1895 Bancorp of Wisconsin Inc MD

Previous wording

Management’s discussion and analysis of financial condition and results of operations at June 30, 2024 and for the three and six months ended June 30, 2024 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Current wording

Management’s discussion and analysis of financial condition and results of operations at September 30, 2024 and for the three and nine months ended September 30, 2024 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Previous wording

Total Assets. Total assets increased $3.9 million, or 0.7%, to $561.5 million at June 30, 2024 from $557.6 million at December 31, 2023. This increase was primarily due to a $3.6 million net increase in cash and cash equivalents, a $4.1 million increase in loans and an $882,000 increase in loans held for sale, partially offset by a $6.2 million decrease in available-for-sale securities.

Current wording

Total Assets. Total assets increased $6.9 million, or 1.2%, to $564.5 million at September 30, 2024 from $557.6 million at December 31, 2023. This increase was primarily due to a $12.4 million net increase in cash and cash equivalents and a $3.0 million increase in loans, partially offset by a $9.3 million decrease in available-for-sale securities.

Previous wording

Cash and Cash Equivalents. Cash and cash equivalents increased $3.6 million, or 27.3%, to $16.8 million at June 30, 2024 from $13.2 million at December 31, 2023. This increase was primarily due to a $3.5 million net increase in FHLB advances, a $5.9 million increase in advance payments by borrowers for taxes and insurance and $7.6 million from maturities, prepayments and calls of available-for-sale securities, partially offset by a $4.8 million decrease in deposits, a $4.1 million increase in loans and the purchase of $2.0 million in available-for-sale securities.

Current wording

Cash and Cash Equivalents. Cash and cash equivalents increased $12.4 million, or 93.2%, to $25.7 million at September 30, 2024 from $13.3 million at December 31, 2023. This increase was primarily due to a $4.8 million net increase in FHLB advances, a $8.6 million increase in advance payments by borrowers for taxes and insurance and $13.6 million from maturities, payments and calls of available-for-sale securities, partially offset by an $8.4 million decrease in deposits, a $3.0 million increase in loans and the purchase of $2.0 million in available-for-sale securities.

Previous wording

Available-for-Sale Securities. Available-for-sale securities decreased $6.2 million, or 5.7%, to $103.4 million at June 30, 2024, from $109.6 million at December 31, 2023. This decrease was primarily due to maturities, payments and calls of securities totaling $7.6 million and a $513,000 increase in the net unrealized loss on available-for-sale securities, partially offset by the purchase of $2.0 million of available-for-sale securities. The net unrealized loss on available-for-sale securities held in the portfolio was $10.1 million at June 30, 2024.

Current wording

Available-for-Sale Securities. Available-for-sale securities decreased $9.3 million, or 8.5%, to $100.3 million at September 30, 2024, from $109.6 million at December 31, 2023. This decrease was primarily due to maturities, payments and calls of securities totaling $13.6 million, partially offset by and a $2.4 million decrease in the net unrealized loss on available-for-sale securities and the purchase of $2.0 million of available-for-sale securities. The net unrealized loss on available-for-sale securities held in the portfolio was $7.1 million at September 30, 2024.

Previous wording

Loans. Loans held for investment, net of deferred costs, increased $4.1 million, or 1.0%, to $402.7 million at June 30, 2024, from $398.6 million at December 31, 2023. This increase was primarily the result of a $5.8 million increase in commercial real estate loans, partially offset by a $1.8 million decrease commercial loans.

Current wording

Loans. Loans held for investment, net of deferred costs, increased $3.0 million, or 0.8%, to $401.6 million at September 30, 2024, from $398.6 million at December 31, 2023. This increase was primarily the result of a $2.4 million increase in commercial loans and a $2.0 million increase in commercial real estate loans, partially offset by a $1.5 million decrease in first mortgage residential real estate loans.

Previous wording

Allowance for Credit Losses. The allowance for credit losses for loans was $3.9 million, or 0.96%, of loans, net of deferred costs, at June 30, 2024 compared to an allowance for credit losses for loans of $3.7 million, or 0.94% of loans, net of deferred costs, at December 31, 2023. During the first six months of 2024, we recorded a $23,000 provision for credit losses and $114,000 in net recoveries. The allowance for credit losses for unfunded loan commitments was $1.0 million at June 30, 2024, compared to $875,000 at December 31, 2023. The increase in the allowance for credit losses for unfunded loan commitments was the result of a $127,000 provision for credit losses. The additional provision was due to a $9.4 million increase in unfunded loan commitments which are expected to fund, from $47.3 million at December 31, 2023 to $56.7 million at June 30, 2024. Nonaccrual loans represented 0.20% of total loans at June 30, 2024 and 0.28% at December 31, 2023. Net recoveries for the six months ended June 30, 2024 were $114,000 compared to net recoveries of $11,000 for the six months ended June 30, 2023.

Current wording

Allowance for Credit Losses. The allowance for credit losses for loans was $4.0 million, or 0.99%, of loans, net of deferred costs, at September 30, 2024 compared to an allowance for credit losses for loans of $3.7 million, or 0.94% of loans, net of deferred costs, at December 31, 2023. During the first nine months of 2024, we recorded a $121,000 provision for credit losses and $111,000 in net recoveries. The allowance for credit losses for unfunded loan commitments was $979,000 at September 30, 2024, compared to $875,000 at December 31, 2023. The increase in the allowance for credit losses for unfunded loan commitments was the result of a $104,000 provision for credit losses. Nonaccrual loans represented 0.23% of total loans at September 30, 2024 and 0.28% at December 31, 2023.

Previous wording

Advance Payments by Borrowers for Taxes and Insurance. Advance payments by borrowers for taxes and insurance increased $5.9 million to $7.1 million at June 30, 2024 from $1.2 million at December 31, 2023. The increase was due to normal seasonal activity.

Current wording

Advance Payments by Borrowers for Taxes and Insurance. Advance payments by borrowers for taxes and insurance increased $8.6 million to $9.8 million at September 30, 2024 from $1.2 million at December 31, 2023. The increase was due to normal seasonal activity.

Previous wording

FHLB Advances. FHLB advances increased $3.5 million, or 4.9%, to $74.5 million at June 30, 2024, from $71.0 million at December 31, 2023. The level of FHLB advances was increased to fund cash outflows related to loans and deposits.

Current wording

FHLB Advances. FHLB advances increased $4.8 million, or 6.8%, to $75.8 million at September 30, 2024, from $71.0 million at December 31, 2023. The level of FHLB advances was increased to fund cash outflows related to loans and deposits.

Previous wording

Total Stockholders’ Equity. Total stockholders’ equity decreased $1.7 million to $71.1 million at June 30, 2024, from $72.8 million at December 31, 2023. The decrease was primarily due to a net loss of $822,000, other comprehensive loss of $405,000, as a result of an increase in the net unrealized loss on available-for-sale securities and the Company's purchase of $855,000 of its common stock under its stock repurchase plan.

Current wording

Total Stockholders’ Equity. Total stockholders’ equity increased $413,000 to $73.2 million at September 30, 2024, from $72.8 million at December 31, 2023. The increase was primarily due to other comprehensive income of $1.7 million as a result of a decrease in the net unrealized loss on available-for-sale securities, and $504,000 as a result of the equity impact of stock compensation expense, partially offset by a net loss of $981,000 and the Company's purchase of $1.0 million of its common stock under its stock repurchase plan.

Previous wording

The following tables set forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances but are reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or interest expense.

Current wording

The following tables set forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances but are reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred costs, premiums and discounts that are amortized or accreted to interest income or interest expense.

Previous wording

Includes net loan expenses of $2,000 and $35,000 for the three months ended June 30, 2024 and 2023, respectively.

Current wording

Includes net loan expenses of $291,000 and $34,000 for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Includes net loan expenses of $20,000 and $54,000 for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Includes net loan expenses of $311,000 and $89,000 for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in average rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior period average rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments included within the following table.

Current wording

The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in average rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior period average rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

Previous wording

Net Loss. We recorded a net loss of $822,000 for the six months ended June 30, 2024, compared to a net loss of $869,000 for the six months ended June 30, 2023. The decrease in net loss was primarily due to a $259,000 decrease in noninterest expenses and a $32,000 increase in noninterest income, partially offset by a $79,000 decrease in net interest income after provision for credit losses and a $165,000 decrease in income tax benefit.

Current wording

Net Loss. We recorded a net loss of $159,000 for the three months ended September 30, 2024, compared to a net loss of $3.6 million for the three months ended September 30, 2023. The decrease in net loss was primarily due to a $1.9 million net loss on sale of securities during the three months ended September 30, 2023, a $1.7 million decrease in income tax expense and a $358,000 increase in other noninterest income (excluding net loss on sale of securities) in the current quarter, partially offset by a $577,000 increase in noninterest expenses.

Previous wording

Interest and Dividend Income. Interest and dividend income increased $1.2 million, or 24.0%, to $6.2 million for the three months ended June 30, 2024 from $5.0 million for the three months ended June 30, 2023. The increase was due primarily to a $696,000 increase in interest and fees on loans and a $419,000 increase in interest income on securities. The increase in interest and fees earned on loans was primarily due to a $20.2 million increase in the average amount of loans outstanding, from $378.8 million in the second quarter of 2023 to $399.0 million in the second quarter of 2024, and a 48 basis point increase in the yield earned on loans, from 4.49% for the second quarter of 2023 to 4.97% in the second quarter of 2024. The increase in the yield earned on loans during the second quarter of 2024 was primarily due to higher yields on new loans and existing loans that have repriced at higher rates since the second quarter of 2023, as a result of higher market interest rates. The increase in loans outstanding is consistent with the Company's strategy to grow the loan portfolio. The increase in interest on securities was primarily due to a 173 basis point increase in the yield earned on securities, from 2.13% for the second quarter of 2023 to 3.86% in the second quarter of 2024, partially offset by a $5.7 million decrease in the average amount of securities outstanding. The increase in yield and interest income was primarily due to the balance sheet repositioning strategies that the Company implemented during 2023.

Current wording

Interest and Dividend Income. Interest and dividend income increased $648,000, or 12.0%, to $6.0 million for the three months ended September 30, 2024 from $5.4 million for the three months ended September 30, 2023. The increase was due primarily to a $377,000 increase in interest and fees on loans and a $290,000 increase in interest income on securities. The increase in interest and fees earned on loans was primarily due to a $17.9 million increase in the average amount of loans outstanding, from $384.3 million in the third quarter of 2023 to $402.2 million in the third quarter of 2024, and an 18 basis point increase in the yield earned on loans, from 4.57% for the third quarter of 2023 to 4.75% in the third quarter of 2024. The increase in the yield earned on loans during the third quarter of 2024 was primarily due to higher yields on new loans and existing loans that have repriced at higher rates since the third quarter of 2023, as a result of higher market interest rates. The increase in loans outstanding is consistent with the Company's strategy to grow the loan portfolio. The increase in interest on securities was primarily due to a 122 basis point increase in the yield earned on securities, from 2.45% for the third quarter of 2023 to 3.67% in the third quarter of 2024, partially offset by a $3.4 million decrease in the average amount of securities outstanding. The increase in yield and interest income on securities was primarily due to the previously disclosed balance sheet repositioning strategies that the Company implemented during 2023.

Previous wording

Interest Expense. Interest expense increased $1.1 million, or 57.9%, to $3.0 million for the three months ended June 30, 2024, from $1.9 million for the three months ended June 30, 2023. This increase was primarily due to a $1.2 million increase in interest expense on deposits, partially offset by a $118,000 decrease in interest expense on FHLB advances. The increase in interest expense on deposits was primarily due to a 129 basis point increase in the average rate paid on deposits and a $39.8 million increase in average interest-bearing deposits outstanding from the second quarter of 2023 to the second quarter of 2024. The increase in interest expense on deposits was primarily due to the increase in market rates of interest and a shift in our deposit mix. As market rates increased, many of our deposit customers transferred funds from noninterest bearing checking accounts and lower rate deposit accounts into higher rate certificates of deposit. The average balance of noninterest bearing checking accounts decreased $6.5 million, or 8.5%, NOW accounts decreased $2.7 million, or 8.5%, savings accounts decreased $11.2 million, or 21.0%, and money market accounts decreased $16.6 million, or 16.3%, respectively, from the second quarter of 2023 to the second quarter of 2024. During the same period, the average balance of certificates of deposits increased $70.3 million, or 72.6%. Interest expense on certificates of deposit increased $1.2 million from the second quarter of 2023 to the second quarter of 2024 as a result of the increase in average balance and a 168 basis point increase in the average rate paid on these accounts.

Current wording

Interest Expense. Interest expense increased $595,000, or 24.8%, to $3.0 million for the three months ended September 30, 2024, from $2.4 million for the three months ended September 30, 2023. This increase was primarily due to a $689,000 increase in interest expense on deposits, partially offset by a $95,000 decrease in interest expense on FHLB advances. The increase in interest expense on deposits was primarily due to a 70 basis point increase in the average rate paid on deposits and a $21.1 million increase in average interest-bearing deposits outstanding from the third quarter of 2023 to the third quarter of 2024. The increase in interest expense on deposits was primarily due to the increase in market rates of interest and a shift in our deposit mix. As market rates increased, many of our deposit customers transferred funds from noninterest bearing checking accounts and lower rate deposit accounts into higher rate certificates of deposit. During this period, the average balance of noninterest bearing checking accounts decreased $2.3 million, or 3.2%, NOW accounts decreased $1.9 million, or 6.4% and savings accounts decreased $9.2 million, or 18.3%. During the same period, the average balance of certificates of deposits increased $30.2 million, or 22.3% and money market accounts increased $1.9 million, or 21.8%. Interest expense on certificates of deposit increased $596,000 from the third quarter of 2023 to the third quarter of 2024 as a result of the increase in average balance and a 75 basis point increase in the average rate paid on these accounts.

Previous wording

Net Interest Income. Net interest income increased $93,000, or 3.0%, to $3.2 million for the three months ended June 30, 2024, from $3.1 million for the three months ended June 30, 2023. This increase was primarily due to a $1.2 million increase in interest income partially offset by a $1.1 million increase in interest and dividend income. Our net interest rate spread decreased 17 basis points to 1.79% for the three months ended June 30, 2024, from 1.96% for the three months ended June 30, 2023. Our net interest margin decreased one basis point to 2.44%, from 2.45% over the same period.

Current wording

Net Interest Income. Net interest income increased $53,000, or 1.8%, to $3.0 million for the three months ended September 30, 2024. This increase was primarily due to a $648,000 increase in interest income partially offset by a $595,000 increase in interest expense. Our net interest rate spread decreased 11 basis points to 1.64% for the three months ended September 30, 2024, from 1.75% for the three months ended September 30, 2023. Our net interest margin was 2.29% for the three months ended September 30, 2024 and the three months ended September 30, 2023.

Previous wording

Provision for Credit Losses. The provision for credit losses was $75,000 for each of the three months ended June 30, 2024 and the three months ended June 30, 2023. The provision in each period was primarily due to an increase in loans outstanding and unfunded loan commitments in each of the respective periods.

Current wording

Provision for Credit Losses. The provision for credit losses was $75,000 for each of the three months ended September 30, 2024 and the three months ended September 30, 2023. The provision in each period was primarily due to an increase in average loans outstanding in each of the respective periods.

Previous wording

Income Tax Expense. We recorded an income tax benefit of $159,000 for the three months ended June 30, 2024, compared to $273,000 for the three months ended June 30, 2023. The decrease in income tax benefit was primarily due to the decreased loss before taxes during the three months ended June 30, 2024 as compared to the loss before taxes for the three months ended June 30, 2023. Also contributing to this decrease was the impact of the change in Wisconsin tax law in July 2023. As a result of this change in tax law, we did not record any income tax benefit for Wisconsin state taxes for the three months ended June 30, 2024.

Current wording

Income Tax Expense. We recorded an income tax benefit of $298,000 for the three months ended September 30, 2024, compared to income tax expense of $1.4 million for the three months ended September 30, 2023. The change in income tax expense (benefit) was primarily due to the impact of the change in Wisconsin tax law in July 2023, retroactive to January 2023. As a result of this change in tax law, we did not record any income tax benefit for Wisconsin state taxes for the three months ended September 30, 2024. In addition, during the second quarter of 2023, this tax law change resulted in a $1.8 million increase in the valuation allowance for deferred tax assets and the recording of a $98,000 reduction in tax benefits previously booked for the six months ended June 30, 2023.

Previous wording

Comparison of Operating Results for the six months ended June 30, 2024 and 2023

Current wording

Comparison of Operating Results for the nine months ended September 30, 2024 and 2023

Previous wording

Net Loss. We recorded a net loss of $516,000 for the three months ended June 30, 2024, compared to a net loss of $508,000 for the three months ended June 30, 2023. The increase in net loss was primarily due to a $104,000 decrease in noninterest income and a $114,000 reduction in income tax benefits, partially offset by a $117,000 decrease in noninterest expenses and a $93,000 increase in net interest income.

Current wording

Net Loss. We recorded a net loss of $981,000 for the nine months ended September 30, 2024, compared to a net loss of $4.5 million for the nine months ended September 30, 2023. The decrease in net loss was primarily due to a $2.3 million increase in noninterest income and a $1.6 million decrease in income tax expense (benefit), partially offset by a $319,000 increase in noninterest expenses.

Previous wording

Interest and Dividend Income. Interest and dividend income increased $2.5 million, or 25.8%, to $12.2 million for the six months ended June 30, 2024, from $9.7 million for the six months ended June 30, 2023. The increase was due primarily to a $1.7 million increase in interest and fees on loans and an $856,000 increase in interest income on securities. The increase in interest and fees earned on loans was primarily due to a $27.6 million increase in the average amount of loans outstanding, from $371.6 million in the first six months of 2023 to $399.2 million in the first six months of 2024, and a 52 basis point increase in the yield earned on loans, from 4.38% for the first six months of 2023 to 4.90% in the first six months of 2024. The increase in the yield earned on loans during the first six months of 2024 was primarily due to higher yields on new loans and existing loans that have repriced at higher rates since the first six months of 2023, as a result of higher market interest rates. The increase in loans is consistent with the Company's strategy to grow the loan portfolio. The increase in interest on securities was primarily due to a 173 basis point increase in the yield earned on securities, from 2.14% for the first six months of 2023 to 3.87% in the first six months of 2024. The increase in yield was primarily due to the balance sheet repositioning strategies that the Company implemented during 2023.

Current wording

Interest and Dividend Income. Interest and dividend income increased $3.2 million, or 21.2%, to $18.3 million for the nine months ended September 30, 2024, from $15.1 million for the nine months ended September 30, 2023. The increase was due primarily to a $2.0 million increase in interest and fees on loans and an $1.1 million increase in interest income on securities. The increase in interest and fees earned on loans was primarily due to a $24.4 million increase in the average amount of loans outstanding, from $375.8 million in the first nine months of 2023 to $400.2 million in the first nine months of 2024, and a 41 basis point increase in the yield earned on loans, from 4.44% for the first nine months of 2023 to 4.85% in the first nine months of 2024. The increase in the yield earned on loans during the first nine months of 2024 was primarily due to higher yields on new loans and existing loans that have repriced at higher rates since the first nine months of 2023, as a result of higher market interest rates. The increase in loans is consistent with the Company's strategy to grow the loan portfolio. The increase in interest on securities was primarily due to a 157 basis point increase in the yield earned on securities, from 2.24% for the first nine months of 2023 to 3.81% in the first nine months of 2024. The increase in yield was primarily due to the balance sheet repositioning strategies that the Company implemented during 2023.

Previous wording

Interest Expense. Interest expense increased $2.6 million, or 76.5%, to $6.0 million for the six months ended June 30, 2024, from $3.4 million for the six months ended June 30, 2023. This increase was due to a $2.6 million increase in interest expense on deposits. The increase in interest expense on deposits was primarily due to a 144 basis point increase in the average rate paid on deposits and a $37.2 million increase in average interest-bearing deposits outstanding from the first six months of 2023 to the first six months of 2024. The increase in interest expense on deposits was primarily due to the increase in market rates of interest and a shift in our deposit mix. As market rates increased, many of our deposit customers transferred funds from noninterest bearing checking accounts and lower rate deposit accounts into higher rate certificates of deposit. The average balance of noninterest bearing checking accounts decreased $9.6 million, or 12.1%, NOW accounts decreased $2.5 million, or 8.1%, savings accounts decreased $12.3 million, or 22.0%, and money market accounts decreased $24.0 million, or 22.0%, respectively, from the first six months of 2023 to the first six months of 2024. During the same period, the average balance of certificates of deposits increased $76.0 million, or 84.6%. Interest expense on certificates of deposit increased $2.6 million from the first six months of 2023 to the first six months of 2024 as a result of the increase in average balance and also a 209 basis point increase in the average rate paid on these accounts.

Current wording

Interest Expense. Interest expense increased $3.2 million, or 55.2%, to $9.0 million for the nine months ended September 30, 2024, from $5.8 million for the nine months ended September 30, 2023. This increase was primarily due to a $3.3 million increase in interest expense on deposits. The increase in interest expense on deposits was primarily due to a 118 basis point increase in the average rate paid on deposits and a $31.8 million increase in average interest-bearing deposits outstanding from the first nine months of 2023 to the first nine months of 2024. The increase in interest expense on deposits was primarily due to the increase in market rates of interest and a shift in our deposit mix. As market rates increased, many of our deposit customers transferred funds from noninterest bearing checking accounts and lower rate deposit accounts into higher rate certificates of deposit. The average balance of noninterest bearing checking accounts decreased $7.2 million, or 9.3%, NOW accounts decreased $2.3 million, or 7.6%, savings accounts decreased $11.3 million, or 20.8%, and money market accounts decreased $15.3 million, or 15.0%, respectively, from the first nine months of 2023 to the first nine months of 2024. During the same period, the average balance of certificates of deposits increased $60.7 million, or 57.9%. Interest expense on certificates of deposit increased $3.2 million from the first nine months of 2023 to the first nine months of 2024 as a result of the increase in average balance and also a 150 basis point increase in the average rate paid on these accounts.

Previous wording

Net Interest Income. Net interest income decreased $79,000, or 1.3%, to $6.2 million for the six months ended June 30, 2024, from $6.3 million for the six months ended June 30, 2023. This decrease was primarily due to a $2.6 million increase in interest expense, partially offset by a $2.5 million increase in interest and dividend income. Our net interest rate spread decreased 33 basis points to 1.76% for the six months ended June 30, 2024, from 2.09% for the six months ended June 30, 2023. Our net interest margin decreased 14 basis points to 2.40%, from 2.54% over the same period.

Current wording

Net Interest Income. Net interest income decreased $24,000, or 0.3%, to $9.2 million for the nine months ended September 30, 2024. This decrease was primarily due to a $3.2 million increase in interest expense, partially offset by a $3.2 million increase in interest and dividend income. Our net interest rate spread decreased 25 basis points to 1.72% for the nine months ended September 30, 2024, from 1.97% for the nine months ended September 30, 2023. Our net interest margin decreased 10 basis points to 2.36%, from 2.46% over the same period.

Previous wording

Provision for Credit Losses. The provision for credit losses was $150,000 for the six months ended June 30, 2024 and the six months ended June 30, 2023, respectively. The provision was primarily due to an increase in loans outstanding and unfunded loan commitments.

Current wording

Provision for Credit Losses. The provision for credit losses was $225,000 for the nine months ended September 30, 2024 and the nine months ended September 30, 2023, respectively. The provision was primarily due to an increase in average loans outstanding for the nine months ended September 30, 2024 and an increase in average loans outstanding and loan commitments that are expected to fund for the nine months ended September 30, 2024 and the nine months ended September 30, 2023.

Previous wording

Noninterest Income. Noninterest income decreased $104,000, from $920,000 for the three months ended June 30, 2023 to $816,000 for the three months ended June 30, 2024. The decrease was primarily due to a $121,000 decrease in other noninterest income and an $84,000 decrease in the unrealized gain on marketable equity securities, partially offset by a $110,000 increase in net gain on sale of loans. The decrease in other noninterest income was primarily due to a $157,000 gain from the collection of benefits from a bank owned life insurance policy received in the second quarter of 2023. The decrease in unrealized gains on marketable equity securities was due to a decrease in the market value of mutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market value of equity securities in noninterest expense. The increase in net gain on sale of loans is primarily due to an increase in the origination and sale of mortgage loans, which increased to $7.3 million and $6.7 million, respectively, during the second quarter of 2024, compared to $1.7 million and $1.8 million, respectively, during the second quarter of 2023.

Current wording

Noninterest Income. Noninterest income increased $2.3 million, to $2.6 million for the nine months ended September 30, 2024, from $306,000 for the nine months ended September 30, 2023. The increase was primarily due to a $1.9 million net loss on sale of securities during the nine months ended September 30, 2023, a $439,000 increase in the unrealized gain on marketable equity securities and a $184,000 increase in net gain on sale of loans, partially offset by a $230,000 decrease in other noninterest income. The loss on sale of securities was a result of the balance sheet repositioning strategies that the Company implemented during 2023. The increase in unrealized gains on marketable equity securities was due to an increase in the market value of mutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market value of equity securities in noninterest expense. The increase in net gain on sale of loans is primarily due to an increase in the origination and sale of mortgage loans, which increased to $17.1 million and $17.6 million, respectively during the first nine months of 2024, compared to $8.9 million and $8.8 million, respectively, during the first nine months of 2023. The decrease in other noninterest income was primarily due to a $157,000 gain from the collection of benefits from a bank owned life insurance policy received in the second quarter of 2023 and a $110,000 gain on the sale of our former branch facility in West Allis in the third quarter of 2023.

Previous wording

Noninterest Expense. Noninterest expense decreased $117,000, or 2.5%, to $4.6 million for the three months ended June 30, 2024 from $4.7 million for the three months ended June 30, 2023. This decrease was primarily due to a $285,000 decrease in salaries and benefits expense and an $84,000 decrease in unrealized gains on marketable equity securities, partially offset by a $332,000 increase other noninterest expense. The decrease in salaries and benefits expense was primarily the result of cost savings initiatives implemented by the Company, including the review of all open positions prior to rehiring and a reduction-in-force ("RIF") implemented in April 2023. These actions have resulted in a reduction in the number of full-time equivalent employees from 106 at September 30, 2022, to 88 at June 30, 2024. The decrease in unrealized gains on marketable equity securities was due to a decrease in the market value of mutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market value of equity securities in noninterest income. The increase in other noninterest expense was primarily due to $358,000 in professional fees related to the renegotiation and renewal of our core data processing contract. The renegotiation of this contract is expected to result in a $1.5 million reduction in data processing expenses over the term of the contract.

Current wording

Noninterest Expense. Noninterest expense increased $319,000, or 2.5%, to $13.1 million for the nine months ended September 30, 2024 from $12.8 million for the nine months ended September 30, 2023. The increase was primarily due to a $439,000 increase in unrealized gains on marketable equity securities and a $374,000 increase in other noninterest expenses, partially offset by a $332,000 decrease in salaries and benefits expense. The increase in unrealized gains on marketable equity securities was due to an increase in the market value of mutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market value of equity securities in noninterest income. The increase in other noninterest expense was primarily due to $358,000 in professional fees related to the renegotiation and renewal of our core data processing contract. The renegotiation of this contract is expected to result in a $1.5 million reduction in data processing expenses over the term of the contract. The decrease in salaries and benefits expense was primarily the result of cost savings initiatives implemented by the Company, including the review of all open positions prior to rehiring and a reduction-in-force ("RIF") implemented in April 2023. These actions have resulted in a reduction in the number of full-time equivalent employees from 106 at September 30, 2022, to 88 at September 30, 2024. The positive impact of these initiatives was partially offset by a $176,000 increase in deferred compensation expense as a result of an increase in the value of our stock held in the deferred compensation plan during this period.

Previous wording

Income Tax Expense. We recorded an income tax benefit of $259,000 for the six months ended June 30, 2024, compared to a tax benefit of $424,000 for the six months ended June 30, 2023. The decrease in income tax benefit was primarily due to the decreased loss before taxes during the six months ended June 30, 2024 as compared to the loss before taxes for the six months ended June 30, 2023. Also contributing to this decrease was the impact of the change in Wisconsin tax law in July 2023. As a result of this change in tax law, we did not record any income tax benefit for Wisconsin state taxes for the six months ended June 30, 2024.

Current wording

Income Tax Expense. We recorded an income tax benefit of $557,000 for the nine months ended September 30, 2024, compared to income tax expense of $1.0 million for the nine months ended September 30, 2023. The change in income tax expense (benefit) was primarily due to the impact of the change in Wisconsin tax law in July 2023. As a result of this change in tax law, we did not record any income tax benefit for Wisconsin state taxes for the nine months ended September 30, 2024. In addition, during the second quarter of 2023, this tax law change resulted in a $1.8 million increase in the valuation allowance for deferred tax assets and the recording of a $98,000 reduction in tax benefits previously booked for the six months ended June 30, 2023.

Previous wording

The table above indicates that at June 30, 2024, in the event of a 100-basis point increase in interest rates, we would have experienced a 1.90% decrease in our EVE and in the event of a 100-basis point decrease in interest rates, we would have experienced a 3.58% increase in our EVE. In the event of a 200-basis point increase in interest rates at June 30, 2024, we would have experienced a 3.54% decrease in our EVE and in the event of a 200-basis point decrease in interest rates, we would have experienced a 3.66% increase in our EVE.

Current wording

The table above indicates that at September 30, 2024, in the event of a 100-basis point increase in interest rates, we would have experienced a 0.69% increase in our EVE and in the event of a 100-basis point decrease in interest rates, we would have experienced a 0.06% increase in our EVE. In the event of a 200-basis point increase in interest rates at September 30, 2024, we would have experienced a 1.50% decrease in our EVE and in the event of a 200-basis point decrease in interest rates, we would have experienced a 1.75% decrease in our EVE.

Previous wording

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, FHLB advances, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. At June 30, 2024, we had $74.5 million outstanding in FHLB advances. At June 30, 2024, we had $95.2 million in additional borrowing capacity at the Federal Home Loan Bank of Chicago, based on the level of qualifying real estate loans currently pledged to the FHLB. Additionally, at June 30, 2024, we had a $12.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at June 30, 2024. The Company also had an $10.0 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $12.2 million at June 30, 2024. The Company had not drawn on the Federal Reserve line as of June 30, 2024.

Current wording

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, FHLB advances, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. At September 30, 2024, we had $75.8 million outstanding in FHLB advances. At September 30, 2024, we had $92.5 million in additional borrowing capacity at the Federal Home Loan Bank of Chicago, based on the level of qualifying real estate loans currently pledged to the FHLB. Additionally, at September 30, 2024, we had a $12.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at September 30, 2024. The Company also had an $11.3 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $13.7 million at September 30, 2024. The Company had not drawn on the Federal Reserve line as of September 30, 2024.

Previous wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash used in operating activities was $1.2 million for the six months ended June 30, 2024, as compared to $836,000 for the six months ended June 30, 2023. Net cash used in operating activities for the six months ended June 30, 2024 primarily consisted of the origination of $9.5 million in mortgage loans held for sale and a $822,000 net loss, partially offset by $8.8 million in proceeds from the sale of mortgage loans held for sale and a $862,000 increase in accrued interest payable and other liabilities. Net cash used in operating activities for the six months ended June 30, 2023 primarily consisted of the origination of $4.0 million in mortgage loans held for sale and an $869,000 net loss, partially offset by $4.2 million in proceeds from the sale of mortgage loans held for sale. Net cash provided by investing activities was $1.1 million for the six months ended June 30, 2024, as compared to $15.0 million used in investing activities for the six months ended June 30, 2023. Net cash provided by investing activities during the six months ended June 30, 2024 consisted primarily of $7.6 million from maturities, calls and payments on available-for-sale securities, partially offset by a $4.0 million increase in loans and $2.0 million in purchases of available-for-sale securities. Net cash used in investing 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 and $720,000 in proceeds from cash value life insurance benefits. Net cash provided by financing activities was $3.7 million for the six months ended June 30, 2024, as compared to $10.3 million for the six months ended June 30, 2023. Net cash provided by financing activities for the first six months of 2024 primarily resulted from borrowings of $50.0 million of FHLB advances and a $5.9 million increase in advance payments by borrowers for taxes and insurance, partially offset by $46.5 million in principal payments on FHLB advances, a $4.8 million decrease in deposits and $855,000 in stock repurchases. Net cash provided by financing activities for the first six months of 2023 primarily resulted from $99.5 million of FHLB advances and a $7.1 million increase in advance payments by borrowers for taxes and insurance, partially offset by $79.5 million in principal payments on FHLB advances and a $16.5 million decrease in deposits.

Current wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $342,000 for the nine months ended September 30, 2024, as compared to cash used in operating activities of $324,000 for the nine months ended September 30, 2023. Net cash provided by operating activities for the nine months ended September 30, 2024 primarily consisted of $17.6 million in proceeds from the sale of mortgage loans held for sale and a $1.4 million increase in accrued interest payable and other liabilities, partially offset by the origination of $17.1 million in mortgage loans held for sale, a $981,000 net loss and a $726,000 increase in the fair value of marketable equity securities. Net cash used in operating activities for the nine months ended September 30, 2023 primarily consisted of the origination of $8.9 million in mortgage loans held for sale and a $4.5 million net loss, partially offset by $8.8 million in proceeds from the sale of mortgage loans held for sale, a $1.9 million net loss on sale of available-for-sale securities and deferred income tax expense of $1.0 million. Net cash provided by investing activities was $8.1 million for the nine months ended September 30, 2024, as compared to net cash used in investing activities of $16.4 million for the nine months ended September 30, 2023. Net cash provided by investing activities during the nine months ended September 30, 2024 consisted primarily of $13.6 million from maturities, calls and payments on available-for-sale securities, partially offset by a $2.9 million increase in loans and $2.0 million in purchases of available-for-sale securities. Net cash used in investing activities during the nine months ended September 30, 2023 consisted primarily of a $23.5 million increase in loans, the purchase of $21.4 million of available-for-sale securities and a $1.4 million increase in FHLB stock, partially offset by $19.5 million in proceeds from sales of available-for-sale securities and $9.7 million from maturities, calls and payments on available-for-sale securities. Net cash provided by financing activities was $4.0 million for the nine months ended September 30, 2024, as compared to $15.0 million for the nine months ended September 30, 2023. Net cash provided by financing activities for the first nine months of 2024 primarily resulted from borrowings of $72.0 million of FHLB advances and an $8.5 million increase in advance payments by borrowers for taxes and insurance, partially offset by $67.2 million in principal payments on FHLB advances, an $8.4 million decrease in deposits and $1.0 million in stock repurchases. Net cash provided by financing activities for the first nine months of 2023 primarily resulted from $100.5 million of FHLB advances and a $9.2 million increase in advance payments by borrowers for taxes and insurance, partially offset by $93.5 million in principal payment…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

At June 30, 2024, PyraMax Bank exceeded all of its regulatory capital requirements with a Tier 1 leverage capital level of $63.0 million, or 11.2% of adjusted total assets, which is above the well-capitalized required level of $28.2 million, or 5.0%. The Bank had total risk-based capital of $67.9 million, or 15.8% of risk-weighted assets, which is above the well-capitalized required level of $43.0 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.

Current wording

At September 30, 2024, PyraMax Bank exceeded all of its regulatory capital requirements with a Tier 1 leverage capital level of $63.1 million, or 11.2% of adjusted total assets, which is above the well-capitalized required level of $28.2 million, or 5.0%. The Bank had total risk-based capital of $68.1 million, or 16.0% of risk-weighted assets, which is above the well-capitalized required level of $42.5 million, or 10.0%. Management is not aware of any conditions or events since the most recent notification that would change our category. For additional information, see Note 13 of the Notes to Financial Statements.