Financial Performance - The company recorded a net loss of $3.6 million for the three months ended September 30, 2023, compared to a net income of $124,000 for the same period in 2022[105]. - The company recorded a net loss of $4.5 million for the nine months ended September 30, 2023, compared to a net loss of $172,000 for the same period in 2022[106]. - Net interest income for the three months ended September 30, 2023, was $2,952 thousand, a decrease from $3,917 thousand in the same period of 2022[99]. - The company reported a net interest income of $9,253 thousand for the nine months ended September 30, 2023, down from $10,760 thousand in the same period of 2022[100]. - Noninterest income decreased by $1.9 million, from $479,000 for the three months ended September 30, 2022, to a net loss of $1.4 million for the same period in 2023[105]. - Noninterest income fell by $680,000, or 69.0%, to $306,000 for the nine months ended September 30, 2023, largely due to a $1.9 million loss on the sale of available-for-sale securities[108]. Asset and Liability Management - Total assets increased by $11.6 million, or 2.1%, to $554.6 million at September 30, 2023, from $543.0 million at December 31, 2022[95]. - Total stockholders' equity decreased by $5.2 million to $70.2 million at September 30, 2023, primarily due to a net loss of $4.5 million for the nine months ended September 30, 2023[97]. - The average outstanding balance of loans was $384,328 thousand in Q3 2023, compared to $352,651 thousand in Q3 2022, reflecting a growth of 8.95%[99]. - The average outstanding loans increased by $35.2 million, or 10.3%, from $340.6 million for the nine months ended September 30, 2022, to $375.8 million for the same period in 2023[107]. - The company had a Tier 1 leverage capital level of $62.2 million, or 11.1% of adjusted total assets, exceeding the well-capitalized required level of $28.1 million[116]. - Total risk-based capital was $66.7 million, or 16.1% of risk-weighted assets, above the well-capitalized requirement of $41.4 million[116]. Interest Income and Expense - Interest and dividend income increased by $1.1 million, or 25.6%, to $5.4 million for the three months ended September 30, 2023, from $4.3 million in the same period of 2022[105]. - Interest and dividend income increased by $3.2 million, or 26.9%, to $15.1 million for the nine months ended September 30, 2023, driven by a $2.6 million increase in interest and fees on loans[107]. - Interest expense increased by $2.0 million, or 502.5%, to $2.4 million for the three months ended September 30, 2023, from $398,000 in the same period of 2022[105]. - Interest expense surged by $4.7 million, or 427.3%, to $5.8 million for the nine months ended September 30, 2023, primarily due to a $3.6 million increase in interest expense on deposits[108]. - Net interest income decreased by $965,000, or 24.7%, to $3.0 million for the three months ended September 30, 2023, from $3.9 million in the same period of 2022[105]. - Net interest income decreased by $1.5 million, or 13.9%, to $9.3 million for the nine months ended September 30, 2023, due to increased interest expenses[108]. Loan and Deposit Activity - Loans held for investment increased by $23.5 million, or 6.5%, to $386.3 million at September 30, 2023, primarily due to a $10.8 million increase in commercial real estate loans[96]. - Deposits decreased by $748,000, or 0.2%, to $387.0 million at September 30, 2023, with significant decreases in money market accounts and noninterest bearing checking accounts[97]. - The average balance of noninterest-bearing checking accounts decreased by $33.1 million, or 16.6%, from Q3 2022 to Q3 2023[105]. - The average balance of certificates of deposit increased by $54.9 million, or 68.5%, from Q3 2022 to Q3 2023[105]. Market and Economic Conditions - As of September 30, 2023, a 400 basis point increase in interest rates would result in a decrease of $20,034 thousand (28.92%) in the estimated Economic Value of Equity (EVE)[115]. - A 200 basis point increase in interest rates would lead to a 14.36% decrease in EVE, equating to a reduction of $9,947 thousand[115]. - A 100 basis point decrease in interest rates would result in a 5.84% increase in EVE, amounting to an increase of $4,047 thousand[115]. Strategic Initiatives - The Company completed a balance sheet repositioning strategy, selling $21.4 million in lower-yielding U.S. Treasury securities and redeploying proceeds into higher-yielding mortgage-backed securities[96]. - The company executed a balance sheet repositioning strategy, resulting in a $1.9 million loss on the sale of securities, which is expected to be recouped within approximately two years[105]. - The company aims to manage interest rate risk by increasing reliance on core deposits, which are less sensitive to interest rate changes[110]. - The strategy includes originating commercial loans with shorter terms and higher interest rates to enhance customer relationships[110]. - The company anticipates sufficient funds to meet current funding commitments based on its strategy to increase core deposits[116]. Operational Efficiency - Noninterest expense increased by $963,000, or 8.1%, to $12.8 million for the first nine months of 2023, primarily due to a $1.2 million increase in the market value of mutual funds held in the deferred compensation plan[108]. - The company implemented a reduction-in-force (RIF) in April 2023, resulting in the termination of five employees and a projected $1.8 million reduction in annual salaries and benefits expense[108]. - The company reported a net cash used in operating activities of $324,000 for the nine months ended September 30, 2023, compared to a net cash provided of $1.8 million for the same period in 2022[116]. - Net cash used in investing activities was $16.4 million for the nine months ended September 30, 2023, compared to $54.5 million for the same period in 2022[116].
1895 Bancorp of Wisconsin(BCOW) - 2023 Q3 - Quarterly Report