080 |
|
| $ | 1,058 |
|
Due after one through 5 years |
|
| 29,133 |
|
|
| 26,429 |
|
Due after 5 through 10 years |
|
| 17,170 |
|
|
| 14,312 |
|
Due after 10 years |
|
| 3,114 |
|
|
| 2,425 |
|
Total debt and other securities |
|
| 50,497 |
|
|
| 44,224 |
|
Mortgage-related securities |
|
| 68,497 |
|
|
| 59,465 |
|
Asset-backed securities |
|
| 3,990 |
|
|
| 3,942 |
|
Total |
| $ | 122,984 |
|
| $ | 107,631 |
|
10
NOTE 3 –
June 30, 2022 | ||||||||
Amortized Cost | Fair Value | |||||||
(in thousands) | ||||||||
Debt and other securities: | ||||||||
Due in one year or less | $ | 1,790 | $ | 1,783 | ||||
Due after one through 5 years | 20,892 | 19,646 | ||||||
Due after 5 through 10 years | 18,661 | 16,772 | ||||||
Due after 10 years | 11,089 | 9,122 | ||||||
Total debt and other securities | 52,432 | 47,323 | ||||||
Mortgage-related securities | 80,261 | 73,701 | ||||||
Asset-backed securities | 5,723 | 5,652 | ||||||
Total | $ | 138,416 | $ | 126,676 | ||||
Gross unrealized losses on securities
| June 30, 2023 |
| ||||||||||||||||||||||
| 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 |
| $ | — |
|
| $ | — |
|
| $ | 26,726 |
|
| $ | (2,913 | ) |
| $ | 26,726 |
|
| $ | (2,913 | ) |
Obligations of states and political |
|
| 648 |
|
|
| (29 | ) |
|
| 15,547 |
|
|
| (3,300 | ) |
|
| 16,195 |
|
|
| (3,329 | ) |
Government-sponsored mortgage-backed |
|
| 5,169 |
|
|
| (325 | ) |
|
| 54,296 |
|
|
| (8,707 | ) |
|
| 59,465 |
|
|
| (9,032 | ) |
Asset-backed securities |
|
| 208 |
|
|
| — |
|
|
| 3,734 |
|
|
| (48 | ) |
|
| 3,942 |
|
|
| (48 | ) |
Certificates of deposit |
|
| — |
|
|
| — |
|
|
| 961 |
|
|
| (33 | ) |
|
| 961 |
|
|
| (33 | ) |
Total |
| $ | 6,025 |
|
| $ | (354 | ) |
| $ | 101,264 |
|
| $ | (15,001 | ) |
| $ | 107,289 |
|
| $ | (15,355 | ) |
| December 31, 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 |
| $ | — |
|
| $ | — |
|
| $ | 26,627 |
|
| $ | (2,970 | ) |
| $ | 26,627 |
|
| $ | (2,970 | ) |
Obligations of states and political |
|
| 5,088 |
|
|
| (396 | ) |
|
| 12,145 |
|
|
| (3,333 | ) |
|
| 17,233 |
|
|
| (3,729 | ) |
Government-sponsored mortgage-backed |
|
| 19,084 |
|
|
| (1,310 | ) |
|
| 45,183 |
|
|
| (7,658 | ) |
|
| 64,267 |
|
|
| (8,968 | ) |
Asset-backed securities |
|
| 4,517 |
|
|
| (46 | ) |
|
| — |
|
|
| — |
|
|
| 4,517 |
|
|
| (46 | ) |
Certificates of deposit |
|
| 1,425 |
|
|
| (34 | ) |
|
| — |
|
|
| — |
|
|
| 1,425 |
|
|
| (34 | ) |
Total |
| $ | 30,114 |
|
| $ | (1,786 | ) |
| $ | 83,955 |
|
| $ | (13,961 | ) |
| $ | 114,069 |
|
| $ | (15,747 | ) |
June 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 | $ | 27,328 | $ | (2,227 | ) | $ | — | $ | — | $ | 27,328 | $ | (2,227 | ) | ||||||||||
Obligations of states and political subdivisions | 14,506 | (2,102 | ) | 3,433 | (787 | ) | 17,939 | (2,889 | ) | |||||||||||||||
Government-sponsored mortgage-backed securities | 67,633 | (5,849 | ) | 4,724 | (730 | ) | 72,357 | (6,579 | ) | |||||||||||||||
Asset-backed securities | 5,345 | (71 | ) | — | — | 5,345 | (71 | ) | ||||||||||||||||
Certificates of deposit | 1,234 | (10 | ) | — | — | 1,234 | (10 | ) | ||||||||||||||||
Total | $ | 116,046 | $ | (10,259 | ) | $ | 8,157 | $ | (1,517 | ) | $ | 124,203 | $ | (11,776 | ) | |||||||||
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 subdivisions | 5,414 | (82 | ) | 4,105 | (123 | ) | 9,519 | (205 | ) | |||||||||||||||
Government-sponsored mortgage-backed securities | 39,392 | (463 | ) | — | — | 39,392 | (463 | ) | ||||||||||||||||
Asset-backed securities | 808 | (1 | ) | — | — | 808 | (1 | ) | ||||||||||||||||
Total | $ | 58,585 | $ | (571 | ) | $ | 4,105 | $ | (123 | ) | $ | 62,690 | $ | (694 | ) | |||||||||
At June 30, 20222023 and December 31, 2021,2022, respectively, the Company had 9085 and 2492 debt securities with unrealized losses representing aggregate depreciation of approximately 9.3%12.5% and 1.1%12.1%, 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.
11
Three months ended June 30, | Six months ended June 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, reported at amortized cost, are summarized as follows:
| June 30, |
|
| December 31, |
| |||
| (in thousands) |
| ||||||
Commercial: |
|
|
|
|
|
| ||
Real estate |
| $ | 222,273 |
|
| $ | 210,858 |
|
Land development |
|
| — |
|
|
| — |
|
Other |
|
| 47,135 |
|
|
| 43,708 |
|
Residential real estate: |
|
|
|
|
|
| ||
First mortgage |
|
| 92,788 |
|
|
| 85,444 |
|
Construction |
|
| 1,776 |
|
|
| 3,248 |
|
Consumer: |
|
|
|
|
|
| ||
Home equity and lines of credit |
|
| 19,131 |
|
|
| 18,590 |
|
Other |
|
| 175 |
|
|
| 99 |
|
Subtotal (1) |
|
| 383,278 |
|
|
| 361,947 |
|
Net deferred loan costs |
|
| 881 |
|
|
| 830 |
|
Allowance for credit losses for loans |
|
| (3,643 | ) |
|
| (3,203 | ) |
Loans, net |
| $ | 380,516 |
|
| $ | 359,574 |
|
(1) Totals do not include accrued interest receivable, which was $944,000 and $874,000 at June 30, 2023 and December 31, 2022, respectively, which is recorded separately on the Company’s Consolidated Balance Sheets.
June 30, 2022 | December 31, 2021 | |||||||
(in thousands) | ||||||||
Commercial: | ||||||||
Real estate | $ | 205,402 | $ | 185,223 | ||||
Land development | — | 1,400 | ||||||
Other | 42,858 | 38,160 | ||||||
Residential real estate: | ||||||||
First mortgage | 83,165 | 80,661 | ||||||
Construction | 3,726 | 3,388 | ||||||
Consumer: | ||||||||
Home equity and lines of credit | 16,592 | 17,032 | ||||||
Other | 145 | 128 | ||||||
Subtotal | 351,888 | 325,992 | ||||||
Net deferred loan costs | 863 | 655 | ||||||
Allowance for loan losses | (3,132 | ) | (2,858 | ) | ||||
Loans, net | $ | 349,619 | $ | 323,789 | ||||
Deposit accounts in an overdrawn position and reclassified as loans totaled $26,000$17,000 and $106,000$98,000 at June 30, 20222023 and December 31, 2021,2022, respectively.
The Company provides several types of loans to its customers, including commercial, residential, construction and consumer loans. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to one borrower or to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. While the Company’s credit risks are geographically concentrated within the metropolitan Milwaukee, Wisconsin area, there are no concentrations with individual borrowers or groups of related borrowers.
During the normal course of business, the Company may transfer a portion of a loan as a participation loan to another financial institution in order to manage portfolio risk. In order to be eligible for sales treatment, all cash flows from the loan must be divided proportionately, and rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties, and no loan holder can have the right to pledge or exchange the entire loan. As of June 30, 20222023 and December 31, 2021,2022, respectively, the Company had transferred $34.9$29.9 million and $32.1$30.3 million in participation loans which were eligible for sales treatment to other financial institutions, all of which continue to be serviced by the Company.
June 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 | $ | — | $ | — | $ | — | $ | 205,402 | $ | 205,402 | ||||||||||
Land development | — | — | — | — | — | |||||||||||||||
Other | — | — | — | 42,858 | 42,858 | |||||||||||||||
Residential real estate: | ||||||||||||||||||||
First mortgage | 69 | — | 69 | 83,096 | 83,165 | |||||||||||||||
Construction | — | — | — | 3,726 | 3,726 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity and lines of credit | 27 | — | 27 | 16,565 | 16,592 | |||||||||||||||
Other | — | — | — | 145 | 145 | |||||||||||||||
Total | $ | 96 | $ | — | $ | 96 | $ | 351,792 | $ | 351,888 | ||||||||||
12
NOTE 4 – LOANS (continued)
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 | ||||||||||
A summary of activity in the allowance for credit losses for loans and the allowance for credit losses for unfunded loan commitments for the three and six months ended June 30, 2023 and in the allowance for loan losses for the three and six months ended June 30, 2022, and June 30, 2021, respectively, is presented below:
Commercial | Residential | Consumer | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Three months ended June 30, 2022 | ||||||||||||||||
Allowance for loan losses | ||||||||||||||||
Beginning balance | $ | 1,814 | $ | 745 | $ | 458 | $ | 3,017 | ||||||||
Provision for loan losses | 105 | — | — | 105 | ||||||||||||
Loans charged-off | — | — | (1 | ) | (1 | ) | ||||||||||
Recoveries | 5 | — | 6 | 11 | ||||||||||||
Ending balance | $ | 1,924 | $ | 745 | $ | 463 | $ | 3,132 | ||||||||
Three months ended June 30, 2021 | ||||||||||||||||
Allowance for loan losses | ||||||||||||||||
Beginning balance | $ | 1,614 | $ | 745 | $ | 340 | $ | 2,699 | ||||||||
Provision for loan losses | — | — | — | — | ||||||||||||
Loans charged-off | — | — | (1 | ) | (1 | ) | ||||||||||
Recoveries | 4 | — | 30 | 34 | ||||||||||||
Ending balance | $ | 1,618 | $ | 745 | $ | 369 | $ | 2,732 | ||||||||
Commercial | Residential | Consumer | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Six months ended June 30, 2022 | ||||||||||||||||
Allowance for loan losses | ||||||||||||||||
Beginning balance | $ | 1,657 | $ | 745 | $ | 456 | $ | 2,858 | ||||||||
Provision for loan losses | 210 | — | — | 210 | ||||||||||||
Loans charged-off | — | — | (4 | ) | (4 | ) | ||||||||||
Recoveries | 57 | — | 11 | 68 | ||||||||||||
Ending balance | $ | 1,924 | $ | 745 | $ | 463 | $ | 3,132 | ||||||||
Six months ended June 30, 2021 | ||||||||||||||||
Allowance for loan losses | ||||||||||||||||
Beginning balance | $ | 1,609 | $ | 745 | $ | 349 | $ | 2,703 | ||||||||
Provision for loan losses | — | — | — | — | ||||||||||||
Loans charged-off | — | — | (17 | ) | (17 | ) | ||||||||||
Recoveries | 9 | — | 37 | 46 | ||||||||||||
Ending balance | $ | 1,618 | $ | 745 | $ | 369 | $ | 2,732 | ||||||||
| Commercial |
|
| Residential |
|
| Consumer |
|
| Total |
| |||||
| (in thousands) |
| ||||||||||||||
Three months ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for credit losses for loans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | 2,669 |
|
| $ | 848 |
|
| $ | 176 |
|
| $ | 3,693 |
|
Provision for credit losses |
|
| (42 | ) |
|
| (17 | ) |
|
| 1 |
|
|
| (58 | ) |
Loans charged-off |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
Recoveries |
|
| 5 |
|
|
| — |
|
|
| 4 |
|
|
| 9 |
|
Ending balance |
| $ | 2,632 |
|
| $ | 831 |
|
| $ | 180 |
|
| $ | 3,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for credit losses for unfunded loan commitments(2) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | 640 |
|
| $ | 25 |
|
| $ | — |
|
| $ | 665 |
|
Provision for credit losses |
|
| 131 |
|
|
| 2 |
|
|
| — |
|
|
| 133 |
|
Loans charged-off |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Recoveries |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Ending balance |
| $ | 771 |
|
| $ | 27 |
|
| $ | — |
|
| $ | 798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Allowance for credit losses for loans and unfunded loan commitments |
| $ | 3,403 |
|
| $ | 858 |
|
| $ | 180 |
|
| $ | 4,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Three months ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | 1,814 |
|
| $ | 745 |
|
| $ | 458 |
|
| $ | 3,017 |
|
Provision for loan losses |
|
| 105 |
|
|
| — |
|
|
| — |
|
|
| 105 |
|
Loans charged-off |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
Recoveries |
|
| 5 |
|
|
| — |
|
|
| 6 |
|
|
| 11 |
|
Ending balance |
| $ | 1,924 |
|
| $ | 745 |
|
| $ | 463 |
|
| $ | 3,132 |
|
13
NOTE 4 – LOANS (continued)
| Commercial |
|
| Residential |
|
| Consumer |
|
| Total |
| |||||
| (in thousands) |
| ||||||||||||||
Six months ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for credit losses for loans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | 1,944 |
|
| $ | 752 |
|
| $ | 507 |
|
| $ | 3,203 |
|
Provision for credit losses |
|
| 12 |
|
|
| 4 |
|
|
| 1 |
|
|
| 17 |
|
CECL Adoption Adjustment(1) |
|
| 666 |
|
|
| 75 |
|
|
| (329 | ) |
| $ | 412 |
|
Loans charged-off |
|
| — |
|
|
| — |
|
|
| (7 | ) |
|
| (7 | ) |
Recoveries |
|
| 10 |
|
|
| — |
|
|
| 8 |
|
|
| 18 |
|
Ending balance |
| $ | 2,632 |
|
| $ | 831 |
|
| $ | 180 |
|
| $ | 3,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for credit losses for unfunded loan commitments(2) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Provision for credit losses |
|
| 131 |
|
|
| 2 |
|
|
| — |
|
|
| 133 |
|
CECL Adoption Adjustment(1) |
|
| 640 |
|
|
| 25 |
|
|
| — |
|
| $ | 665 |
|
Loans charged-off |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Recoveries |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Ending balance |
| $ | 771 |
|
| $ | 27 |
|
| $ | — |
|
| $ | 798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Allowance for credit losses for loans and unfunded loan commitments |
| $ | 3,403 |
|
| $ | 858 |
|
| $ | 180 |
|
| $ | 4,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Six months ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | 1,657 |
|
| $ | 745 |
|
| $ | 456 |
|
| $ | 2,858 |
|
Provision for loan losses |
|
| 210 |
|
|
| — |
|
|
| — |
|
|
| 210 |
|
Loans charged-off |
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| (4 | ) |
Recoveries |
|
| 57 |
|
|
| — |
|
|
| 11 |
|
|
| 68 |
|
Ending balance |
| $ | 1,924 |
|
| $ | 745 |
|
| $ | 463 |
|
| $ | 3,132 |
|
(1) On January 1, 2023, the Company adopted ASU 2016-13 ("CECL"). See Note 2 for additional information regarding the adoption of ASU 2016-13.
(2) The allowance for credit losses for unfunded loan commitments is included in other liabilities on the Company's Consolidated Balance Sheets.
14
NOTE 4 – LOANS (continued)
The provision for credit losses is determined by the Company as the amount that is to be added to the ACL accounts to bring the ACL to a level that, in management's judgment, is necessary to absorb expected credit losses over the lives of the allowancerespective financial instruments. The following table presents the components of the provision for loan losses for loans evaluated individually and collectively for impairment is presented below:credit losses:
| Three months ended June 30, |
| ||||||
| 2023 |
|
| 2022 |
| |||
| (in thousands) |
| ||||||
Provision for credit losses for: |
|
|
|
|
|
| ||
Loans |
| $ | (58 | ) |
| $ | 105 |
|
Unfunded loan commitments |
|
| 133 |
|
| N/A |
| |
Total |
| $ | 75 |
|
| $ | 105 |
|
| Six months ended June 30, |
| ||||||
| 2023 |
|
| 2022 |
| |||
| (in thousands) |
| ||||||
Provision for credit losses for: |
|
|
|
|
|
| ||
Loans |
| $ | 17 |
|
| $ | 210 |
|
Unfunded loan commitments |
|
| 133 |
|
| N/A |
| |
Total |
| $ | 150 |
|
| $ | 210 |
|
June 30, 2022 | ||||||||||||||||
Commercial | Residential | Consumer | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Loans: | ||||||||||||||||
Individually evaluated for impairment | $ | 4,009 | $ | 1,192 | $ | 35 | $ | 5,236 | ||||||||
Collectively evaluated for impairment | 244,251 | 85,699 | 16,702 | 346,652 | ||||||||||||
Total loans | $ | 248,260 | $ | 86,891 | $ | 16,737 | $ | 351,888 | ||||||||
Allowance for loan losses: | ||||||||||||||||
Individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | ||||||||
Collectively evaluated for impairment | 1,924 | 745 | 463 | 3,132 | ||||||||||||
Total allowance for loan losses | $ | 1,924 | $ | 745 | $ | 463 | $ | 3,132 | ||||||||
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 | ||||||||
The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loancredit losses. The credit quality indicators monitored differ depending on the class of loan.
June 30, 2022 | ||||||||||||||||
Pass | Watch and Special Mention | Substandard | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Commercial: | ||||||||||||||||
Real estate | $ | 196,641 | $ | 5,188 | $ | 3,573 | $ | 205,402 | ||||||||
Land development | — | — | — | — | ||||||||||||
Other | 40,556 | 1,866 | 436 | 42,858 | ||||||||||||
Total | $ | 237,197 | $ | 7,054 | $ | 4,009 | $ | 248,260 | ||||||||
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 | ||||||||
Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing accordingor in nonaccrual status. Refer to Note 1 to the contractual terms of the loan. Management determines that a loan is impaired ornon-performingwhen it is probable at least a portion of the loan will not be collectedConsolidated Financial Statements in accordanceour 2022 Annual Report on Form 10-K, filed with the original terms due to a deterioration inSEC on March 30, 2023, for additional information on our nonaccrual policy.
15
NOTE 4 – LOANS (continued)
The following table presents the financial conditionamortized cost basis of the borrower or the valueour loans by credit quality indicator and origination year, at June 30, 2023:
| June 30, 2023 |
| ||||||||||||||||||||||||||||||||||
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 and Prior |
|
| Revolving Lines of Credit |
|
| Revolving Lines of Credit Converted to Term Loans |
|
| Total Loans |
| ||||||||||
| (in thousands) |
| ||||||||||||||||||||||||||||||||||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 10,250 |
|
| $ | 65,765 |
|
| $ | 52,397 |
|
| $ | 41,692 |
|
| $ | 10,665 |
|
| $ | 36,630 |
|
| $ | 22 |
|
| $ | - |
|
| $ | 217,421 |
|
Watch and special mention |
|
| - |
|
|
| 3,129 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 243 |
|
|
| - |
|
|
| - |
|
|
| 3,372 |
|
Substandard |
|
| - |
|
|
| 162 |
|
|
| 610 |
|
|
| - |
|
|
| 294 |
|
|
| 414 |
|
|
| - |
|
|
| - |
|
|
| 1,480 |
|
Total commercial real estate |
|
| 10,250 |
|
|
| 69,056 |
|
|
| 53,007 |
|
|
| 41,692 |
|
|
| 10,959 |
|
|
| 37,287 |
|
|
| 22 |
|
|
| - |
|
|
| 222,273 |
|
Other commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
|
| 12,609 |
|
|
| 14,863 |
|
|
| 6,858 |
|
|
| 1,655 |
|
|
| 222 |
|
|
| 1,894 |
|
|
| 6,223 |
|
|
| - |
|
|
| 44,324 |
|
Watch and special mention |
|
| - |
|
|
| - |
|
|
| 171 |
|
|
| 159 |
|
|
| 24 |
|
|
| 64 |
|
|
| 51 |
|
|
| - |
|
|
| 469 |
|
Substandard |
|
| - |
|
|
| 267 |
|
|
| 308 |
|
|
| - |
|
|
| 13 |
|
|
| 143 |
|
|
| 1,611 |
|
|
| - |
|
|
| 2,342 |
|
Total other commercial loans |
|
| 12,609 |
|
|
| 15,130 |
|
|
| 7,337 |
|
|
| 1,814 |
|
|
| 259 |
|
|
| 2,101 |
|
|
| 7,885 |
|
|
| - |
|
|
| 47,135 |
|
Total commercial loans |
|
| 22,859 |
|
|
| 84,186 |
|
|
| 60,344 |
|
|
| 43,506 |
|
|
| 11,218 |
|
|
| 39,388 |
|
|
| 7,907 |
|
|
| - |
|
|
| 269,408 |
|
Residential real estate - first mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Performing |
|
| 7,326 |
|
|
| 14,426 |
|
|
| 33,136 |
|
|
| 16,168 |
|
|
| 3,103 |
|
|
| 17,947 |
|
|
| - |
|
|
| - |
|
|
| 92,106 |
|
Nonaccrual |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 682 |
|
|
| - |
|
|
| - |
|
|
| 682 |
|
Total residential real estate - first mortgage |
|
| 7,326 |
|
|
| 14,426 |
|
|
| 33,136 |
|
|
| 16,168 |
|
|
| 3,103 |
|
|
| 18,629 |
|
|
| - |
|
|
| - |
|
|
| 92,788 |
|
Residential real estate - construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Performing |
|
| - |
|
|
| 437 |
|
|
| 1,339 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,776 |
|
Nonaccrual |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total residential real estate - construction |
|
| - |
|
|
| 437 |
|
|
| 1,339 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,776 |
|
Total residential real estate |
|
| 7,326 |
|
|
| 14,863 |
|
|
| 34,475 |
|
|
| 16,168 |
|
|
| 3,103 |
|
|
| 18,629 |
|
|
| - |
|
|
| - |
|
|
| 94,564 |
|
Consumer - home equity and lines of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Performing |
|
| 20 |
|
|
| 67 |
|
|
| 151 |
|
|
| 115 |
|
|
| 177 |
|
|
| 1,397 |
|
|
| 16,267 |
|
|
| 905 |
|
|
| 19,099 |
|
Nonaccrual |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 32 |
|
|
| - |
|
|
| - |
|
|
| 32 |
|
Total consumer - home equity and lines of credit |
|
| 20 |
|
|
| 67 |
|
|
| 151 |
|
|
| 115 |
|
|
| 177 |
|
|
| 1,429 |
|
|
| 16,267 |
|
|
| 905 |
|
|
| 19,131 |
|
Consumer - other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Performing |
|
| 108 |
|
|
| 52 |
|
|
| - |
|
|
| 9 |
|
|
| 4 |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| 175 |
|
Nonaccrual |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total consumer - other |
|
| 108 |
|
|
| 52 |
|
|
| - |
|
|
| 9 |
|
|
| 4 |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| 175 |
|
Total consumer |
|
| 128 |
|
|
| 119 |
|
|
| 151 |
|
|
| 124 |
|
|
| 181 |
|
|
| 1,431 |
|
|
| 16,267 |
|
|
| 905 |
|
|
| 19,306 |
|
Total loans |
| $ | 30,313 |
|
| $ | 99,168 |
|
| $ | 94,970 |
|
| $ | 59,798 |
|
| $ | 14,502 |
|
| $ | 59,448 |
|
| $ | 24,174 |
|
| $ | 905 |
|
| $ | 383,278 |
|
16
NOTE 4 – LOANS (continued)
A summary 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 loansat amortized cost, prior to the adoption of CECL is presented below:
| December 31, 2022 |
| ||||||||||||||
| Pass |
|
| Watch and Special Mention |
|
| Substandard |
|
| Total |
| |||||
| (in thousands) |
| ||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Real estate |
| $ | 206,655 |
|
| $ | 2,932 |
|
| $ | 1,271 |
|
| $ | 210,858 |
|
Land development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| 41,569 |
|
|
| 35 |
|
|
| 2,104 |
|
|
| 43,708 |
|
Total |
| $ | 248,224 |
|
| $ | 2,967 |
|
| $ | 3,375 |
|
| $ | 254,566 |
|
June 30, 2022 | ||||||||||||
Performing | Non Performing | Total | ||||||||||
(in thousands) | ||||||||||||
Residential real estate: | ||||||||||||
First mortgage | $ | 82,383 | $ | 782 | $ | 83,165 | ||||||
Construction | 3,726 | — | 3,726 | |||||||||
Consumer: | ||||||||||||
Home equity and lines of credit | 16,557 | 35 | 16,592 | |||||||||
Other | 145 | — | 145 | |||||||||
Total | $ | 102,811 | $ | 817 | $ | 103,628 | ||||||
There were no commercial loans rated Doubtful or Loss as of Contents
| December 31, 2022 |
| ||||||||||
| Performing |
|
| Non-Performing |
|
| Total |
| ||||
| (in thousands) |
| ||||||||||
Residential real estate: |
|
|
|
|
|
|
|
|
| |||
First mortgage |
| $ | 84,730 |
|
| $ | 714 |
|
| $ | 85,444 |
|
Construction |
|
| 3,248 |
|
|
| — |
|
|
| 3,248 |
|
Consumer: |
|
|
|
|
|
|
|
|
| |||
Home equity and lines of credit |
|
| 18,535 |
|
|
| 55 |
|
|
| 18,590 |
|
Other |
|
| 99 |
|
|
| — |
|
|
| 99 |
|
Total |
| $ | 106,612 |
|
| $ | 769 |
|
| $ | 107,381 |
|
The following tables present gross charge-offs of our loans for each portfolio class, by origination year, that occurred during the three and six months ended June 30, 2023. Refer to Note 1 to the Consolidated Financial Statements in our 2022 Annual Report on Form 10-K for additional information on our charge-off policy.
| For the three months ended June 30,2023 |
| ||||||||||||||||||||||||||||||||||
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 and Prior |
|
| Revolving Lines of Credit |
|
| Revolving Lines of Credit Converted to Term Loans |
|
| Total Loans |
| ||||||||||
| (in thousands) |
| ||||||||||||||||||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Real estate |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Land development |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
|
| |
Other |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total commercial loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
First mortgage |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Construction |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total residential real estate |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Home equity and lines of credit |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
Total consumer |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
Total current period charge-offs |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 1 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 1 |
|
17
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 | ||||||
As of and for the Six Months Ended June 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 with reserve | — | — | — | — | — | |||||||||||||||
Impaired loans with no reserve: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Real estate | 3,573 | 3,573 | NA | 3,785 | 71 | |||||||||||||||
Land development | — | — | NA | — | — | |||||||||||||||
Other | 436 | 436 | NA | 505 | 62 | |||||||||||||||
Residential real estate: | ||||||||||||||||||||
First mortgage | 1,192 | 1,412 | NA | 1,271 | 32 | |||||||||||||||
Construction | — | — | NA | — | — | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity and lines of credit | 35 | 40 | NA | 36 | 1 | |||||||||||||||
Other | — | — | NA | — | — | |||||||||||||||
Total impaired loans with no reserve | 5,236 | 5,461 | NA | 5,597 | 166 | |||||||||||||||
Total impaired loans | $ | 5,236 | $ | 5,461 | $ | — | $ | 5,597 | $ | 166 | ||||||||||
| For the six months ended June 30,2023 |
| ||||||||||||||||||||||||||||||||||
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 and Prior |
|
| Revolving Lines of Credit |
|
| Revolving Lines of Credit Converted to Term Loans |
|
| Total Loans |
| ||||||||||
| (in thousands) |
| ||||||||||||||||||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Real estate |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Land development |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Other |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total commercial loans |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
First mortgage |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Construction |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total residential real estate |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Home equity and lines of credit |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other |
|
| - |
|
|
| 3 |
|
|
| 1 |
|
|
| 1 |
|
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| 7 |
|
Total consumer |
|
| - |
|
|
| 3 |
|
|
| 1 |
|
|
| 1 |
|
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| 7 |
|
Total current period charge-offs |
| $ | - |
|
| $ | 3 |
|
| $ | 1 |
|
| $ | 1 |
|
| $ | - |
|
| $ | 2 |
|
| $ | - |
|
| $ | - |
|
| $ | 7 |
|
18
NOTE 4 – LOANS (continued)
An analysis of past due loans, net of amortized costs, is presented below:
| June 30, 2023 |
| ||||||||||||||||||
| Loans Past Due 30-89 Days |
|
| Loans Past Due 90+ Days |
|
| Total Past Due |
|
| Current Loans |
|
| Total Loans |
| ||||||
| (in thousands) |
| ||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Real estate |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 222,273 |
|
| $ | 222,273 |
|
Land development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47,135 |
|
|
| 47,135 |
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
First mortgage |
|
| 60 |
|
|
| — |
|
|
| 60 |
|
|
| 92,728 |
|
|
| 92,788 |
|
Construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,776 |
|
|
| 1,776 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity and lines of credit |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,131 |
|
|
| 19,131 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 175 |
|
|
| 175 |
|
Total |
| $ | 60 |
|
|
| — |
|
| $ | 60 |
|
| $ | 383,218 |
|
| $ | 383,278 |
|
| December 31, 2022 |
| ||||||||||||||||||
| Loans Past Due 30-89 Days |
|
| Loans Past Due 90+ Days |
|
| Total Past Due |
|
| Current Loans |
|
| Total Loans |
| ||||||
| (in thousands) |
| ||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Real estate |
| $ | 1,732 |
|
| $ | — |
|
| $ | 1,732 |
|
| $ | 209,126 |
|
| $ | 210,858 |
|
Land development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 43,708 |
|
|
| 43,708 |
|
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
First mortgage |
|
| 181 |
|
|
| 63 |
|
|
| 244 |
|
|
| 85,200 |
|
|
| 85,444 |
|
Construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,248 |
|
|
| 3,248 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity and lines of credit |
|
| 72 |
|
|
| 21 |
|
|
| 93 |
|
|
| 18,497 |
|
|
| 18,590 |
|
Other |
|
| 2 |
|
|
| — |
|
|
| 2 |
|
|
| 97 |
|
|
| 99 |
|
Total |
| $ | 1,987 |
|
| $ | 84 |
|
| $ | 2,071 |
|
| $ | 359,876 |
|
| $ | 361,947 |
|
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 with reserve | — | — | — | — | — | |||||||||||||||
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 with no reserve | 6,227 | 6,498 | NA | 8,758 | 337 | |||||||||||||||
Total impaired loans | $ | 6,227 | $ | 6,498 | $ | — | $ | 8,758 | $ | 337 | ||||||||||
There were 0 additional funds committed to impairedno loans 90 days or more past due and accruing interest as of June 30, 2022 and2023 or December 31, 2021,2022, respectively.
June 30, 2022 | December 31, 2021 | |||||||
(in thousands) | ||||||||
Nonaccrual loans, other than troubled debt restructurings | $ | 630 | $ | 826 | ||||
Nonaccrual loans, troubled debt restructurings | 187 | 191 | ||||||
Total nonperforming loans | $ | 817 | $ | 1,017 | ||||
Troubled debt restructurings, accruing | $ | 410 | $ | 418 | ||||
19
NOTE 4 – LOANS (continued)
The following table presents the amortized cost of our loans on nonaccrual status as of June 30, 2023 and December 31, 2022. All loans that were 090 days or more past due were on nonaccrual status as of June 30, 2023 and December 31, 2022.
| June 30, |
|
| December 31, |
| |||
| (in thousands) |
| ||||||
Commercial: |
|
|
|
|
|
| ||
Real estate |
| $ | — |
|
| $ | — |
|
Land development |
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
Residential real estate: |
|
|
|
|
|
| ||
First mortgage |
|
| 682 |
|
|
| 714 |
|
Construction |
|
| — |
|
|
| — |
|
Consumer: |
|
|
|
|
|
| ||
Home equity and lines of credit |
|
| 32 |
|
|
| 55 |
|
Other |
|
| — |
|
|
| — |
|
Total nonaccrual loans |
| $ | 714 |
|
| $ | 769 |
|
Total nonaccrual loans to total loans |
|
| 0.19 | % |
|
| 0.21 | % |
Total nonaccrual loans to total assets |
|
| 0.13 | % |
|
| 0.14 | % |
The Company had $714,000 of loans modifiedthat were in nonaccrual status as troubled debt restructurings duringof June 30, 2023, with no related allowance for credit losses. During the six months ended June 30, 20222023, there was no interest earned on nonaccrual loans and year ended December 31, 2021, respectively.
At June 30, 2023, the Company held loans that were individually evaluated for impairment due to financial difficulties experienced by the borrower and for which the repayment, on the basis of our assessment, is expected to be provided substantially through the sale or operation of the CARES Act included an electioncollateral. The ACL for these collateral dependent loans is primarily based on the fair value of the underlying collateral at the reporting date. The following describes the type of collateral that secure collateral dependent loans:
The table below summarizes collateral dependent loans and the related ACL at June 30, 2023 for which the borrower is experiencing financial difficulty:
| Loans |
|
| ACL |
| |||
| (in thousands) |
| ||||||
Commercial: |
|
|
|
|
|
| ||
Real estate |
| $ | 1,318 |
|
| $ | — |
|
Land development |
|
| — |
|
|
| — |
|
Other |
|
| 2,698 |
|
|
| — |
|
Residential real estate: |
|
|
|
|
|
| ||
First mortgage |
|
| 883 |
|
|
| — |
|
Construction |
|
| — |
|
|
| — |
|
Consumer: |
|
|
|
|
|
| ||
Home equity and lines of credit |
|
| 32 |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
Total |
| $ | 4,931 |
|
|
| — |
|
20
NOTE 4 – LOANS (continued)
A summary of the allowance for loan losses for loans evaluated individually and collectively for impairment, at amortized cost, prior to not apply the guidance on accounting foradoption of CECL is presented below:
| December 31, 2022 |
| ||||||||||||||
| Commercial |
|
| Residential |
|
| Consumer |
|
| Total |
| |||||
| (in thousands) |
| ||||||||||||||
Loans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Individually evaluated for impairment |
| $ | 3,525 |
|
| $ | 917 |
|
| $ | 55 |
|
| $ | 4,497 |
|
Collectively evaluated for impairment |
|
| 251,041 |
|
|
| 87,775 |
|
|
| 18,634 |
|
|
| 357,450 |
|
Total loans |
| $ | 254,566 |
|
| $ | 88,692 |
|
| $ | 18,689 |
|
| $ | 361,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Individually evaluated for impairment |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Collectively evaluated for impairment |
|
| 1,944 |
|
|
| 752 |
|
|
| 507 |
|
|
| 3,203 |
|
Total allowance for loan losses |
| $ | 1,944 |
|
| $ | 752 |
|
| $ | 507 |
|
| $ | 3,203 |
|
21
NOTE 4 – LOANS (continued)
Information regarding impaired loans, at amortized cost, prior to the adoption of CECL is presented below:
| As of and for the Year Ended December 31, 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 |
| $ | 1,422 |
|
| $ | 1,470 |
|
| NA |
|
| $ | 3,952 |
|
| $ | 177 |
| |
Land development |
|
| — |
|
|
| — |
|
| NA |
|
|
| — |
|
|
| — |
| |
Other |
|
| 2,103 |
|
|
| 2,103 |
|
| NA |
|
|
| 1,325 |
|
|
| 110 |
| |
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
First mortgage |
|
| 917 |
|
|
| 1,138 |
|
| NA |
|
|
| 1,011 |
|
|
| 55 |
| |
Construction |
|
| — |
|
|
| — |
|
| NA |
|
|
| — |
|
|
| — |
| |
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity and lines of credit |
|
| 55 |
|
|
| 60 |
|
| NA |
|
|
| 37 |
|
|
| 2 |
| |
Other |
|
| — |
|
|
| — |
|
| NA |
|
|
| — |
|
|
| — |
| |
Total impaired loans |
|
| 4,497 |
|
|
| 4,771 |
|
| NA |
|
|
| 6,325 |
|
|
| 344 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total impaired loans |
| $ | 4,497 |
|
| $ | 4,771 |
|
| $ | — |
|
| $ | 6,325 |
|
| $ | 344 |
|
The adoption of ASU 2022-02 eliminated troubled debt restructurings (TDR's) recognition and measurement guidance, as well as all TDR related disclosures. Refer to Note 2 for additional information. TDRs were loan modifications such as extensions or deferrals, relatedwhere concessions were granted toCOVID-19made between March 1, 2020 and the earlier of (i) December 31, 2021 or (ii) 60 days after the end of theCOVID-19national emergency. borrowers experiencing financial difficulties. The relief can only be applied to modificationsCompany did not modify any loans for borrowers that are experiencing financial difficulty and did not have any previous modifications that were not more than 30 days past due as of December 31, 2019. The Company elected to adopt these provisions of the CARES Act. As of June 30, 2022, the Company had 1 to 3 month deferrals of approximately $251,000 in interest, escrow, and principal payments on $5.7 million in outstanding loans.
At December 31, 2022, and 2021.the Company had $538,000 of TDR's, of which $183,000 was on nonaccrual status. There were no loan modifications that were classified as a TDR during the year ended December 31, 2022.
22
June 30, 2022 | December 31, 2021 | |||||||
(in thousands) | ||||||||
Commercial: | ||||||||
Real estate | $ | — | $ | — | ||||
Land development | — | — | ||||||
Other | — | — | ||||||
Residential real estate: | ||||||||
First mortgage | 782 | 939 | ||||||
Construction | — | — | ||||||
Consumer: | ||||||||
Home equity and lines of credit | 35 | 78 | ||||||
Other | — | — | ||||||
Total non-accrual loans | $ | 817 | $ | 1,017 | ||||
Total non-accrual loans to total loans | 0.23 | % | 0.31 | % | ||||
Total non-accrual loans to total assets | 0.15 | % | 0.19 | % |
NOTE 5 – MORTGAGE SERVICING RIGHTS
Loans serviced for others are not included in the Company’s consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $317.5$291.5 million and $332.9$304.3 million as of June 30, 20222023 and December 31, 2021,2022, respectively.
A summary of activity in the Company’s mortgage servicing rights is presented below:
| Three Months Ended June 30, 2023 |
|
| Three Months Ended June 30, 2022 |
|
| Six Months Ended June 30, 2023 |
|
| Six Months Ended June 30, 2022 |
| |||||
| (in thousands) |
|
| (in thousands) |
| |||||||||||
Mortgage servicing rights beginning balance |
| $ | 1,824 |
|
| $ | 1,988 |
|
| $ | 1,860 |
|
| $ | 2,036 |
|
Additions |
|
| 8 |
|
|
| 20 |
|
|
| 17 |
|
|
| 47 |
|
Amortization |
|
| (55 | ) |
|
| (69 | ) |
|
| (100 | ) |
|
| (144 | ) |
Mortgage servicing rights ending balance |
| $ | 1,777 |
|
| $ | 1,939 |
|
| $ | 1,777 |
|
| $ | 1,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fair value at beginning of period |
| $ | 3,488 |
|
| $ | 2,811 |
|
| $ | 3,376 |
|
| $ | 2,477 |
|
Fair value at end of period |
| $ | 3,317 |
|
| $ | 3,273 |
|
| $ | 3,317 |
|
| $ | 3,273 |
|
Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Mortgage servicing rights beginning balance | $ | 1,988 | $ | 2,147 | $ | 2,036 | $ | 1,806 | ||||||||
Additions | 20 | 117 | 47 | 320 | ||||||||||||
Amortization | (69 | ) | (155 | ) | (144 | ) | (386 | ) | ||||||||
Decrease in valuation allowance | — | — | — | 369 | ||||||||||||
Mortgage servicing rights ending balance | $ | 1,939 | $ | 2,109 | $ | 1,939 | $ | 2,109 | ||||||||
Fair value at beginning of period | $ | 2,811 | $ | 2,153 | $ | 2,477 | $ | 1,806 | ||||||||
Fair value at end of period | $ | 3,273 | $ | 2,361 | $ | 3,273 | $ | 2,361 |
The estimated fair value of mortgage servicing rights was determined using a valuation model that calculates the present value of expected future servicing and ancillary income, net of expected servicing costs. The model incorporates various assumptions such as discount rates, prepayment speeds and ancillary income and servicing costs. As of June 30, 2022,2023, the model used discount rates ranging from 9.5%10.0% to 13%13.0%, and prepayment speeds ranging from 11.3%6.9% to 26.8%34.5%, respectively, both of which were based on market data from independent organizations. As of June 30, 2021 2022the model used discount rates ranging from 10%9.5% to 13.5%13.0%, and prepayment speeds ranging from 12.8%11.3% to 35.8%, respectively, both of which were based on market data from independent organizations.
The following table summarizes the estimated future amortization expense for mortgage servicing rights for the annual periods indicated. The projections of amortization expense are based on existing asset balances as of June 30, 2022.2023. 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 June 30, 2023: |
| (in thousands) |
| |
2023 |
| $ | 89 |
|
2024 |
|
| 203 |
|
2025 |
|
| 187 |
|
2026 |
|
| 167 |
|
2027 |
|
| 148 |
|
Thereafter |
|
| 983 |
|
Total |
| $ | 1,777 |
|
23
(in thousands) | ||||
Estimated future amortization as of June 30, 2022: | ||||
2022 | $ | 127 | ||
2023 | 234 | |||
2024 | 208 | |||
2025 | 186 | |||
2026 | 164 | |||
Thereafter | 1,020 | |||
Total | $ | 1,939 | ||
NOTE 6 – DEPOSITS
The composition of deposits is summarized below:
| June 30, |
|
| December 31, 2022 |
| |||
| (in thousands) |
| ||||||
Non-interest bearing checking |
| $ | 74,825 |
|
| $ | 92,465 |
|
Interest bearing checking |
|
| 30,002 |
|
|
| 32,514 |
|
Money market |
|
| 96,673 |
|
|
| 121,215 |
|
Statement savings |
|
| 50,785 |
|
|
| 61,969 |
|
Certificates of deposit |
|
| 118,905 |
|
|
| 79,558 |
|
Total |
| $ | 371,190 |
|
| $ | 387,721 |
|
June 30, 2022 | December 31, 2021 | |||||||
(in thousands) | ||||||||
Non-interest bearing checking | $ | 102,998 | $ | 106,664 | ||||
Interest bearing checking | 34,016 | 37,467 | ||||||
Money market | 95,878 | 94,823 | ||||||
Statement savings | 67,456 | 64,954 | ||||||
Certificates of deposit | 82,714 | 80,593 | ||||||
Total | $ | 383,062 | $ | 384,501 | ||||
Certificates of deposit whichthat met or exceeded the FDIC insurance limit of $250,000$250,000 totaled $22.2 million and $8.9 million as of June 30, 20222023 and December 31, 2021,2022, respectively. The Company did 0tnot hold any brokered deposits as of June 30, 2022 and2023 or December 31, 2021.
As of June 30, 2022,2023, the scheduled maturities of certificates of deposit for the annual periods are presented below:
| (in thousands) |
| ||
2023 |
| $ | 40,361 |
|
2024 |
|
| 57,372 |
|
2025 |
|
| 8,844 |
|
2026 |
|
| 11,967 |
|
2027 |
|
| 302 |
|
Thereafter |
|
| 59 |
|
Total |
| $ | 118,905 |
|
24
(in thousands) | ||||
2022 | $ | 38,552 | ||
2023 | 33,484 | |||
2024 | 1,209 | |||
2025 | 8,823 | |||
2026 | 347 | |||
Thereafter | 299 | |||
Total | $ | 82,714 | ||
NOTE 7 – FEDERAL HOME LOAN BANK ADVANCES
A summary ofFederal Home Loan Bank advances consist of the following:follows:
| June 30, 2023 |
|
| December 31, 2022 |
| |||||||||||
| Rate |
|
| Amount |
|
| Rate |
|
| Amount |
| |||||
| (dollars in thousands) |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fixed rate, fixed term advance, maturing Feb 2023 |
|
| — |
|
|
| — |
|
|
| 1.62 | % |
|
| 6,500 |
|
Fixed rate, fixed term advance, maturing July 2027 |
|
| 2.90 | % |
|
| 5,000 |
|
|
| 2.90 | % |
|
| 5,000 |
|
Putable advance, maturing July 2029, first option date January 2023 |
|
| — |
|
|
| — |
|
|
| 1.68 | % |
|
| 5,000 |
|
Putable advance, maturing February 2030, first option date February 2023 |
|
| — |
|
|
| — |
|
|
| 0.98 | % |
|
| 5,000 |
|
Putable advance, maturing October 2029, first put option date July 2023 |
|
| 2.96 | % |
|
| 5,000 |
|
|
| 2.96 | % |
|
| 5,000 |
|
Putable advance, maturing January 2028, first option date July 2023 |
|
| 3.34 | % |
|
| 2,500 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing January 2028, first option date July 2023 |
|
| 3.22 | % |
|
| 2,500 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing February 2028, first option date August 2023 |
|
| 3.37 | % |
|
| 2,500 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing February 2028, first option date November 2023 |
|
| 3.82 | % |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing May 2028, first option date November 2023 |
|
| 3.16 | % |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing January 2028, first option date January 2024 |
|
| 3.44 | % |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing February 2028, first option date February 2024 |
|
| 3.63 | % |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing March 2028, first option date March 2024 |
|
| 3.47 | % |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing May 2026, first option date May 2024 |
|
| 3.92 | % |
|
| 2,500 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing May 2028, first option date May 2024 |
|
| 3.51 | % |
|
| 2,500 |
|
|
| — |
|
|
| — |
|
Putable advance, maturing Mar 2030, first put option date March 2025 |
|
| 0.89 | % |
|
| 10,000 |
|
|
| 0.89 | % |
|
| 10,000 |
|
Putable advance, maturing Mar 2032, first put option date March 2027 |
|
| 1.74 | % |
|
| 10,000 |
|
|
| 1.74 | % |
|
| 10,000 |
|
Advance structured note, payments due monthly, maturing April 2030 |
|
| 1.05 | % |
|
| 6,946 |
|
|
| 1.05 | % |
|
| 7,435 |
|
Advance structured note, payments due monthly, maturing May 2030 |
|
| 1.19 | % |
|
| 7,042 |
|
|
| 1.19 | % |
|
| 7,529 |
|
SOFR Floater advance, maturing October 2023 |
|
| 5.30 | % |
|
| 5,000 |
|
|
| 4.54 | % |
|
| 5,000 |
|
SOFR Floater advance, maturing October 2024 |
|
| 5.35 | % |
|
| 5,000 |
|
|
| 4.59 | % |
|
| 5,000 |
|
Total |
|
|
|
| $ | 91,488 |
|
|
|
|
| $ | 71,464 |
|
June 30, 2022 | December 31, 2021 | |||||||||||||||
Rate | Amount | Rate | Amount | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Fixed rate, fixed term advance, maturing Feb 2022 | N/A | $ | — | 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 | ||||||||||
Putable advance, maturing Mar 2032 first put option date Mar 2027 | 1.74 | % | 10,000 | — | — | |||||||||||
Advance structured note, payments due monthly, maturing Feb 2030 | — | — | 7.47 | % | 542 | |||||||||||
Advance structured note, payments due monthly, maturing April 2030 | 1.05 | % | 7,922 | 1.05 | % | 8,405 | ||||||||||
Advance structured note, payments due monthly, maturing May 2030 | 1.19 | % | 8,013 | 1.19 | % | 8,495 | ||||||||||
Total | $ | 57,435 | $ | 55,442 | ||||||||||||
The scheduled maturities and required principal payments of Federal Home Loan Bank advances are presented below:
| June 30, 2023 |
| ||||||
| Weighted Average Rate |
|
| Amount |
| |||
| (dollars in thousands) |
| ||||||
2023 |
|
| 4.61 | % |
| $ | 5,981 |
|
2024 |
|
| 4.15 | % |
|
| 6,979 |
|
2025 |
|
| 1.12 | % |
|
| 2,002 |
|
2026 |
|
| 2.67 | % |
|
| 4,524 |
|
2027 |
|
| 2.38 | % |
|
| 7,047 |
|
Thereafter |
|
| 2.58 | % |
|
| 64,955 |
|
Total |
|
| 2.79 | % |
| $ | 91,488 |
|
June 30, 2022 | ||||||||
Weighted Average Rate | Amount | |||||||
(dollars in thousands) | ||||||||
2022 | 1.12 | % | $ | 971 | ||||
2023 | 1.50 | % | 8,457 | |||||
2024 | 1.12 | % | 1,979 | |||||
2025 | 1.12 | % | 2,002 | |||||
2026 | 1.12 | % | 2,024 | |||||
Thereafter | 1.17 | % | 42,002 | |||||
Total | $ | 57,435 | ||||||
Actual maturities may differ from scheduled maturities due to call options on various Federal Home Loan BankFHLB advances.
The Company maintains a master contract agreement with the Federal Home Loan Bank,FHLB, which provides for borrowing up to the lesser of 22.22 times the value of the Federal Home Loan BankFHLB 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 BankFHLB provides both fixed and floating rate advances. Floating rates are tied to short-term market rates of interest such as the Secured Overnight Financing Rate ("SOFR"), federal funds or Treasury bill rates. Federal Home Loan BankFHLB advances are subject to a prepayment penalty if they are repaid prior to maturity.
Additionally, at June 30, 2022 the Company2023 we had a $15.0$15.0 million federal funds rate line of credit with the BMO Harris Bank, none of which was drawn at June 30, 2022.2023. The Company also had a $10.4an $8.9 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $13.3$11.6 million at June 30, 2022.2023. The Company had 0tnot drawn on the Federal Reserve line as of June 30, 2022.2023. We also have the ability to participate in the Federal Reserve's new Bank Term Funding Program as needed.
25
NOTE 8 – INCOME TAXES
Income tax (benefit) expense was ($133,000)273,000) and ($58,000)133,000) for the three months ended June 30, 20222023 and 2021,2022, respectively, and ($192,000)424,000) and $102,000($192,000) for the six months ended June 30, 2023 and 2022, and 2021, respectively.
Deferred tax assets are deferred tax consequences attributable to deductible temporary differences and carryforwards. After the deferred tax asset has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance. A valuation allowance is needed when, based on the weight of the available evidence, it is more likely than not that some portion of the deferred asset will not be realized. As required by generally accepted accounting principles, available evidence is weighted heavily on cumulative losses, with less weight placed on future projected profitability. The realization of deferred tax assets is dependent on the existence of taxable income of the appropriate character (e.g., ordinary or capital) within the carry-back and carry-forward periods available under tax law, which would consider future reversals of existing taxable temporary differences and available tax planning strategies. As of June 30, 2022,2023, and December 31, 2021,2022, the deferred tax valuation allowance was $934,000,$934,000, reducing our net deferred tax asset to $7.2$8.9 million and $3.8$8.3 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.
26
NOTE 9 – COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company may be involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial statements. No material legal proceedings existed at June 30, 2022.
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
ASU 2016-13 requires that we establish an allowance for credit losses for off-balance sheet credit exposures, including unfunded loan commitments, that meet certain requirements. The allowance for credit losses for off-balance sheet credit exposures is estimated by portfolio segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, also taking into consideration management’s assumption of the likelihood that funding will occur. The allowance for credit losses for off-balance sheet credit exposures is included in other liabilities on the Company’s Consolidated Balance Sheets. Additional provisions for expected losses occur through a charge to the provision for credit losses. The adoption of the ASU 2016-13 resulted in the establishment of a $665,000 allowance for credit losses for unfunded loan commitments, based on $41.1 million in outstanding loan commitments that are expected to fund. At June 30, 2023, the allowance for credit losses for unfunded commitments was $798,000 and there was $45.6 million in outstanding commitments to extend credit that were expected to fund.
The contractual amounts of
| June 30, 2023 |
| ||||||||||
| Fixed Rate |
|
| Variable Rate |
|
| Total |
| ||||
| (in thousands) |
| ||||||||||
Commitments to extend credit |
| $ | 3,424 |
|
| $ | 89,090 |
|
| $ | 92,514 |
|
Standby letters of credit |
|
| — |
|
|
| 150 |
|
|
| 150 |
|
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program |
|
| 937 |
|
|
| — |
|
|
| 937 |
|
Commitments to sell loans |
|
| 817 |
|
|
| — |
|
|
| 817 |
|
Overdraft protection program commitments |
|
| 3,809 |
|
|
| — |
|
|
| 3,809 |
|
| December 31, 2022 |
| ||||||||||
| Fixed Rate |
|
| Variable Rate |
|
| Total |
| ||||
| (in thousands) |
| ||||||||||
Commitments to extend credit |
| $ | 3,391 |
|
| $ | 80,631 |
|
| $ | 84,022 |
|
Standby letters of credit |
|
| — |
|
|
| 150 |
|
|
| 150 |
|
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program |
|
| 894 |
|
|
| — |
|
|
| 894 |
|
Commitments to sell loans |
|
| 1,292 |
|
|
| — |
|
|
| 1,292 |
|
Overdraft protection program commitments |
|
| 3,881 |
|
|
| — |
|
|
| 3,881 |
|
June 30, 2022 | ||||||||||||
Fixed Rate | Variable Rate | Total | ||||||||||
(in thousands) | ||||||||||||
Commitments to extend credit | $ | 16,740 | $ | 62,575 | $ | 79,315 | ||||||
Standby letters of credit | — | 150 | 150 | |||||||||
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program | 1,309 | — | 1,309 | |||||||||
Commitments to sell loans | 3,012 | — | 3,012 | |||||||||
Overdraft protection program commitments | 3,932 | — | 3,932 |
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 |
27
NOTE 9
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 $2.2 million ofno commitments to deliver loans through the Program as of June 30, 2022.2023. Once delivered to the Program, the Company provides a contractually agreed-upon credit enhancement and performs servicing of the loans. Under the credit enhancement, the Company is liable for losses on loans delivered through the Program after application of any mortgage insurance and a contractually agreed-upon credit enhancement provided by the Program, subject to an agreed-upon maximum. The Company receives a fee for this credit enhancement. The Company records a liability for expected losses in excess of anticipated credit enhancement fees. As of June 30, 2022,2023, and December 31, 2021,2022, 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.
28
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 connectionconjunction with the mutual holding company reorganization and organization of Old 1895 Bancorp.reorganization. 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(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 theDuringThe ESOP completed the six months ended June 30, 2022,purchase of all the ESOP purchased 96,446 additional283,360 shares at an average price of $10.95. As$10.90 in the second quarter of June 30, 2022, the ESOP had purchased 283,360 of the additional shares at an average price of $10.90.
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 following table provides the allocated and unallocated shares of common stock associated with the ESOP.
| June 30, |
|
| December 31, |
| |||
| (dollars in thousands) |
| ||||||
Shares committed to be released |
|
| 9,782 |
|
|
| 19,730 |
|
Total allocated shares |
|
| 55,900 |
|
|
| 36,170 |
|
Total unallocated shares |
|
| 444,010 |
|
|
| 453,792 |
|
Total ESOP shares |
|
| 509,692 |
|
|
| 509,692 |
|
Fair value of unallocated shares (based on $7.51 and $10.00 share |
| $ | 3,335 |
|
| $ | 4,538 |
|
29
June 30, 2022 | December 31, 2021 | |||||||
(dollars in thousands) | ||||||||
Shares committed to be released | 9,865 | 22,401 | ||||||
Total allocated shares | 37,640 | 15,239 | ||||||
Total unallocated shares | 463,658 | 377,077 | ||||||
Total ESOP shares | 511,163 | 414,717 | ||||||
Fair value of unallocated shares (based on $10.25 and $10.99 share price as of June 30, 2022 and December 31, 2021, respectively) | $ | 4,752 | $ | 4,144 | ||||
NOTE 11 – RELATED PARTY TRANSACTIONS
A summary of loans to directors, executive officers, and their affiliates follows:
| June 30, |
|
| December 31, 2022 |
| |||
| (in thousands) |
| ||||||
Beginning balance |
| $ | 1,015 |
|
| $ | 932 |
|
Adjustments due to changes in directors, executive officers, and/or principal |
|
| — |
|
|
| — |
|
New loans |
|
| 218 |
|
|
| 169 |
|
Repayments |
|
| (37 | ) |
|
| (86 | ) |
Ending balance |
| $ | 1,196 |
|
| $ | 1,015 |
|
June 30, 2022 | December 31, 2021 | |||||||
(in thousands) | ||||||||
Beginning balance | $ | 932 | $ | 1,034 | ||||
Adjustments due to changes in directors, executive officers, and/or principal stockholders | — | 202 | ||||||
New loans | 4 | 53 | ||||||
Repayments | (56 | ) | (357 | ) | ||||
Ending balance | $ | 880 | $ | 932 | ||||
Deposits from directors, executive officers, and their affiliates totaled $1.1 million$672,000 and $583,000 at June 30, 20222023 and December 31, 2021,2022, 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 immaterial for the three and six months ended June 30, 2023 and 2022, and 2021, respectively.
NOTE 12 – FAIR VALUE MEASUREMENTS
ASC Topic 820,
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 securitiesimpairedcollateral dependent loans, may be measured at fair value on a nonrecurring basis.
30
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
Collateral dependent loans
Rate lock commitments
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 |
| |||||||||||
| June 30, |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||
| (in thousands) |
| ||||||||||||||
Marketable equity securities |
| $ | 3,416 |
|
| $ | 3,416 |
|
| $ | — |
|
| $ | — |
|
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury notes |
|
| 26,726 |
|
|
| — |
|
|
| 26,726 |
|
|
| — |
|
Obligations of states and political subdivisions |
|
| 16,537 |
|
|
| — |
|
|
| 16,537 |
|
|
| — |
|
Government-sponsored mortgage-backed securities |
|
| 59,465 |
|
|
| — |
|
|
| 59,465 |
|
|
| — |
|
Asset-backed securities |
|
| 3,942 |
|
|
| — |
|
|
| 3,942 |
|
|
| — |
|
Certificates of deposit |
|
| 961 |
|
|
| — |
|
|
| 961 |
|
|
| — |
|
Total |
| $ | 111,047 |
|
| $ | 3,416 |
|
| $ | 107,631 |
|
| $ | — |
|
31
NOTE 12 – FAIR VALUE MEASUREMENTS (continued)
|
|
|
| Recurring Fair Value Measurements Using |
| |||||||||||
| December 31, |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||
| (in thousands) |
| ||||||||||||||
Marketable equity securities |
| $ | 2,924 |
|
| $ | 2,924 |
|
| $ | — |
|
| $ | — |
|
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury notes |
|
| 26,627 |
|
|
| — |
|
|
| 26,627 |
|
|
| — |
|
Obligations of states and political subdivisions |
|
| 17,656 |
|
|
| — |
|
|
| 17,656 |
|
|
| — |
|
Government-sponsored mortgage-backed securities |
|
| 64,267 |
|
|
| — |
|
|
| 64,267 |
|
|
| — |
|
Asset-backed securities |
|
| 4,517 |
|
|
| — |
|
|
| 4,517 |
|
|
| — |
|
Certificates of deposit |
|
| 1,425 |
|
|
| — |
|
|
| 1,425 |
|
|
| — |
|
Total |
| $ | 117,416 |
|
| $ | 2,924 |
|
| $ | 114,492 |
|
| $ | — |
|
Recurring Fair Value Measurements Using | ||||||||||||||||
June 30, 2022 | Level 1 | Level 2 | Level 3 | |||||||||||||
(in thousands) | ||||||||||||||||
Marketable equity securities | $ | 2,867 | $ | 2,867 | $ | — | $ | — | ||||||||
Securities available-for-sale: | ||||||||||||||||
U.S. Treasury notes | 27,328 | — | 27,328 | — | ||||||||||||
Obligations of states and political subdivisions | 18,546 | — | 18,546 | — | ||||||||||||
Government-sponsored mortgage-backed securities | 73,701 | — | 73,701 | — | ||||||||||||
Asset-backed securities | 5,652 | — | 5,652 | — | ||||||||||||
Certificates of deposit | 1,449 | — | 1,449 | — | ||||||||||||
Total | $ | 129,543 | $ | 2,867 | $ | 126,676 | $ | — | ||||||||
Recurring Fair Value Measurements Using | ||||||||||||||||
December 31, 2021 | 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 | $ | — | ||||||||
Individually evaluated collateral dependent loans are measured at fair value on a0no individually evaluated collateral dependent loans that were considered impaired with a specific valuation allowance as of June 30, 20222023 and December 31, 2021.
Mortgage servicing rights are measured at fair value on a0impairmentno impairment on mortgage servicing rights as of June 30, 20222023 and December 31, 2021.
The carrying values and estimated fair values of financial instruments are presented below:
| June 30, 2023 |
| ||||||||||||||
| Carrying Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||
| (in thousands) |
| ||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 22,795 |
|
| $ | 22,795 |
|
| $ | — |
|
| $ | — |
|
Available-for-sale securities |
|
| 107,631 |
|
|
| — |
|
|
| 107,631 |
|
|
| — |
|
Marketable equity securities |
|
| 3,416 |
|
|
| 3,416 |
|
|
| — |
|
|
| — |
|
Loans, net |
|
| 380,516 |
|
|
| — |
|
|
| — |
|
|
| 354,272 |
|
Rate lock commitments |
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
Accrued interest receivable |
|
| 1,266 |
|
|
| 1,266 |
|
|
| — |
|
|
| — |
|
Federal Home Loan Bank Stock |
|
| 4,870 |
|
|
| — |
|
|
| — |
|
|
| 4,870 |
|
Cash value of life insurance |
|
| 13,813 |
|
|
| — |
|
|
| — |
|
|
| 13,813 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Deposits |
|
| 371,190 |
|
|
| 252,285 |
|
|
| — |
|
|
| 117,062 |
|
Advance payments by borrowers for taxes and insurance |
|
| 8,141 |
|
|
| 8,141 |
|
|
| — |
|
|
| — |
|
Federal Home Loan Bank advances |
|
| 91,488 |
|
|
| — |
|
|
| — |
|
|
| 87,303 |
|
Accrued interest payable |
|
| 698 |
|
|
| 698 |
|
|
| — |
|
|
| — |
|
32
NOTE 12 – FAIR VALUE MEASUREMENTS (continued)
| December 31, 2022 |
| ||||||||||||||
| Carrying Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||
| (in thousands) |
| ||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 28,344 |
|
| $ | 28,344 |
|
| $ | — |
|
| $ | — |
|
Available-for-sale securities |
|
| 114,492 |
|
|
| — |
|
|
| 114,492 |
|
|
| — |
|
Marketable equity securities |
|
| 2,924 |
|
|
| 2,924 |
|
|
| — |
|
|
| — |
|
Loans held for sale |
|
| 125 |
|
|
| — |
|
|
| 125 |
|
|
| — |
|
Loans, net |
|
| 359,574 |
|
|
| — |
|
|
| — |
|
|
| 335,987 |
|
Rate lock commitments |
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
Accrued interest receivable |
|
| 1,257 |
|
|
| 1,257 |
|
|
| — |
|
|
| — |
|
Federal Home Loan Bank Stock |
|
| 3,429 |
|
|
| — |
|
|
| — |
|
|
| 3,429 |
|
Cash value of life insurance |
|
| 14,316 |
|
|
| — |
|
|
| — |
|
|
| 14,316 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Deposits |
|
| 387,721 |
|
|
| 308,162 |
|
|
| — |
|
|
| 78,418 |
|
Advance payments by borrowers for taxes and insurance |
|
| 1,029 |
|
|
| 1,029 |
|
|
| — |
|
|
| — |
|
Federal Home Loan Bank advances |
|
| 71,464 |
|
|
| — |
|
|
| — |
|
|
| 69,633 |
|
Accrued interest payable |
|
| 291 |
|
|
| 291 |
|
|
| — |
|
|
| — |
|
June 30, 2022 | ||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | |||||||||||||
(in thousands) | ||||||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents | $ | 20,221 | $ | 20,221 | $ | — | $ | — | ||||||||
Available-for-sale | 126,676 | — | 126,676 | — | ||||||||||||
Marketable equity securities | 2,867 | 2,867 | — | — | ||||||||||||
Loans held for sale | 262 | — | 262 | — | ||||||||||||
Loans | 349,619 | — | — | 331,153 | ||||||||||||
Rate lock commitments | 17 | — | — | 17 | ||||||||||||
Accrued interest receivable | 1,027 | 1,027 | — | — | ||||||||||||
Federal Home Loan Bank stock | 3,032 | — | — | 3,032 | ||||||||||||
Cash value of life insurance | 14,101 | — | — | 14,101 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Deposits | 383,062 | 300,347 | — | 81,348 | ||||||||||||
Advance payments by borrowers for taxes and insurance | 7,739 | 7,739 | — | — | ||||||||||||
Federal Home Loan Bank advances | 57,435 | — | — | 54,130 | ||||||||||||
Accrued interest payable | 128 | 128 | — | — |
December 31, 2021 | ||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | |||||||||||||
(in thousands) | ||||||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents | $ | 66,803 | $ | 66,803 | $ | — | $ | — | ||||||||
Available-for-sale | 112,440 | — | 112,440 | — | ||||||||||||
Marketable equity securities | 3,544 | 3,544 | — | — | ||||||||||||
Loans held for sale | 1,183 | — | 1,183 | — | ||||||||||||
Loans | 323,789 | — | — | 323,182 | ||||||||||||
Rate lock commitments | 30 | — | — | 30 | ||||||||||||
Accrued interest receivable | 948 | 948 | — | — | ||||||||||||
Federal Home Loan Bank Stock | 3,032 | — | — | 3,032 | ||||||||||||
Cash value of life insurance | 13,892 | — | — | 13,892 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Deposits | 384,501 | 303,908 | — | 80,473 | ||||||||||||
Advance payments by borrowers for taxes and insurance | 1,860 | 1,860 | — | — | ||||||||||||
Federal Home Loan Bank advances | 55,442 | — | — | 55,981 | ||||||||||||
Accrued interest payable | 109 | 109 | — | — |
The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based on quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters that could affect the estimates. Fair value estimates are based on existing
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 assetsasset 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.
33
NOTE 13 – EQUITY AND REGULATORY MATTERS
PyraMax Bank is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, PyraMaxthe Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain$3$3 billion.
Quantitative measures established by regulation to ensure capital adequacy require PyraMaxthe 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. PyraMaxThe Bank met all applicable capital adequacy requirements as of June 30, 20222023 and December 31, 2021, respectively.
As of June 30, 2022, and December 31, 2021, PyraMax2023, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, PyraMaxthe Bank must maintain minimum regulatory capital ratios as set forth in the table below. PyraMaxThere are no conditions or events since June 30, 2023 that management believes have changed the capital category of the Bank.
The Bank’s actual and required capital amounts and ratios are presented below:
| June 30, 2023 |
| ||||||||||||||||||||||
| Actual |
|
| For Capital Adequacy Purposes |
|
| To Be Well Capitalized Under Prompt Corrective Action Provisions |
| ||||||||||||||||
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
| |||||||
| (dollars in thousands) |
| ||||||||||||||||||||||
PyraMax Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Leverage (Tier 1) |
| $ | 64,508 |
|
|
| 11.7 | % |
| $ | 22,010 |
|
|
| 4.0 | % |
| $ | 27,513 |
|
|
| 5.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Risk-based: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Common Equity Tier 1 |
|
| 64,508 |
|
|
| 15.7 | % |
|
| 18,515 |
|
|
| 4.5 | % |
|
| 26,744 |
|
|
| 6.5 | % |
Tier 1 |
|
| 64,508 |
|
|
| 15.7 | % |
|
| 24,687 |
|
|
| 6.0 | % |
|
| 32,916 |
|
|
| 8.0 | % |
Total |
|
| 68,949 |
|
|
| 16.8 | % |
|
| 32,916 |
|
|
| 8.0 | % |
|
| 41,145 |
|
|
| 10.0 | % |
| December 31, 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) |
| $ | 65,497 |
|
|
| 11.9 | % |
| $ | 22,086 |
|
|
| 4.0 | % |
| $ | 27,608 |
|
|
| 5.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Risk-based: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Common Equity Tier 1 |
|
| 65,497 |
|
|
| 16.6 | % |
|
| 17,711 |
|
|
| 4.5 | % |
|
| 25,583 |
|
|
| 6.5 | % |
Tier 1 |
|
| 65,497 |
|
|
| 16.6 | % |
|
| 23,615 |
|
|
| 6.0 | % |
|
| 31,486 |
|
|
| 8.0 | % |
Total |
|
| 68,700 |
|
|
| 17.5 | % |
|
| 31,486 |
|
|
| 8.0 | % |
|
| 39,358 |
|
|
| 10.0 | % |
June 30, 2022 | ||||||||||||||||||||||||
Actual | For Capital Adequacy Purposes | To Be Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
PyraMax Bank | ||||||||||||||||||||||||
Leverage (Tier 1) | $ | 64,385 | 11.8 | % | $ | 21,897 | 4.0 | % | $ | 27,371 | 5.0 | % | ||||||||||||
Risk-based: | ||||||||||||||||||||||||
Common Equity Tier 1 | 64,385 | 17.0 | % | 17,017 | 4.5 | % | 24,579 | 6.5 | % | |||||||||||||||
Tier 1 | 64,385 | 17.0 | % | 22,689 | 6.0 | % | 30,252 | 8.0 | % | |||||||||||||||
Total | 67,516 | 17.9 | % | 30,252 | 8.0 | % | 37,814 | 10.0 | % |
December 31, 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. On August 26, 2022, the Company received a non-objection letter from the Federal Reserve Bank of Contents
On April 28, 2023, the Company adopted a second stock repurchase program. On June 9, 2023, the Company received a non-objection letter from the Federal Reserve Bank of Chicago ("FRB"), permitting the Company to repurchase 621,522 shares of its common stock, which represented 10% of the shares outstanding at the time discussions were held with the FRB. The Company began purchasing shares on June 15, 2023 and as of June 30, 2023, the Company had repurchased 4,455 shares for a total purchase price of $34,000.
34
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 includenon-vestedrestricted stock awards and restricted stock units, though no actual shares of common stock related to restricted stock units are issued until the settlement of such units, to the extent holders of these securities receivenon-forfeitabledividends or dividend equivalents at the same rate as holders of the Company’s common stock.period. Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. Antidilutive options are disregarded in earnings per share calculations. For the three and six months ended June 30, 2022, 169,1672023, 130,155 and 179,938 average11,314 shares, respectively were excluded, based on average share price, from the computation of diluted EPS because the effect would be antidilutive. For the three and six months ended June 30, 2021, 149,0202022, 169,167 and 11,436 (196,155 and 15,053179,938 average shares, adjusted for conversion) average sharesrespectively, were excluded from the computation of diluted EPS because the effect would be antidilutive.
Earnings (loss) per common share for the three and six months ended June 30, 20222023 and 20212022 are presented in the following table.tables.
| Three months ended June 30, | ||||||||
| 2023 |
|
| 2022 |
|
| |||
| (In thousands, except per share amounts) | ||||||||
|
|
|
|
|
|
|
| ||
Net (loss) |
| $ | (508 | ) |
| $ | (241 | ) |
|
|
|
|
|
|
|
|
| ||
Weighted shares outstanding for basic EPS |
|
|
|
|
|
|
| ||
Weighted average shares outstanding |
|
| 5,991,777 |
|
|
| 6,289,572 |
|
|
Less: Weighted average unallocated ESOP shares |
|
| 446,442 |
|
|
| 446,468 |
|
|
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding for basic EPS |
|
| 5,545,335 |
|
|
| 5,843,104 |
|
|
Additional dilutive shares(1) |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding for dilutive EPS |
|
| 5,545,335 |
|
|
| 5,843,104 |
|
|
|
|
|
|
|
|
|
| ||
Basic (loss) per share |
| $ | (0.09 | ) |
| $ | (0.04 | ) |
|
Diluted (loss) per share(1) |
| $ | (0.09 | ) |
| $ | (0.04 | ) |
|
| Six months ended June 30, | ||||||||
| 2023 |
|
| 2022 |
|
| |||
| (In thousands, except per share amounts) | ||||||||
|
|
|
|
|
|
|
| ||
Net (loss) income |
| $ | (869 | ) |
| $ | (296 | ) |
|
|
|
|
|
|
|
|
| ||
Weighted shares outstanding for basic EPS |
|
|
|
|
|
|
| ||
Weighted average shares outstanding |
|
| 5,997,436 |
|
|
| 6,282,749 |
|
|
Less: Weighted average unallocated ESOP shares |
|
| 448,874 |
|
|
| 424,300 |
|
|
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding for basic EPS |
|
| 5,548,562 |
|
|
| 5,858,449 |
|
|
Additional dilutive shares (1) |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding for dilutive EPS |
|
| 5,548,562 |
|
|
| 5,858,449 |
|
|
|
|
|
|
|
|
|
| ||
Basic (loss) income per share |
| $ | (0.16 | ) |
| $ | (0.05 | ) |
|
Diluted (loss) income per share (1) |
| $ | (0.16 | ) |
| $ | (0.05 | ) |
|
(1) For the three and six months ended June 30, 2023 and June 30, 2022, the effect of stock options was anti-dilutive due to the net loss and therefore no dilutive shares are included in the weighted average shares outstanding or diluted loss calculations.
35
Three months ended June 30, | ||||||||||||
2022 | 2021 (1) | 2021 (2) | ||||||||||
(In thousands, except per share amounts) | ||||||||||||
Net (loss) income | $ | (241 | ) | $ | (51 | ) | $ | (51 | ) | |||
Weighted shares outstanding for basic EPS | ||||||||||||
Weighted average shares outstanding | 6,289 | 4,759 | 6,264 | |||||||||
Less: Weighted average unallocated ESOP shares | 446 | 159 | 209 | |||||||||
Weighted average shares outstanding for basic EPS | 5,843 | 4,600 | 6,065 | |||||||||
Additional dilutive shares | — | — | — | |||||||||
Weighted average shares outstanding for dilutive EPS | 5,843 | 4,600 | 6,065 | |||||||||
Basic (loss) income per share | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.01 | ) | |||
Diluted (loss) income per share | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.01 | ) | |||
Six months ended June 30, | ||||||||||||
2022 | 2021 (1) | 2021 (2) | ||||||||||
(In thousands, except per share amounts) | ||||||||||||
Net (loss) income | $ | (296 | ) | $ | 470 | $ | 470 | |||||
Weighted shares outstanding for basic EPS | ||||||||||||
Weighted average shares outstanding | 6,282 | 4,754 | 6,247 | |||||||||
Less: Weighted average unallocated ESOP shares | 424 | 160 | 210 | |||||||||
Weighted average shares outstanding for basic EPS | 5,858 | 4,594 | 6,047 | |||||||||
Additional dilutive shares | — | 62 | 81 | |||||||||
Weighted average shares outstanding for dilutive EPS | 5,858 | 4,656 | 6,128 | |||||||||
Basic (loss) income per share | $ | (0.05 | ) | $ | 0.10 | $ | 0.08 | |||||
Diluted (loss) income per share | $ | (0.05 | ) | $ | 0.10 | $ | 0.08 | |||||
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 (313,894 stock options adjusted for the conversion) stock options and 95,387 (125,557 (125,557 shares adjusted for the conversion) restricted shares were approved for award. As of June 30, 2023, 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 shareholders 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. As of June 30, 2023, 44,455 shares of common stock remain available for grant as stock options and 21,382 shares remain available for grant as restricted stock or stock units under the 2022 Equity Incentive Plan. The stock options granted to employees and non-employee directors under this plan vest in five installments with the first installment vesting on the first anniversary of the date of grant. The exercise price for all stock options granted is equal to the quoted NASDAQ market close price on the date that the awards were granted and expire ten years after the grant date, if not exercised. The restricted stock awards granted to employees and non-employee directors under this plan vest in five installments with the first installment vesting on the first anniversary of the date of grant.
Accounting for Stock-Based Compensation Plan
The fair value of stock options granted is estimated on the grant date using a Black-Scholes pricing model. The fair value of restricted shares is equal to the quoted NASDAQ market closing price on the date of grant. The fair value of stock grants is recognized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense is included in salaries and employee benefits in the consolidated statements of operations. The following assumptions were used in estimating the fair value of options granted during the six months ended June 30, 2022 and June 30, 2021:
For the Six Months Ended | ||||||||
June 30, 2022 | June 30, 2021 | |||||||
Dividend yield | 0.00 | % | 0.00 | % | ||||
Risk-free interest rate | 3.06 | % | 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 | $ | 2.76 |
Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock options represent the period of time that the options are expected to be outstanding and is based on the historical results from the previous awards. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the actual volatility of 1895 Bancorp of Wisconsin, Inc. stock for the weighted average life time period prior to issuance date.
| For the Six Months Ended |
| ||||||
| June 30, |
|
| June 30, |
| |||
|
|
|
|
|
|
| ||
Dividend yield |
|
| 0.00 | % |
|
| 0.00 | % |
Risk-free interest rate |
|
| 3.59 | % |
|
| 3.06 | % |
Expected volatility |
|
| 24.64 | % |
|
| 24.64 | % |
Weighted average expected life (years) |
|
| 6.5 |
|
|
| 6.5 |
|
Weighted average per share value of options |
| $ | 3.37 |
|
| $ | 3.25 |
|
36
NOTE 15 – STOCK BASED COMPENSATION (continued)
A summary of the Company’s stock option activity for the six months ended June 30, 20222023 is presented below.
Stock Options |
| Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining in Contractual Term (Years) |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding December 31, 2022 |
| 656,130 |
|
| $ | 8.27 |
|
|
| 8.69 |
|
| $ | 1,122,214 |
| |
Granted |
| 3,000 |
|
|
| 9.94 |
|
|
| 6.50 |
|
|
| — |
| |
Exercised |
|
| — |
|
|
| — |
|
| N/A |
|
| N/A |
| ||
Forfeited |
| 43,489 |
|
|
| 8.70 |
|
| N/A |
|
| N/A |
| |||
Outstanding June 30, 2023 |
|
| 615,641 |
|
|
| 8.24 |
|
| 8.02 |
|
| 379,761 |
| ||
Options exercisable at June 30, 2023 |
| 174,786 |
|
|
| 6.21 |
|
| 6.37 |
|
| 237,372 |
|
Stock Options | Shares | Weighted Average Exercise Price | Weighted Average Remaining in Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||||||
Outstanding December 31, 2021 | 300,720 | $ | 6.19 | 8.40 | $ | 1,443,067 | ||||||||||
Granted | 18,955 | 10.00 | 6.50 | — | ||||||||||||
Exercised | — | — | — | — | ||||||||||||
Forfeited | — | — | — | — | ||||||||||||
Outstanding June 30, 2022 | 319,675 | 6.42 | 8.03 | $ | 1,209,321 | |||||||||||
Options exercisable at June 30, 2022 | 112,824 | 6.09 | 7.86 | $ | 463,999 | |||||||||||
The following table summarizes information about the Company’s nonvested stock option activity for the six months ended June 30, 2022:2023:
Stock Options |
| Shares |
|
| Weighted Average Grant Date Fair Value |
| ||
Nonvested at December 31, 2022 |
|
| 543,306 |
|
| $ | 2.82 |
|
Granted |
| 3,000 |
|
|
| 3.37 |
| |
Vested(1) |
|
| (61,962 | ) |
|
| 1.67 |
|
Forfeited |
|
| (43,489 | ) |
|
| 8.70 |
|
Nonvested at June 30, 2023 |
|
| 440,855 |
|
|
| 2.99 |
|
Stock Options | Shares | Weighted Average Grant Date Fair Value | ||||||
Nonvested at December 31, 2021 | 248,043 | $ | 1.58 | |||||
Granted | 18,955 | 3.25 | ||||||
Vested (1) | (60,147 | ) | 1.56 | |||||
Forfeited | — | — | ||||||
Nonvested at June 30, 2022 | 206,851 | $ | 1.74 | |||||
The Company amortizes the expense related to stock options as compensation expense over the vesting period. The Company recognized $24,000$65,000 and $26,000$24,000 in stock option expense during the three months ended June 30, 2023 and 2022, respectively and 2021. Additionally, the Company recognized $47,000$149,000 and $48,000$47,000 in stock option expense during the six months ended June 30, 2023 and 2022, and 2021, respectively.
At June 30, 2022,2023, the Company had $337,000$1.1 million in estimated unrecognized compensation costs related to outstanding stock options that is expected to be recognized over a weighted average period of 3.334.0 years.
The following table summarizes information about the Company’s restricted stock activity for the six months ended June 30, 2022:2023:
Restricted Stock |
| Shares |
|
| Weighted Average Grant Date Fair Value |
| ||
Nonvested at December 31, 2022 |
|
| 211,349 |
|
| $ | 8.71 |
|
Granted |
|
| — |
|
|
| — |
|
Vested(1)(2) |
|
| (24,606 | ) |
|
| 6.43 |
|
Forfeited |
|
| (13,910 | ) |
|
| 8.86 |
|
Nonvested at June 30, 2023 |
|
| 172,833 |
|
| $ | 9.02 |
|
Restricted Stock | Shares | Weighted Average Grant Date Fair Value | ||||||
Nonvested at December 31, 2021 | 97,128 | $ | 6.25 | |||||
Granted | 7,371 | 10.00 | ||||||
Vested (1)(2) | (23,532 | ) | 6.20 | |||||
Forfeited | — | — | ||||||
Nonvested at June 30, 2022 | 80,967 | $ | 6.60 | |||||
The Company amortizes the expense related to restricted stock awards as compensation expense over the vesting period. The Company recognized $36,000$84,000 and $39,000$36,000 in restricted stock expense during the three months ended June 30, 2023 and 2022, respectively and 2021, respectively. Additionally, the Company recognized $72,000$188,000 and $75,000$72,000 in restricted stock shares expense during the six months ended June 30, 20222023 and 2021,2022, respectively. At June 30, 2022,2023, the Company had $500,000$1.4 million of unrecognized compensation expense related to restricted stock shares that is expected to be recognized over a weighted average period of 3.263.8 years.
37
(in thousands) | ||||
2022 | $ | 43 | ||
2023 | 87 | |||
2024 | 89 | |||
2025 | 91 | |||
2026 | 93 | |||
Thereafter | 112 | |||
Amounts representing interest | (25 | ) | ||
Total | $ | 490 | ||
General
Management’s discussion and analysis of financial condition and results of operations at June 30, 20222023 and for the three and six months ended June 30, 20222023 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:
38
Because of these impacts as of the date of this filing, we are disclosing potentially material items of which we are aware.
Critical Accounting Policies
As a result of the complex and dynamic nature of the Company’s business, management must exercise judgment in selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with the current accounting principles generally accepted in the United States of America (“GAAP”), but also reflects management’s discretion with regard to choosing the most suitable methodology for reporting the Company’s financial performance. It is management’s opinion that the accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates affect the reported amounts of assets and liabilities as well as disclosures of revenues and expenses during the reporting period. Actual results could meaningfully differ from these estimates. Management believes that the critical accounting estimates include the allowance for loancredit losses, determination of fair value for financial instruments, and valuation of deferred income taxes.
A summary of the accounting policies used by management is disclosed in Note 1, “Summary of Significant Accounting Policies” in the Company's most recent Form(fiscal (fiscal year ended December 31, 2021)2022) filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022.
On January 1, 2023 we adopted ASU 2016-13, Financial Instruments - Credit Losses. This guidance replaced the incurred loss methodology, which was used to calculate the allowance for loan losses as described in the Consolidated Financial Statements in our 2022 Annual Report on Form 10-K, with an expected lifetime loss methodology, as described in Note 2 to the Consolidated Financial Statements.
During 2023, we did not substantively change any material aspect of our overall methodologies and processes used in developing the remaining critical accounting estimates from those described in the Consolidated Financial Statements in our 2022 Annual Report on Form 10-K, other than those related to the adoption of ASU 2016-13.
Comparison of Financial Condition at June 30, 20222023 and December 31, 2021
Total Assets.
Cash and Cash Equivalents. Cash and cash equivalents decreased $5.5 million, or 19.4%, to $22.8 million at June 30, 2023 from $28.3 million at December 31, 2022. This decrease was primarily due to $79.5 million in principal payments on FHLB advances, a $46.6$16.5 million decrease in cash and cash equivalents, partially offset bydeposits, a $25.8$21.4 million net increase in loans held for investment, a $14.2 million increase inavailable-for-saleinvestment securities and a $4.1 million increase in other assets.
39
available-for-sale securities, a $7.1 million net increase in advance $14.9payments by borrowers for taxes and insurance and $4.2 million from the sale of mortgage loans held for sale, $10.9 million from maturities, prepayments and calls ofavailable-for-sale
Available-for-Sale Securities. Available-for-sale securities and a $5.9 million increase in advance payments by borrowers for taxes and insurance.
Loans Held for Sale.
Loans.
Allowance for Credit Losses. On January 1, 2023, the Company adopted ASU 2016-13 which replaced the incurred loss methodology, which was previously used to calculate the allowance for loan losses, with an expected lifetime loss methodology ("CECL"), as described in Note 2 to the Consolidated Financial Statements. The adoption of ASU 2016-13 resulted in an initial increase of $412,000 to the allowance for credit losses for loans ("ACL for loans") and the establishment of a $665,000 allowance for credit losses for unfunded loan commitments ("ACL for unfunded loan commitments"). The ACL for loans is included as a separate line item on the Company's Consolidated Balance Sheets and the ACL for unfunded loan commitments is included in other liabilities. The total allowance for credit losses was $4.4 million at June 30, 2023.
The ACL for loans was $3.6 million, or 66.9%0.95%, of loans, net of deferred costs, at June 30, 2023 compared to an allowance for loan losses of $3.2 million, or 0.88% of loans, net of deferred costs, at December 31, 2022. The increase in the ACL for loans was primarily the result of the $412,000 increase related to the adoption of ASU 2016-13, a $17,000 provision for credit losses and $10,000 in net recoveries. The ACL for unfunded loan commitments was $798,000 at June 30, 2023. The increase in the ACL for unfunded loan commitments was primarily the result of the $665,000 increase related to the adoption of ASU 2016-13 and a $133,000 provision for credit losses. Nonaccrual loans represented 0.19% of total loans at June 30, 2023, compared to 0.21% of total loans at December 31, 2022. Net recoveries for the six months ended June 30, 2023 were $10,000 compared to net recoveries of $64,000 for the six months ended June 30, 2022.
FHLB Stock. FHLB stock increased $1.5 million, or 44.1%, from $6.1$3.4 million at December 31, 20212022 to $10.2$4.9 million at June 30, 2022.2023. This increase was primarily due to a $3.4 millionthe net increase in deferred tax assets, which was primarilyFHLB advances and the result of the increase in unrealized losses on available for sale securities. Other assets also increased as a result of a $490,000 increase in right of use lease assetsrequirement by FHLB to hold additional stock as a result of the adoptionincreased level of ASU2016-02in the first quarter of 2022, and a $312,000 increase in prepaid expenses, which was primarily due to the payment of annual insurance premiums in the first quarter of 2022.
Deposits.
Advance Payments by Borrowers for Taxes and Insurance.
40
FHLB Advances. FHLB advances increased $2.0$20.0 million, or 3.6%28.0%, to $57.4$91.5 million at June 30, 2022,2023, from $55.4$71.5 million at December 31, 2021.2022. The increase in FHLB advances was dueprimarily used to an advance of $10.0 million borrowed duringpartially fund outgoing cash flows from the quarter ended June 30, 2022, partially offset by maturitiesdecrease in deposits and principal repayments on existing advances of $8.0 million.
Total Stockholders’ Equity.
Average Balances and Yields
The following table presentstables present 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.costs for the three and six months ended June 30, 2023 and 2022. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Nonaccrual loans are included in average balances only. Loan fees are included in interest income on loans and are not material.
| Three Months Ended June 30, |
| ||||||||||||||||||||||
| 2023 |
|
| 2022 |
| |||||||||||||||||||
| Average |
|
| Interest and |
|
| Yield/Cost |
|
| Average |
|
| Interest and |
|
| Yield/Cost |
| |||||||
| (Dollars in thousands) |
| ||||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans(1) |
| $ | 378,797 |
|
| $ | 4,238 |
|
|
| 4.49 | % |
| $ | 339,448 |
|
| $ | 3,009 |
|
|
| 3.56 | % |
Securities available-for-sale |
|
| 110,718 |
|
|
| 588 |
|
|
| 2.13 | % |
|
| 128,204 |
|
|
| 566 |
|
|
| 1.77 | % |
Other interest-earning assets |
|
| 12,427 |
|
|
| 191 |
|
|
| 6.18 | % |
|
| 36,623 |
|
|
| 92 |
|
|
| 1.00 | % |
Total interest-earning |
|
| 501,942 |
|
|
| 5,017 |
|
|
| 4.01 | % |
|
| 504,275 |
|
|
| 3,667 |
|
|
| 2.92 | % |
Non-interest-earning assets |
|
| 36,636 |
|
|
|
|
|
|
|
|
| 35,778 |
|
|
|
|
|
|
| ||||
Total assets |
| $ | 538,578 |
|
|
|
|
|
|
|
| $ | 540,053 |
|
|
|
|
|
|
| ||||
Interest-earning liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
NOW accounts |
| $ | 31,370 |
|
| $ | 59 |
|
|
| 0.76 | % |
| $ | 36,367 |
|
| $ | 9 |
|
|
| 0.10 | % |
Money market accounts |
|
| 102,230 |
|
|
| 530 |
|
|
| 2.08 | % |
|
| 96,782 |
|
|
| 73 |
|
|
| 0.30 | % |
Savings accounts |
|
| 53,323 |
|
|
| 7 |
|
|
| 0.05 | % |
|
| 67,690 |
|
|
| 8 |
|
|
| 0.05 | % |
Certificates of deposit |
|
| 96,829 |
|
|
| 700 |
|
|
| 2.90 | % |
|
| 84,240 |
|
|
| 97 |
|
|
| 0.46 | % |
Total interest-bearing deposits |
|
| 283,752 |
|
|
| 1,296 |
|
|
| 1.83 | % |
|
| 285,079 |
|
|
| 187 |
|
|
| 0.26 | % |
Federal Home Loan Bank advances |
|
| 90,974 |
|
|
| 654 |
|
|
| 2.88 | % |
|
| 57,802 |
|
|
| 181 |
|
|
| 1.25 | % |
Other interest-bearing liabilities |
|
| 6,872 |
|
|
| 1 |
|
|
| 0.08 | % |
|
| 7,314 |
|
|
| 2 |
|
|
| 0.12 | % |
Total interest-bearing |
|
| 381,598 |
|
|
| 1,951 |
|
|
| 2.05 | % |
|
| 350,195 |
|
|
| 370 |
|
|
| 0.42 | % |
Non-interest-bearing deposits |
|
| 77,138 |
|
|
|
|
|
|
|
|
| 103,148 |
|
|
|
|
|
|
| ||||
Other non-interest-bearing liabilities |
|
| 7,550 |
|
|
|
|
|
|
|
|
| 6,493 |
|
|
|
|
|
|
| ||||
Total liabilities |
|
| 466,286 |
|
|
|
|
|
|
|
|
| 459,836 |
|
|
|
|
|
|
| ||||
Total stockholders’ equity |
|
| 72,292 |
|
|
|
|
|
|
|
|
| 80,217 |
|
|
|
|
|
|
| ||||
Total liabilities and |
| $ | 538,578 |
|
|
|
|
|
|
|
| $ | 540,053 |
|
|
|
|
|
|
| ||||
Net interest income |
|
|
|
| $ | 3,066 |
|
|
|
|
|
|
|
| $ | 3,297 |
|
|
|
| ||||
Net interest-earning assets |
| $ | 120,344 |
|
|
|
|
|
|
|
| $ | 154,080 |
|
|
|
|
|
|
| ||||
Interest rate spread(2) |
|
|
|
|
|
|
|
| 1.96 | % |
|
|
|
|
|
|
|
| 2.50 | % | ||||
Net interest margin(3) |
|
|
|
|
|
|
|
| 2.45 | % |
|
|
|
|
|
|
|
| 2.62 | % | ||||
Average interest-earning assets to |
|
| 131.54 | % |
|
|
|
|
|
|
|
| 144.00 | % |
|
|
|
|
|
|
Three Months Ended June 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Average Outstanding Balance | Interest and Dividends | Yield/Cost Rate | Average Outstanding Balance | Interest and Dividends | Yield/Cost Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans (1) | $ | 339,448 | $ | 3,009 | 3.59 | % | $ | 336,634 | $ | 3,125 | 3.76 | % | ||||||||||||
Securities available-for-sale | 128,204 | 566 | 1.79 | % | 79,527 | 335 | 1.71 | % | ||||||||||||||||
Other interest-earning assets | 36,623 | 92 | 1.02 | % | 76,263 | 51 | 0.27 | % | ||||||||||||||||
Total interest-earning assets | 504,275 | 3,667 | 2.95 | % | 492,424 | 3,511 | 2.89 | % | ||||||||||||||||
Non-interest-earning assets | 35,778 | 34,658 | ||||||||||||||||||||||
Total assets | $ | 540,053 | $ | 527,082 | ||||||||||||||||||||
Interest-earning liabilities: | ||||||||||||||||||||||||
NOW accounts | $ | 36,367 | $ | 9 | 0.10 | % | $ | 33,596 | $ | 10 | 0.12 | % | ||||||||||||
Money market accounts | 96,782 | 73 | 0.31 | % | 98,513 | 61 | 0.25 | % | ||||||||||||||||
Savings accounts | 67,690 | 8 | 0.05 | % | 65,042 | 8 | 0.05 | % | ||||||||||||||||
Certificates of deposit | 84,240 | 97 | 0.47 | % | 81,329 | 114 | 0.57 | % | ||||||||||||||||
Total interest-bearing deposits | 285,079 | 187 | 0.27 | % | 278,480 | 193 | 0.28 | % | ||||||||||||||||
Federal Home Loan Bank advances | 57,802 | 181 | 1.27 | % | 65,009 | 200 | 1.25 | % | ||||||||||||||||
Other interest-bearing liabilities | 7,144 | 2 | 0.12 | % | 7,733 | — | — | |||||||||||||||||
Total interest-bearing liabilities | 350,025 | 370 | 0.43 | % | 351,222 | 393 | 0.45 | % | ||||||||||||||||
Non-interest-bearing deposits | 103,148 | 90,099 | ||||||||||||||||||||||
Other non-interest-bearing liabilities | 6,142 | 7,733 | ||||||||||||||||||||||
Total liabilities | 459,315 | 449,054 | ||||||||||||||||||||||
Total stockholders’ equity | 80,738 | 78,028 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 540,053 | $ | 527,082 | ||||||||||||||||||||
Net interest income | $ | 3,297 | $ | 3,118 | ||||||||||||||||||||
Net interest-earning assets | $ | 154,250 | $ | 141,202 | ||||||||||||||||||||
Interest rate spread (2) | 2.52 | % | 2.44 | % | ||||||||||||||||||||
Net interest margin (3) | 2.65 | % | 2.57 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 144.07 | % | 140.20 | % |
(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. |
41
| Six Months Ended June 30, |
| ||||||||||||||||||||||
| 2023 |
|
| 2022 |
| |||||||||||||||||||
| Average |
|
| Interest and |
|
| Yield/Cost |
|
| Average |
|
| Interest and |
|
| Yield/Cost |
| |||||||
| (Dollars in thousands) |
| ||||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans(1) |
| $ | 371,562 |
|
| $ | 8,064 |
|
|
| 4.38 | % |
| $ | 334,612 |
|
| $ | 6,299 |
|
|
| 3.80 | % |
Securities available-for-sale |
|
| 112,291 |
|
|
| 1,191 |
|
|
| 2.14 | % |
|
| 131,090 |
|
|
| 1,114 |
|
|
| 1.71 | % |
Other interest-earning assets |
|
| 16,022 |
|
|
| 476 |
|
|
| 5.99 | % |
|
| 38,656 |
|
|
| 139 |
|
|
| 0.73 | % |
Total interest-earning |
|
| 499,875 |
|
|
| 9,731 |
|
|
| 3.93 | % |
|
| 504,358 |
|
|
| 7,552 |
|
|
| 3.02 | % |
Non-interest-earning assets |
|
| 36,801 |
|
|
|
|
|
|
|
|
| 34,700 |
|
|
|
|
|
|
| ||||
Total assets |
| $ | 536,676 |
|
|
|
|
|
|
|
| $ | 539,058 |
|
|
|
|
|
|
| ||||
Interest-earning liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
NOW accounts |
| $ | 31,399 |
|
| $ | 111 |
|
|
| 0.72 | % |
| $ | 36,430 |
|
| $ | 16 |
|
|
| 0.09 | % |
Money market accounts |
|
| 108,779 |
|
|
| 1,072 |
|
|
| 1.99 | % |
|
| 96,746 |
|
|
| 144 |
|
|
| 0.30 | % |
Savings accounts |
|
| 56,064 |
|
|
| 14 |
|
|
| 0.05 | % |
|
| 67,049 |
|
|
| 17 |
|
|
| 0.05 | % |
Certificates of deposit |
|
| 89,854 |
|
|
| 1,081 |
|
|
| 2.43 | % |
|
| 82,614 |
|
|
| 179 |
|
|
| 0.44 | % |
Total interest-bearing deposits |
|
| 286,096 |
|
|
| 2,278 |
|
|
| 1.61 | % |
|
| 282,839 |
|
|
| 356 |
|
|
| 0.25 | % |
Federal Home Loan Bank advances |
|
| 85,385 |
|
|
| 1,148 |
|
|
| 2.71 | % |
|
| 56,293 |
|
|
| 350 |
|
|
| 1.25 | % |
Other interest-bearing liabilities |
|
| 5,024 |
|
|
| 3 |
|
|
| 0.11 | % |
|
| 5,424 |
|
|
| 4 |
|
|
| 0.17 | % |
Total interest-bearing |
|
| 376,505 |
|
|
| 3,429 |
|
|
| 1.84 | % |
|
| 344,556 |
|
|
| 710 |
|
|
| 0.42 | % |
Non-interest-bearing deposits |
|
| 79,836 |
|
|
|
|
|
|
|
|
| 104,585 |
|
|
|
|
|
|
| ||||
Other non-interest-bearing |
|
| 7,019 |
|
|
|
|
|
|
|
|
| 6,474 |
|
|
|
|
|
|
| ||||
Total liabilities |
|
| 463,360 |
|
|
|
|
|
|
|
|
| 455,615 |
|
|
|
|
|
|
| ||||
Total stockholders’ equity |
|
| 73,316 |
|
|
|
|
|
|
|
|
| 83,443 |
|
|
|
|
|
|
| ||||
Total liabilities and |
| $ | 536,676 |
|
|
|
|
|
|
|
| $ | 539,058 |
|
|
|
|
|
|
| ||||
Net interest income |
|
|
|
| $ | 6,302 |
|
|
|
|
|
|
|
| $ | 6,842 |
|
|
|
| ||||
Net interest-earning assets |
| $ | 123,370 |
|
|
|
|
|
|
|
| $ | 159,802 |
|
|
|
|
|
|
| ||||
Interest rate spread(2) |
|
|
|
|
|
|
|
| 2.09 | % |
|
|
|
|
|
|
|
| 2.60 | % | ||||
Net interest margin(3) |
|
|
|
|
|
|
|
| 2.54 | % |
|
|
|
|
|
|
|
| 2.74 | % | ||||
Average interest-earning |
|
| 132.77 | % |
|
|
|
|
|
|
|
| 146.38 | % |
|
|
|
|
|
|
Six Months Ended June 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Average Outstanding Balance | Interest and Dividends | Yield/Cost Rate | Average Outstanding Balance | Interest and Dividends | Yield/Cost Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans (1) | $ | 334,612 | $ | 6,299 | 3.80 | % | $ | 334,682 | $ | 6,418 | 3.87 | % | ||||||||||||
Securities available-for-sale | 131,090 | 1,114 | 1.71 | % | 69,905 | 603 | 1.74 | % | ||||||||||||||||
Other interest-earning assets | 38,656 | 139 | 0.73 | % | 81,634 | 107 | 0.26 | % | ||||||||||||||||
Total interest-earning assets | 504,358 | 7,552 | 3.02 | % | 486,221 | 7,128 | 2.96 | % | ||||||||||||||||
Non-interest-earning assets | 34,700 | 33,537 | ||||||||||||||||||||||
Total assets | $ | 539,058 | $ | 519,758 | ||||||||||||||||||||
Interest-earning liabilities: | ||||||||||||||||||||||||
NOW accounts | $ | 36,430 | $ | 16 | 0.09 | % | $ | 32,720 | $ | 19 | 0.11 | % | ||||||||||||
Money market accounts | 96,746 | 144 | 0.30 | % | 100,285 | 140 | 0.28 | % | ||||||||||||||||
Savings accounts | 67,049 | 17 | 0.05 | % | 63,532 | 18 | 0.06 | % | ||||||||||||||||
Certificates of deposit | 82,614 | 179 | 0.44 | % | 82,809 | 272 | 0.66 | % | ||||||||||||||||
Total interest-bearing deposits | 282,839 | 356 | 0.25 | % | 279,346 | 449 | 0.32 | % | ||||||||||||||||
Federal Home Loan Bank advances | 56,293 | 350 | 1.25 | % | 66,544 | 400 | 1.21 | % | ||||||||||||||||
Other interest-bearing liabilities | 5,424 | 4 | 0.17 | % | 6,480 | — | — | |||||||||||||||||
Total interest-bearing liabilities | 344,556 | 710 | 0.42 | % | 352,370 | 849 | 0.49 | % | ||||||||||||||||
Non-interest-bearing deposits | 104,585 | 76,819 | ||||||||||||||||||||||
Other non-interest-bearing liabilities | 6,474 | 5,436 | ||||||||||||||||||||||
Total liabilities | 455,615 | 434,625 | ||||||||||||||||||||||
Total stockholders’ equity | 83,443 | 85,133 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 539,058 | $ | 519,758 | ||||||||||||||||||||
Net interest income | $ | 6,842 | $ | 6,279 | ||||||||||||||||||||
Net interest-earning assets | $ | 159,802 | $ | 133,851 | ||||||||||||||||||||
Interest rate spread (2) | 2.60 | % | 2.47 | % | ||||||||||||||||||||
Net interest margin (3) | 2.74 | % | 2.60 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 146.38 | % | 137.99 | % |
42
Rate/Volume Analysis
The following table presentstables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in average rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior period average rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume. There were
| Three Months Ended June 30, |
| ||||||||||
| Increase (Decrease) Due to |
|
|
|
| |||||||
| Volume |
|
| Rate |
|
| Total |
| ||||
| (Dollars in thousands) |
| ||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
| |||
Loans |
| $ | 377 |
|
| $ | 852 |
|
| $ | 1,229 |
|
Securities |
|
| (45 | ) |
|
| 67 |
|
|
| 22 |
|
Other |
|
| (15 | ) |
|
| 114 |
|
|
| 99 |
|
Total interest-earning assets |
|
| 317 |
|
|
| 1,033 |
|
|
| 1,350 |
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
| |||
NOW |
|
| 1 |
|
|
| (51 | ) |
|
| (50 | ) |
Money market deposits |
|
| (4 | ) |
|
| (453 | ) |
|
| (457 | ) |
Savings |
|
| 1 |
|
|
| — |
|
|
| 1 |
|
Certificates of deposit |
|
| (17 | ) |
|
| (586 | ) |
|
| (603 | ) |
Total interest-bearing deposits |
|
| (19 | ) |
|
| (1,090 | ) |
|
| (1,109 | ) |
Borrowings |
|
| (145 | ) |
|
| (328 | ) |
|
| (473 | ) |
Other |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
Total interest-bearing liabilities |
|
| (164 | ) |
|
| (1,417 | ) |
|
| (1,581 | ) |
Change in net interest income |
| $ | 153 |
|
| $ | (384 | ) |
| $ | (231 | ) |
| Six Months Ended June 30, |
| ||||||||||
| Increase (Decrease) Due to |
|
|
|
| |||||||
| Volume |
|
| Rate |
|
| Total |
| ||||
| (Dollars in thousands) |
| ||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
| |||
Loans |
| $ | 740 |
|
| $ | 1,025 |
|
| $ | 1,765 |
|
Securities |
|
| (105 | ) |
|
| 182 |
|
|
| 77 |
|
Other |
|
| (30 | ) |
|
| 367 |
|
|
| 337 |
|
Total interest-earning assets |
|
| 605 |
|
|
| 1,574 |
|
|
| 2,179 |
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
| |||
NOW |
|
| 2 |
|
|
| (97 | ) |
|
| (95 | ) |
Money market deposits |
|
| (20 | ) |
|
| (908 | ) |
|
| (928 | ) |
Savings |
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Certificates of deposit |
|
| (17 | ) |
|
| (885 | ) |
|
| (902 | ) |
Total interest-bearing deposits |
|
| (32 | ) |
|
| (1,890 | ) |
|
| (1,922 | ) |
Borrowings |
|
| (246 | ) |
|
| (552 | ) |
|
| (798 | ) |
Other |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
Total interest-bearing liabilities |
|
| (278 | ) |
|
| (2,441 | ) |
|
| (2,719 | ) |
Change in net interest income |
| $ | 327 |
|
| $ | (867 | ) |
| $ | (540 | ) |
43
Three Months Ended June 30, 2022 vs. 2021 | ||||||||||||
Increase (Decrease) Due to | Total Increase (Decrease) | |||||||||||
Volume | Rate | |||||||||||
(Dollars in thousands) | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans | $ | 26 | $ | (142 | ) | $ | (116 | ) | ||||
Securities | 214 | 17 | 231 | |||||||||
Other | (10 | ) | 51 | 41 | ||||||||
Total interest-earning assets | 230 | (74 | ) | 156 | ||||||||
Interest-bearing liabilities: | ||||||||||||
NOW | (1 | ) | 2 | 1 | ||||||||
Money market deposits | 1 | (13 | ) | (12 | ) | |||||||
Savings | — | — | — | |||||||||
Certificates of deposit | (4 | ) | 21 | 17 | ||||||||
Total interest-bearing deposits | (4 | ) | 10 | 6 | ||||||||
Borrowings | 23 | (4 | ) | 19 | ||||||||
Other | — | (2 | ) | (2 | ) | |||||||
Total interest-bearing liabilities | 19 | 4 | 23 | |||||||||
Change in net interest income | $ | 249 | (70 | ) | 179 | |||||||
Six Months Ended June 30, 2022 vs. 2021 | ||||||||||||
Increase (Decrease) Due to | Total Increase (Decrease) | |||||||||||
Volume | Rate | |||||||||||
(Dollars in thousands) | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans | $ | (1 | ) | $ | (118 | ) | $ | (119 | ) | |||
Securities | 520 | (9 | ) | 511 | ||||||||
Other | (14 | ) | 46 | 32 | ||||||||
Total interest-earning assets | 505 | (81 | ) | 424 | ||||||||
Interest-bearing liabilities: | ||||||||||||
NOW | (3 | ) | 6 | 3 | ||||||||
Money market deposits | 5 | (9 | ) | (4 | ) | |||||||
Savings | (1 | ) | 2 | 1 | ||||||||
Certificates of deposit | 1 | 92 | 93 | |||||||||
Total interest-bearing deposits | 2 | 91 | 93 | |||||||||
Borrowings | 64 | (14 | ) | 50 | ||||||||
Other | — | (4 | ) | (4 | ) | |||||||
Total interest-bearing liabilities | 66 | 73 | 139 | |||||||||
Change in net interest income | $ | 571 | $ | (8 | ) | $ | 563 | |||||
Comparison of Operating Results for the Three Months Ended June 30, 20222023 and 2021
Net Loss.
Interest and Dividend Income. Interest and dividend income increased $1.3 million, or 35.1%, to $5.0 million for the three months ended June 30, 2021. This increase was primarily due to a $1.0 million decrease innon-interestincome, which was partially offset by a $678,000 decrease in noninterest expense, a $74,000 increase in net interest income after provision for loan losses and a $75,000 increase in income tax benefit.
Interest Expense. Interest expense increased $1.6 million, or 432.4%, to $2.0 million for the three months ended June 30, 2021. The increase was due primarily to an increase in interest earned on taxable securities, which increased $231,000, or 69.0%2023, from $335,000 in the second quarter of 2021 to $566,000 in the second quarter of 2022. This increase was primarily due to the Company’s strategy to deploy excess liquidity into securities, which resulted in the average outstanding balance of securities increasing $48.7 million, or 61.3%, from $79.5 million for the second quarter of 2021 to $128.2 million for the second quarter of 2022. Offsetting the increase in interest earned on taxable securities, was a $116,000 decrease in interest and fees earned on loans. This decrease was primarily due to a decrease in the yield earned on loans, which decreased from 3.76% in the second quarter of 2021 to 3.59% in the second quarter of 2022. The decrease in the loan yield was primarily due to a decrease in fees collected on PPP loans between the two periods.
Interest expense on FHLB advances increased $473,000, or 261.3%, from $181,000 for the second quarter of 2022 to $654,000 for the second quarter of 2023. This increase was primarily due to a 163 basis point increase in the average rate paid on the advances from 1.25% in the second quarter of 2022 to 2.88% in the second quarter of 2023 and a $33.2 million, or 57.4%, increase in the average balance outstanding, from $57.8 million in the second quarter of 2022 to $91.0 million in the second quarter of 2023. The increase in the average rate paid on FHLB advances was primarily due to the changes in market interest rates.
Net Interest Income. Net interest income decreased $231,000, or 7.0%, to $3.1 million for the three months ended June 30, 2021. This decrease was primarily due to a decline in interest expense on FHLB advances, which declined $19,0002023, from $200,000 in the second quarter of 2021 to $181,000 in the second quarter of 2022. This decrease was primarily the result of a $7.2 million decrease in average FHLB advances outstanding.
Provision for Credit Losses. The provision for credit losses was $75,000 for the three months ended June 30, 2021. Our net interest margin also increased 8 basis points to 2.65% from 2.57% over the same period.
Noninterest Income. Noninterest income increased $802,000, or 0.89%679.7%, of total loans (and 0.89% excluding PPP loans), at June 30, 2022, compared to $2.9 million, or 0.88% of total loans (and 0.89% excluding PPP loans), at December 31, 2021. Nonaccrual loans constituted 0.23% of total gross loans (and 0.23% excluding PPP loans) at June 30, 2022, compared to 0.31% of gross loans at December 31, 2021 (and 0.32% excluding PPP loans). Net recoveries$920,000 for the three months ended June 30, 2022 were $10,000 compared to net charge-offs of $33,000 for the three months ended June 30, 2021. The increase in provision was primarily due to the increase in loans outstanding.
Noninterest Expense.
44
in salaries and benefits expense. The increase in salaries and benefits expense was primarily due primarily to a $763,000 decrease$747,000 increase in the market value of mutual funds held in our deferred compensation plan, offsetplan. We record an offsetting amount for the change in part by a $94,000the market of equity securities in noninterest income. Also contributing to the increase in salaries.
Income Tax Benefit.
Comparison of Operating Results for the Six Months Ended June 30, 20222023 and 2021
Net Income (Loss) Income.
Interest and Dividend Income.
Interest Expense.
Interest expense on FHLB advances increased $798,000, or 228.0%, from $350,000 for the first six months of 2022 to $1.1 million for the first six months of 2023. This increase was primarily due to a 146 basis point increase in the average rate paid on the advances from 1.25% in the first six months of 2022 to 2.71% in the first six months of 2023 and a $29.1 million, or 51.7%, increase in the average balance outstanding, from $56.3 million in the first six months of 2022 to $85.4 million in the first six months of 2023. The increase in the average rate paid on FHLB advances was primarily due to the changes in market interest rates.
45
Net Interest Income. Net interest income decreased $540,000, or 7.9%, to $6.3 million for the six months ended June 30, 2021. This decrease was primarily due to a decline in the cost of our interest-bearing deposits, which decreased 7 basis points2023 and 2022, from 0.32% for the first six months of 2021 to 0.25% for the same period in 2022. This decline was primarily due to the low interest rate environment.
Provision for Credit Losses. The provision for credit losses was $150,000 for the six months ended June 30, 2023, compared to a $210,000 provision for the six months ended June 30, 2022.
Noninterest Income. Noninterest income increased $1.2 million, or 236.2%, to $1.7 million for the six months ended June 30, 2021. Our net interest rate spread increased 13 basis points to 2.60% for the six months ended June 30, 2022,2023, from 2.47% for the six months ended June 30, 2021 while our net interest margin increased 14 basis points to 2.74% from 2.60% over the same period.
Noninterest Expense. Noninterest expense increased $1.5 million, or 19.7%, to $9.1 million for the first six months of 2023 from $7.6 million for the first six months of 2022. This increase was primarily due to a $1.7 million increase in salaries and benefits expense, partially offset by $156,000 decrease in other noninterest expenses. The increase in salaries and benefits expense was primarily due to a $1.2 million increase in the market value of mortgage servicing rights increasedmutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market of equity securities in noninterest income. Also contributing to the increase in salaries and benefits expense was $418,000 in severance related cost as a result of anthe reduction-in-force ("RIF") that was implemented in April 2023 and a $218,000 increase in market interest rates.
In addition to the actions taken to reduce salaries and benefits expense, the Company has also implemented additional cost savings initiatives that have resulted in a $156,000 decrease in other noninterest expenses for the six months ended June 30, 2022 from $8.5 million for the2023 as compared to six months ended June 30, 2021. This decrease was primarily due2022. The majority of these savings were related to an $835,000 decreasea $94,000 reduction in salaries and employee benefits. The decrease in salaries and employee benefits primarily resulted from a $1.1 million decline in the market value of marketable equity securities held in our deferred compensation plan, offset in part by a $135,000 increase in incentive bonus expenseprofessional services and a $69,000 increase$42,000 reduction in salaryadvertising and promotions expense.
Income Tax (Benefit) Expense.
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:
46
Our board of directors is responsible for the review and oversight of our executive management team and other essential operational staff which are responsible for our asset/liability analysis. These officers act as an asset/liability committee and are charged with developing and implementing an asset/liability management plan, and they meet at least quarterly to review pricing and liquidity needs and assess our interest rate risk. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.
We do not engage in hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities.
The table below sets forth, as of June 30, 2022,2023, 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 |
| $ | 10,280 |
|
|
| (12.67 | )% |
+300 |
|
| 10,819 |
|
|
| (8.08 | )% |
+200 |
|
| 11,371 |
|
|
| (3.39 | )% |
+100 |
|
| 11,471 |
|
|
| (2.54 | )% |
Level |
|
| 11,770 |
|
|
| — | % |
-100 |
|
| 11,663 |
|
|
| (0.91 | )% |
-200 |
|
| 11,265 |
|
|
| (4.30 | )% |
-300 |
|
| 10,891 |
|
|
| (7.47 | )% |
-400 |
|
| 10,424 |
|
|
| (11.44 | )% |
Change in Interest Rates (basis points) (1) | Net Interest Income Year 1 Forecast | Year 1 Change from Level | ||||||
(Dollars in thousands) | ||||||||
+400 | $ | 13,815 | 4.48 | % | ||||
+300 | 13,637 | 3.14 | % | |||||
+200 | 13,472 | 1.88 | % | |||||
+100 | 13,328 | 0.79 | % | |||||
Level | 13,223 | — | % | |||||
-100 | 13,223 | 0.01 | % |
47
Economic Value of Equity
The table below sets forth, as of June 30, 2022,2023, 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 |
| $ | 52,815 |
|
| $ | (17,675 | ) |
|
| (25.07 | )% |
+300 |
|
| 57,261 |
|
|
| (13,229 | ) |
|
| (18.77 | )% |
+200 |
|
| 62,035 |
|
|
| (8,455 | ) |
|
| (11.99 | )% |
+100 |
|
| 65,911 |
|
|
| (4,579 | ) |
|
| (6.50 | )% |
Level |
|
| 70,490 |
|
|
| — |
|
|
| — |
|
-100 |
|
| 74,347 |
|
|
| 3,857 |
|
|
| 5.47 | % |
-200 |
|
| 76,033 |
|
|
| 5,543 |
|
|
| 7.86 | % |
-300 |
|
| 75,458 |
|
|
| 4,968 |
|
|
| 7.05 | % |
-400 |
|
| 71,123 |
|
|
| 633 |
|
|
| 0.90 | % |
Estimated Increase (Decrease) in EVE | ||||||||||||
Basis Point (“bp”) Change in Interest Rates (1) | Estimated EVE (2) | Amount | Percent | |||||||||
(Dollars in thousands) | ||||||||||||
+400 | $ | 61,629 | $ | (9,188 | ) | (12.97 | %) | |||||
+300 | 63,670 | (7,147 | ) | (10.09 | %) | |||||||
+200 | 65,710 | (5,107 | ) | (7.21 | %) | |||||||
+100 | 67,968 | (2,849 | ) | (4.02 | %) | |||||||
Level | 70,817 | — | — | % | ||||||||
-100 | 70,850 | 33 | 0.05 | % |
The table above indicates that at June 30, 2022,2023, in the event of a4.02%6.50% decrease in our EVE and in the event of a 100-basis point decrease in interest rates, we would have experienced a 5.47% increase in our EVE. In the event of a2022,2023, we would have experienced a 7.21%11.99% decrease in our EVE and in the event of a 200-basis point decrease in interest rates, we would have experienced a 7.86% increase in our EVE.
Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in EVE require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the EVE table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the EVE table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and will differ from actual results.
EVE calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.
Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, FHLB advances, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB. At June 30, 2022,2023, we had $57.4$91.5 million outstanding in advances from the FHLB. At June 30, 2022,2023, we had $85.4$73.2 million in additional borrowing capacity at the Federal Home Loan Bank of Chicago.Chicago, based on the level of qualifying real estate loans currently pledged to the FHLB. Additionally, at June 30, 2022,2023, we had a $15.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at June 30, 2022.2023. The Company also had a $10.4an $8.9 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $13.3$11.6 million at June 30, 2022.2023. The Company had not drawn on the Federal Reserve line as of June 30, 2022.
48
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 byused in operating activities was $533,000$836,000 million for the six months ended June 30, 2022,2023, as compared to $611,000 net cash provided by operating activities of $523,000 for the six months ended June 30, 2021.2022. Net cash used in investing activities which consists primarily of disbursementswas $15.0 million for loan originations and the purchase ofavailable-for-salesecurities, offset by proceeds from maturing securities and pay downs on securities, wassix months ended June 30, 2023, as compared to $52.5 million for the six months ended June 30, 2022. Net cash used in investment activities during the six months ended June 30, 2023 consisted primarily of a $21.4 million net increase in loans and a $1.4 million increase in FHLB stock, partially offset by $7.2 million from maturities, calls and payments on available-for-sale securities. Net cash used in investment activities during the six months ended June 30, 2022 as compared to $35.0consisted primarily of the purchase of $37.1 million of available-for-sale securities and a $26.0 million net increase in loans, partially offset by $10.9 million from maturities, calls and payments on available-for-sale securities. Net cash provided by financing activities was $10.3 million for the six months ended June 30, 2021.2023, as compared to $5.3 million for the six months ended June 30, 2022. Net cash provided by financing activities consistingfor the first six months of 2023 primarily resulted from borrowings of increases$99.5 million of FHLB advances and a $7.1 million increase in borrowings and advance payments by borrowers for taxes and insurance, was $5.4partially offset by $79.5 million for the six months ended June 30, 2022, as compared to $87.8in principal payments on FHLB advances and a $16.5 million ofdecrease in deposits. Net cash provided by financing activities duringfor the first six months ended June 30, 2021. The primary source of the difference2022 primarily resulted from borrowings of $10.0 million of FHLB advances and a $5.9 million increase in cash providedadvance payments by financing activities was $94.8borrowers for taxes and insurance, partially offset by $8.0 million in initial subscriptions from the stock offeringprincipal payments on FHLB advances and a $1.4 million decrease in 2021, of which the Company retained $35.4 million.
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 June 30, 2022,2023, PyraMax Bank exceeded all of its regulatory capital requirements with a Tier 1 leverage capital level of $64.5 million, or 11.8%11.7% of adjusted total assets, which is above the well-capitalized required level of $27.4$27.5 million, or 5.0%. The Bank had total risk-based capital of $67.6$68.9 million, or 17.9%16.8% of risk-weighted assets, which is above the well-capitalized required level of $37.8$41.1 million, or 10.0%. Management is not aware of any conditions or events since the most recent notification that would change our category. For additional information, see Note 13 of the Notes to Financial Statements.
Off-Balance
Commitments.
Contractual Obligations.
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.
49
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 Rule2022.2023. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
There were no changes in the Company’s internal controlscontrol over financial reporting in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the second quarter of 2023 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 June 30, 2022,2023, 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 Form20212022 Annual Report on Form There are no material changes
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Common Stock Repurchases. The following table presents information regarding shares of our common stock repurchased during the three months ended June 30, 2023.
Period |
| Total Number of Shares (or Units) Purchases (1) |
|
| Weighted Average Price Paid per Share (or Unit) |
|
| Total Number of Shares (or Units) Purchased as Part of a Publicly Announced Plans or Programs |
|
| Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
| ||||
|
|
|
|
|
|
|
|
| ||||||||
April 1 to April 30, 2023 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,945 |
|
May 1 to May 31, 2023 |
|
| 9,282 |
|
| $ | 6.84 |
|
|
| 9,282 |
|
|
| 663 |
|
June 1 to June 30, 2023 |
|
| 5,118 |
|
|
| 7.50 |
|
|
| 5,118 |
|
|
| 617,067 |
|
On July 29, 2022, the Company adopted a stock repurchase program. On August 26, 2022, the Company received a non-objection letter from the risk factors included inFederal Reserve Bank of Chicago ("FRB"), permitting the Annual ReportCompany to repurchase 319,766 shares of its common stock, which represented 5% of the shares outstanding at the time discussions were held with the FRB. The Company began purchasing shares on Form10-K.
On April 28, 2023, the Company adopted a second stock repurchase program. On June 9, 2023, the Company received a non-objection letter from the Federal Reserve Bank of Chicago ("FRB"), permitting the Company to repurchase 621,522 shares of its common stock, which represented 10% of the shares outstanding at the time discussions were held with the FRB. The Company began purchasing shares on June 15, 2023 and as of June 30, 2023, the Company had repurchased 4,455 shares for a total purchase price of $34,000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
50
Item 6. Exhibits
Exhibit | ||
Number | Description | |
3.1 | ||
3.2 | ||
31.1 | Certification of Chief Executive Officer Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002 | |
32.1 | ||
101.0 | ||
The following materials for the quarter ended June 30, | ||
104.0 | ||
The cover page of this Quarterly Report on Form |
_____________
* Furnished, not filed.
51
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
1895 BANCORP OF WISCONSIN, INC. | ||||||
Date: August | /s/ | |||||
David R. Ball | ||||||
President and Chief Executive Officer | ||||||
Date: August | /s/ Steven T. Klitzing | |||||
Steven T. Klitzing | ||||||
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
52