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10-Q

1895 Bancorp of Wisconsin, Inc. /MD/ (BCOW)

10-Q 2022-11-10 For: 2022-09-30
View Original
Added on April 06, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 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 No. 001-40609

1895 Bancorp of Wisconsin, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland 61-1993378
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
7001 West Edgerton Avenue<br><br>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<br><br>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.

Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer  Accelerated filer 
Non-accelerated filer  Smaller reporting company 
Emerging growth company 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  No 

6,621,077 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding as of November 7, 2022.

1895 Bancorp of Wisconsin, Inc.

Form 10-Q

Table of Contents

Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Consolidated Balance Sheets at September 30, 2022 (unaudited) and December 31, 2021 1
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) 2
Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) 3
Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) 4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32
Item 3. Quantitative and Qualitative Disclosures About Market Risk 43
Item 4. Controls and Procedures 43
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 43
Item 1A. Risk Factors 43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 43
Item 3. Defaults Upon Senior Securities 43
Item 4. Mine Safety Disclosures 43
Item 5. Other Information 43
Item 6. Exhibits 44
SIGNATURES 45

Item 1. Financial Statements

1895 Bancorp of Wisconsin, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

December 31,<br>2021
Assets
Cash and due from banks 13,002 $ 65,300
Fed funds sold 2,700 1,503
Cash and cash equivalents 15,702 66,803
Marketable equity securities, stated at fair value 2,723 3,544
Available-for-sale securities, stated at fair value 118,414 112,440
Loans held for sale 365 1,183
Loans, net of allowance for loan losses of 3,180 and 2,858 at    September 30, 2022 and December 31, 2021, respectively 354,740 323,789
Premises and equipment, net 5,562 5,864
Mortgage servicing rights, net 1,890 2,036
Federal Home Loan Bank (FHLB) stock, at cost 3,205 3,032
Accrued interest receivable 1,106 948
Cash value of life insurance 14,209 13,892
Other assets 11,401 6,108
TOTAL ASSETS 529,317 $ 539,639
Liabilities and Stockholders’ Equity
Deposits 379,298 $ 384,501
Advance payments by borrowers for taxes and insurance 10,225 1,860
FHLB advances 56,951 55,442
Accrued interest payable 142 109
Other liabilities 6,798 6,834
TOTAL LIABILITIES 453,414 448,746
Preferred stock, 0.01 par value, 10,000,000 shares authorized at September 30, 2022    and December 31, 2021 — —
Common stock (par value 0.01 per share) Authorized - 90,000,000 shares at    September 30, 2022 and December 31, 2021 Issued – 6,253,854 at    September 30, 2022 and 6,402,571 at December 31, 2021 (includes 116,387 and    97,128 unvested shares, respectively) Outstanding – 6,223,791 at    September 30, 2022 and 6,372,508 at December 31, 2021 (includes 116,387 and    97,128 unvested shares, respectively) 63 64
Additional paid-in capital 50,943 52,805
Unallocated common stock of Employee Stock Ownership Plan (ESOP), 458,765 and    377,077 shares at September 30, 2022 and December 31, 2021, respectively (4,354 ) (3,432 )
Less treasury stock at cost, 30,063 shares at September 30, 2022 and December 31, 2021 (301 ) (301 )
Retained earnings 41,443 41,615
Accumulated other comprehensive (loss) income, net of income taxes (11,891 ) 142
Total stockholders’ equity 75,903 90,893
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 529,317 $ 539,639

All values are in US Dollars.

See accompanying notes to the unaudited consolidated financial statements.

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts) – Unaudited

Three months ended<br>September 30, Nine months ended<br>September 30,
2022 2021 2022 2021
Interest and dividend income:
Loans, including fees $ 3,563 $ 2,939 $ 9,862 $ 9,357
Securities, taxable 613 368 1,727 971
Other 139 74 279 181
Total interest and dividend income 4,315 3,381 11,868 10,509
Interest expense:
Interest-bearing deposits 196 171 551 620
Borrowed funds 200 178 550 579
Other interest-bearing liabilities 2 — 7 —
Total interest expense 398 349 1,108 1,199
Net interest income 3,917 3,032 10,760 9,310
Provision for loan losses — 30 210 30
Net interest income after provision for loan losses 3,917 3,002 10,550 9,280
Noninterest income:
Service charges and other fees 229 242 722 713
Loan servicing, net 167 204 515 971
Net gain on sale of loans 83 448 266 1,361
Net gain on sale of securities — — — 12
Increase in cash surrender value of insurance 108 103 317 304
Unrealized (loss) on marketable equity securities (159 ) (377 ) (892 ) (5 )
Other 51 8 58 15
Total noninterest income 479 628 986 3,371
Noninterest expense:
Salaries and employee benefits 2,528 2,137 6,846 7,290
Advertising and promotions 33 52 146 84
Data processing 221 206 630 611
Occupancy and equipment 326 341 1,010 1,076
FDIC assessment 36 38 99 105
Other 1,107 1,028 3,149 3,086
Total noninterest expense 4,251 3,802 11,880 12,252
Income (loss) before income taxes 145 (172 ) (344 ) 399
Income tax expense (benefit) 21 (57 ) (172 ) 45
Net income (loss) $ 124 $ (115 ) $ (172 ) $ 354
Earnings (loss) per common share:
Basic $ 0.02 $ (0.02 ) $ (0.03 ) $ 0.06
Diluted $ 0.02 $ (0.02 ) $ (0.03 ) $ 0.06
Average common shares outstanding:
Basic 5,810,185 6,011,247 5,842,184 6,035,289
Diluted 5,983,241 6,011,247 5,842,184 6,262,722

See accompanying notes to the unaudited consolidated financial statements.

1895 Bancorp of Wisconsin, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands) - Unaudited

Three months ended<br>September 30, Nine months ended<br>September 30,
2022 2021 2022 2021
Net income (loss) $ 124 $ (115 ) $ (172 ) $ 354
Other comprehensive (loss) income:
Unrealized holding (losses) arising during the<br>   period on available-for-sale securities (4,549 ) (39 ) (16,483 ) (392 )
Reclassification adjustment for (gains) realized in net<br>   income on available-for-sale securities — — — (12 )
Other comprehensive (loss) before tax effect (4,549 ) (39 ) (16,483 ) (404 )
Tax effect of other comprehensive (loss) income items 1,228 10 4,451 108
Other comprehensive (loss), net of tax (3,321 ) (29 ) (12,032 ) (296 )
Comprehensive (loss) income $ (3,197 ) $ (144 ) $ (12,204 ) $ 58

See accompanying notes to the unaudited consolidated financial statements.

1895 Bancorp of Wisconsin, Inc.

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 June 30, 2022 $ 64 $ 52,855 $ (4,401 ) $ (301 ) $ 41,319 $ (8,570 ) $ 80,966
Net income — — — — 124 — 124
Other comprehensive loss — — — — — (3,321 ) (3,321 )
ESOP shares committed to be released (4,892 shares) — 2 47 — — — 49
Repurchase and retirement of shares-stock repurchase program <br>   (184,270 shares) (1 ) (1,994 ) — — — — (1,995 )
Stock compensation expense — 80 — — — — 80
Balance as of September 30, 2022 $ 63 $ 50,943 $ (4,354 ) $ (301 ) $ 41,443 $ (11,891 ) $ 75,903
Balance as of June 30, 2021 $ 49 $ 20,188 $ (1,580 ) $ (1,228 ) $ 42,000 $ 871 $ 60,300
Net loss — — — — (115 ) — (115 )
Other comprehensive (loss) — — — — — (29 ) (29 )
Purchase of treasury stock — — — (136 ) — — (136 )
ESOP shares committed to be released (3,420 shares) — (10 ) 18 — — — 8
Gross proceeds from stock offering 15 35,505 — — — — 35,520
Stock offering costs — (1,976 ) — — — — (1,976 )
Purchase of 131,727 shares by ESOP — — (1,429 ) — — — (1,429 )
Retirement of treasury shares from stock offering — (1,053 ) — 1,053 — — 0
Stock compensation expense — 65 — — — — 65
Balance as of September 30, 2021 $ 64 $ 52,719 $ (2,991 ) $ (311 ) $ 41,885 $ 842 $ 92,208
Balance as of January 1, 2022 $ 64 $ 52,805 $ (3,432 ) $ (301 ) $ 41,615 $ 142 $ 90,893
Net loss — — — — (172 ) — (172 )
Other comprehensive loss — — — — — (12,033 ) (12,033 )
Reimbursement of stock offering costs — 2 — — — — 2
Purchase of 96,446 shares by ESOP — — (1,062 ) — — — (1,062 )
ESOP shares committed to be released (14,757 shares) — 11 140 — — — 151
Repurchase and retirement of shares-stock repurchase program <br>   (184,270 shares) (1 ) (1,994 ) — — — — (1,995 )
Retirement of common stock — (81 ) — — — — (81 )
Stock compensation expense — 200 — — — — 200
Balance as of September 30, 2022 $ 63 $ 50,943 $ (4,354 ) $ (301 ) $ 41,443 $ (11,891 ) $ 75,903
Balance as of January 1, 2021 $ 49 $ 20,134 $ (1,615 ) $ (1,228 ) $ 41,531 $ 1,138 $ 60,009
Net income — — — — 354 — 354
Other comprehensive loss — — — — — (296 ) (296 )
Purchase of treasury stock — — — (151 ) — (151 )
ESOP shares committed to be released (6,930 shares) — 6 53 — — — 59
Gross proceeds from stock offering 15 35,505 — — — — 35,520
Stock offering costs — (1,976 ) — — — — (1,976 )
Purchase of 131,727 shares by ESOP — — (1,429 ) — — — (1,429 )
Issuance of treasury stock – stock compensation plan — (15 ) — 15 — — 0
Retirement of common stock — (70 ) — — — — (70 )
Retirement of treasury shares from stock offering — (1,053 ) — 1,053 — — 0
Stock compensation expense — 188 — — — — 188
Balance as of September 30, 2021 $ 64 $ 52,719 $ (2,991 ) $ (311 ) $ 41,885 $ 842 $ 92,208

See accompanying notes to the unaudited consolidated financial statements.

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) - Unaudited

Nine months ended September 30,
2022 2021
(unaudited)
Cash flows from operating activities:
Net (loss) income $ (172 ) $ 354
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net amortization of investment securities 121 81
Depreciation 464 497
Provision for loan losses 210 30
Net change in fair value of marketable equity securities 892 5
Net gain on sale of available for sale securities — (12 )
Stock compensation expense 200 188
Adjustment to mortgage servicing rights valuation — (370 )
(Benefit from) provision for deferred income tax (172 ) 45
Originations of mortgage loans held for sale (19,006 ) (90,869 )
Proceeds from sales of mortgage loans held for sale 20,416 102,235
Net gain on sale of mortgage loans held for sale (266 ) (1,361 )
ESOP compensation 151 59
Net change in cash value of life insurance (317 ) (304 )
Changes in operating assets and liabilities:
Net change in mortgage servicing rights 146 94
Accrued interest receivable and other assets (907 ) (568 )
Accrued interest payable and other liabilities (6 ) 915
Net cash provided by operating activities 1,754 11,019
Cash flows from investing activities
Proceeds from sales of available-for-sale securities — 1,018
Maturities, prepayments, and calls of available-for-sale securities 14,561 9,296
Purchases of available-for-sale securities (37,139 ) (39,218 )
Purchase of marketable equity securities (71 ) (87 )
Net increase in loans (31,486 ) (10,715 )
Purchase of FHLB stock, net (174 ) —
Net capital expenditures for premises and equipment (162 ) (194 )
Net cash used in investing activities (54,471 ) (39,900 )
Cash flows from financing activities
Net decrease in deposits (5,203 ) (5,534 )
Net increase in advance payments by borrowers for taxes and insurance 8,365 9,245
Proceeds from issuance of Federal Home Loan Bank advances 10,000 —
Principal payments on Federal Home Loan Bank advances (8,491 ) (12,464 )
Gross proceeds from stock offering — 35,520
Stock offering costs — (1,976 )
Reimbursement of stock offering costs 2 —
Repurchase of common stock for cancellation (1,995 ) —
Purchases of treasury stock — (151 )
Purchase of ESOP shares (1,062 ) (1,429 )
Net cash provided by financing activities 1,616 23,211
Net decrease in cash and cash equivalents (51,101 ) (5,670 )
Cash and cash equivalents at beginning of period 66,803 92,526
Cash and cash equivalents at end of period $ 15,702 $ 86,856
Supplemental cash flow information:
Cash paid during the year for interest $ 1,075 $ 1,269
Noncash activities:
Retirement of common stock $ 78 $ 70
Loans transferred to held for sale 325 9,448
Issuance of treasury stock - stock compensation plan — 15
Retirement of treasury stock — 1,053

See accompanying notes to the unaudited consolidated financial statements.

1895 BANCORP OF WISCONSIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

1895 Bancorp of Wisconsin, Inc., a Maryland corporation (the “Company” or “New 1895 Bancorp”) was formed to serve as the stock holding company for PyraMax Bank, FSB (the “Bank”) as part of the mutual-to-stock conversion of 1895 Bancorp of Wisconsin, MHC. Upon completion of the conversion, which occurred on July 14, 2021, 1895 Bancorp of Wisconsin, MHC and 1895 Bancorp of Wisconsin, a federal corporation (“Old 1895 Bancorp”), ceased to exist and New 1895 Bancorp became the successor corporation to Old 1895 Bancorp. The conversion was accomplished by the merger of 1895 Bancorp of Wisconsin, MHC with and into Old 1895 Bancorp followed by the merger of Old 1895 Bancorp with and into New 1895 Bancorp. The shares of New 1895 Bancorp common stock that were offered for sale in connection with the conversion represented the majority ownership interest in Old 1895 Bancorp owned by 1895 Bancorp of Wisconsin, MHC. On July 14, 2021, public stockholders of Old 1895 Bancorp received 1.3163 shares of common stock of New 1895 Bancorp in exchange for each of their shares of Old 1895 Bancorp common stock. The shares of Old 1895 Bancorp common stock owned by 1895 Bancorp of Wisconsin, MHC were canceled at that time. The conversion and offering were completed on July 14, 2021, and New 1895 Bancorp was organized as a fully public stock holding company, with 100% of the common stock being held by the public. The consolidated financial statements and other financial information contained in these consolidated financial statements are for New 1895 Bancorp.

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

PyraMax Bank is a stock savings bank headquartered in Greenfield, Wisconsin. PyraMax Bank operates as a full-service financial institution, providing a full range of financial services, including the granting of commercial, residential, and consumer loans and acceptance of deposits from individual customers and small businesses in the metropolitan Milwaukee, Wisconsin, area. PyraMax Bank is subject to competition from other financial and nonfinancial institutions providing financial products. In addition, PyraMax Bank is subject to the regulations of certain regulatory agencies and undergoes periodic examination by those regulatory agencies.

The accompanying unaudited interim consolidated financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position, results of operations, changes in stockholders' equity and cash flows as of and for the periods presented. Certain amounts from prior periods have been reclassified to conform with current period presentation.

The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the audited annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 29, 2022 and amended on April 29, 2022.

In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the fair value of investment securities, financial instruments and mortgage servicing rights, and the valuation of deferred income tax assets. Actual results could differ from those estimates.

On April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies and define an “emerging growth company.” As an emerging growth company, the Company may delay adoption of new or revised financial accounting standards until such date that the standards are required to be adopted by non-issuer companies. If such standards would not apply to non-issuer companies, no deferral would be applicable. The Company intends to take advantage of the benefits of the extended transition periods allowed under the JOBS Act.

Accordingly, the Company’s financial statements may not be comparable to those of public companies that adopt new or revised financial accounting standards as of an earlier date. The effective dates of the recent accounting standards in Note 2 reflect those that relate to non-issuer companies.

6

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

Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this quarterly report on Form 10-Q were issued.

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

NOTE 2 – RECENT ACCOUNTING STANDARDS

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

ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, amending the effective date for this standard. ASU 2016-13 will be effective for fiscal years beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2022. In March 2022, the FASB issued ASU 2022-02—Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, ASU 2022-02 requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6. ASU No. 2022-02 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The amendments should be applied prospectively, however, an entity has the option to apply a modified retrospective transition method related to the recognition and measurement of TDRs, which would result in a cumulative effect adjustment to retained earnings in the period of adoption. Management has elected to defer adoption of ASC 2016-13, as well as ASU 2022-02, until January 1, 2023. The Company has implemented and is currently testing and evaluating a third-party software solution to assist with the adoption of ASU 2016-13. The impact of adopting ASU 2016-13 on the Company’s consolidated financial statements is still being quantified. Management will continue to progress on its implementation project plan and improve the Company’s approach throughout the deferral period.

ASU 2016-02, Leases (Topic 842). This ASU affects any entity that enters into a lease and is intended to increase the transparency and comparability of financial reporting. The ASU requires, among other changes, a lessee to recognize on its balance sheet a lease asset and a lease liability for those leases previously classified as operating leases. The lease asset will represent the right to use the underlying asset for the lease term, and the lease liability will represent the discounted value of the required lease payments to the lessor. The ASU will also require entities to disclose key information about leasing arrangements. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted.

On November 15, 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, amending the effective date for this standard. On June 3, 2020, the FASB issued ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, updating the effective date for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company adopted ASC 842 on January 1, 2022. The cumulative effect did not have a material impact on the Company's statement of operations. Where the Company is a lessee, the Company recorded an initial increase in both assets and liabilities of $529,000 to reflect the right of use asset and the lease liability.

NOTE 3 – AVAILABLE-FOR-SALE SECURITIES

The amortized costs and fair values of securities available-for-sale were as follows:

September 30, 2022
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(in thousands)
U.S. Treasury notes $ 29,576 $ — $ (3,241 ) $ 26,335
Obligations of states and political subdivisions 21,398 4 (3,736 ) 17,666
Government-sponsored mortgage-backed securities 77,048 — (9,266 ) 67,782
Asset-backed securities 5,222 — (21 ) 5,201
Certificates of deposit 1,459 — (29 ) 1,430
Total $ 134,703 $ 4 $ (16,293 ) $ 118,414
December 31, 2021
--- --- --- --- --- --- --- --- --- ---
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(in thousands)
U.S. Treasury notes $ 19,501 $ 8 $ (25 ) $ 19,484
Obligations of states and political subdivisions 20,758 207 (205 ) 20,760
Government-sponsored mortgage-backed securities 64,049 563 (463 ) 64,149
Asset-backed securities 6,479 45 (1 ) 6,523
Certificates of deposit 1,459 65 — 1,524
Total $ 112,246 $ 888 $ (694 ) $ 112,440

Available-for-sale securities with a carrying value of $3.7 million and $1.8 million were pledged as collateral at September 30, 2022 and December 31, 2021, respectively.

The amortized costs and fair values of securities available-for-sale, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. In addition, expected maturities will differ from contractual maturities for mortgage-backed securities and asset-backed securities, as the expected repayment terms may be less than the underlying mortgage pool contractual maturities. Therefore, these securities are not included in the maturity categories in the maturity summary below.

September 30, 2022
Amortized Cost Fair Value
(in thousands)
Debt and other securities:
Due in one year or less $ 1,788 $ 1,769
Due after one through 5 years 21,397 19,497
Due after 5 through 10 years 20,486 17,231
Due after 10 years 8,762 6,934
Total debt and other securities 52,433 45,431
Mortgage-related securities 77,048 67,782
Asset-backed securities 5,222 5,201
Total $ 134,703 $ 118,414

8

NOTE 3 – AVAILABLE-FOR-SALE SECURITIES (continued)

Gross unrealized losses on securities available-for-sale and the fair values of the related securities, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position were as follows:

September 30, 2022
Less than 12 months 12 months or longer Total
Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss
(in thousands)
U.S. Treasury notes $ 26,335 $ (3,241 ) $ — $ — $ 26,335 $ (3,241 )
Obligations of states and political<br>   subdivisions 9,642 (1,655 ) 7,602 (2,081 ) 17,244 (3,736 )
Government-sponsored mortgage-backed<br>   securities 47,967 (5,414 ) 19,815 (3,852 ) 67,782 (9,266 )
Asset-backed securities 4,917 (21 ) — — 4,917 (21 )
Certificates of deposit 1,430 (29 ) — — 1,430 (29 )
Total $ 90,291 $ (10,360 ) $ 27,417 $ (5,933 ) $ 117,708 $ (16,293 )
December 31, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Less than 12 months 12 months or longer Total
Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss
(in thousands)
U.S. Treasury notes $ 12,971 $ (25 ) $ — $ — $ 12,971 $ (25 )
Obligations of states and political<br>   subdivisions 5,414 (82 ) 4,105 (123 ) 9,519 (205 )
Government-sponsored mortgage-backed<br>   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 September 30, 2022 and December 31, 2021, respectively, the Company had 93 and 24 debt securities with unrealized losses representing aggregate depreciation of approximately 12.2% and 1.1%, respectively, from their respective amortized cost basis. These unrealized losses relate principally to changes in interest rates and were not caused by changes in the financial condition of the issuers, the quality of any underlying assets or applicable credit enhancements. In analyzing whether unrealized losses on debt securities are other-than-temporary, management considers whether the securities are issued by a government body or agency, whether a rating agency has downgraded the securities, industry analysts’ reports, the financial condition and performance of the issuer and the quality of any underlying assets or credit enhancements. As management has the intent and ability to hold these debt securities to projected recovery, none of these declines are deemed to be other-than-temporary.

9

NOTE 3 – AVAILABLE-FOR-SALE SECURITIES (continued)

The following table provides a summary of the proceeds from sales of securities available-for-sale, as well as gross gains and losses, for the periods presented:

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
(in thousands) (in thousands)
Proceeds from sales of securities available-for-sale $ — $ — $ — $ 1,018
Gross realized gains $ — $ — $ — $ 12
Gross realized losses — — — —
Net realized gains $ — $ — $ — $ 12

NOTE 4 – LOANS

Major classifications of loans are summarized as follows:

September 30,<br>2022 December 31,<br>2021
(in thousands)
Commercial:
Real estate $ 207,714 $ 185,223
Land development — 1,400
Other 45,074 38,160
Residential real estate:
First mortgage 83,900 80,661
Construction 2,653 3,388
Consumer:
Home equity and lines of credit 17,601 17,032
Other 115 128
Subtotal 357,057 325,992
Net deferred loan costs 863 655
Allowance for loan losses (3,180 ) (2,858 )
Loans, net $ 354,740 $ 323,789

Deposit accounts in an overdrawn position and reclassified as loans totaled $13,000 and $106,000 at September 30, 2022 and December 31, 2021, respectively.

The Company provides several types of loans to its customers, including commercial, residential, construction and consumer loans. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to one borrower or to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. While the Company’s credit risks are geographically concentrated within the metropolitan Milwaukee, Wisconsin area, there are no concentrations with individual borrowers or groups of related borrowers.

During the normal course of business, the Company may transfer a portion of a loan as a participation loan to another financial institution in order to manage portfolio risk. In order to be eligible for sales treatment, all cash flows from the loan must be divided proportionately, and rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties, and no loan holder can have the right to pledge or exchange the entire loan. As of September 30, 2022 and December 31, 2021, respectively, the Company had transferred $30.4 million and $32.1 million in participation loans which were eligible for sales treatment to other financial institutions, all of which continue to be serviced by the Company.

10

NOTE 4 – LOANS (continued)

An analysis of past due loans is presented below:

September 30, 2022
30-89 Days Past Due 90 Days or More Past Due Total Past Due Current Loans Total Loans
(in thousands)
Commercial:
Real estate $ — $ — $ — $ 207,714 $ 207,714
Land development — — — — —
Other — — — 45,074 45,074
Residential real estate:
First mortgage 339 — 339 83,561 83,900
Construction — — — 2,653 2,653
Consumer:
Home equity and lines of credit 27 — 27 17,574 17,601
Other — — — 115 115
Total $ 366 — $ 366 $ 356,691 $ 357,057
December 31, 2021
--- --- --- --- --- --- --- --- --- --- ---
30-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans
(in thousands)
Commercial:
Real estate — — — $ 185,223 $ 185,223
Land development — — — 1,400 1,400
Other 33 — 33 38,127 38,160
Residential real estate:
First mortgage 342 — 342 80,319 80,661
Construction — — — 3,388 3,388
Consumer:
Home equity and lines of credit — — — 17,032 17,032
Other — — — 128 128
Total $ 375 — $ 375 $ 325,617 $ 325,992

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

A summary of activity in the allowance for loan losses for the three and nine months ended September 30, 2022 and September 30, 2021, respectively, is presented below:

Commercial Residential Consumer Total
(in thousands)
Three months ended September 30, 2022
Allowance for loan losses
Beginning balance $ 1,924 $ 745 $ 463 $ 3,132
Provision for loan losses — — — —
Loans charged-off — — (1 ) (1 )
Recoveries 4 — 45 49
Ending balance $ 1,928 $ 745 $ 507 $ 3,180
Three months ended September 30, 2021
Allowance for loan losses
Beginning balance $ 1,618 $ 745 $ 369 $ 2,732
Provision for loan losses 30 — — 30
Loans charged-off — — (1 ) (1 )
Recoveries 4 — 23 27
Ending balance $ 1,652 $ 745 $ 391 $ 2,788

11

NOTE 4 – LOANS (continued)

Commercial Residential Consumer Total
(in thousands)
Nine months ended September 30, 2022
Allowance for loan losses
Beginning balance $ 1,657 $ 745 $ 456 $ 2,858
Provision for loan losses 210 — — 210
Loans charged-off — — (5 ) (5 )
Recoveries 61 — 56 117
Ending balance $ 1,928 $ 745 $ 507 $ 3,180
Nine months ended September 30, 2021
Allowance for loan losses
Beginning balance $ 1,609 $ 745 $ 349 $ 2,703
Provision for loan losses 30 — — 30
Loans charged-off — — (18 ) (18 )
Recoveries 13 — 60 73
Ending balance $ 1,652 $ 745 $ 391 $ 2,788

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

September 30, 2022
Commercial Residential Consumer Total
(in thousands)
Loans:
Individually evaluated for impairment $ 6,198 $ 1,132 $ 34 $ 7,364
Collectively evaluated for impairment 246,590 85,421 17,682 349,693
Total loans $ 252,788 $ 86,553 $ 17,716 $ 357,057
Allowance for loan losses:
Individually evaluated for impairment $ — $ — $ — $ —
Collectively evaluated for impairment 1,928 745 507 3,180
Total allowance for loan losses $ 1,928 $ 745 $ 507 $ 3,180
December 31, 2021
--- --- --- --- --- --- --- --- ---
Commercial Residential Consumer Total
(in thousands)
Loans:
Individually evaluated for impairment $ 4,833 $ 1,357 $ 37 $ 6,227
Collectively evaluated for impairment 219,950 82,692 17,123 319,765
Total loans $ 224,783 $ 84,049 $ 17,160 $ 325,992
Allowance for loan losses:
Individually evaluated for impairment $ — $ — $ — $ —
Collectively evaluated for impairment 1,657 745 456 2,858
Total allowance for loan losses $ 1,657 $ 745 $ 456 $ 2,858

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

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

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

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

12

NOTE 4 – LOANS (continued)

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

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

September 30, 2022
Pass Watch and Special Mention Substandard Total
(in thousands)
Commercial:
Real estate $ 199,479 $ 4,059 $ 4,176 $ 207,714
Land development — — — —
Other 42,290 762 2,022 45,074
Total $ 241,769 $ 4,821 $ 6,198 $ 252,788
December 31, 2021
--- --- --- --- --- --- --- --- ---
Pass Watch and Special Mention Substandard Total
(in thousands)
Commercial:
Real estate $ 172,172 $ 8,963 $ 4,088 $ 185,223
Land development 1,400 — — 1,400
Other 37,414 1 745 38,160
Total $ 210,986 $ 8,964 $ 4,833 $ 224,783

There were no loans rated Doubtful or Loss as of September 30, 2022 or December 31, 2021, respectively.

Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing according to the contractual terms of the loan. Management determines that a loan is impaired or non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent. Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans is presented below:

September 30, 2022
Performing Non Performing Total
(in thousands)
Residential real estate:
First mortgage $ 83,175 $ 725 $ 83,900
Construction 2,653 — 2,653
Consumer:
Home equity and lines of credit 17,567 34 17,601
Other 115 — 115
Total $ 103,510 $ 759 $ 104,269

13

NOTE 4 – LOANS (continued)

December 31, 2021
Performing Non Performing Total
(in thousands)
Residential real estate:
First mortgage $ 79,722 $ 939 $ 80,661
Construction 3,388 — 3,388
Consumer:
Home equity and lines of credit 16,954 78 17,032
Other 128 — 128
Total $ 100,192 $ 1,017 $ 101,209

Information regarding impaired loans is presented below:

As of and for the Nine Months Ended September 30, 2022
Recorded Investment Unpaid Principal Reserve Average Investment Interest Recognized
(in thousands)
Impaired loans with reserve:
Commercial:
Real estate $ — $ — $ — $ — $ —
Land development — — — — —
Other — — — — —
Residential real estate:
First mortgage — — — — —
Construction — — — — —
Consumer:
Home equity and lines of credit — — — — —
Other — — — — —
Total impaired loans <br>with reserve $ — $ — $ — $ — $ —
Impaired loans with no reserve:
Commercial:
Real estate $ 4,176 $ 4,176 NA $ 3,897 $ 111
Land development — — NA — —
Other 2,022 2,022 NA 1,009 86
Residential real estate:
First mortgage 1,132 1,349 NA 1,231 50
Construction — — NA — —
Consumer:
Home equity and lines of credit 34 39 NA 35 1
Other — — NA — —
Total impaired loans <br>with no reserve 7,364 7,586 NA 6,172 248
Total impaired loans $ 7,364 $ 7,586 $ — $ 6,172 $ 248

14

NOTE 4 – LOANS (continued)

As of and for the Year Ended December 31, 2021
Recorded Investment Unpaid Principal Reserve Average Investment Interest Recognized
(in thousands)
Impaired loans with reserve:
Commercial:
Real estate $ — $ — $ — $ — $ —
Land development — — — — —
Other — — — — —
Residential real estate:
First mortgage — — — — —
Construction — — — — —
Consumer:
Home equity and lines of credit — — — — —
Other — — — — —
Total impaired loans <br>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 <br>with no reserve 6,227 6,498 NA 8,758 337
Total impaired loans $ 6,227 $ 6,498 $ — $ 8,758 $ 337

There were no additional funds committed to impaired loans as of September 30, 2022 and December 31, 2021, respectively.

Nonperforming loans are as follows:

September 30, 2022 December 31, 2021
(in thousands)
Nonaccrual loans, other than troubled debt restructurings $ 575 $ 826
Nonaccrual loans, troubled debt restructurings 184 191
Total nonperforming loans $ 759 $ 1,017
Troubled debt restructurings, accruing $ 406 $ 418

There were no loans modified as troubled debt restructurings during the nine months ended September 30, 2022 and year ended December 31, 2021, respectively.

The CARES Act and related legislation included an option to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and December 31, 2021. The relief could only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The Company elected to adopt these provisions of the CARES Act. As of September 30, 2022, the Company had 1 to 3 month deferrals of approximately $245,000 in interest, escrow, and principal payments on $4.6 million in outstanding loans.

15

NOTE 4 – LOANS (continued)

The Company considers a troubled debt restructuring in default if it becomes past due more than 90 days. There were no troubled debt restructurings within the past twelve months for which there was a default during the nine months ended September 30, 2022 and 2021.

Information on non-accrual loans is presented below:

September 30,<br>2022 December 31,<br>2021
(in thousands)
Commercial:
Real estate $ — $ —
Land development — —
Other — —
Residential real estate:
First mortgage 725 939
Construction — —
Consumer:
Home equity and lines of credit 34 78
Other — —
Total non-accrual loans $ 759 $ 1,017
Total non-accrual loans to total loans 0.21 % 0.31 %
Total non-accrual loans to total assets 0.14 % 0.19 %

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 $309.6 million and $332.9 million as of September 30, 2022 and December 31, 2021, respectively.

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

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021
(in thousands) (in thousands)
Mortgage servicing rights beginning balance $ 1,939 $ 2,109 $ 2,036 $ 1,806
Additions 10 137 57 457
Amortization (59 ) (164 ) (203 ) (551 )
Decrease in valuation allowance — — — 370
Mortgage servicing rights ending balance $ 1,890 $ 2,082 $ 1,890 $ 2,082
Fair value at beginning of period $ 3,273 $ 2,361 $ 2,477 $ 1,806
Fair value at end of period $ 3,335 $ 2,285 $ 3,335 $ 2,285

The estimated fair value of mortgage servicing rights was determined using a valuation model that calculates the present value of expected future servicing and ancillary income, net of expected servicing costs. The model incorporates various assumptions such as discount rates, prepayment speeds and ancillary income and servicing costs. As of September 30, 2022, the model used discount rates ranging from 9.5% to 13%, and prepayment speeds ranging from 7.7% to 38.2%, respectively, both of which were based on market data from independent organizations. As of September 30, 2021 the model used discount rates ranging from 10% to 13.5%, and prepayment speeds ranging from 12.5% to 39.7%, respectively, both of which were based on market data from independent organizations.

16

NOTE 5 – MORTGAGE SERVICING RIGHTS (continued)

The following table summarizes the estimated future amortization expense for mortgage servicing rights for the annual periods indicated. The projections of amortization expense are based on existing asset balances as of September 30, 2022. The actual amortization expense the Company recognizes in any given period may vary significantly depending on changes in interest rates, market conditions and regulatory requirements.

Estimated future amortization as of September 30, 2022: (in thousands)
2022 $ 82
2023 229
2024 207
2025 185
2026 163
Thereafter 1,024
Total $ 1,890

NOTE 6 – DEPOSITS

The composition of deposits is summarized below:

September 30,<br>2022 December 31, 2021
(in thousands)
Non-interest bearing checking $ 109,280 $ 106,664
Interest bearing checking 35,444 37,467
Money market 88,137 94,823
Statement savings 68,275 64,954
Certificates of deposit 78,162 80,593
Total $ 379,298 $ 384,501

The Company held $7.9 million and $10.0 million in certificates of deposit which met or exceeded the FDIC insurance limit of $250,000 as of September 30, 2022 and December 31, 2021, respectively. The Company did not hold any brokered deposits as of September 30, 2022 and December 31, 2021.

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

(in thousands)
2022 $ 22,992
2023 43,226
2024 1,365
2025 9,950
2026 350
Thereafter 279
Total $ 78,162

NOTE 7 – FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank advances consist of the following:

September 30, 2022 December 31, 2021
Rate Amount Rate Amount
(dollars in thousands)
Fixed rate, fixed term advance, maturing Feb 2022 — $ — 1.62 % $ 6,500
Fixed rate, fixed term advance, maturing Feb 2023 1.62 % 6,500 1.62 % 6,500
Fixed rate, fixed term advance, maturing July 2027 2.90 % 5,000 — —
Putable advance, maturing Oct 2029 first put option date Nov 2020 — — 1.03 % 10,000
Putable advance, maturing Feb 2030 first put option date Feb 2023 0.98 % 5,000 0.98 % 5,000
Putable advance, maturing Mar 2030 first put option date Mar 2025 0.89 % 10,000 0.89 % 10,000
Putable advance, maturing Mar 2032 first put option date Mar 2027 1.74 % 10,000 — —
Putable advance, maturing July 2029 first put option date January 2023 1.68 % 5,000 — —
Advance structured note, payments due monthly, maturing Feb 2030 — — 7.47 % 542
Advance structured note, payments due monthly, maturing April 2030 1.05 % 7,679 1.05 % 8,405
Advance structured note, payments due monthly, maturing May 2030 1.19 % 7,772 1.19 % 8,495
Total $ 56,951 $ 55,442

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

September 30, 2022
Weighted Average Rate Amount
(dollars in thousands)
2022 1.12 % $ 486
2023 1.50 % 8,457
2024 1.12 % 1,980
2025 1.12 % 2,002
2026 1.12 % 2,024
Thereafter 0.93 % 42,002
Total $ 56,951

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

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

The Company has pledged qualifying loans of $251.4 million and $232.7 million as collateral for Federal Home Loan Bank advances as of September 30, 2022 and December 31, 2021, respectively. Collateral values to borrow against were approximately $171.0 million and $147.5 million as of September 30, 2022 and December 31, 2021, respectively. Federal Home Loan Bank advances were also secured by approximately $3.2 million and $3.0 million of Federal Home Loan Bank stock held by the Company as of September 30, 2022 and December 31, 2021, respectively. The Company’s available and unused portion of this borrowing agreement totaled $112.6 million and $90.9 million as of September 30, 2022 and December 31, 2021, respectively. Additional borrowing would require additional stock purchase.

Additionally, at September 30, 2022 the Company had a $15.0 million federal funds rate line of credit with the BMO Harris Bank, none of which was drawn at September 30, 2022. The Company also had a $10.0 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $13.2 million at September 30, 2022. The Company had not drawn on the Federal Reserve line as of September 30, 2022.

NOTE 8 – INCOME TAXES

Income tax expense (benefit) was $21,000 and ($57,000) for the three months ended September 30, 2022 and 2021, respectively, and ($172,000) and $45,000 for the nine months ended September 30, 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 September 30, 2022, and December 31, 2021, the deferred tax valuation allowance was $934,000, reducing our net deferred tax asset to $8.4 million and $3.8 million at each respective date.

The board and management continue to assess the deferred tax assets in light of recent changes in market conditions, forecasted future projected income and available tax planning strategies. As such, there may be additional deferred tax asset impairment in subsequent periods.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company may be involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial statements. No material legal proceedings existed at September 30, 2022.

In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These instruments include commitments to extend credit and commitments to sell loans. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the balance sheets.

The Company’s exposure to credit losses is represented by the contractual, or notional, amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments. As some of the commitments are expected to expire without being drawn upon, and some of the commitments may not be drawn upon to the total extent of the commitment, the notional amount of these commitments does not necessarily represent future cash requirements of the Company.

The contractual amounts of off-balance-sheet credit-related financial instruments are summarized below:

September 30, 2022
Fixed Rate Variable Rate Total
(in thousands)
Commitments to extend credit $ 12,257 $ 72,300 $ 84,557
Standby letters of credit — 150 150
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program 1,365 — 1,365
Commitments to sell loans 2,184 — 2,184
Overdraft protection program commitments 3,933 — 3,933
December 31, 2021
--- --- --- --- --- --- ---
Fixed Rate Variable Rate Total
(in thousands)
Commitments to extend credit $ 21,586 $ 56,921 $ 78,507
Standby letters of credit — 175 175
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance Program 1,214 — 1,214
Commitments to sell loans 5,410 — 5,410
Overdraft protection program commitments 3,993 — 3,993

20

NOTE 9 – COMMITMENTS AND CONTINGENCIES (continued)

Commitments to extend credit are agreements to lend to a customer at fixed or variable rates, as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The amount of collateral obtained upon extension of credit is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable; inventory; property, plant and equipment; real estate; and stocks and bonds. Commitments to sell loans represent commitments obtained by the Company from a secondary market agency to purchase mortgages from the Company at specified interest rates and within specified periods of time.

Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, all standby letters of credit have expiration dates within one year. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting these commitments. Standby letters of credit are not reflected in the financial statements, since recording the fair value of these guarantees would not have a significant impact on the financial statements.

The Company participates in the Federal Home Loan Bank of Chicago Mortgage Partnership Finance Program (the “Program”). In addition to entering into forward commitments to sell mortgage loans to a secondary market agency, the Company enters into firm commitments to deliver loans to the Federal Home Loan Bank of Chicago through the Program. Under the Program, loans are funded by the Federal Home Loan Bank of Chicago, and the Company receives an agency fee reported as a component of gain on sale of loans. The Company had $711,000 of commitments to deliver loans through the Program as of September 30, 2022. Once delivered to the Program, the Company provides a contractually agreed-upon credit enhancement and performs servicing of the loans. Under the credit enhancement, the Company is liable for losses on loans delivered through the Program after application of any mortgage insurance and a contractually agreed-upon credit enhancement provided by the Program, subject to an agreed-upon maximum. The Company receives a fee for this credit enhancement. The Company records a liability for expected losses in excess of anticipated credit enhancement fees. As of September 30, 2022, and December 31, 2021, the Company had no liability outstanding related to the Program.

Unfunded commitments under overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit may or may not require collateral and may or may not contain a specific maturity date.

NOTE 10 – EMPLOYEE STOCK OWNERSHIP PLAN

The Company established a tax qualified Employee Stock Ownership Plan (“ESOP”) for the benefit of its employees, effective January 1, 2019, in connection with the mutual holding company reorganization and organization of Old 1895 Bancorp. Eligible employees become 20% vested in their accounts after 1 year of service, 40% vested after 2 years of service, 60% vested after 3 years of service, 80% vested after 4 years of service, and 100% vested after 5 or more years of service, or earlier, upon death, disability or attainment of normal retirement age.

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

As part of the mutual-to-stock conversion and stock offering completed on July 14, 2021, the ESOP refinanced the aforementioned loan with New 1895 Bancorp, enabling the ESOP to purchase an aggregate of 283,360 additional shares of common stock. During the nine months ended September 30, 2022, the ESOP purchased an additional 96,446 shares at an average price of $10.95. As of September 30, 2022, the ESOP had purchased all of the additional 283,360 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 difference between the average fair market value and the cost of the shares allocated by the ESOP is recorded as an adjustment to stockholders’ equity. The Company recognized $49,000 and $10,000 in compensation expense for the three months ended September 30, 2022 and September 30, 2021, respectively, and $151,000 and $61,000 for the nine months ended September 30, 2022 and September 30, 2021, respectively.

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

September 30,<br>2022 December 31,<br>2021
(dollars in thousands)
Shares committed to be released 14,757 22,401
Total allocated shares 37,641 15,239
Total unallocated shares 458,765 377,077
Total ESOP shares 511,163 414,717
Fair value of unallocated shares (based on $10.58 and $10.99 share<br>   price as of September 30, 2022 and December 31, 2021, respectively) $ 4,854 $ 4,144

NOTE 11 – RELATED PARTY TRANSACTIONS

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

September 30,<br>2022 December 31, 2021
(in thousands)
Beginning balance $ 932 $ 1,034
Adjustments due to changes in directors, executive officers, and/or principal<br>   stockholders — 202
New loans 4 53
Repayments (71 ) (357 )
Ending balance $ 865 $ 932

Deposits from directors, executive officers, and their affiliates totaled $759,000 and $1.1 million at September 30, 2022 and December 31, 2021, respectively.

The Company utilizes the services of law firms in which certain of the Company’s directors are partners. Fees paid to the firms for these services were immaterial for the three and nine months ended September 30, 2022 and 2021, respectively.

NOTE 12 – FAIR VALUE MEASUREMENTS

ASC Topic 820, Fair Value Measurements and Disclosures defines fair values, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This accounting standard applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements. The standard also emphasizes that fair value (i.e., the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. When considering the assumptions that market participants would use in pricing an asset or liability, this accounting standard establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and

the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels.

Level 1 inputs – In general, fair values determined by Level 1 inputs use quoted market prices in active markets for identical assets or liabilities that we have the ability to access.

Level 2 inputs – Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets where there are few transactions and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs – Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Some assets and liabilities, such as securities available-for-sale, are measured at fair value on a recurring basis under GAAP. Other assets and liabilities, such as impaired loans, may be measured at fair value on a nonrecurring basis.

23

NOTE 12 – FAIR VALUE MEASUREMENTS (continued)

Following is a description of the Company’s valuation methodology and significant inputs used for each asset and liability measured at fair value on a recurring or nonrecurring basis.

Securities – Marketable equity securities and securities available-for-sale may be classified as Level 1 or Level 2 measurements within the fair value hierarchy. Level 1 securities include equity securities traded on a national exchange. The fair value measurements of Level 1 securities are based on the quoted market price of those securities. Level 2 securities include U.S. Treasury notes, U.S. government and agency securities, obligations of states and political subdivisions, corporate debt securities and mortgage-related securities. The fair value measurements of Level 2 securities are obtained from independent pricing services and are based on recent sales of similar securities and other observable market data.

Impaired loans – The Company does not record loans at fair value on a recurring basis. However, periodically, a loan is considered impaired and is reported at fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. Independent appraisals are obtained to determine the fair values of underlying collateral, and generally utilize one or more valuation methodologies, which typically include comparable sales and income approaches. Management routinely evaluates the fair value measurements of independent appraisers and adjusts those valuations based on differences noted between actual selling prices of collateral and the most recently appraised value. Such adjustments are usually significant, which results in a Level 3 classification. All other impaired loan measurements are based on the present value of expected future cash flows discounted at the applicable effective interest rate and are not considered fair value measurements.

Rate lock commitments – Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in other assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements for fixed-rate commitments and also considers the difference between current levels of interest rates and the committed rates. While there are Level 2 and 3 inputs used in the valuation models, the Company has determined that one or more of the inputs significant in the valuation of both of the mortgage banking derivatives fall within Level 3 of the fair value hierarchy. The change in fair value is recorded through an adjustment to the statement of operations, within mortgage banking income.

Mortgage servicing rights – The Company utilizes an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of mortgage servicing rights. The model utilizes prepayment assumptions to project cash flows related to the mortgage servicing rights based upon the current interest rate environment, which is then discounted to estimate an expected fair value of the mortgage servicing rights. The model considers characteristics specific to the underlying mortgage portfolio, such as: contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges and costs to service. Given the significance of the unobservable inputs utilized in the estimation process, mortgage servicing rights are classified as Level 3 within the fair value hierarchy. The Company records the mortgage servicing rights at the lower of amortized cost or fair value.

Assets measured at fair value on a recurring basis are summarized below, along with the level of the fair value hierarchy of the inputs utilized to determine such fair value.

Recurring Fair Value Measurements Using
September 30,<br>2022 Level 1 Level 2 Level 3
(in thousands)
Marketable equity securities $ 2,723 $ 2,723 $ — $ —
Securities available-for-sale:
U.S. Treasury notes 26,336 — 26,335 —
Obligations of states and political subdivisions 17,665 — 17,666 —
Government-sponsored mortgage-backed securities 67,782 — 67,782 —
Asset-backed securities 5,201 — 5,201 —
Certificates of deposit 1,430 — 1,430 —
Total $ 121,137 $ 2,723 $ 118,414 $ —

24

NOTE 12 – FAIR VALUE MEASUREMENTS (continued)

Recurring Fair Value Measurements Using
December 31,<br>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 $ —

Impaired loans are measured at fair value on a non-recurring basis. There were no loans that were considered impaired with a specific valuation allowance as of September 30, 2022 and December 31, 2021.

Mortgage servicing rights are measured at fair value on a non-recurring basis. There was no impairment on mortgage servicing rights as of September 30, 2022 and December 31, 2021.

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

September 30, 2022
Carrying Value Level 1 Level 2 Level 3
(in thousands)
Financial assets:
Cash and cash equivalents $ 15,702 $ 15,702 $ — $ —
Available-for-sale securities 118,414 — 118,414 —
Marketable equity securities 2,723 2,723 — —
Loans held for sale 365 — 365 —
Loans 354,740 — — 333,696
Rate lock commitments 10 — — 10
Accrued interest receivable 1,106 1,106 — —
Federal Home Loan Bank stock 3,205 — — 3,205
Cash value of life insurance 14,209 — — 14,209
Financial liabilities:
Deposits 379,298 301,137 — 77,102
Advance payments by borrowers for taxes and insurance 10,225 10,225 — —
Federal Home Loan Bank advances 56,951 — — 58,085
Accrued interest payable 142 142 — —

25

NOTE 12 – FAIR VALUE MEASUREMENTS (continued)

December 31, 2021
Carrying Value Level 1 Level 2 Level 3
(in thousands)
Financial assets:
Cash and cash equivalents $ 66,803 $ 66,803 $ — $ —
Available-for-sale securities 112,440 — 112,440 —
Marketable equity securities 3,544 3,544 — —
Loans held for sale 1,183 — 1,183 —
Loans 323,789 — — 323,182
Rate lock commitments 30 — — 30
Accrued interest receivable 948 948 — —
Federal Home Loan Bank Stock 3,032 — — 3,032
Cash value of life insurance 13,892 — — 13,892
Financial liabilities:
Deposits 384,501 303,908 — 80,473
Advance payments by borrowers for taxes and insurance 1,860 1,860 — —
Federal Home Loan Bank advances 55,442 — — 55,981
Accrued interest payable 109 109 — —

The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based on quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters that could affect the estimates. Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business.

Deposits with no stated maturities are defined as having a fair value equivalent to the amount payable on demand. This prohibits adjusting fair value derived from retaining those deposits for an expected future period of time. This component, commonly referred to as a deposit base intangible, is neither considered in the above amounts, nor is it recorded as an intangible assets on the balance sheets. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

NOTE 13 – EQUITY AND REGULATORY MATTERS

PyraMax Bank is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, PyraMax Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about their components, risk weightings and other factors. The Company is exempt from consolidated capital requirements as those requirements do not apply to certain small bank holding companies with consolidated assets under $3 billion.

Quantitative measures established by regulation to ensure capital adequacy require PyraMax Bank to maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1 and Total capital to risk-weighted assets, and of Tier 1 capital to average assets. PyraMax Bank met all applicable capital adequacy requirements as of September 30, 2022 and December 31, 2021, respectively.

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

September 30, 2022
Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(dollars in thousands)
PyraMax Bank
Leverage (Tier 1) $ 64,937 11.9 % $ 21,761 4.0 % $ 27,201 5.0 %
Risk-based:
Common Equity Tier 1 64,937 16.9 % 17,325 4.5 % 25,025 6.5 %
Tier 1 64,937 16.9 % 23,100 6.0 % 30,800 8.0 %
Total 68,117 17.7 % 30,800 8.0 % 38,501 10.0 %
December 31, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(dollars in thousands)
PyraMax Bank
Leverage (Tier 1) $ 65,179 11.9 % $ 21,838 4.0 % $ 27,298 5.0 %
Risk-based:
Common Equity Tier 1 65,179 19.4 % 15,124 4.5 % 21,846 6.5 %
Tier 1 65,179 19.4 % 20,166 6.0 % 26,888 8.0 %
Total 68,037 20.2 % 26,888 8.0 % 33,610 10.0 %

On July 29, 2022, the Company adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to 5% of the current outstanding shares. On August 26, 2022, the Company received a non-objection letter from the Federal Reserve Bank of Chicago ("FRB") to repurchase 319,766 shares, which represented 5% of the shares outstanding at the time discussions were held with the FRB. The Company began purchasing shares on September 1, 2022 and through September 30, 2022, the Company had repurchased 184,270 shares for a total purchase price of $2 million.

NOTE 14 – EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding, adjusted for weighted average unallocated ESOP shares, during the applicable period, excluding outstanding participating securities. Participating securities include non-vested restricted stock awards and restricted stock units, though no actual shares of common stock related to restricted stock units are issued until the settlement of such units, to the extent holders of these securities receive non-forfeitable dividends or dividend equivalents at the same rate as holders of the Company’s common stock. Diluted earnings per share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. Antidilutive options are disregarded in earnings per share calculations. For the three and nine months ended September 30, 2022, zero and 182,457 average shares, respectively, were excluded from the computation of diluted EPS because the effect would be antidilutive. For the three and nine months ended September 30, 2021, 209,508 and zero average shares were excluded from the computation of diluted EPS because the effect would be antidilutive.

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

Three months ended September 30,
2022 2021
(In thousands, except per share amounts)
Net income (loss) $ 124 $ (115 )
Weighted shares outstanding for basic EPS
Weighted average shares outstanding 6,271 6,269
Less: Weighted average unallocated ESOP shares 461 258
Weighted average shares outstanding for basic EPS 5,810 6,011
Additional dilutive shares 173 —
Weighted average shares outstanding for dilutive EPS 5,983 6,011
Basic income (loss) per share $ 0.02 $ (0.02 )
Diluted income (loss) per share $ 0.02 $ (0.02 )
Nine months ended September 30,
--- --- --- --- --- ---
2022 2021
(In thousands, except per share amounts)
Net (loss) income $ (172 ) $ 354
Weighted shares outstanding for basic EPS
Weighted average shares outstanding 6,279 6,261
Less: Weighted average unallocated ESOP shares 437 226
Weighted average shares outstanding for basic EPS 5,842 6,035
Additional dilutive shares — 228
Weighted average shares outstanding for dilutive EPS 5,842 6,263
Basic (loss) income per share $ (0.03 ) $ 0.06
Diluted (loss) income per share $ (0.03 ) $ 0.06

NOTE 15 – STOCK BASED COMPENSATION

Stock-Based Compensation Plans

On March 27, 2020, the Company’s stockholders approved the 1895 Bancorp of Wisconsin, Inc. 2020 Equity Incentive Plan (the “2020 Equity Incentive Plan”). A total of 238,467 (313,894 stock options adjusted for the conversion) stock options and 95,387 (125,557 shares adjusted for the conversion) restricted shares were approved for award. As of September 30, 2022, no shares of common stock remained available for grant as stock options, restricted stock or restricted stock units under the 2020 Equity Incentive Plan. The stock options granted to employees and 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.

On August 26, 2022, the Company’s stockholders approved the 1895 Bancorp of Wisconsin, Inc. 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”). A total of 354,200 stock options and 141,680 restricted shares were approved for award. The stock options granted to employees and non-employee directors under this plan vest in five installments with the first installment vesting on the first anniversary of the date of grant. The exercise price for all stock options granted is equal to the quoted NASDAQ market close price on the date that the awards were granted and expire ten years after the grant date, if not exercised. The restricted stock awards granted to employees and non-employee directors under this plan vest in five installments with the first installment vesting on the first anniversary of the date of grant.

Upon approval of the 2022 Equity Incentive Plan, if awards under the 2020 Equity Incentive Plan are forfeited and again become available for grant, no further awards will be granted under the 2020 Equity Incentive Plan. However, any restricted stock or stock options outstanding under the 2020 Equity Incentive Plan on the approval date of the 2022 Equity Incentive Plan will remain outstanding and subject to the terms and conditions of the 2020 Equity Incentive Plan.

Accounting for Stock-Based Compensation Plan

The fair 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 nine months ended September 30, 2022 and September 30, 2021, respectively:

For the Nine Months Ended
September 30,<br>2022 September 30,<br>2022
Dividend yield 0.00 % 0.00 %
Risk-free interest rate 3.13 % 0.96 %
Expected volatility 24.64 % 24.64 %
Weighted average expected life 6.5 6.5
Weighted average per share value of options $ 3.25 $ 2.10

Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock options represent the period of time that the options are expected to be outstanding and is based on the historical results from the previous awards. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the actual volatility of 1895 Bancorp of Wisconsin, Inc. stock for the weighted average life time period prior to issuance date.

29

NOTE 15 – STOCK BASED COMPENSATION (continued)

A summary of the Company’s stock option activity for the nine months ended September 30, 2022 is presented below.

Stock Options Shares Weighted Average Exercise Price Weighted Average Remaining in Contractual Term (Years) Aggregate Intrinsic Value
Outstanding December 31, 2021 300,720 $ 6.19 8.40 $ 1,443,067
Granted 107,505 9.93 6.50 —
Exercised — — — —
Forfeited — — — —
Outstanding September 30, 2022 408,225 7.17 8.24 $ 1,557,498
Options exercisable at September 30, 2022 112,824 6.09 7.61 $ 553,129

The following table summarizes information about the Company’s nonvested stock option activity for the nine months ended September 30, 2022:

Stock Options Shares Weighted Average Grant Date Fair Value
Nonvested at December 31, 2021 248,043 $ 1.58
Granted 107,505 3.25
Vested(1) (60,147 ) 1.56
Forfeited — —
Nonvested at September 30, 2022 295,401 $ 2.19

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

The Company amortizes the expense related to stock options as compensation expense over the vesting period. The Company recognized $33,000 and $26,000 in stock option expense during the three months ended September 30, 2022 and 2021. Additionally, the Company recognized $80,000 and $74,000 in stock option expense during the nine months ended September 30, 2022 and 2021, respectively.

At September 30, 2022, the Company had $593,000 in estimated unrecognized compensation costs related to outstanding stock options that is expected to be recognized over a weighted average period of

3.96

years.

The following table summarizes information about the Company’s restricted stock activity for the nine months ended September 30, 2022:

Restricted Stock Shares Weighted Average Grant Date Fair Value
Nonvested at December 31, 2021 97,128 $ 6.25
Granted 42,791 9.93
Vested(1)(2) (23,532 ) 6.20
Forfeited — —
Nonvested at September 30, 2022 116,387 $ 7.61

(1) Includes 263 shares vested under a restricted stock inducement award to the Company’s President and Chief Executive Officer.

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

The Company amortizes the expense related to restricted stock awards as compensation expense over the vesting period. The Company recognized $47,000 and $39,000 in restricted stock expense during the three months ended September 30, 2022 and 2021, respectively. Additionally, the Company recognized $120,000 and $114,000 in restricted stock shares expense during the nine months ended September 30, 2022 and 2021, respectively. At September 30, 2022, the Company had $804,000 of unrecognized compensation expense related to restricted stock shares that is expected to be recognized over a weighted average period of

3.83

years.

NOTE 16 – LEASES

The Company has operating leases consisting primarily of real estate leases. The Company leases real estate property for bank branches and office space with terms extending through 2028. As of September 30, 2022, the Company reported $471,000 of right-of-use asset and $471,000 lease liability in its consolidated balance sheet under other assets and other liabilities, respectively. The Company’s average remaining maturity for its leases is

5.5

years and its average discount rate is 1.79%.

At September 30, 2022, the Company was obligated under noncancelable operating leases for office space and other commitments. Rent expense under operating leases, included in net occupancy and equipment expense, was $19,000 and $57,000 for the three and nine months ended September 30, 2022, respectively, and $21,000 and $62,000 for the three and nine months ended September 30, 2021, respectively.

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

(in thousands)
2022 $ 21
2023 87
2024 89
2025 91
2026 94
Thereafter 112
Amounts representing interest (23 )
Total $ 471

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

General

Management’s discussion and analysis of financial condition and results of operations at September 30, 2022 and for the three and nine months ended September 30, 2022 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

• statements of our goals, intentions and expectations;

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

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

• estimates of our risks and future costs and benefits.

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

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

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

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

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

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

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

• our ability to access cost-effective funding;

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

• demand for loans and deposits in our market area;

• our ability to implement and change our business strategies;

• competition among depository and other financial institutions;

• adverse changes in the securities or secondary mortgage markets;

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

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

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

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

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

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

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

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

• changes in consumer spending, borrowing and savings habits;

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

• our ability to retain key employees;

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

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

Additionally, the outbreak of COVID-19 may continue to adversely impact a broad range of industries in which the Company’s customers operate and will continue to impair their ability to fulfill their financial obligations to the Company.

Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020 as a $2 trillion legislative package. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to continue to have a material impact on our operations.

The CARES Act and related legislation included an option to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and December 31, 2021. The relief could only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The Company elected to adopt these provisions of the CARES Act. As of September 30, 2022, the Company had 1 to 3 month deferrals of approximately $245,000 in interest, escrow, and principal payments on $4.6 million in outstanding loans.

The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new loan program called the Paycheck Protection Program (“PPP”). As a qualified SBA lender, we were automatically authorized to originate PPP loans. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP. As part of the first round of this program, the Bank had funded 246 PPP loans totaling $30.3 million, with no outstanding balance remaining as of September 30, 2022.

On December 27, 2020, the Relief Act became law and provided an additional $284 billion for the PPP, as well as extending the PPP through June 30, 2021. As of September 30, 2022, we had funded 143 second round PPP loans totaling $10.5 million, of which $10.2 million had been forgiven as of September 30, 2022.

Because of the above and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Additional factors that may affect our results are discussed in our Annual Report on Form 10-K under the heading “Risk Factors.”

Critical Accounting Policies

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 loan 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 most recent Form 10-K (fiscal year ended December 31, 2021) filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022 and amended on April 29, 2022.

Comparison of Financial Condition at September 30, 2022 and December 31, 2021

Total Assets. Total assets decreased $10.3 million, or 1.9%, to $529.3 million at September 30, 2022 from $539.6 million at December 31, 2021. This decrease was primarily due to a $51.1 million decrease in cash and cash equivalents, partially offset by a $31.0 million increase in loans held for investment, a $6.0 million increase in available-for-sale investment securities and a $5.3 million increase in other assets.

Cash and Cash Equivalents. Cash and cash equivalents decreased $51.1 million, or 76.5%, to $15.7 million at September 30, 2022 from $66.8 million at December 31, 2021. This decrease was primarily due to the purchase of $37.1 million in available-for-sale securities, $31.5 million of net loan growth, $19.0 million in originations of loans held for sale, $8.5 million in principal payments on FHLB advances and a $5.2 million decrease in deposits. These decreases were partially offset by $10.0 million from the issuance of additional FHLB advances, $20.4 million from the sale of mortgage loans held for sale, $14.6 million from maturities, prepayments and calls of available-for-sale securities and an $8.4 million net increase in advance payments by borrowers for taxes and insurance.

Available-for-Sale Securities. Available-for-sale securities increased $6.0 million, or 5.3%, to $118.4 million at September 30, 2022, from $112.4 million at December 31, 2021. The increase was primarily due to purchases of securities totaling $37.1 million during the nine months ended September 30, 2022, partially offset by maturities, prepayments and calls of securities totaling $14.6 million and a reduction in the unrealized gain held within the portfolio of $16.5 million, resulting in a net unrealized loss of $16.3 million at September 30, 2022. The increase in securities purchases was the result of management’s strategy, implemented in the fourth quarter of 2021, to invest a significant portion of the Company’s liquidity that was held in cash and cash equivalents into securities with higher yields to increase future earnings, while maintaining a high degree of liquidity.

Loans Held for Sale. Loans held for sale decreased $818,000, or 69.1%, to $365,000 at September 30, 2022, from $1.2 million at December 31, 2021. This decrease was due primarily to a decrease in the volume of first mortgage residential real estate loan originations sold into the secondary market as a result of the changing interest rate environment. Mortgage loan originations and sales were $19.0 million and $20.4 million, respectively, during the first nine months of 2022 compared to $90.9 million and $102.2 million, respectively, for the same period in 2021.

Net Loans. Net loans held for investment increased $30.9 million, or 9.6%, to $354.7 million at September 30, 2022, from $323.8 million at December 31, 2021. The majority of this growth was in commercial real estate loans which increased $22.5 million during this period to $207.7 million. Also contributing to this growth was an increase in non-real estate commercial loans which grew $6.9 million during this period to $45.1 million. The growth in these types of loans is consistent with the Company’s long-term loan strategy to increase the level of commercial and commercial real estate loans within our portfolio.

Other Assets. Other assets increased $5.3 million, or 86.7%, from $6.1 million at December 31, 2021 to $11.4 million at September 30, 2022. This increase was primarily due to a $4.6 million increase in deferred tax assets, which was primarily the result of the increase in unrealized losses on available-for-sale securities. Other assets also increased as a result of a $471,000 increase in right of use lease assets as a result of the adoption of ASU 2016-02 in the first quarter of 2022, and a $189,000 increase in prepaid expenses, which was primarily due to the payment of annual insurance premiums in the first quarter of 2022.

Deposits. Deposits decreased $5.2 million, or 1.4%, to $379.3 million at September 30, 2022, from $384.5 million at December 31, 2021. This decrease was primarily due to a $6.7 million decrease in money market accounts, a $2.4 million decrease in certificates of deposit and a $2.0 million decrease in interest bearing checking accounts. These decreases were partially offset by a $3.3 million increase in statement savings accounts and a $2.6 million increase in noninterest bearing checking accounts.

Advance Payments by Borrowers for Taxes and Insurance. Advance payments by borrowers for taxes and insurance increased $8.3 million to $10.2 million at September 30, 2022 from $1.9 million at December 31, 2021. The increase was due to normal seasonal activity.

Borrowings. Borrowings, consisting entirely of FHLB advances, increased $1.5 million, or 2.7%, to $56.9 million at September 30, 2022, from $55.4 million at December 31, 2021.

Total Stockholders’ Equity. Total stockholders’ equity decreased $15.0 million to $75.9 million at September 30, 2022, from $90.9 million at December 31, 2021. The decrease was primarily due to a $16.5 million increase in net unrealized losses on available-for-sale securities, which net of taxes, resulted in a $12.0 million decrease in stockholders’ equity. The increase in net unrealized losses on available-for-sale securities resulted primarily from changes in market interest rates. The decrease in stockholders' equity was also partially due to the repurchase and retirement of the Company's common stock during the third quarter of 2022 and an increase in unallocated common stock held by the ESOP. During the third quarter of 2022, the Company repurchased 184,270 shares of its common stock, pursuant to the stock repurchase program that was adopted by the Board of Directors on July 29, 2022. The

repurchase of these shares resulted in a $2.0 million decrease in stockholders' equity. See "Note 13 - Equity and Regulatory Matters" for additional information regarding the Company's stock repurchase program. The increase in unallocated common shares held by the ESOP, was the result of additional shares purchased by the ESOP during the nine months ended September 30, 2022, which resulted in a $1.1 million decrease in stockholders' equity.

Average Balances and Yields

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

Three Months Ended September 30,
2022 2021
Average<br>Outstanding<br>Balance Interest and<br>Dividends Yield/Cost<br>Rate Average<br>Outstanding<br>Balance Interest and<br>Dividends Yield/Cost<br>Rate
(Dollars in thousands)
Interest-earning assets:
Loans(1) $ 352,651 $ 3,563 4.01 % $ 330,353 $ 2,939 3.53 %
Securities available-for-sale 124,578 613 1.95 % 89,748 368 1.63 %
Other interest-earning assets 22,264 139 2.48 % 95,316 74 0.31 %
Total interest-earning<br>   assets 499,493 4,315 3.43 % 515,417 3,381 2.60 %
Non-interest-earning assets 35,090 32,739
Total assets $ 534,583 $ 548,156
Interest-earning liabilities:
NOW accounts $ 35,186 $ 10 0.12 % $ 34,134 $ 9 0.10 %
Money market accounts 93,344 79 0.34 % 93,554 60 0.25 %
Savings accounts 67,977 9 0.05 % 66,416 8 0.05 %
Certificates of deposit 80,213 98 0.49 % 80,046 94 0.47 %
Total interest-bearing deposits 276,720 196 0.28 % 274,150 171 0.25 %
Federal Home Loan Bank advances 57,435 200 1.38 % 57,002 178 1.24 %
Other interest-bearing liabilities 9,910 2 0.08 % 10,851 ― ―
Total interest-bearing<br>   liabilities 344,065 398 0.46 % 342,003 349 0.41 %
Non-interest-bearing deposits 105,359 97,151
Other non-interest-bearing liabilities 6,597 6,500
Total liabilities 456,021 445,654
Total stockholders’ equity 78,562 102,502
Total liabilities and<br>   stockholders’ equity $ 534,583 $ 548,156
Net interest income $ 3,917 $ 3,032
Net interest-earning assets $ 155,428 $ 173,414
Interest rate spread(2) 2.97 % 2.19 %
Net interest margin(3) 3.11 % 2.33 %
Average interest-earning assets to<br>   average interest-bearing<br>   liabilities 145.17 % 150.71 %

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

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

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

Nine Months Ended September 30,
2022 2021
Average<br>Outstanding<br>Balance Interest and<br>Dividends Yield/Cost<br>Rate Average<br>Outstanding<br>Balance Interest and<br>Dividends Yield/Cost<br>Rate
(Dollars in thousands)
Interest-earning assets:
Loans(1) $ 340,626 $ 9,862 3.87 % $ 333,235 $ 9,357 3.75 %
Securities available-for-sale 128,920 1,727 1.79 % 76,520 971 1.70 %
Other interest-earning assets 33,193 279 1.12 % 86,195 181 0.28 %
Total interest-earning<br>   assets 502,739 11,868 3.16 % 495,950 10,509 2.83 %
Non-interest-earning assets 34,827 33,274
Total assets $ 537,566 $ 529,224
Interest-earning liabilities:
NOW accounts $ 36,016 $ 26 0.10 % $ 33,191 $ 27 0.11 %
Money market accounts 95,612 223 0.31 % 98,041 200 0.27 %
Savings accounts 67,358 25 0.05 % 64,493 27 0.06 %
Certificates of deposit 81,813 277 0.45 % 81,888 366 0.60 %
Total interest-bearing deposits 280,799 551 0.26 % 277,613 620 0.30 %
Federal Home Loan Bank advances 56,673 550 1.30 % 63,363 579 1.22 %
Other interest-bearing liabilities 6,919 7 0.13 % 7,937 — ―
Total interest-bearing<br>   liabilities 344,391 1,108 0.43 % 348,913 1,199 0.46 %
Non-interest-bearing deposits 104,787 96,056
Other non-interest-bearing<br>   liabilities 6,515 5,791
Total liabilities 455,693 450,760
Total stockholders’ equity 81,873 78,464
Total liabilities and<br>   stockholders’ equity $ 537,566 $ 529,224
Net interest income $ 10,760 $ 9,310
Net interest-earning assets $ 158,348 $ 147,037
Interest rate spread(2) 2.73 % 2.37 %
Net interest margin(3) 2.86 % 2.51 %
Average interest-earning<br>   assets to average interest-bearing<br>   liabilities 145.98 % 142.14 %

(1) Includes loan fees (expense) of $352,000 and ($39,000) for the nine months ended September 30, 2022 and 2021, respectively.

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

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

Rate/Volume Analysis

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

Three Months Ended September 30,<br>2022 vs. 2021
Increase (Decrease) Due to
Volume Rate Total<br>Increase<br>(Decrease)
(Dollars in thousands)
Interest-earning assets:
Loans $ 207 $ 417 $ 624
Securities 162 83 245
Other (8 ) 73 65
Total interest-earning assets 361 573 934
Interest-bearing liabilities:
NOW ― (1 ) (1 )
Money market deposits ― (19 ) (19 )
Savings (1 ) ― (1 )
Certificates of deposit ― (4 ) (4 )
Total interest-bearing deposits (1 ) (24 ) (25 )
Borrowings (2 ) (20 ) (22 )
Other ― (2 ) (2 )
Total interest-bearing liabilities (3 ) (46 ) (49 )
Change in net interest income $ 358 $ 527 $ 885
Nine Months Ended September 30,<br>2022 vs. 2021
--- --- --- --- --- --- --- --- --- ---
Increase (Decrease) Due to
Volume Rate Total<br>Increase<br>(Decrease)
(Dollars in thousands)
Interest-earning assets:
Loans $ 210 $ 295 $ 505
Securities 699 57 756
Other (25 ) 123 98
Total interest-earning assets 884 475 1,359
Interest-bearing liabilities:
NOW (3 ) 4 1
Money market deposits 5 (28 ) (23 )
Savings (1 ) 3 2
Certificates of deposit ― 89 89
Total interest-bearing deposits 1 68 69
Borrowings 70 (41 ) 29
Other ― (7 ) (7 )
Total interest-bearing liabilities 71 20 91
Change in net interest income $ 955 $ 495 $ 1,450

Comparison of Operating Results for the Three Months Ended September 30, 2022 and 2021

Net Income (Loss). We recorded net income of $124,000 for the three months ended September 30, 2022, an increase of $239,000 from a net loss of $115,000 recorded for the three months ended September 30, 2021. This increase was primarily due to a $915,000 million increase in net interest income after provision for loan losses, which was partially offset by a $449,000 increase in noninterest expense, a $149,000 decrease in noninterest income and a $78,000 increase in income tax expense.

Interest and Dividend Income. Interest and dividend income increased $934,000, or 27.6%, to $4.3 million for the three months ended September 30, 2022, from $3.4 million for the three months ended September 30, 2021. The increase was due primarily to a $624,000 increase in interest and fees on loans and a $245,000 increase in interest earned on taxable securities. The increase in interest and fees earned on loans was primarily due to a $22.3 million increase in the average amount of loans outstanding, from $330.4 million in the third quarter of 2021 to $352.7 million in the third quarter of 2022, and a 48 basis point increase in the yield earned on loans, from 3.53% for the third quarter of 2021 to 4.01% in the third quarter of 2022. The increase in the yield earned on loans during the third quarter of 2022 was due an increase in market rates as well as the collection of $212,000 in loan prepayment fees during the quarter. The increase in loans was consistent with the Company's strategy to grow the loan portfolio. The increase in interest earned on taxable securities was primarily due to the Company’s strategy to deploy excess liquidity into securities, which resulted in the average outstanding balance of securities increasing $34.9 million, or 38.8%, from $89.7 million for the third quarter of 2021 to $124.6 million for the third quarter of 2022.

Interest Expense. Interest expense increased $49,000, or 14.0%, to $398,000 for the three months ended September 30, 2022, from $349,000 for the three months ended September 30, 2021. This increase was primarily due to an increase in interest expense on FHLB advances and money market accounts. Interest expense on FHLB advances increased $22,000, or 12.4%, from $178,000 for the third quarter of 2021 to $200,000 for the third quarter of 2022. This increase was primarily due to a 14 basis point increase in the average rate paid on the advances from 1.24% in the third quarter of 2021 to 1.38% in the third quarter of 2022. Interest expense on money market accounts increased $19,000, or 31.6%, from $60,000 in the third quarter of 2021 to $79,000 in the third quarter of 2022. This increase was primarily the result of a 9 basis point increase in the average rate paid on money market accounts, from 0.25% in the third quarter of 2021 to 0.34% in the third quarter of 2022.

Net Interest Income. Net interest income increased $885,000, or 29.2%, to $3.9 million for the three months ended September 30, 2022, from $3.0 million for the three months ended September 30, 2021. This increase was primarily due to a $624,000 increase in interest and fees on loans and a $245,000 increase in interest earned on taxable securities and a $65,000 increase in interest earned on other interest-earning assets. These increases were partially offset by a $49,000 increase in interest expense. Our net interest rate spread increased 78 basis points to 2.97% for the three months ended September 30, 2022, from 2.19% for the three months ended September 30, 2021. Our net interest margin also increased 78 basis points to 3.11% from 2.33% over the same period.

Provision for Loan Losses. The Company did not make any provision for loan losses during the three months ended September 30, 2022, compared to a $30,000 provision for the three months ended September 30, 2021. The allowance for loan losses was $3.2 million, or 0.89%, of total loans at September 30, 2022, compared to $2.9 million, or 0.88% of total loans at December 31, 2021. Nonaccrual loans constituted 0.21% of total loans at September 30, 2022, compared to 0.31% of total loans at December 31, 2021. Net recoveries for the three months ended September 30, 2022 were $48,000 compared to net recoveries of $26,000 for the three months ended September 30, 2021.

Non-interest Income. Non-interest income decreased $149,000, or 23.7%, to $479,000 for the three months ended September 30, 2022, from $628,000 for the three months ended September 30, 2021. The decrease was primarily the result of a $365,000 decrease in net gain on sale of loans, partially offset by a $218,000 increase in income associated with changes in the market value of equity securities. The decrease in the net gain on sale of loans was primarily due to the decrease in the sale of mortgage loans held for sale, which decreased $26.6 million, from $32.2 million in the third quarter of 2021 to $5.6 million in the third quarter of 2022. The increase in the market value of 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 of equity securities in non-interest expense.

Non-interest Expense. Non-interest expense increased $449,000, or 11.8%, to $4.3 million for the three months ended September 30, 2022 from $3.8 million for the three months ended September 30, 2021. This increase was primarily due to a $391,000 increase in salaries and employee benefits expense. The increase in salaries and employee benefits expense was due primarily to a $218,000 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 of equity securities in non-interest income. The remaining $173,000 increase in other salaries and employee benefits expense was primarily the result of a $65,000 increase in wages, a $39,000 increase in ESOP expense and a $21,000 increase in the accrual for incentive bonuses.

Income Tax (Benefit) Expense. We recorded an income tax expense of $21,000 for the three months ended September 30, 2022, compared to an income tax benefit of $57,000 for the three months ended September 30, 2021. The increase in income tax expense was primarily due to a increase in income before taxes during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

Comparison of Operating Results for the Nine Months Ended September 30, 2022 and 2021

Net (Loss) Income. We recorded a net loss of $172,000 for the nine months ended September 30, 2022, compared to net income of $354,000 recorded for the nine months ended September 30, 2021. This decrease was primarily due to a $2.4 million decrease in non-interest income, which was partially offset by a $1.3 million increase in net interest income after provision for loan losses, a $372,000 decrease in noninterest expense and a $217,000 decrease in income tax expense.

Interest and Dividend Income. Interest and dividend income increased $1.4 million, or 12.9%, to $11.9 million for the nine months ended September 30, 2022, from $10.5 million for the nine months ended September 30, 2021. The increase was due primarily to an increase in interest earned on taxable securities and an increase in interest earned on loans. Interest income on taxable securities increased $756,000, or 77.9% from $971,000 in the first nine months of 2021 to $1.7 million in the first nine months of 2022. This increase was primarily due to the Company’s strategy to deploy excess liquidity into securities, which resulted in the average outstanding balance of securities increasing $52.4 million, or 68.5%, from $76.5 million for the first nine months of 2021 to $128.9 million for the same period of 2022. The increase in interest income on loans was primarily the result of a 12 basis point increase in the yield earned on loans from 3.75% for the first nine months of 2021 to 3.87% for the same period in 2022 and a $7.4 million increase in average loans outstanding for the same period.

Interest Expense. Interest expense decreased $91,000, or 7.6%, to $1.1 million for the nine months ended September 30, 2022, from $1.2 million for the nine months ended September 30, 2021. This decrease was primarily due to a decline in the cost of our interest-bearing deposits, which decreased 4 basis points from 0.30% for the first nine months of 2021 to 0.26% for the same period in 2022. This decline was primarily due to the low interest rate environment. Also contributing to the decrease in interest expense was a $6.7 million decrease in the average outstanding balance of FHLB advances, which was partially offset by an 8 basis point increase in the average rate paid on these advances.

Net Interest Income. Net interest income increased $1.5 million, or 15.6%, to $10.8 million for the nine months ended September 30, 2022 from $9.3 million for the nine months ended September 30, 2021. Our net interest rate spread increased 36 basis points to 2.73% for the nine months ended September 30, 2022, from 2.37% for the nine months ended September 30, 2021 while our net interest margin also increased 35 basis points to 2.86% from 2.51% over the same period.

Provision for Loan Losses. Provision for loan losses for the nine months ended September 30, 2022 was $210,000 compared to $30,000 for the nine months ended September 30, 2021. The increase in provision was primarily due to the increase in loans outstanding. Net recoveries for the nine months ended September 30, 2022 were $112,000 compared to net recoveries of $55,000 for the nine months ended September 30, 2021.

Non-interest Income. Non-interest income decreased $2.4 million, or 70.8%, to $986,000 for the nine months ended September 30, 2022 from $3.4 million for the nine months ended September 30, 2021. This decrease was due primarily to a $1.1 million decrease in net gains on the sale of loans, an $887,000 decline in income associated with changes in the market value of marketable equity securities and a $456,000 decrease in loan servicing fees. The decrease in the net gain on sale of loans was primarily due to the decrease in the sale of mortgage loans held for sale, which decreased $81.8 million, from $102.2 million in the first nine months of 2021 to $20.4 million in the same period of 2022. The decrease in the market value of marketable equity securities was due to a decrease in the market value of mutual funds held in our deferred compensation plan. We record an offsetting amount for the change in the market of equity securities in non-interest expense. The decrease in loan servicing fees was primarily due to the reversal of a $369,000 impairment previously recorded against the value of mortgage servicing rights in the first nine months of 2021. The value of mortgage servicing rights increased as a result of an increase in market interest rates.

Non-interest Expense. Non-interest expense decreased $372,000, or 3.0%, to $11.9 million for the nine months ended September 30, 2022 from $12.3 million for the nine months ended September 30, 2021. This decrease was primarily due to a $444,000 decrease in salaries and employee benefits expense. The decrease in salaries and employee benefits expense primarily resulted from an $887,000 decline in the market value of marketable equity securities held in our deferred compensation plan. We record an offsetting amount for the change in the market of equity securities in non-interest income. This decrease was partially offset by a $443,000 increase in other salaries and benefits expense, which was primarily the result of a $134,000 increase in wages, a $91,000 increase in ESOP expense and a $156,000 increase in the accrual for incentive bonuses.

Income Tax (Benefit) Expense. We recorded an income tax benefit of $172,000 for the nine months ended September 30, 2022, compared to an income tax expense of $45,000 for the nine months ended September 30, 2021. The decrease in income tax

expense was primarily due to a decrease in income before taxes during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.

Management of Market Risk

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

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

• originating commercial real estate and commercial loans, which tend to have shorter terms and higher interest rates than owner occupied one- to four-family residential real estate loans, and which generate customer relationships that can result in larger non-interest-bearing checking accounts;

• selling substantially all of our conforming and eligible jumbo, longer-term, fixed-rate one- to four-family residential real estate loans and retaining the non-conforming and shorter-term, fixed-rate and adjustable-rate one- to four-family residential real estate loans that we originate, subject to market conditions and periodic review of our asset/liability management needs; and

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

Our board of directors is responsible for the review and oversight of our executive management team and other essential operational staff which are responsible for our asset/liability analysis. These officers act as an asset/liability committee and are charged with developing and implementing an asset/liability management plan, and they meet at least quarterly to review pricing and liquidity needs and assess our interest rate risk. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

We do not engage in hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities.

The table below sets forth, as of September 30, 2022, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.

Change in Interest<br>Rates (basis points) (1) Net Interest Income<br>Year 1 Forecast Year 1 Change<br>from Level
(Dollars in thousands)
+400 $ 16,863 15.03 %
+300 16,231 10.72 %
+200 15,611 6.49 %
+100 15,179 3.54 %
Level 14,660 — %
-100 14,237 (2.88 )%
-200 13,800 (5.86 )%

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

Economic Value of Equity. We also monitor interest rate risk through the use of a simulation model that estimates the amounts by which the fair value of our assets and liabilities (our economic value of equity or “EVE”) would change in the event of a range of

assumed changes in market interest rates. The quarterly reports developed in the simulation model assist us in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance within our policy guidelines.

The table below sets forth, as of September 30, 2022, the estimated changes in our EVE that would result from the designated instantaneous changes in market interest rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

Estimated Increase (Decrease) in EVE
Basis Point (“bp”) Change in Interest Rates(1) Estimated EVE(2) Amount Percent
(Dollars in thousands)
+400 $ 74,095 $ (8,389 ) (10.17 )%
+300 75,768 (6,716 ) (8.14 )%
+200 77,525 (4,959 ) (6.01 )%
+100 79,923 (2,561 ) (3.10 )%
Level 82,484 — —
-100 83,160 676 0.82 %
-200 82,783 299 0.36 %

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

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

The table above indicates that at September 30, 2022, in the event of a 100-basis point increase in interest rates, we would have experienced a 3.10% decrease in our EVE. In the event of a 200-basis point increase in interest rates at September 30, 2022, we would have experienced a 6.01% decrease in our EVE.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in EVE require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the EVE table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the EVE table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and will differ from actual results.

EVE calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB. At September 30, 2022, we had $57.0 million outstanding in advances from the FHLB. At September 30, 2022, we had $112.6 million in additional borrowing capacity at the Federal Home Loan Bank of Chicago. Additionally, at September 30, 2022, we had a $15.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at September 30, 2022. The Company also had a $10.0 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $13.2 million at September 30, 2022. The Company had not drawn on the Federal Reserve line as of September 30, 2022.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents and available-for-sale investment securities. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $1.8 million for the nine months ended September 30, 2022, as

compared to net cash provided by operating activities of $11.0 million for the nine months ended September 30, 2021. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of available-for-sale securities, offset by proceeds from maturing securities and pay downs on securities, was $54.5 million for the nine months ended September 30, 2022, as compared to $39.9 million for the nine months ended September 30, 2021. Net cash provided by financing activities, consisting primarily of increases in borrowings and advance payments by borrowers for taxes and insurance, was $1.6 million for the nine months ended September 30, 2022, as compared to $23.2 million of cash provided by financing activities during the nine months ended September 30, 2021. The primary source of the difference in cash provided by financing activities were net proceeds of $33.5 million from the stock offering in 2021.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments based on our current strategy to increase core deposits, along with the continued use of FHLB advances as well as brokered certificates of deposit as needed, to fund loan growth.

Capital

At September 30, 2022, PyraMax Bank exceeded all of its regulatory capital requirements with a Tier 1 leverage capital level of $64.9 million, or 11.9% of adjusted total assets, which is above the well-capitalized required level of $27.2 million, or 5.0%. The Bank had total risk-based capital of $68.1 million, or 17.7% of risk-weighted assets, which is above the well-capitalized required level of $38.5 million, or 10.0%. Management is not aware of any conditions or events since the most recent notification that would change our category. For additional information, see Note 13 of the Notes to Financial Statements.

Off-Balance Sheet Arrangements and Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. For additional information, see Note 9 of the Notes to Financial Statements.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment, agreements with respect to borrowings and deposits, and agreements with respect to securities.

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles in the United States of America which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2022. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at September 30, 2022, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in the Form 10-Q, you should carefully consider the risk factors that appeared under Item 1A “Risk Factors” disclosed in the Company’s December 31, 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission. There are no material changes from the risk factors included in the Annual Report on Form 10-K.

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

The following table presents information regarding shares of our common stock repurchased during the third quarter of 2022.

Period Total Number of Shares (or Units) Purchased (1) Weighted Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1 to July 31, 2022 — $ — — 319,766
August 1 to August 31, 2022 — — — 319,766
September 1 to September 30, 2022 184,270 10.78 184,270 135,496

(1) On July 29, 2022, the Board of Directors of the Company adopted a stock repurchase program. Regulatory non-objection was received on August 26, 2022. Under the repurchase program, the Company may repurchase up to 319,766 shares of its common stock, or approximately 5% of its outstanding shares of common stock at the time regulatory non-objection was sought. Shares may be repurchased from time to time in open market or private transactions, through block trades, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The repurchase program has no expiration date.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit
Number Description
3.1 Articles of Incorporation of 1895 Bancorp of Wisconsin, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-254135))
3.2 Bylaws of 1895 Bancorp of Wisconsin, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-254135))
10.1 1895 Bancorp of Wisconsin, Inc. 2022 Equity Incentive Plan (incorporated by reference to Appendix A to the proxy statement for the Annual Meeting of Stockholders (File No. 001-40609), filed under the Exchange Act on July 18, 2022)
10.2 Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-8 (File No. 333-267139), filed on August 29, 2022)
10.3 Form of Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-8 (File No. 333-267139), filed on August 29, 2022)
10.4 Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-8 (File No. 333-267139), filed on August 29, 2022)
10.5 First Amendment to Employment Agreement among PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, Inc. and Richard Hurd (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-40609), filed on October 4, 2022)
10.6 First Amendment to Employment Agreement among PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, Inc. and David Ball (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-40609), filed on October 4, 2022)
10.7 First Amendment to Employment Agreement among PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, Inc. and Monica Baker (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No. 001-40609), filed on October 4, 2022)
10.8 First Amendment to Employment Agreement among PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, Inc. and Steven Klitzing (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No. 001-40609), filed on October 4, 2022)
10.9 First Amendment to Employment Agreement among PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, Inc. and Thomas Peterson (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K (File No. 001-40609), filed on October 4, 2022)
31.1 Certification of Chief Executive Officer Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0 The following materials for the quarter ended September 30, 2022, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive (Loss) Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements *
104.0 The cover page of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022, formatted in XBRL (contained in Exhibit 101.0) *

_____________

* Furnished, not filed.

SIGNATURES

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

1895 BANCORP OF WISCONSIN, INC.
Date: November 10, 2022 /s/ David R. Ball
David R. Ball
President and Chief Executive Officer
Date: November 10, 2022 /s/ Steven T. Klitzing
Steven T. Klitzing
Executive Vice President and Chief Financial Officer<br><br>(Principal Financial and Accounting Officer)

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002

I, David R. Ball, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of 1895 Bancorp of Wisconsin, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2022 /s/ David R. Ball
David R. Ball
President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 312 of the Sarbanes-Oxley Act of 2002

I, Steven T. Klitzing, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of 1895 Bancorp of Wisconsin, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2022 /s/ Steven T. Klitzing
Steven T. Klitzing
Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

David R. Ball, President and Chief Executive Officer of 1895 Bancorp of Wisconsin, Inc. (the “Company”), and Steven T. Klitzing, Executive Vice President and Chief Financial Officer of the Company, each certifies in his capacity as an executive officer of the Company that he has reviewed the Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (the “Report”) and that, to the best of his knowledge:

1. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 10, 2022 /s/ David R. Ball
David R. Ball
President and Chief Executive Officer
Date: November 10, 2022 /s/ Steven T. Klitzing
--- ---
Steven T. Klitzing
Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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