1895 Bancorp of Wisconsin, Inc.: Form 10-Q for the period ended Sep 30, 2023
Filed with the SEC on Nov 9, 2023 and accepted by EDGAR at Nov 9, 2023, 11:00 ET.
Management's discussion and analysis
As filed, 60,114 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
General
Management’s discussion and analysis of financial condition and results of operations at September 30, 2023 and for the three and nine months ended September 30, 2023 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:
- inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments, including our mortgage servicing rights asset, 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 maintain liquidity, primarily through deposits, in light of recent events in the banking industry;
- 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 credit losses;
- our ability to manage market risk, credit risk and operational risk;
- 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, capital requirements and insurance premiums;
- changes in the quality or composition of our loan or investment portfolios;
- technological changes that may be more difficult or expensive than expected;
- the inability of third-party providers to perform as expected;
- a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;
- the actual or anticipated impacts of military conflict, terrorism or other geopolitical events;
- 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 have acquired or may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;
- our ability to retain key employees;
- 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, including the effects of our adoption of the Current Expected Credit Loss ("CECL") accounting standard, which we implemented on January 1, 2023;
- our compensation expense associated with equity allocated or awarded to our employees;
- changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Because of these 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 under the heading "Risk Factors" in our most recent Annual Report on Form 10-K (fiscal year ended December 31, 2022) filed with the Securities and Exchange Commission (“SEC”) on March 30, 2023, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events. Accordingly, you should not place undue reliance on forward-looking statements.
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 credit losses, determination of fair value for financial instruments, and valuation of deferred income taxes.
A summary of the accounting policies used by management is disclosed in Note 1, “Summary of Significant Accounting Policies” in the Company's most recent Form 10-K (fiscal year ended December 31, 2022) filed with the Securities and Exchange Commission (“SEC”) on March 30, 2023.
On January 1, 2023 we adopted ASU 2016-13, Financial Instruments - Credit Losses. This guidance replaced the incurred loss methodology, which was used to calculate the allowance for loan losses as described in the Consolidated Financial Statements in our 2022 Annual Report on Form 10-K, with an expected lifetime loss methodology, as described in Note 2 to the Consolidated Financial Statements.
During 2023, we did not substantively change any material aspect of our overall methodologies and processes used in developing the remaining critical accounting estimates from those described in the Consolidated Financial Statements in our 2022 Annual Report on Form 10-K, other than those related to the adoption of ASU 2016-13.
Comparison of Financial Condition at September 30, 2023 and December 31, 2022
Total Assets. Total assets increased $11.6 million, or 2.1%, to $554.6 million at September 30, 2023 from $543.0 million at December 31, 2022. This increase was primarily due to a $23.5 million net increase in loans, partially offset by a $9.9 million decrease in available-for-sale securities, a $1.7 million decrease in cash and cash equivalents and a $1.3 million decrease in other assets.
Cash and Cash Equivalents. Cash and cash equivalents decreased $1.7 million, or 6.0%, to $26.6 million at September 30, 2023 from $28.3 million at December 31, 2022. This decrease was primarily due to $93.5 million in principal payments on FHLB advances, a $23.5 million net increase in loans, $21.4 million for the purchase of available-for-sale securities and $8.9 million in originations of loans held for sale. These decreases were partially offset by $100.5 million of additional FHLB advances, $19.5 million in proceeds from the sale of available-for-sale securities, $9.7 million from maturities, payments and calls of available-for-sale securities, a $9.2 million net increase in advance payments by borrowers for taxes and insurance and $8.8 million from the sale of mortgage loans held for sale.
Available-for-Sale Securities. Available-for-sale securities decreased $9.9 million, or 8.6%, to $104.6 million at September 30, 2023, from $114.5 million at December 31, 2022. This decrease was primarily due to maturities, payments and calls of securities totaling $9.7 million. The net unrealized loss on available-for-sale securities held in the portfolio was $15.8 million at September 30, 2023.
During the third quarter of 2023, the Company completed its balance sheet repositioning strategy related to its investment portfolio. This strategy included the sale of $21.4 million in book value of its lower-yielding U.S. Treasury securities. Proceeds of $19.5 million from the sale of these securities were redeployed into approximately $21.4 million of U.S. government sponsored mortgage-backed securities, which were classified as available-for-sale upon purchase. The purchased securities have a positive spread differential of approximately 456 basis points compared to the securities that were sold, which is expected to result in approximately $1.0 million in additional pre-tax earnings, on an annualized basis. The pre-tax loss on the sale of securities was $1.9 million, which the Company estimates will be recouped within approximately two years. The effective duration of the securities sold was 2.7 years, while the effective duration of the securities purchased is 1.7 years.
Loans Held for Sale. Loans held for sale increased $285,000, to $410,000 at September 30, 2023. The volume of loans originated and sold remains relatively low, as a result of the changing interest rate environment and lower inventory of housing available in our market. Mortgage loan originations and sales were $8.9 million and $8.8 million, respectively, during the first nine months of 2023 compared to $19.0 million and $20.4 million, respectively, for the same period in 2022.
Loans. Loans held for investment, net of deferred costs, increased $23.5 million, or 6.5%, to $386.3 million at September 30, 2023, from $362.8 million at December 31, 2022. The majority of this growth was the result of a $10.8 million increase in commercial real estate loans, to $221.7 million, and a $9.9 million increase in first mortgage residential real estate loans, to $95.4 million. Also contributing to this growth was a $2.0 million increase in non-real estate commercial loans which grew to $45.7 million during this period. The growth in the level of commercial real estate and other commercial loans is consistent with the Company’s long-term loan strategy to increase these types of loans within our portfolio. The Company also purchases loan participations from other financial institutions. The outstanding balance of loans purchased are included in the totals above and totaled $39.4 million as of September 30, 2023 and $31.6 million as of December 31, 2022. Loans purchased are primarily comprised of commercial real estate and other commercial loans. The increase in first mortgage loans is primarily due to an increase in adjustable rate mortgages, as a result of the current interest rate environment and the impact on fixed rate mortgage rates, the majority of which the Company retained on its books.
Allowance for Credit Losses. On January 1, 2023, the Company adopted ASU 2016-13 which replaced the incurred loss methodology, which was previously used to calculate the allowance for loan losses, with an expected lifetime loss methodology ("CECL"), as described in Note 2 to the Consolidated Financial Statements. The adoption of ASU 2016-13 resulted in an initial increase of $412,000 to the allowance for credit losses for loans ("ACL for loans") and the establishment of a $665,000 allowance for credit losses for unfunded loan commitments ("ACL for unfunded loan commitments"). The ACL for loans is included as a separate line item on the Company's Consolidated Balance Sheets and the ACL for unfunded loan commitments is included in other liabilities. The total allowance for credit losses was $4.5 million at September 30, 2023.
The ACL for loans was $3.6 million, or 0.94%, of loans, net of deferred costs, at September 30, 2023 compared to an allowance for loan losses of $3.2 million, or 0.88% of loans, net of deferred costs, at December 31, 2022. The increase in the ACL for loans was primarily the result of the $412,000 increase related to the adoption of ASU 2016-13, a $19,000 negative provision for credit losses and $18,000 in net recoveries. The ACL for unfunded loan commitments was $909,000 at September 30, 2023. The increase in the ACL for unfunded loan commitments was primarily the result of the $665,000 increase related to the adoption of ASU 2016-13 and a $244,000 provision for credit losses. The additional provision was due to a $14.1 million increase in unfunded loan commitments which are expected to fund from $41.1 million at December 31, 2022 to $55.2 million at September 30, 2023. Nonaccrual loans represented 0.18% of total loans at September 30, 2023, compared to 0.21% of total loans at December 31, 2022. Net recoveries for the nine months ended September 30, 2023 were $18,000 compared to net recoveries of $112,000 for the nine months ended September 30, 2022.
Other Assets. Other assets decreased $1.3 million, or 11.6%, from $11.2 million at December 31, 2022 to $9.9 million at September 30, 2023. This decrease was primarily due to a $700,000 decrease in net deferred tax assets as a result of changes in Wisconsin tax law in July 2023 and a $600,000 decrease in other real estate owned as a result of the sale of the former branch facility in West Allis, Wisconsin.
FHLB Stock. FHLB stock increased $1.4 million, or 41.2%, from $3.4 million at December 31, 2022 to $4.8 million at September 30, 2023. This increase was primarily due to the net increase in FHLB advances and the requirement by FHLB to hold additional stock as a result of the increased level of advances.
Deposits. Deposits decreased $748,000, or 0.2%, to $387.0 million at September 30, 2023, from $387.7 million at December 31, 2022. During this period, money market accounts decreased $34.5 million, or 28.5%, noninterest bearing checking accounts decreased $20.1 million, or 21.7%, and savings accounts decreased $13.2 million, or 21.3%. These decreases were partially offset by a $69.6 million, or 87.4%, increase in certificates of deposit. As market rates have increased, there has been a shift in our deposit mix from noninterest bearing checking accounts, negotiable order of withdrawal ("NOW") accounts, savings accounts and money market accounts to higher rate certificates of deposits. The decrease in noninterest bearing and money market deposits was partially due to the use of these funds by our commercial customers to fund their operations, as their borrowing cost have increased during the current interest rate environment. The Company continues to build upon its banking relationships with its core customers, including deposits, and in attracting new relationships.
Advance Payments by Borrowers for Taxes and Insurance. Advance payments by borrowers for taxes and insurance increased $9.3 million to $10.3 million at September 30, 2023 from $1.0 million at December 31, 2022. The increase was due to normal seasonal activity.
FHLB Advances. FHLB advances increased $7.0 million, or 9.8%, to $78.5 million at September 30, 2023, from $71.5 million at December 31, 2022. The increase in FHLB advances was primarily used to partially fund outgoing cash flows from the decrease in deposits and the increase in net loans.
Total Stockholders’ Equity. Total stockholders’ equity decreased $5.2 million to $70.2 million at September 30, 2023, from $75.4 million at December 31, 2022. The decrease was primarily due to a $5.3 million decrease in retained earnings. The decrease in retained earnings was primarily the result of a net loss of $4.5 million for the nine months ended September 30, 2023 and the adoption of ASU 2016-13 on January 1, 2023, which had a $783,000 negative impact on retained earnings. The Company also purchased 59,410 shares of its common stock during the nine months ended September 30, 2023 under its stock repurchase plans which resulted in a $470,000 reduction in stockholders' equity.
Average Balances and Yields
The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing
liabilities, and the resulting annualized average yields and costs for the three and nine months ended September 30, 2023 and 2022. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or
liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Nonaccrual loans are included in average balances only. Loan fees are included in interest income on loans and are not material.
(Dollars in thousands)
| Interest-earning assets: | Three Months Ended September 30, 2023 Average Outstanding Balance | Interest and Dividends | Yield/Cost Rate | 2022 Average Outstanding Balance | Interest and Dividends | Yield/Cost Rate |
|---|---|---|---|---|---|---|
| Loans(1) | $384,328 | $4,423 | 4.57% | $352,651 | $3,563 | 4.01% |
| Securities available-for-sale | 106,003 | 656 | 2.45% | 124,578 | 613 | 1.95% |
| Other interest-earning assets | 20,136 | 292 | 5.75% | 22,264 | 139 | 2.48% |
| Total interest-earning assets | 510,467 | 5,371 | 4.17% | 499,493 | 4,315 | 3.43% |
| Non-interest-earning assets | 36,860 | 35,090 | ||||
| Total assets | $547,327 | $534,583 | ||||
| Interest-earning liabilities: | ||||||
| NOW accounts | $29,328 | $67 | 0.90% | $35,186 | $10 | 0.12% |
| Money market accounts | 89,069 | 473 | 2.11% | 93,344 | 79 | 0.34% |
| Savings accounts | 50,037 | 5 | 0.04% | 67,977 | 9 | 0.05% |
| Certificates of deposit | 135,141 | 1,287 | 3.78% | 80,213 | 98 | 0.49% |
| Total interest-bearing deposits | 303,575 | 1,832 | 2.39% | 276,720 | 196 | 0.28% |
| Federal Home Loan Bank advances | 82,537 | 586 | 2.82% | 57,435 | 200 | 1.38% |
| Other interest-bearing liabilities | 9,843 | 1 | 0.05% | 9,910 | 2 | 0.08% |
| Total interest-bearing liabilities | 395,955 | 2,419 | 2.42% | 344,065 | 398 | 0.46% |
| Non-interest-bearing deposits | 72,289 | 105,359 | ||||
| Other non-interest-bearing liabilities | 8,287 | 6,597 | ||||
| Total liabilities | 476,531 | 456,021 | ||||
| Total stockholders’ equity | 70,796 | 78,562 | ||||
| Total liabilities and stockholders’ equity | $547,327 | $534,583 | ||||
| Net interest income | $2,952 | $3,917 | ||||
| Net interest-earning assets | $114,512 | $155,428 | ||||
| Interest rate spread(2) | 1.75% | 2.97% | ||||
| Net interest margin(3) | 2.29% | 3.11% | ||||
| Average interest-earning assets to average interest-bearing liabilities | 128.92% | 145.17% |
(1) Includes loan (expense) fees of ($34,000) and $20,000 for the three months ended September 30, 2023 and 2022, 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.
(Dollars in thousands)
| Interest-earning assets: | Nine Months Ended September 30, 2023 Average Outstanding Balance | Interest and Dividends | Yield/Cost Rate | 2022 Average Outstanding Balance | Interest and Dividends | Yield/Cost Rate |
|---|---|---|---|---|---|---|
| Loans(1) | $375,817 | $12,487 | 4.44% | $340,626 | $9,862 | 3.87% |
| Securities available-for-sale | 110,193 | 1,847 | 2.24% | 128,920 | 1,727 | 1.79% |
| Other interest-earning assets | 17,393 | 767 | 5.89% | 33,193 | 279 | 1.12% |
| Total interest-earning assets | 503,403 | 15,101 | 4.01% | 502,739 | 11,868 | 3.16% |
| Non-interest-earning assets | 36,935 | 34,827 | ||||
| Total assets | $540,338 | $537,566 | ||||
| Interest-earning liabilities: | ||||||
| NOW accounts | $30,709 | $178 | 0.78% | $36,016 | $26 | 0.10% |
| Money market accounts | 102,209 | 1,545 | 2.02% | 95,612 | 223 | 0.31% |
| Savings accounts | 54,055 | 20 | 0.05% | 67,358 | 25 | 0.05% |
| Certificates of deposit | 104,948 | 2,368 | 3.02% | 81,813 | 277 | 0.45% |
| Total interest-bearing deposits | 291,921 | 4,111 | 1.88% | 280,799 | 551 | 0.26% |
| Federal Home Loan Bank advances | 84,436 | 1,733 | 2.74% | 56,673 | 550 | 1.30% |
| Other interest-bearing liabilities | 6,502 | 4 | 0.09% | 6,919 | 7 | 0.13% |
| Total interest-bearing liabilities | 382,859 | 5,848 | 2.04% | 344,391 | 1,108 | 0.43% |
| Non-interest-bearing deposits | 77,321 | 104,787 | ||||
| Other non-interest-bearing liabilities | 7,441 | 6,515 | ||||
| Total liabilities | 467,621 | 455,693 | ||||
| Total stockholders’ equity | 72,717 | 81,873 | ||||
| Total liabilities and stockholders’ equity | $540,338 | $537,566 | ||||
| Net interest income | $9,253 | $10,760 | ||||
| Net interest-earning assets | $120,544 | $158,348 | ||||
| Interest rate spread(2) | 1.97% | 2.73% | ||||
| Net interest margin(3) | 2.46% | 2.86% | ||||
| Average interest-earning assets to average interest-bearing liabilities | 131.49% | 145.98% |
(1) Includes loan (expense) fees of ($89,000) and $352,000 for the nine months ended September 30, 2023 and 2022, 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 tables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in average rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior period average rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments included within the following table.
(Dollars in thousands)
| Interest-earning assets: | Three Months Ended September 30, 2023 vs. 2022 Increase (Decrease) Due to Volume | Rate | Total Increase (Decrease) |
|---|---|---|---|
| Loans | $338 | $522 | $860 |
| Securities | (59) | 102 | 43 |
| Other | (12) | 165 | 153 |
| Total interest-earning assets | 267 | 789 | 1,056 |
| Interest-bearing liabilities: | |||
| NOW | 1 | (58) | (57) |
| Money market deposits | 4 | (398) | (394) |
| Savings | 1 | 3 | 4 |
| Certificates of deposit | (109) | (1,080) | (1,189) |
| Total interest-bearing deposits | (103) | (1,533) | (1,636) |
| Borrowings | (114) | (272) | (386) |
| Other | — | 1 | 1 |
| Total interest-bearing liabilities | (217) | (1,804) | (2,021) |
| Change in net interest income | $50 | $(1,015) | $(965) |
(Dollars in thousands)
| Interest-earning assets: | Nine Months Ended September 30, 2023 vs. 2022 Increase (Decrease) Due to Volume | Rate | Total Increase (Decrease) |
|---|---|---|---|
| Loans | $1,081 | $1,544 | $2,625 |
| Securities | (164) | 284 | 120 |
| Other | (62) | 550 | 488 |
| Total interest-earning assets | 855 | 2,378 | 3,233 |
| Interest-bearing liabilities: | |||
| NOW | 3 | (155) | (152) |
| Money market deposits | (17) | (1,305) | (1,322) |
| Savings | 4 | 1 | 5 |
| Certificates of deposit | (99) | (1,992) | (2,091) |
| Total interest-bearing deposits | (109) | (3,451) | (3,560) |
| Borrowings | (361) | (822) | (1,183) |
| Other | 1 | 2 | 3 |
| Total interest-bearing liabilities | (469) | (4,271) | (4,740) |
| Change in net interest income | $386 | $(1,893) | $(1,507) |
44
Comparison of Operating Results for the Three Months Ended September 30, 2023 and 2022
Net Income (Loss). We recorded a net loss of $3.6 million for the three months ended September 30, 2023, compared to net income of $124,000 for the three months ended September 30, 2022. The loss was primarily due to a $1.9 million pre-tax loss on the sale of securities as a result of the implementation of the Company's balance sheet repositioning strategy related to its investment securities portfolio, a $1.4 million increase in income tax expense, a significant portion of which was due to the change in Wisconsin tax law in July 2023, and a $1.0 million decrease in net interest income after provision for credit losses, partially offset by a $541,000 decrease in noninterest expense.
Interest and Dividend Income. Interest and dividend income increased $1.1 million, or 25.6%, to $5.4 million for the three months ended September 30, 2023, from $4.3 million for the three months ended September 30, 2022. The increase was due primarily to an $860,000 increase in interest and fees on loans. The increase in interest and fees earned on loans was primarily due to a $31.6 million increase in the average amount of loans outstanding, from $352.7 million in the third quarter of 2022 to $384.3 million in the third quarter of 2023, and a 56 basis point increase in the yield earned on loans, from 4.01% for the third quarter of 2022 to 4.57% in the third quarter of 2023. The increase in the yield earned on loans during the third quarter of 2023 was primarily due to increases in market rates. The increase in loans is consistent with the Company's strategy to grow the loan portfolio.
Interest Expense. Interest expense increased $2.0 million, or 502.5%, to $2.4 million for the three months ended September 30, 2023, from $398,000 for the three months ended September 30, 2022. This increase was primarily due to a $1.6 million increase in interest expense on deposits and a $386,000 increase in interest expense on FHLB advances. The increase in interest expense on deposits was primarily due to a 211 basis point increase in the average rate paid on deposits and a $26.9 million increase in average interest-bearing deposits outstanding from the third quarter of 2022 to the third quarter of 2023. The increase in interest expense on deposits was primarily due to the increase in market rates of interest and a shift in our deposit mix. As market rates increased, many of our deposit customers transferred funds from noninterest bearing checking accounts and lower rate deposit accounts into higher rate certificates of deposit. The average balance of noninterest bearing checking accounts decreased $33.1 million, or 31.4%, NOW accounts decreased $5.9 million, or 16.6%, savings accounts decreased $17.9 million, or 26.4%, and money market accounts decreased $4.3 million, or 4.6%, respectively, from the third quarter of 2022 to the third quarter of 2023. During the same period, the average balance of certificates of deposits increased $54.9 million, or 68.5%. Interest expense on certificates of deposit increased $1.2 million from the third quarter of 2022 to the third quarter of 2023 as a result of the increase in average balance and also a 329 basis point increase in the average rate paid on these accounts.
Interest expense on FHLB advances increased $386,000, or 193.0%, from $200,000 for the third quarter of 2022 to $586,000 for the third quarter of 2023. This increase was primarily due to a 144 basis point increase in the average rate paid on the advances from 1.38% in the third quarter of 2022 to 2.82% in the third quarter of 2023 and a $25.1 million, or 43.7%, increase in the average balance outstanding, from $57.4 million in the third quarter of 2022 to $82.5 million in the third quarter of 2023. The increase in the average rate paid on FHLB advances was primarily due to the increase in market interest rates.
Net Interest Income. Net interest income decreased $965,000, or 24.7%, to $3.0 million for the three months ended September 30, 2023, from $3.9 million for the three months ended September 30, 2022. This decrease was primarily due to a $2.0 million increase in interest expense partially offset by a $1.1 million increase in interest and dividend income. Our net interest rate spread decreased 122 basis points to 1.75% for the three months ended September 30, 2023, from 2.97% for the three months ended September 30, 2022. Our net interest margin decreased 82 basis points to 2.29%, from 3.11% over the same period.
Provision for Credit Losses. The provision for credit losses was $75,000 for the three months ended September 30, 2023, compared to no provision for the three months ended September 30, 2022. The increase in provision was primarily due to an increase in unfunded loan commitments and continued growth in the loan portfolio.
Noninterest Income. Noninterest income decreased $1.9 million, from $479,000 for the three months ended September 30, 2022 to a net loss of $1.4 million for the three months ended September 30, 2023. The decrease was primarily the result of a $1.9 million loss on the sale of available-for-sale securities. The loss on sale of securities was the result of the implementation of the company's balance sheet repositioning strategy which was executed in the third quarter of 2023. This strategy included the sale of $21.4 million in book value of its lower-yielding U.S. Treasury securities. Proceeds of $19.5 million from the sale of these securities were redeployed into approximately $21.4 million of U.S. government sponsored mortgage-backed securities, which were classified as available-for-sale upon purchase. The purchased securities have a positive spread differential of approximately 456 basis points compared to the securities that were sold, which is expected to result in $1.0 million in additional pre-tax earnings, on an annualized basis. The Company estimates that the $1.9 million loss on the sale of securities will be recouped within approximately two years. The effective duration of the securities sold was 2.7 years, while the effective duration of the securities purchased is 1.7 years.
During the third quarter of 2023, the Company sold its former branch facility in West Allis, which was closed in December 2019. The sale resulted in a net gain of $110,000.
Noninterest Expense. Noninterest expense decreased $541,000, or 12.9%, to $3.7 million for the three months ended September 30, 2023 from $4.2 million for the three months ended September 30, 2022. This decrease was primarily due to a $423,000 decrease in salaries and benefits expense. The decrease in salaries and benefits expense was primarily due to a reduction in the number of full-time equivalent employees from 106 at September 30, 2022 to 90 at September 30, 2023. The reduction in FTE's was the a result of cost savings initiatives implemented by the Company, including the review of all open positions prior to rehiring and also a reduction-in-force ("RIF") that was implemented in April 2023. The RIF resulted in the termination of five employees and a $575,000 reduction in annual salaries and benefits expense. As part of the RIF, we eliminated the majority of our IT staff and outsourced our network administration to an external third party. The projected annual cost for these IT related services is expected to be $257,000. In addition, we have significantly adjusted our bonus program for 2023 (to be paid in 2024), which is projected to result in a $558,000 reduction in salaries and benefits expense for 2023. This includes the elimination of projected bonuses for our three executive officers as well as a reduction in bonuses for other positions. Partially offsetting these decreases, was a $98,000 increase in stock based compensation expense. The increase in stock based compensation expense was primarily related to the issuance of stock options and awards granted in the third quarter of 2022 under the 2022 Equity Incentive Plan.
Income Tax Expense. We recorded income tax expense of $1.4 million for the three months ended September 30, 2023, compared to $21,000 for the three months ended September 30, 2022. The increase in income tax expense was primarily due to the increased loss before taxes during the three months ended September 30, 2023 as compared to income before taxes for the three months ended September 30, 2022. Also contributing to this increase was the impact of the change in Wisconsin tax law in July 2023, retroactive to January 2023, which resulted in a $98,000 reduction in tax benefits previously booked for the six months ended June 30, 2023 and a $1.8 increase in the valuation allowance for deferred tax assets.
Comparison of Operating Results for the Nine Months Ended September 30, 2023 and 2022
Net Income (Loss). We 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 nine months ended September 30, 2022. The increased loss was primarily due to a $1.5 million decrease in net interest income after provision for credit losses, a $680,000 decrease in noninterest income, a $963,000 increase in noninterest expense and a $1.2 million increase in income tax expense.
Interest and Dividend Income. Interest and dividend income increased $3.2 million, or 26.9%, to $15.1 million for the nine months ended September 30, 2023, from $11.9 million for the nine months ended September 30, 2022. The increase was due primarily to a $2.6 million increase in interest and fees on loans and a $488,000 increase in interest on other interest earning assets. The increase in interest and fees earned on loans was primarily due to a $35.2 million, or 10.3%, increase in the average amount of loans outstanding, from $340.6 million for the nine months ended September 30, 2022 to $375.8 million for the nine months ended September 30, 2023, and a 57 basis point increase in the yield earned on loans, from 3.87% for nine months ended September 30, 2022 to 4.44% for the nine months ended September 30, 2023. The increase in the yield earned on loans during the nine months ended September 30, 2023 was primarily due to increases in market rates. The increase in loans is consistent with the Company's strategy to grow the loan portfolio. The increase in interest earned on other interest earning assets, the majority of which is comprised of fed funds sold and FHLB stock, was primarily due to a 477 basis point increase in yield, from 1.12% for the nine months ended September 30, 2022 to 5.89% for the nine months ended September 30, 2023, partially offset by a $15.8 million decrease in the average balance outstanding, from $33.2 million for the nine months ended September 30, 2022 to $17.4 million for the nine months ended September 30, 2023.
Interest Expense. Interest expense increased $4.7 million, or 427.3%, to $5.8 million for the nine months ended September 30, 2023, from $1.1 million for the nine months ended September 30, 2022. This increase was primarily due to a $3.6 million increase in interest expense on deposits and a $1.2 million increase in interest expense on FHLB advances. The increase in interest expense on deposits was primarily due to a 162 basis point increase in the average rate paid on deposits and a $11.1 million increase in average deposits outstanding from the first nine months of 2022 to the first nine months of 2023. The increase in interest expense on deposits was primarily due to the increase in market rates of interest and also a shift in our deposit mix. As market rates increased, many of our deposit customers transferred funds from noninterest bearing checking accounts and lower rate NOW and savings accounts, into higher rate money market accounts and certificates of deposit. The average balance of noninterest bearing checking accounts decreased $27.5 million, or 26.2%, NOW accounts decreased $5.3 million, or 14.7%, and savings accounts decreased $13.3 million, or 19.7%, respectively, from the first nine months of 2022 to the first nine months of 2023. During the same period, the average balance of money market accounts and certificates of deposits increased $6.6 million, or 6.9%, and $23.1 million, or 28.3%, respectively. Interest expense on money market accounts increased $1.3 million, or 592.8%, from the first nine months of 2022 to the first nine months of 2023 as a result of the increase in average balances outstanding and also a 171 basis point increase in the average rate paid on these accounts. Interest expense on certificates of deposit increased $2.1 million, or 754.9%, from the first nine months of 2022 to the first nine months of 2023 as a result of the increase in average balances outstanding and also a 257 basis point increase in the average rate paid on these accounts.
Interest expense on FHLB advances increased $1.2 million, or 218.2%, from $550,000 for the first nine months of 2022 to $1.7 million for the first nine months of 2023. This increase was primarily due to a 144 basis point increase in the average rate paid on the advances from 1.30% in the first nine months of 2022 to 2.74% in the first nine months of 2023 and a $27.7 million, or 48.9%, increase in the average balance outstanding, from $56.7 million in the first nine months of 2022 to $84.4 million in the first nine months of 2023. The increase in the average rate paid on FHLB advances was primarily due to the changes in market interest rates.
Net Interest Income. Net interest income decreased $1.5 million, or 13.9%, to $9.3 million for the nine months ended September 30, 2023 and 2022, from $10.8 million for the nine months ended September 30, 2022. This decrease was primarily due to a $4.7 million increase in interest expense partially offset by a $3.2 million increase in interest and dividend income. Our net interest rate spread decreased 76 basis points to 1.97% for the nine months ended September 30, 2023, from 2.73% for the nine months ended September 30, 2022. Our net interest margin decreased 40 basis points to 2.46%, from 2.86% over the same period.
Provision for Credit Losses. The provision for credit losses was $225,000 for the nine months ended September 30, 2023, compared to a $210,000 provision for the nine months ended September 30, 2022. The increase in provision was primarily due to continued growth in the loan portfolio and an increase in unfunded loan commitments.
Noninterest Income. Noninterest income decreased $680,000, or 69.0%, to $306,000 for the nine months ended September 30, 2023, from $986,000 for the nine months ended September 30, 2022. The decrease was primarily the result of a $1.9 million loss on the sale of available-for-sale securities. The loss on sale of securities was the result of the implementation of the company's balance sheet repositioning strategy which was executed in the third quarter of 2023. This strategy included the sale of $21.4 million in book value of its lower-yielding U.S. Treasury securities. Proceeds of $19.5 million from the sale of these securities were redeployed into approximately $21.4 million of U.S. government sponsored mortgage-backed securities, which were classified as available-for-sale upon purchase. The purchased securities have a positive spread differential of approximately 456 basis points compared to the securities that were sold, which is expected to result in $1.0 million in additional pre-tax earnings, on an annualized basis. The Company estimates that the $1.9 million loss on the sale of securities will be recouped within approximately two years. The effective duration of the securities sold was 2.7 years, while the effective duration of the securities purchased is 1.7 years. This decrease was partially offset by a $1.2 million increase in income (loss) associated with changes in the market value of equity securities, from an unrealized loss of $892,000 for the nine months ended September 30, 2022, to an unrealized gain of $287,000 for the nine months ended September 30, 2023. 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 noninterest expense. Also offsetting the decrease, was a $220,000 increase in other noninterest income. This increase was primarily due to the $110,000 gain on the sale of the West Allis facility and a $157,000 gain from the collection of benefits from a bank owned life insurance policy.
Noninterest Expense. Noninterest expense increased $963,000, or 8.1%, to $12.8 million for the first nine months of 2023 from $11.9 million for the first nine months of 2022. This increase was primarily due to a $1.2 million increase 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 noninterest income. This increase was partially offset by a $285,000 decrease in other noninterest expenses, which are primarily due to cost savings initiatives that the Company has implemented. The majority of these savings were related to a $201,000 reduction in professional and consulting services, a $43,000 reduction in business development expenses and a $41,000 reduction in insurance expense.
The Company has also taken a number of cost savings initiatives to reduce salary and benefits related expenses. In April 2023, a reduction-in-force ("RIF") was implemented which resulted in the termination of five employees and a $575,000 reduction in annual salaries and benefits expense. Severance costs related to the RIF were $418,000. As part of the RIF, we eliminated the majority of our IT staff and outsourced our network administration to an external third party. The projected annual cost for these IT related services is expected to be $257,000. In addition to the RIF, the Company has continued its initiative to review all open positions prior to rehiring. As a result of these actions, we have eliminated 16 full-time equivalent positions, from 106 at September 30, 2022 to 90 at September 30, 2023. The reduction in staff is projected to result in a $1.8 million reduction in salaries and benefits expense on an annual basis. In addition, we are significantly adjusting our bonus program for 2023 (to be paid in 2024), which is projected to result in a $558,000 reduction in salaries and benefits expense for 2023. This includes the elimination of projected bonuses for our three executive officers as well as a reduction in bonuses for other positions. The impact of these cost savings initiatives related to salaries and benefits, was offset by $418,000 in severance costs related to the RIF and a $315,000 increase in stock-based compensation expense. The increase in stock based compensation expense was primarily due to the issuance of stock options and awards granted in the third quarter of 2022 under the 2022 Equity Incentive Plan.
Income Tax (Benefit) Expense. We recorded income tax expense of $1.0 million for the first nine months of 2023, compared to an income tax benefit of $172,000 for the first nine months of 2022. The increase in income tax expense was primarily due to an increase in the loss before taxes during the first nine months of 2023 as compared to the first nine months of 2022. Also contributing to this increase was the impact of the change in Wisconsin tax law in July 2023, retroactive to January 2023, which resulted in a $98,000 reduction in tax benefits previously booked during the six months ended June 30, 2023 and a $1.8 million increase in the valuation allowance for deferred tax assets.
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, 2023, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.
(Dollars in thousands)
| Change in Interest Rates (basis points) (1) | Net Interest Income Year 1 Forecast | Year 1 Change from Level |
|---|---|---|
| +400 | $9,895 | (16.33)% |
| +300 | 10,584 | (10.50)% |
| +200 | 11,202 | (5.27)% |
| +100 | 11,503 | (2.73)% |
| Level | 11,826 | —% |
| -100 | 11,789 | (0.31)% |
| -200 | 11,579 | (2.09)% |
| -300 | 11,336 | (4.15)% |
| -400 | 10,943 | (7.46)% |
(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, 2023, the estimated changes in our EVE that would result from the designated instantaneous changes in market interest rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.
(Dollars in thousands)
| Basis Point (“bp”) Change in Interest Rates(1) | Estimated EVE(2) | Estimated Increase (Decrease) in EVE Amount | Percent |
|---|---|---|---|
| +400 | $49,232 | $(20,034) | (28.92)% |
| +300 | 54,088 | (15,178) | (21.91)% |
| +200 | 59,319 | (9,947) | (14.36)% |
| +100 | 64,056 | (5,210) | (7.52)% |
| Level | 69,266 | — | — |
| -100 | 73,313 | 4,047 | 5.84% |
| -200 | 76,262 | 6,996 | 10.10% |
| -300 | 77,461 | 8,195 | 11.83% |
| -400 | 75,951 | 6,685 | 9.65% |
(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, 2023, in the event of a 100-basis point increase in interest rates, we would have experienced a 7.52% decrease in our EVE and in the event of a 100-basis point decrease in interest rates, we would have experienced a 5.84% increase in our EVE. In the event of a 200-basis point increase in interest rates at September 30, 2023, we would have experienced a 14.36% decrease in our EVE and in the event of a 200-basis point decrease in interest rates, we would have experienced a 10.10% increase in our EVE.
Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in EVE require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the EVE table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the EVE table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and will differ from actual results.
EVE calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.
Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, FHLB advances, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. At September 30, 2023, we had $78.5 million outstanding in advances from the FHLB. At September 30, 2023, we had $91.1 million in additional borrowing capacity at the Federal Home Loan Bank of Chicago, based on the level of qualifying real estate loans currently pledged to the FHLB. Additionally, at September 30, 2023, we had a $12.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at September 30, 2023. The Company also had an $9.5 million line of credit at the Federal Reserve based on pledged commercial real estate loans of approximately $12.7 million at September 30, 2023. The Company had not drawn on the Federal Reserve line as of September 30, 2023. We also have the ability to participate in the Federal Reserve's new Bank Term Funding Program as needed.
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 used in operating activities was $324,000 for the nine months ended September 30, 2023, as compared to $1.8 million net cash provided by operating activities for the nine months ended September 30, 2022. Net cash used in operating activities for the nine months ended September 30, 2023 primarily consisted of the origination of $8.9 million in mortgage loans held for sale and a net loss of $4.5 million, partially offset by $8.8 million in proceeds from the sale of mortgage loans held for sale and a $1.9 million net loss on the sale of available-for-sale securities. Net cash provided by operating activities for the nine months ended September 30, 2022 primarily consisted of $20.4 million in proceeds from the sale of mortgage loans held for sale, partially offset by $19.0 million in originations of mortgage loans held for sale. Net cash used in investing activities was $16.4 million for the nine months ended September 30, 2023, as compared to $54.5 million for the nine months ended September 30, 2022. Net cash used in investment activities during the nine months ended September 30, 2023 consisted primarily of a $23.5 million net increase in loans, $21.4 million for the purchase of available-for-sale securities and a $1.4 million increase in FHLB stock, partially offset by $19.5 million from proceeds from the sale of available-for-sale securities and $9.7 million from maturities, calls and payments on available-for-sale securities. Net cash used in investment activities during the nine months ended September 30, 2022 consisted primarily of the purchase of $37.1 million of available-for-sale securities and a $31.5 million net increase in loans, partially offset by $14.6 million from maturities, calls and payments on available-for-sale securities. Net cash provided by financing activities was $15.0 million for the nine months ended September 30, 2023, as compared to $1.6 million for the nine months ended September 30, 2022. Net cash provided by financing activities for the first nine months of 2023 primarily resulted from borrowings of $100.5 million of FHLB advances and a $9.2 million increase in advance payments by borrowers for taxes and insurance, partially offset by $93.5 million in principal payments on FHLB advances. Net cash provided by financing activities for the first nine months of 2022 primarily resulted from borrowings of $10.0 million of FHLB advances and a $8.4 million increase in advance payments by borrowers for taxes and insurance, partially offset by $8.5 million in principal payments on FHLB advances, a $5.2 million decrease in deposits, $2.0 million to repurchase the company's common stock and $1.1 million to purchase additional shares for the company's ESOP.
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, 2023, PyraMax Bank exceeded all of its regulatory capital requirements with a Tier 1 leverage capital level of $62.2 million, or 11.1% of adjusted total assets, which is above the well-capitalized required level of $28.1 million, or 5.0%. The Bank had total risk-based capital of $66.7 million, or 16.1% of risk-weighted assets, which is above the well-capitalized required level of $41.4 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 as the 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.
Controls and procedures
As filed, 947 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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, 2023. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
There were no changes in the Company’s internal control over financial reporting in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the third quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Risk factors
As filed, 329 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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, 2022 Annual Report on Form 10-K and March 31, 2023 Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2023-09-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Interest expense | 3 months2023-07-01 to 2023-09-30 | $2.4m | us-gaap:InterestExpense |
| Interest expense | 9 months2023-01-01 to 2023-09-30 | $5.8m | us-gaap:InterestExpense |
| Income tax | 3 months2023-07-01 to 2023-09-30 | $1.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months2023-01-01 to 2023-09-30 | $1.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2023-07-01 to 2023-09-30 | −$3.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months2023-01-01 to 2023-09-30 | −$4.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2023-07-01 to 2023-09-30 | −$0.66 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2023-01-01 to 2023-09-30 | −$0.81 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2023-07-01 to 2023-09-30 | −$0.66 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2023-01-01 to 2023-09-30 | −$0.81 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2023-07-01 to 2023-09-30 | 5,534,711 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2023-01-01 to 2023-09-30 | 5,538,509 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2023-01-01 to 2023-09-30 | −$324.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Total assets | At period end2023-09-30 | $554.6m | us-gaap:Assets |
| Total liabilities | At period end2023-09-30 | $484.4m | us-gaap:Liabilities |
| Shareholders' equity | At period end2023-09-30 | $70.2m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0000950170-23-061978. Last ingested by Listed: Oct 24, 2026, 15:06 ET. Listed shows no prices and gives no investment advice.