EWSB Bancorp (EWSB) S-1IPO registration

Exhibit 99.3

Feldman Financial Advisors, Inc.

8804 Mirador Place

McLean, VA 22102

(202) 467-6862

Feldman Financial Advisors, Inc.

8804 Mirador Place

McLean, VA 22102

(202) 467-6862

February 23, 2024

Board of Directors

Wisconsin Mutual Bancorp, MHC

221 South Locust Street

Kaukauna, Wisconsin 68801

Members of the Board of Directors:

At your request, we have completed and hereby provide an independent appraisal (the “Appraisal”) of the estimated pro forma market value of Wisconsin Mutual Bancorp, MHC (the “Company”) as of February 23, 2024, in conjunction with the Company’s conversion (the “Conversion”) from a mutual holding company to a stock holding company form of organization, issuance of all of its capital stock to a newly formed Maryland corporation known as EWSB Bancorp, Inc. (“New EWSB Bancorp”), and offering for sale of New EWSB Bancorp’s common stock to eligible depositors of East Wisconsin Savings Bank (the “Bank”) and the Bank’s employee stock ownership plan, and also to certain members of the general public if necessary, in the subscription and community offering (the “Stock Offering”).

The Conversion is being undertaken pursuant to a Plan of Conversion adopted by the Boards of Directors of the Company, the Bank, New EWSB Bancorp, and the mid-tier stock holding company, EWSB Bancorp, Inc. (“Old EWSB Bancorp”). The Appraisal is furnished in conjunction with the filing by the Company of regulatory applications concerning the Conversion and the Stock Offering with the Board of Governors of the Federal Reserve System and the Wisconsin Department of Financial Institutions.

Feldman Financial Advisors, Inc. (“Feldman Financial”) is a financial consulting and advisory firm that specializes in valuations and analyses of business enterprises and securities in the thrift, banking, and mortgage industries. The background of Feldman Financial is presented in Exhibit I. In preparing the Appraisal, we conducted an analysis of the Company that included discussions with the Company’s management, the Company’s legal counsel, Luse Gorman, PC, and the Company’s independent registered public accounting firm, Plante & Moran, PLLC.

In addition, where appropriate, we considered information based on other available published sources that we believe are reliable; however, we cannot guarantee the accuracy and completeness of such information. We also reviewed, among other factors, the economy in the Company’s primary market area and compared the Company’s financial condition and operating performance with that of selected publicly traded thrift institutions. We reviewed conditions in the securities markets in general and in the market for thrift institution common stocks in particular.

Feldman Financial Advisors, Inc.

Board of Directors

Wisconsin Mutual Bancorp, MHC

February 23, 2024

Page Two

The Appraisal is based on the Company’s representation that the information in the Conversion regulatory applications and additional evidence furnished to us by the Company and its independent auditor are truthful, accurate, and complete. We did not independently verify the financial statements and other information provided by the Company and its independent accounting firm, nor did we independently value the assets or liabilities of the Company. The Appraisal considers the Company only as a going concern and should not be considered as an indication of the liquidation value of the Company.

Pursuant to the Plan of Conversion, the Company will convert from the mutual holding company form of organization to the stock holding company form of organization through the following series of steps. The Company currently owns 100% of the common stock of Old EWSB Bancorp, which in turn owns 100% of the common stock of the Bank. The Company will first merge with and into Old EWSB Bancorp, which will immediately merge with and into New EWSB Bancorp, which in turn will sell shares of common stock in the Stock Offering. When the Conversion and Stock Offering are completed, all of the outstanding capital stock of the Bank will be owned by New EWSB Bancorp, and all of the common stock of New EWSB Bancorp will be owned by shareholders. The Bank will operate as a wholly-owned subsidiary of New EWSB Bancorp, and the Company and Old EWSB will both cease to exist.

It is our opinion that, as of February 23, 2024, the estimated pro forma market value of the Company was within a range (the “Valuation Range”) of $7,437,500 to $10,062,500 with a midpoint of $8,750,000. Pursuant to applicable appraisal guidelines, the Valuation Range was based upon a 15% decrease from the midpoint value to determine the minimum value and a 15% increase from the midpoint value to establish the maximum value. Assuming an additional 15% increase above the maximum value results in an adjusted maximum of $11,571,880. Based on the Valuation Range and an initial offering price of $10.00 per share, the number of shares to be sold in the Stock Offering is as follows: 743,750 at the minimum, 875,000 at the midpoint, 1,006,250 at the maximum, and 1,157,188 at the adjusted maximum.

Our Appraisal is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of common stock in the Stock Offering. Moreover, because the Appraisal is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of stock in the Stock Offering will thereafter be able to sell such shares at prices related to the foregoing estimate of the Company’s pro forma market value. Feldman Financial is not a seller of securities within the meaning of any federal or state securities laws, and any report prepared by Feldman Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.

Feldman Financial Advisors, Inc.

Board of Directors

Wisconsin Mutual Bancorp, MHC

February 23, 2024

Page Three

The Valuation Range reported herein will be updated as appropriate. These updates will consider, among other factors, any developments or changes in the Company’s operating performance, financial condition, or management policies, and current conditions in the securities markets for thrift institution common stocks. Should any such new developments or changes be material, in our opinion, to the valuation of the Company, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in detail at that time.

	Respectfully submitted,
	Feldman Financial Advisors, Inc.
	Trent R. Feldman
	President
	Peter W. L. Williams
	Principal

Feldman Financial Advisors, Inc.

TABLE OF CONTENTS

Feldman Financial Advisors, Inc.

LIST OF TABLES

Feldman Financial Advisors, Inc.

INTRODUCTION

At your request, we have completed and hereby provide an independent appraisal (the “Appraisal”) of the estimated pro forma market value of Wisconsin Mutual Bancorp, MHC (the “Company”) as of February 23, 2024, in conjunction with the Company’s conversion (the “Conversion”) from a mutual holding company to a stock holding company form of organization, issuance of all of its capital stock to a newly formed Maryland corporation known as EWSB Bancorp, Inc. (“New EWSB Bancorp”), and offering for sale of New EWSB Bancorp’s common stock to eligible depositors of East Wisconsin Savings Bank (the “Bank”) and the Bank’s employee stock ownership plan (the “ESOP”), and also to certain members of the general public if necessary, in the subscription and community offering (the “Stock Offering”).

The Conversion is being undertaken pursuant to a Plan of Conversion adopted by the Boards of Directors of the Company, the Bank, New EWSB Bancorp, and the mid-tier stock holding company, EWSB Bancorp, Inc. (“Old EWSB Bancorp”). The Appraisal is furnished in conjunction with the filing by the Company of regulatory applications concerning the Conversion and the Stock Offering with the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) and the Wisconsin Department of Financial Institutions (“DFI”).

Pursuant to the Plan of Conversion, the Company will convert from the mutual holding company form of organization to the stock holding company form of organization through the following series of steps. The Company currently owns 100% of the common stock of Old EWSB Bancorp, which in turn owns 100% of the common stock of the Bank. The Company will first merge with and into Old EWSB Bancorp, which will immediately merge with and into New EWSB Bancorp, which in turn will sell shares of common stock in the Stock Offering. When the Conversion and Stock Offering are completed, all of the outstanding capital stock of the Bank will be owned by New EWSB Bancorp, and all of the common stock of New EWSB Bancorp will be owned by shareholders. The Bank will operate as a wholly-owned subsidiary of New EWSB Bancorp, and the Company and Old EWSB will both cease to exist.

Feldman Financial Advisors, Inc.

Feldman Financial Advisors, Inc. (“Feldman Financial”) is a financial consulting and advisory firm that specializes in valuations and analyses of business enterprises and securities in the thrift, banking, and mortgage industries. The background of Feldman Financial is presented in Exhibit I. In preparing the Appraisal, we conducted an analysis of the Company that included discussions with the Company’s management, the Company’s legal counsel, Luse Gorman, PC, and the Company’s independent registered public accounting firm, Plante & Moran, PLLC.

In addition, where appropriate, we considered information based on other available published sources that we believe are reliable; however, we cannot guarantee the accuracy and completeness of such information. We also reviewed, among other factors, the economy in the Company’s primary market area and compared the Company’s financial condition and operating performance with that of selected publicly traded thrift institutions. We reviewed conditions in the securities markets in general and in the market for thrift institution common stocks in particular.

The Appraisal is based on the Company’s representation that the information in the Conversion regulatory applications and additional evidence furnished to us by the Company and its independent auditor are truthful, accurate, and complete. We did not independently verify the financial statements and other information provided by the Company and its independent accounting firm, nor did we independently value the assets or liabilities of the Company. The Appraisal considers the Company only as a going concern and should not be considered as an indication of the liquidation value of the Company.

Feldman Financial Advisors, Inc.

Our Appraisal is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of common stock in the Stock Offering. Moreover, because the Appraisal is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of stock in the Stock Offering will thereafter be able to sell such shares at prices related to the foregoing estimate of the Company’s pro forma market value. Feldman Financial is not a seller of securities within the meaning of any federal or state securities laws, and any report prepared by Feldman Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.

The Valuation Range reported herein will be updated as appropriate. These updates will consider, among other factors, any developments or changes in the Company’s operating performance, financial condition, or management policies, and current conditions in the securities markets for thrift institution common stocks. Should any such new developments or changes be material, in our opinion, to the valuation of the Company, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in detail at that time.

Feldman Financial Advisors, Inc.

I. Business of the Company

General Overview

Wisconsin Mutual Bancorp, MHC (the “Company) is a Wisconsin-chartered mutual holding company that owns all of the common stock of EWSB Bancorp, Inc. (“Old EWSB Bancorp”), a mid-tier stock holding company that owns all of the common stock of East Wisconsin Savings Bank (the “Bank”). The Bank is a Wisconsin-chartered savings bank headquartered in Kaukauna, Wisconsin. All references to the Company in this report include the consolidated operations of the Company, Old EWSB Bancorp, and the Bank, unless the context indicates another meaning.

The Bank was organized originally in 1887 under the name East Wisconsin Savings and Loan Association. In 1997, the Bank changed its name to East Wisconsin Savings Bank, S.A., and in 2017, it reorganized into the no-stock mutual holding company form of ownership. The Bank operates through its headquarters in Kaukauna and branches in Appleton, Freedom, Grand Chute, and Kimberly, Wisconsin. The Bank considers its primary lending market area to be Outagamie County, Wisconsin, and its adjoining counties.

The Company’s business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, primarily in one- to four-family residential real estate loans, as well as marine and recreational vehicle loans, home equity loans and lines of credit, and other consumer loans. To a lesser extent, the Company originates commercial and multi-family real estate, residential construction, and commercial business loans. At December 31, 2023, the Company had total assets of $262.6 million, total deposits of $230.5 million, net total loans of $174.3 million, and total equity of $11.5 million (measuring 4.39% of total assets). The Company reported a net loss of -$935,000 for the year ended December 31, 2023 and a net loss of -$4.2 million for the year ended December 31, 2022. At December 31, 2023, the Bank had a tier 1 leverage ratio of 6.34%, a common equity tier 1 risk-based ratio of 11.17%, a tier 1 risk-based ratio of 11.17%, and a total risk-based capital ratio of 11.89%.

Feldman Financial Advisors, Inc.

The Bank’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is subject to regulation, supervision, and examination by the Wisconsin Department of Financial Institutions (“DFI”) under Wisconsin law, and the FDIC as its primary federal regulator and insurer of its deposits. The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Chicago. Following the completion of the Conversion, New EWSB Bancorp will be a bank holding company and will be subject to examination by and the enforcement authority of the Federal Reserve Board (“FRB”).

The Company’s long operating history has provided it with a familiarity of its local communities and customer base. The Company believes that it has a strong community reputation as a residential mortgage lender, and its management and staff are easily accessible to customers. The Company continues to stress customer service and is community focused through its staff personnel who are knowledgeable of the local customer base and very active in community endeavors. Since 1887, the Company has remained committed to its original mission statement: “To afford our members a safe and profitable investment of their savings and to aid them in acquiring homesteads and other property.”

Over much of the past decade, the Company expanded at a gradual pace and added to its capital base through profitable operating results. To decrease its reliance on long-term residential mortgage loans, the Company also began to diversify its lending activities to include certain consumer and commercial business loans. As of December 31, 2020, the Company had total assets of $270.8 million and total equity capital of $24.4 million (9.00% of total assets). The Company’s total assets expanded to $292.2 million at December 31, 2021, largely due to the banking industrywide trend of increased deposit inflows from stimulus-related funds. In response to the expanded liquidity on its balance sheet, the Company increased its holdings of investment securities, primarily comprising U.S. Government-sponsored agency obligations and municipal bonds. Available-for-sale securities increased from $58.7 million or 21.7% of total assets at December 31, 2020 to $110.2 million or 37.7% of total assets at December 31, 2021.

Feldman Financial Advisors, Inc.

However, due to rapidly rising interest rates in 2022, the Company experienced mounting unrealized losses on its available-for-sale securities portfolio that adversely impacted its equity capital. Debt securities classified as available-for-sale are carried at fair value on the balance sheet with unrealized gains or losses reflected in accumulated other comprehensive income (“AOCI”). During 2022, the Company’s equity capital declined sharply as a result of accumulated other comprehensive losses of $10.5 million (before tax effect), primarily due to negative adjustments to the Company’s investment securities portfolio.

In the third quarter of 2022, the Company sought to limit further erosion to its capital position and bolster liquidity levels by restructuring its securities portfolio. As part of the restructuring, the Company reassessed the classification of certain investment securities and transferred $46.4 million from available-for-sale securities to held-to-maturity securities. The securities were transferred at their amortized cost basis, net of any remaining unrealized gains or losses reported in AOCI. The related unrealized loss of $8.1 million was recorded in AOCI to be accreted over the remaining life of the securities, diminishing its impact on the Company’s equity over time as the underlying securities approach their respective maturities. The securities portfolio restructuring resulted in a $5.1 million pre-tax loss on the sale of available-for-sale securities during the year ended December 31, 2022. As a result of the net loss on sale of securities and the large AOCI deficit, the Company’s equity capital declined from $22.5 million (7.72% of total assets) at December 31, 2021 to $10.9 million (4.03% of total assets) at December 31, 2022. The Company reported a net operating loss of -$4.2 million for the year ended December 31, 2022.

Feldman Financial Advisors, Inc.

The Company’s earnings remained negative in 2023 as it reported a net loss of -$935,000 for the year ended December 31, 2023. The operating deficit in 2023 was chiefly attributable to a further narrowing of the Company’s net interest margin and increased non-interest expense related to the Company’s proposed acquisition of another mutual savings institution, which transaction was subsequently terminated. Due to a $1.6 million improvement in the AOCI deficit, the Company’s equity capital increased from $10.9 million (4.03% of total assets) at December 31, 2022 to $11.5 million (4.39% of total assets) at December 31, 2023.

For regulatory capital purposes, the amount of AOCI and certain net deferred tax assets are excluded from the Bank’s calculation of tier 1 and total capital levels. As of December 31, 2023, the Bank’s regulatory capital levels exceeded the levels required to be technically considered “well capitalized” under federal regulatory capital regulations. As noted previously, the Bank had a tier 1 leverage ratio of 6.34%, a common equity tier 1 risk-based ratio of 11.17%, a tier 1 risk-based ratio of 11.17%, and a total risk-based capital ratio of 11.89% at December 31, 2023.

In July 2023, the Bank entered into a confidential memorandum of understanding (“MOU”) with the FDIC and the DFI , the Bank’s primary banking regulators. The MOU requires that the Bank address certain practices and conditions identified during regulatory examinations, including, among other things, the level of its capital, earnings, liquidity, investments, and information technology. The MOU also requires enhancements to Board oversight, asset/liability management, and risk management. The MOU also places certain restrictions on the Bank’s operations.

The Bank is in the process of putting into place policies and processes to address each of these noted areas. The failure to adequately address the issues identified in the MOU or comply with its terms could result in additional regulatory or enforcement actions by the FDIC and/or the DFI. The Bank has expended significant resources in connection with the MOU, and its continued efforts to comply with the MOU may restrict its operations or result in the continued expenditure of significant resources, which could have adverse effects on its operations and financial condition.

Feldman Financial Advisors, Inc.

The Company’s current operating goal is to position the organization to succeed in an evolving and competitive financial services landscape and enhance its standing as one of the leading community banking institutions in its market. In recent years, the Company has added financial investment and insurance products and services to its lines of business, which are conducted through an internal division operating as Wisconsin Mutual Investment Group. The Company believes that it can provide long-term value to its customers, employees, future stockholders, and the communities it serves by executing a prudent business strategy that produces a return to profitability. The Company also believes there is a significant opportunity for a community-focused banking institution to continue to compete effectively in its primary market area and that the increased capital it will have after the completion of the Conversion will help to facilitate this objective. Subject to changes necessitated by future market conditions, regulatory restrictions, and other factors, the Company intends to pursue the core business strategies that are outlined in more detail below:

Feldman Financial Advisors, Inc.

Feldman Financial Advisors, Inc.

The Company believes it must raise additional capital in order to facilitate its loan growth objectives and provide a greater cushion in response to the risk profile associated with continued expansion and future economic conditions. As a stock organization upon completion of the Conversion, the Company will be organized in the ownership form used by commercial banks, most major businesses, and a large number of thrift institutions. The ability to raise new equity capital through the issuance and sale of capital stock will allow the Company and the flexibility to increase its equity capital position more rapidly than by earnings retention.

The Company also believes that the ability to attract new capital also will help address the needs of the communities it serves and enhance its ability to expand. Finally, the Company expects to benefit from its customers and local community members having stock ownership in its business, since that is viewed as an effective means of promoting customer loyalty and business interest.

In summary, the Company’s primary reasons for implementing the Conversion and undertaking the Stock Offering are to:

Feldman Financial Advisors, Inc.

The remainder of Chapter I examines in more detail the trends addressed in this section, including the impact of changes in the Company’s economic and competitive environment, and recent strategic initiatives. The discussion is supplemented by the exhibits in the Appendix. Exhibit II-1 presents the Company’s consolidated balance sheets as of December 31, 2022 and 2023. Exhibit II-2 summarizes the Company’s consolidated income statements for the years ended December 31, 2022 and 2023.

Feldman Financial Advisors, Inc.

Financial Condition

Table 1 presents selected data concerning the Company’s financial position as of December 31, 2022 and 2023. Table 2 displays relative balance sheet concentrations as of similar dates.

Table 1

Selected Financial Condition Data

Wisconsin Mutual Bancorp, MHC

As of December 31, 2022 and 2023

(Dollars in Thousands)

Asset Composition

The Company's total assets amounted to $262.6 million at December 31, 2023, reflecting a $8.6 million or 3.2% decrease from total assets of $271.2 million at December 31, 2022. The recent decrease in total assets was primarily related to a decrease of $8.6 million in investment securities. Cash and cash equivalents decreased by $1.5 million or 48.8% between December 31, 2022 and 2023. Net total loans increased by $1.9 million or 1.1% between December 31, 2022 and 2023, while total deposits decreased by $18.7 million or 7.5%. Borrowed funds increased by $9.9 million from $9.1 million at December 31, 2022 to $19.0 million at December 31, 2023.

Feldman Financial Advisors, Inc.

Table 2

Relative Balance Sheet Concentrations

Wisconsin Mutual Bancorp, MHC

As of December 31, 2022 and 2023

(Percent of Total Assets)

The aggregate concentration of cash and investments declined from $81.5 million or 30.1% of total assets at December 31, 2022 to $71.2 million or 27.1% of total assets at December 31, 2023. The decrease was largely due to the maturing of a portion of the U.S. Government agency securities portfolio in 2023. The proceeds from these maturing securities were utilized to support loan growth and manage liquidity. As a result of the recent decrease in the Company’s securities portfolio, the percentage of net total loans increased from 63.6% of total assets at December 31, 2022 to 66.4% of total assets at December 31, 2023.

Feldman Financial Advisors, Inc.

The Company’s loan portfolio consists of various loan types but is still overwhelmingly composed of one- to four-family residential mortgage loans, which accounted for $122.2 million or 69.7% of total loans at December 31, 2023 as illustrated in Exhibit II-3. The Company’s loan portfolio also included home equity loans and lines of credit ($6.2 million or 3.5% of total loans), consumer loans ($34.8 million or 19.9% of total loans), commercial business loans ($4.4 million or 2.5% of total loans), construction loans ($4.0 million or 2.3% of total loans), and commercial and multi-family real estate loans ($3.8 million or 2.2% of total loans). Of the total amount of loans due after December 31, 2024, approximately $96.8 million, or approximately 56%, consisted of fixed-rate loans and $76.8 million, or approximately 44%, represented adjustable-rate loans.

At December 31, 2023, the Company had $122.2 million in one- to four-family residential mortgage loans, which represented 69.7% of total loans. The vast majority of the one- to four-family residential real estate loans that the Company originates are secured by properties located in its primary market area. At December 31, 2023, $13.5 million or 10.7% of residential mortgage loans were secured by non-owner occupied properties. The Company’s largest residential mortgage loan had an outstanding balance of $855,000 at December 31, 2023 and was performing according to its original terms. The average principal loan balance of the Company’s one- to four-family residential real estate loans was $94,000 at December 31, 2023. The Company also had $4.0 million of residential construction loans outstanding as of December 31, 2023. At the end of the construction phase, the loan may convert to a permanent mortgage loan or may be paid in full.

The Company’s one- to four-family residential real estate loans are generally underwritten to secondary market guidelines. The Company currently sells a significant majority of the fixed-rate residential real estate loans that it originates on a servicing retained basis, while retaining shorter-term fixed-rate, adjustable-rate, and non-conforming residential mortgages in order to manage the duration and time to repricing of its loan portfolio. At December 31, 2023, $59.0 million, or approximately 48%, of the Company’s one- to four-family residential mortgage loans were adjustable-rate loans.

Feldman Financial Advisors, Inc.

In addition to one- to four-family residential real estate loans, the Company offers home equity loans and lines of credit that are secured by the borrower’s primary or secondary residence. At December 31, 2023, the Company had $6.2 million or 3.5% of its total loan portfolio in home equity loans and lines of credit. Home equity loans and lines of credit are generally underwritten using the same criteria that the Company uses to underwrite one- to four-family residential mortgage loans with terms of up to 15 years. Home equity loans and lines of credit may be underwritten with a loan-to-value ratio of up to 90% when combined with the principal balance of the existing first mortgage loan.

At December 31, 2023, the Company’s aggregate amount of consumer loans totaled $34.8 million or 19.9% of total loans. Of this total, approximately $30.8 million consisted of marine and recreational loans that are typically made through a broker relationship and primarily secured by boats and motor homes purchased in the upper Midwest region of the United States. These loans typically have a maximum loan term of 15 years and are made at a fixed rate. For each marine or recreational vehicle loan arranged through its broker relationship, the Company generally pays the broker a commission based on the amount of the loan. The Company’s marine and recreational vehicle loans are generally limited to no more than 120% of invoice for new financings and 100% of the National Automobile Dealers Association (“NADA”) Marine Appraisal Guide used price plus taxes and fees. As mitigating risk factors, the Company’s marine and recreational vehicle loan borrowers generally have very high credit scores, substantial down payments, substantial net worth, personal liquidity, and excess cash flow.

Feldman Financial Advisors, Inc.

The Company also originates a limited amount of other consumer loans, which amounted to $4.0 million at December 31, 2023. The other consumer loans originated by the Company generally consist of loans secured by automobile loans, deposits, and miscellaneous other types of installment loans, including a limited amount of unsecured personal loans.

At December 31, 2023, the Company had $3.8 million in commercial real estate and multi-family real estate loans, which represented 2.2% of total loans. The Company’s commercial real estate and multi-family loans are secured primarily by owner-occupied commercial properties, multi-family properties, and retail or mixed-use properties, almost all of which are located in the Outagamie County lending market and the surrounding area. The Company generally originates adjustable-rate multi-family and other commercial real estate loans with maximum terms of up to 30 years. From time to time, the Company will also originate fixed-rate loans in these portfolios. The Company generally limits loan-to-value ratios to 95% of the appraised value or purchase price, whichever is lower. Loans over 80% are required to have mortgage insurance.

At December 31, 2023, the Company had commercial business loans outstanding amounting to $4.4 million, or 2.5% of total loans. The Company’s commercial business loans included both term loans and lines of credit made with either fixed or adjustable interest rates. Almost the entire portfolio of commercial business loans comprises loans originated and serviced by a national broker specializing in the professional and healthcare industries. All loans purchased are fully reviewed by the Company and underwritten pursuant to its policies and procedures.

Feldman Financial Advisors, Inc.

Exhibit II-4 presents a summary of the Company’s portfolio of cash, short-term liquidity, and investment securities as of December 31, 2022 and 2023. The Company’s primary investment objectives are to (1) provide and maintain liquidity within regulatory guidelines; (2) maintain high quality investments to minimize risk; (3) provide collateral for pledging requirements and short-term borrowing needs; (4) serve as a countercyclical balance to earnings; (5) maximize returns; and (6) manage interest rate risk. The Company’s investment policy is adopted by the Board of Directors and reviewed annually by the Board of Directors. All investment decisions are made by the Company’s Asset/Liability Management Committee according to Board-approved policies. The Company’s current investment policy authorizes, with certain limitations, investments in U.S. Treasury securities; securities issued by the U.S. Government and its agencies or Government-sponsored enterprises (“GSEs”), including mortgage-backed securities; corporate and municipal bonds; federally-insured deposits in other financial institutions; FHLB instruments; federal funds; bankers acceptances; and repurchase agreements.

As shown in Exhibit II-4, the Company’s aggregate cash and investments amounted to $71.2 million or 17.2% of total assets as of December 31, 2023. Cash and cash equivalents amounted to $6.1 million or 8.6% of the Company’s total assets as of December 31, 2023. The Company’s available-for-sale securities portfolio, reported at fair value, totaled $23.9 million or 9.1% of total assets at December 31, 2023 and was composed of $9.0 million of mortgage-backed securities, $12.1 million of municipal bonds, and $2.8 million of corporate securities. The Company’s held-to-maturity securities portfolio, reported at amortized cost, amounted to $40.1 million or 15.3% of total assets and comprised $28.2 million of U.S. Government-sponsored agency securities and $11.8 million of U.S. Treasury securities.

Feldman Financial Advisors, Inc.

As of December 31, 2023, the Company had net unrealized losses of $3.9 million in its available-for-sale securities portfolio and net unrealized losses of $246,000 in its held-to-maturity securities portfolio. The Company also had $6.5 million in remaining unrealized losses related to its securities reclassification adjustment. The available-for-sale securities portfolio had a weighted average yield of 2.66% and the held-to-maturity securities portfolio had a weighted average yield of 1.40% for the year ended December 31, 2023. The Company also owned $1.1 million of stock in the FHLB of Chicago as of December 31, 2023.

Liability Composition

Deposits are the Company’s primary external source of funds for lending and investment purposes. Exhibit II-5 presents a summary of the Company’s deposit composition as of December 31, 2022 and 2023. Total deposits amounted to $230.5 million or 87.8% of total assets and 91.8% of total liabilities at December 31, 2023. Total deposits decreased by 7.5% or $18.7 million from $249.2 million at December 31, 2022 to $230.5 million at December 31, 2023. Certificates of deposit increased by $5.5 million to $104.5 million at December 31, 2023 from $99.0 million at December 31, 2022, while the Company experienced decreases in all other deposit categories. As a result of recent increases in market interest rates, customers have sought higher-yielding deposits.

Core deposits, defined as total deposits excluding certificate of deposit accounts, decreased by $24.2 million or 16.2% from $150.2 million at December 31, 2022 to $126.0 million at December 31, 2023. The ratio of core deposits to total deposits decreased from 60.3% at December 31, 2022 to 54.7% at December 31, 2023, while the concentration of certificate deposits to total deposits increased from 39.7% to 45.3% over the same time period.

The Company relies on personalized customer service, longstanding relationships with customers, and a favorable reputation in its primary market area to attract and retain local deposits. Deposit account terms vary according to the minimum balance required, the time period that funds must remain on deposit, and the interest rate, among other factors. In determining the rates and terms of its deposit accounts, the Company considers the rates offered by competitors, liquidity needs, growth objectives, current operating strategies, and customer preferences and concerns. As of December 31, 2023, the Company’s weighted average cost of interest-bearing deposits was 1.59% and the overall weighted average cost of total deposits (including non-interest bearing deposits) was 1.52%.

Feldman Financial Advisors, Inc.

The Company has utilized borrowing to supplement deposits as a funding source. FHLB borrowings increased from $9.1 million at December 31, 2022 to $18.6 million at December 31, 2023. The Company has a master contract agreement with the FHLB of Chicago that provides for borrowing up to an FHLB determined percent of the book value of the Company’s qualifying one- to four-family residential real estate loans. The loans pledged as security for FHLB borrowings totaled approximately $97.8 million and $65.8 million at December 31, 2022 and 2023, respectively. FHLB advances are also secured by $1.1 million of FHLB stock owned by the Company at both December 31, 2022 and 2023. At December 31, 2023, the Company’s available and unused portion of the FHLB borrowing agreement totaled $1.7 million based on FHLB stock owned. The Company also has short-term borrowing availability through the Federal Reserve Bank’s discount window of up to $25 million. The Company is required to pledge securities and/or loans in order to borrow at the discount window.

The Company also had additional borrowings outstanding of $400,000 as of December 31, 2023. In 2023, the Company entered into subordinated promissory note agreements with various directors and officers of the Company to support future capital contributions. The par value of the notes is $400,000 in aggregate and the annual interest rate on the notes is 7.0%.

Feldman Financial Advisors, Inc.

Equity Capital

Prior to 2022, the Company had historically maintained solid capital levels. However, due to the adverse effect rising interest rates had on its available-for-sale securities portfolio and the resulting AOCI deficit, the Company’s total equity declined sharply from $22.5 million or 7.72% of total assets at December 31, 2021 to $10.9 million or 4.03% of total assets at December 31, 2022. The Company’s total equity increased moderately to $11.5 million or 4.39% of total assets at December 31, 2023. The Company’s total equity at December 31, 2023 was composed of $19.2 million in retained earnings, which was offset by an AOCI deficit of $7.7 million. The AOCI deficit consists of current unrealized losses on available-for-sale securities and the remaining unaccreted portion of the $8.1 million of unrealized loss that was included in AOCI upon the reclassification in 2023 of $46.4 million in available-for-sale securities to held-to-maturity securities.

Because of the net operating loss incurred in 2022, the Bank’s regulatory capital declined significantly in 2022. The Bank’s tier 1 leverage capital ratio declined from 8.17% at December 31, 2021 to 6.59% at December 31, 2022 and 6.34% at December 31, 2023. The Bank’s regulatory capital ratios of tier 1 leverage capital, common equity tier 1 risk-based capital, tier 1 risk-based capital, and total risk-based capital were 6.34%, 11.17%, 11.17%, and 11.89%, respectively, as of December 31, 2023. In comparison, the minimum regulatory requirements under federal banking agency guidelines were 4.00%, 4.50%, 6.00%, and 8.00%, and the threshold requirements for regulatory well capitalized levels were 5.00%, 6.50%, 8.00%, and 10.00%, respectively.

Additionally, as a Wisconsin-chartered savings bank, the Bank must maintain a net worth ratio of 6.0% (with “net worth ratio” defined as the Bank’s liabilities subtracted from its assets, plus unallocated general loan loss reserves, all divided by the Bank’s total assets). As of December 31, 2023, the Bank had a net worth ratio of 4.50% and, therefore, was not in compliance with the corresponding 6.0% net worth ratio requirement at such date.

Feldman Financial Advisors, Inc.

Income and Expense Trends

Table 3 displays the main components of the Company’s earnings performance for the years ended December 31, 2022 and 2023. Table 4 displays the Company’s principal income and expense ratios as a percent of average assets for the corresponding periods. Table 5 presents selected operating performance ratios along with other financial ratios. Table 6 displays the Company’s weighted average yields on interest-earning assets and weighted average costs of interest-bearing liabilities.

General Overview

Historically, the Company has exhibited a trend of steady profitability with low to moderate earnings results. However, over the past two years, the Company’s business model has been challenged by rising interest rates and increased operating expenses that adversely affected its capital and earnings levels. The Company incurred a net loss of -$4.2 million for the year ended December 31, 2022, which was mainly attributable to a $5.1 million loss on sale of available-for-sale securities in connection with its investments portfolio restructuring. The Company reported a net loss of -$935,000 for the year ended December 31, 2023 due to the continued erosion of its net interest margin and increased operating expenses related in part to its aborted acquisition of another savings institution.

During the past two years, the Company’s net interest income did not cover its non-interest expense, which is a fundamental measure of profitability for financial institutions. The Company reported a negative return on average assets (“ROA”) of -1.47% and -0.35% for the years ended December 31, 2022 and 2023, respectively. The Company reported a negative return on average equity (“ROE”) of -32.09% and -8.70% for the years ended December 31, 2022 and 2023, respectively.

Feldman Financial Advisors, Inc.

Table 3

Income Statement Summary

Wisconsin Mutual Bancorp, MHC

For the Years Ended December 31, 2022 and 2023

(Dollars in Thousands)

Source:  Wisconsin Mutual Bancorp, MHC, audited financial statements.

Feldman Financial Advisors, Inc.

Net interest income decreased $1.6 million or 25.5% to $4.6 million for the year ended December 31, 2023 from $6.2 million for the year ended December 31, 2022, as a result of interest expense increasing by a greater amount than interest income. The Company’s net interest rate spread decreased from 2.27% in the year ended December 31, 2022 to 1.79% for the year ended December 31, 2023, and the net interest margin declined from 2.29% in 2022 to 1.82% in 2023 as shown in Table 6. The decreases in the net interest rate spread and the net interest margin were primarily due to an increase in the rates paid on interest-bearing liabilities and an increase in FHLB borrowings, offset partially offset by an increase in the yield on interest-earning assets.

Based on management’s analysis of the adequacy of allowance for credit losses, the Company recorded a $145,000 provision for loan losses in the year ended December 31, 2023. On January 1, 2023, the Company adopted the current expected credit loss (“CECL”) methodology for evaluating the adequacy of its loan loss allowance and added to its reserves as a result. The Company’s non-performing assets declined from $37,000 or 0.01% of total assets at December 31, 2022 to $18,000 or 0.01% of total assets at December 31, 2023. The Company’s allowance for credit losses was equal to $1.1 million or 0.60% of gross total loans at December 31, 2023 as compared to $909,000 or 0.53% of gross total loans at December 31, 2022.

Non-interest income increased by $572,000 or 65.2% to $1.4 million for the year ended December 31, 2023 from $877,000 for the year ended December 31, 2022. The increase resulted primarily from an increase of $164,000 in mortgage banking income to $355,000 in 2023 and an increase of $279,000 in gains on sale of other assets. The Company recognized a $208,000 gain on sale of a branch office in the third quarter of 2023. In January 2023, the Company closed its branch office in Little Chute, Wisconsin, due to the proximity to its other office locations and the strategic objective to reduce operating expenses. The Company also recorded a $71,000 gain on other real estate owned in 2023. The ratio of non-interest income to average assets increased from 0.31% in 2022 to 0.54% in 2023.

Feldman Financial Advisors, Inc.

Non-interest expense decreased $5.5 million or 43.4% to $7.2 million for the year ended December 31, 2023 from $12.8 million for the year ended December 31, 2022. The decrease was primarily due to the $5.1 million net loss on the sale of available-for-sale securities in 2022 with no such loss recorded in 2023. Additionally, salaries and related benefits decreased $616,000 or 13.5% in 2023 from $4.6 million to $3.9 million. The decrease in salary and related benefits resulted primarily from the closing of a branch office in the third quarter of 2023 and additional operational efficiencies that the Company implemented in 2023. Partially offsetting these decreases was an increase of $466,000 in other non-interest expense from $997,000 in 2022 to $1.5 million in 2023. The increase in other non-interest expense was mainly due to professional fees incurred in 2023 related to the attempted acquisition of another savings institution and increased FDIC insurance premiums. The ratio of non-interest expense to average assets declined from 4.52% in 2022 to 2.70% in 2023. Excluding the net loss on sale of securities, the adjusted non-interest expense ratio would have measured 2.71% of average assets in 2022.

Because of the Company’s negative pre-tax earnings, it recognized an income tax benefit of $1.6 million for the year ended December 31, 2022 and $398,000 for the year ended December 31, 2023. Due to prior years’ losses, the Company has a net operating loss carryforward of $1.9 million and net deferred tax assets of $4.9 million as of December 31, 2023. In order to realize the benefit of these tax losses, credits, and deductions, the Company must generate substantial taxable income in future periods.

Feldman Financial Advisors, Inc.

Table 4

Income Statement Ratios

Wisconsin Mutual Bancorp, MHC

For the Years Ended December 31, 2022 and 2023

(Percent of Average Assets)

Source:  Wisconsin Mutual Bancorp, MHC, financial data; Feldman Financial Advisors, Inc.

Feldman Financial Advisors, Inc.

Table 5

Selected Operating Performance and Financial Ratios

Wisconsin Mutual Bancorp, MHC

At or For the Years Ended December 31, 2022 and 2023

(Dollars in Thousands)

Source:  Wisconsin Mutual Bancorp, MHC, financial data; Feldman Financial Advisors, Inc.

Feldman Financial Advisors, Inc.

Table 6

Yield and Cost Summary

For the Years Ended December 31, 2022 and 2023

Source:  Wisconsin Mutual Bancorp, MHC, financial data.

Feldman Financial Advisors, Inc.

Interest Rate Risk Management

The Company seeks to reduce its earnings vulnerability and capital risk to changes in market interest rates by managing the mismatch between asset and liability maturities and interest rates. The Asset/Liability Management Committee (“ALCO”) is responsible for evaluating the interest rate risk inherent in the Company’s assets and liabilities, for determining the level of risk that is appropriate, given its business strategy, operating environment, capital, liquidity, and performance objectives, and for managing this risk consistent with the policy and guidelines approved by its Board of Directors. The Company believes that accepting some level of interest rate risk is necessary in order to achieve realistic profit goals. The ALCO meets at least quarterly, comprises directors, executive officers, and certain senior management, and reports to the full Board on at least a quarterly basis. The Company currently utilizes a third-party modeling program, prepared on a quarterly basis, to evaluate its sensitivity to changing interest rates.

The Company has implemented various strategies to manage its interest rate risk. By enacting these strategies, the Company believes that it is better positioned to react to changes in market interest rates. These strategies include:

Feldman Financial Advisors, Inc.

The Company monitors its interest rate sensitivity management through third-party models that estimate the change in its economic value of equity (“EVE”) over a range of interest rate scenarios. EVE, which is different from book value, is equal to the market value of assets minus the market value of liabilities (representing the difference between incoming and outgoing discounted cash flows of assets and liabilities) with adjustments made for off-balance sheet items. The EVE ratio, under any interest rate scenario, is defined as the EVE in that scenario divided by the market value of assets in the same scenario. Table 7 sets forth the Company’s EVE as of December 31, 2023 and reflects the changes to EVE as a result of immediate and sustained changes in interest rates as indicated.

Table 7 indicates that at December 31, 2023, in the event of an instantaneous parallel 100 basis point increase in interest rates, the Company would experience a 15.8% decrease in EVE. In the event of an instantaneous 100 basis point decrease in interest rates, the Company would experience a 12.2% increase in EVE. In the event of an instantaneous 200 basis point increase in interest rates, the Company would experience a 33.1% decrease in EVE. In the event of an instantaneous 200 basis point decrease in interest rates, the Company would experience a 27.0% increase in EVE. The EVE simulations do not reflect any steps that the Company might take to counter the impact of such interest rate movement.

In addition to modeling changes in EVE, the Company also analyzes potential changes to net interest income for a one-year period under rising and falling interest rate scenarios. The Company estimates its net interest income for a one-year period, and then calculates what the net interest income would be for the same period under the assumption that the U.S. Treasury yield curve increases or decreases gradually by up to 300 basis points.

Feldman Financial Advisors, Inc.

Table 7

Economic Value of Equity

As of December 31, 2023

(Dollars in Thousands)

Source: Wisconsin Mutual Bancorp, MHC, financial data.

Table 8 sets forth, as of December 31, 2023, the calculation of the estimated changes in the Company’s net interest income resulting from the designated changes in the U.S. Treasury yield curve. As shown in Table 8, an upward change of 100 basis points in market interest rates would increase net interest income by $66,000 or 1.8%, and a downward change of 100 basis points would increase net interest income by $125,000 or 3.4%. An upward change of 200 basis points in market interest rates would increase net interest income by $23,000 or 0.6%, and a downward change of 200 basis points would increase net interest income by $134,000 or 3.6%.

Feldman Financial Advisors, Inc.

Table 8

Net Interest Income Sensitivity

As of December 31, 2023

(Dollars in Thousands)

Source: Wisconsin Mutual Bancorp, MHC, financial data.

Feldman Financial Advisors, Inc.

Asset Quality

Table 9 summarizes the Company’s total non-performing assets as of December 31, 2022 and 2023. The Company has a record of reporting satisfactory asset quality in recent years. Non-performing loans decreased from $37,000 at December 31, 2022 to $18,000 at December 31, 2023. The Company’s non-performing loans consisted of $18,000 in home equity loans as of December 31, 2023 and $37,000 of one- to four-family residential mortgage loans at December 31, 2022. Relative to total loans, non-performing loans measured 0.02% and 0.01% as of December 31, 2022 and 2023, respectively. The Company had no foreclosed assets at December 31, 2022 or 2023. The Company’s ratio of non-performing assets to total assets measured 0.01% as of December 31, 2022 and December 31, 2023.

Table 10 summarizes the Company’s allowance for credit losses as of December 31, 2022 and 2023. The allowance for credit losses increased from $909,000 or 0.53% of gross total loans at December 31, 2022 to $1.1 million or 0.60% of gross total loans at December 31, 2023. The Company’s provision for credit losses amounted to zero in 2022 and $145,000 in 2023. In 2022, the Company experienced net charge-offs of $77,000, which were related to marine and recreational vehicle loans. In 2023, the Company recorded $2,000 in net recoveries. The increased provision for credit losses in 2023 was mainly attributable to the Company’s adoption of the CECL methodology.

Feldman Financial Advisors, Inc.

Table 9

Non-performing Assets Summary

As of December 31, 2022 and 2023

(Dollars in Thousands)

Source:  Wisconsin Mutual Bancorp, MHC, financial data.

Feldman Financial Advisors, Inc.

Table 10

Allowance for Credit Losses

At or For the Years Ended December 31, 2022 and 2023

(Dollars in Thousands)

Source: Wisconsin Mutual Bancorp, MHC, financial data.

Feldman Financial Advisors, Inc.

Market Area

Overview of Market Area

The Bank operates from its main office in Kaukauna, Wisconsin, and four additional branch offices in the communities of Appleton, Freedom, Grand Chute, and Kimberly. All of the Bank’s offices are located in Outagamie County, which is part of the Appleton Metropolitan Statistical Area (“MSA”). The Bank’s primary market area includes parts of Outagamie, Calumet, and Winnebago counties. The Appleton MSA consists of Outagamie County and Calumet County, while Winnebago County comprises the Oshkosh-Neenah MSA. Kaukauna is a city in Outagamie and Calumet counties and situated on the Fox River, approximately 100 miles north of Milwaukee. Appleton is a city in Outagamie, Calumet, and Winnebago counties and is also situated on the Fox River, 30 miles southwest of Green Bay and 100 miles north of Milwaukee. The Fox Cities region is generally considered to include Outagamie County, Calumet County, and the northern portion of Winnebago County. A map of the Bank’s branch office network is presented on the next page.

The Fox Cities region of Northeast Wisconsin encompasses the cities, towns, and villages situated along the Fox River as it flows northward from Lake Winnebago into Green Bay. The Fox Cities region (also referred to as the Fox Valley region) is a mixture of rural and urban areas and includes the cities of Appleton, Kaukauna, Menasha, and Neenah, the villages of Combined Locks, Fox Crossing, Harrison, Hortonville, Kimberley, Little Chute, and Sherwood, and the towns of Buchanan, Clayton, Freedom, Grand Chute, Greenville, and Harrison. Appleton is the largest city in the Fox Cities, while Neenah and Menasha anchor the south end and Kaukauna is at the extreme east end. Since the mid-nineteenth century, the paper industry and its allied industries have been the foundation for the region’s economy. The area is known for its stable economy, educational opportunities, affordable cost of living, quality health care, and recreational amenities.

Feldman Financial Advisors, Inc.

● East Wisconsin Savings Bank– full-service banking offices

The manufacturing of various types of paper and paper products has long been the basis of the Fox Cities economy. The Fox River, with its water power and transportation, made the Fox Cities an important manufacturing location. Today, outgrowths of those early manufacturing activities have led to a more diverse economy, which includes light manufacturing, insurance, plastics, retail, health care, education, government, and food processing. Major paper and paper product manufacturing companies in the area include Kimberly-Clark (Neenah), AstenJohnson (Appleton), and Georgia-Pacific (Neenah). Other large employers in the area include ThedaCare (health care system), Ascension (health care system), Thrivent Financial (financial services), Pierce Manufacturing (manufacturing of fire and rescue apparatus), Plexus Corp. (integrated engineering and contract manufacturing), Presto Products Company (plastics), Miller Electric (welding and cutting equipment), and Bemis Manufacturing Company (plastics and molding).

Feldman Financial Advisors, Inc.

Table 11 presents the total employment force by industry sectors in the United States, Wisconsin, the Appleton MSA, and the Oshkosh-Neenah MSA. The aggregate labor force in 2023 averaged 137,100 in the Appleton MSA and 102,200 in the Oshkosh-Neenah MSA. As displayed in Table 11, manufacturing accounted for the largest employment concentration in the Appleton MSA and the Oshkosh-Neenah MSA, followed by trade, transportation, and utilities. The financial activities sector also exhibited a significant concertation in the Appleton MSA.

Table 11

Total Employment Force by Industry Sector

Average Employment Data for 2023

Source: Wisconsin Department of Workforce Development.

Feldman Financial Advisors, Inc.

Table 12 provides selected demographic data for the United States, the state of Wisconsin, the Appleton MSA, and the Oshkosh-Neenah MSA. The Appleton MSA had an estimated 2024 population of 247,081 and the Oshkosh-Neenah MSA had an estimated population of 171,193. In recent years, the population growth in the Appleton MSA has outpaced both national and state rates. Since 2020, the population in the Appleton MSA expanded by 1.6% as compared to the national and state rates of 1.4%, and 0.4%, respectively. Over the next five years, the population in the Appleton MSA is projected to increase by 2.7% as compared to the national and state rates of 2.4% and 1.6%, respectively. The Appleton-Oshkosh-Neenah combined statistical area (“CSA”) with an estimated population of 418,274 is the third most populous CSA in Wisconsin, after the Milwaukee-Racine-Waukesha CSA and the Madison-Janesville-Beloit CSA.

The median age in the Appleton MSA was 40.1 years, below the state median of 41.0 years but above the national median of 39.8 years. The estimated 2024 median household income in the Appleton MSA was $81,942, above the national and state median levels of $75,874 and $74,195, respectively. The median household income in the Oshkosh-Neenah MSA was lower at $68,906. The unemployment rates in Wisconsin and the local market areas have consistently been lower than the national averages. In December 2023, the unemployment rates in the Appleton MSA and the Oshkosh-Neenah MSA were both equal to 2.3%, measuring below the corresponding state unemployment rate of 2.7% and the national unemployment rate of 3.5%.

The city of Appleton is the county seat of Outagamie County. Appleton had an estimated 2024 population of 75,469, ranking it as the sixth most populous city in the state. Appleton serves as the heart of the Fox Valley and is home to Lawrence University, a private liberal arts college and music conservatory. Fox Valley Technical College is a public technical college located in Grand Chute (Outagamie County), Wisconsin.

Feldman Financial Advisors, Inc.

Table 12
Selected Demographic Data

Feldman Financial Advisors, Inc.

Table 12 (continued)
Selected Demographic Data

(1) As a percentage of total number of households.

Source: Claritas; S&P Global Market Intelligence; U.S. Bureau of the Census; U.S. Department of Labor.

Feldman Financial Advisors, Inc.

The city of Kaukauna is located within the Appleton MSA and had an estimated 2024 population of 17,768. The city has diverse industrial and manufacturing businesses, including the original Oscar Thilmany Paper Mill, which was constructed in 1883 and currently produces specialty paper products. The paper mill has changed ownership numerous times and is now owned by Ahlstrom. Kaukauna had an estimated 2024 median household income of $79.607. The population of Kaukauna increased by 4.0% between 2020 and 2024 and is projected to increase by 3.2% over the next five years.

The town of Grand Chute is located in Outagamie County and had an estimated 2024 population of 23,831. The main campus of Fox Valley Technical College, a public technical college, is located in Grand Chute. Fox Valley Technical College offers more than 220 associate degree, technical diploma, and certificate programs, and instruction related to 19 apprenticeship trades, in addition to providing services to business and industry. The college serves over 50,000 people annually, more than any other technical college in Wisconsin. The Fox River Mall in Grand Chute anchors a regional shopping, hospitality, and entertainment district.

Located east of Appleton, the village of Kimberly is situated in Outagamie County and had an estimated 2024 population of 7,464. Kimberly features a small-town atmosphere within a large metropolitan area. In addition to the village’s traditional downtown area, significant commercial development has occurred over the past 40 years with the development of a business park and business corridor. Kimberly was named after John Kimberly, one of the co-founders of what is now the Kimberly-Clark Corporation, which opened a paper mill in the community in 1889. The paper mill thrived under numerous names and was a major employment facility for the village until its closing in 2008. The 100-acre property is currently under redevelopment with residential and green space park development and trail system expansion in progress.

Feldman Financial Advisors, Inc.

Overview of Office Network

Table 13 provides deposit data for the Company’s full-service banking offices as of June 30, 2021, 2022, and 2023. The Company’s deposits decreased by 11.5% over the one-year period from June 30, 2022 to 2023 and decreased by a compound annual growth rate (“CAGR”) of 1.4% over the two-year period from June 30, 2021 to 2023. The Company’s largest office based on deposits is the main office in Kaukauna, which had deposits of $118.7 million or 50.4% of the Company’s total deposits at June 30, 2023. A branch office in Appleton was the second largest with total deposits of $46.4 million as of June 30, 2023. As discussed previously, a branch office in Little Chute was closed in January 2023 due to the Company’s strategic objective to reduce operating expenses and also because of its proximity to other nearby branch locations.

Table 13

Branch Office Deposit Data

Data as of June 30, 2021, 2022, and 2023

(1) Branch office was closed in January 2023.

Source: S&P Global.

Feldman Financial Advisors, Inc.

Deposit Market Share Analysis

Table 14 displays branch deposit data as of June 30, 2023 for the financial institutions (commercial banks and thrift institutions) in Outagamie County, Wisconsin (with deposit data adjusted for subsequently completed mergers). The Company ranked seventh in Outagamie County out of 18 financial institutions, with total deposits of $235.4 million in five offices as of June 30, 2023 for a market share of 5.9%. The Company ranked as the largest thrift institution with branch offices in Outagamie County. The Company’s deposit market share declined from 6.1% at June 30, 2002. The deposit market share leaders in Outagamie County were BMO Bank with a market share of 17.6% and Associated Bank with a market share of 15.0%. BMO Bank is headquartered in Chicago, Illinois, and had total assets of $265.7 billion at December 31, 2023. BMO Bank is a subsidiary of the Canadian multi-national bank and financial services company, Bank of Montreal. Associated Bank is headquartered in Green Bay, Wisconsin, and had total assets of $41.0 billion at December 31, 2023. The deposit market total in Outagamie County declined by 8.5% from $4.3 billion at June 30, 2022 to $4.0 billion at June 30, 2023.

As shown in Table 15, the Company ranked eighth in the Appleton MSA (consisting of Outagamie and Calumet Counties) out of 23 financial institutions, with total deposits of $235.4 million for a market share of 4.9%. The deposit market share leaders in the Appleton MSA included BMO Bank (18.22% market share), Associated Bank (12.3% market share), JPMorgan Chase Bank (11.3% market share), and Nicolet National Bank (10.4% market share). The deposit market total in the Appleton MSA decreased by 6.6% from $5.2 billion at June 30, 2022 to $4.8 billion at June 30, 2023.

Feldman Financial Advisors, Inc.

Table 14

Deposit Market Share in Outagamie County, Wisconsin

Data as of June 30, 2022 and 2023

(Dollars in Thousands)

Source:  S&P Global.

Feldman Financial Advisors, Inc.

Table 15

Deposit Market Share in the Appleton MSA-Wisconsin
Data as of June 30, 2022 and 2023

(Dollars in Thousands)

Source:  S&P Global.

Feldman Financial Advisors, Inc.

Summary Outlook

Due to the rapid increase in market rates and the correlated impact on its securities portfolio, the Company reported net operating losses over the past two years and also experienced a significant contraction of its equity capital. The Company’s net losses amounted to -$4.2 million in 2022 and -$935,000 in 2023. Due to the net losses and mounting AOCI deficit, the Company’s equity capital declined from $22.5 million at year-end 2021 to $11.5 million at year-end 2023. The path to improved profitability for the Company has been impeded by its comparatively low net interest margin, which is exacerbated by its low level of equity.

The Company’s net interest margin remains under pressure in the current interest rate environment and its efficiency ratio is still well above peer group averages. The large concentrations of residential mortgage loans, along with liquidity and investments, have the effect of restraining the Company’s net interest income. Historically, the Company’s provision for credit losses has amounted to very small amounts. In 2022 and 2023, the Company’s non-interest expense substantially offset its generation of net interest income and resulted in net losses. The Company recently experienced increased levels of non-interest expense due to its attempted acquisition of another savings institution. The Company reported eight consecutive quarters of net losses in 2022 and 2023.

The Company plans to continue its emphasis on residential mortgage lending, while also continuing its diversification efforts in certain consumer and commercial business lending activities with which it is experienced. The Company seeks to improve its earning asset yields and interest rate sensitivity with shorter-maturity loans generated through these types of loans. A return to more normalized mortgage loan production should also enhance the Company’s mortgage banking income, which has been a meaningful contributor to profitability in prior years. A key element of the Company’s operating strategy is to continue to aggressively manage credit risk so as to continue to maintain the Company’s favorable measures of credit quality.

Feldman Financial Advisors, Inc.

The infusion of additional capital from the Stock Offering will strengthen the Company’s strained capital position and allow more flexibility for the implementation of prudent loan growth strategies. However, the Company’s operating results will continue to be negatively impacted until it is able to increase interest income and non-interest income relative to its expenses. Although the capital raised in the Conversion will support this effort, the Conversion will have an adverse impact on earnings in the near term due to additional expenses incurred in conjunction with the Conversion. These additional expenses include compensation expenses related to various stock-based benefit plans and certain costs associated with becoming a public company. Therefore, the Company does not expect a rapid turnaround in its profitability immediately following the completion of the Conversion. It remains focused on improving its longer-term earnings viability and returning to a positive earnings position in the future.

Feldman Financial Advisors, Inc.

II. COMPARISONS WITH PUBLICLY TRADED THRIFTS

General Overview

The comparative market approach provides a sound basis for determining estimates of going-concern valuations where a regular and active market exists for the stocks of peer institutions. The comparative market approach was utilized in determining the estimated pro forma market value of the Company because (1) reliable market and financial data are readily available for comparable institutions; (2) the comparative market method is required by the applicable regulatory guidelines; and (3) other alternative valuation methods (such as income capitalization, liquidation analysis, or discounted cash flow) are unlikely to produce a reliable valuation relevant to the future trading patterns of the related equity interest. The generally employed valuation method in initial public offerings, where possible, is the comparative market approach, which also can be relied upon to determine pro forma market value in a thrift stock conversion.

The comparative market approach derives valuation benchmarks from the trading patterns of selected peer institutions which, due to certain factors such as financial performance and operating strategies, enable the appraiser to estimate the potential value of the subject institution in a stock conversion offering. The pricing levels and trading histories of recent initial public offerings of thrifts are also examined to provide evidence of the “new issue discount” that must be considered. In Chapter II, our valuation analysis focuses on the selection and comparison of the Company with a comparable group of publicly traded thrift institutions (the “Comparative Group”). Chapter III will detail any additional discounts or premiums that we believe are appropriate to the Company’s pro forma market value.

Feldman Financial Advisors, Inc.

Selection Criteria

Selected market price and financial performance data for all public thrifts listed on major stock exchanges are shown in Exhibit III. The list excludes companies that are subject to being acquired under a pending transaction and companies that have a majority ownership interest controlled by a mutual holding company. Several criteria, discussed below, were used to select the individual members of the Comparative Group from the overall universe of publicly traded thrifts.

Feldman Financial Advisors, Inc.

The operations of the Company fit the general profile of a traditional thrift institution, concentrating on residential mortgage lending in its local market and relying on retail deposits as the primary funding source. In determining the Comparative Group composition, we focused on the Company’s asset size, capitalization, asset quality, and geographic location. Attempting to concentrate on the Company’s performance characteristics and to develop a meaningful number of comparables for valuation purposes, we expanded the criteria to include a statistically significant number of companies. In addition, because of the scarcity of candidates meeting the criteria precisely, we expanded the asset size and geographic criteria to generate a significant number of comparables. As with any composition of a group of comparable companies, the selection criteria were broadened sufficiently to assemble a significant number of members.

We performed an initial screening for publicly traded thrifts headquartered in the Midwest region of the United States with total assets less than $1.2 billion. We then expanded the selection criteria to certain other geographic regions, including the Southwest, Southeast, and Mid-Atlantic regions, and applied the following selection criteria:

Feldman Financial Advisors, Inc.

As a result of applying the criteria, the screening process produced a reliable representation of public thrifts. A general operating summary of the 11 companies included in the Comparative Group is presented in Table 16. All of the selected companies are traded on the NASDAQ Stock Market. The Comparative Group companies ranged in asset size from $256.8 million at NSTS Bancorp to $1.1 billion at HMN Financial. The median asset size of the Comparative Group was $439.9 million. Because of the initial and continuing listing standards of NASDAQ and the NYSE, including public float and round lot holders requirements, as well as the fact that many of the smaller converted thrifts ultimately de-list their shares from NASDAQ and/or are acquired by larger companies, not many small thrifts are listed on major stock exchanges. Accordingly, all but one Comparative Group member had a larger asset size than the Company.

The Comparative Group includes four thrifts based in the Midwest region: 1895 Bancorp (Wisconsin), HMN Financial (Minnesota), IF Bancorp (Illinois), and NSTS Bancorp (Illinois). The Comparative Group’s remaining members are located in the Southwest (three companies), Mid-Atlantic (two companies), and Southeast (two companies). Similar to the Company, 1895 Bancorp operates in Wisconsin with its headquarters in Greenfield, which is situated outside of Milwaukee and located approximately 115 miles south of Kaukauna.

Of the 29 public thrifts based in the Midwest, 19 were excluded because their stock issues are not traded on a major stock exchange and are instead listed on over-the-counter (“OTC”) markets. In addition, several other Midwest thrifts were excluded because of their corporate structure being organized in the MHC form or their asset size exceeded the threshold of $1.2 billion. While some differences inevitably may exist between the Company and the individual companies, we believe that the chosen Comparative Group, on the whole, provides a meaningful basis for financial comparison for valuation purposes.

Feldman Financial Advisors, Inc.

Table 16

Comparative Group Operating Summary

As of December 31, 2023