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Section 1: 424B3 (424B3)

424B3
Table of Contents

Filed pursuant to 424(b)(3)
Registration No. 333-227223

Prospectus Supplement

Interests in

PYRAMAX BANK, FSB 401(K) SAVINGS PLAN

Offering of Participation Interests in up to 528,550 Shares of

1895 Bancorp of Wisconsin, Inc.

Common Stock

In connection with the conversion of PyraMax Bank, FSB (the “Bank”) from the mutual to the stock form of organization and the related stock offering of 1895 Bancorp of Wisconsin, Inc. (the “Reorganization”), 1895 Bancorp of Wisconsin, Inc. and the Bank are allowing participants in the PyraMax Bank, FSB 401(k) Savings Plan (the “401(k) Plan”) the opportunity to invest up to 50% of their 401(k) Plan accounts in shares of common stock of 1895 Bancorp of Wisconsin, Inc. (“1895 Bancorp Common Stock”) on the date of the stock offering. Based on the value of the 401(k) Plan assets at July 31, 2018, the trustee of the 401(k) Plan can acquire up to 528,550 shares of 1895 Bancorp Common Stock, at the purchase price of $10.00 per share. This prospectus supplement relates to the initial election of the 401(k) Plan participants to direct the trustee of the 401(k) Plan to invest up to 50% of their 401(k) Plan accounts in 1895 Bancorp Common Stock at the time of the stock offering.

The Bank has registered on behalf of the 401(k) Plan up to 528,550 participation interests so that the trustee of the 401(k) Plan could purchase up to 528,550 shares of 1895 Bancorp Common Stock in the offering, at the purchase price of $10.00 per share. This prospectus supplement relates to the election of Plan participants to direct the trustee of the 401(k) Plan to invest up to 50% of their 401(k) Plan accounts in the 1895 Bancorp Stock Fund on the date of the stock offering.

The prospectus of 1895 Bancorp of Wisconsin, Inc., dated November 6, 2018, accompanies this prospectus supplement. It contains detailed information regarding the Reorganization of the Bank and the stock offering of 1895 Bancorp Common Stock and the financial condition, results of operations and business of 1895 Bancorp of Wisconsin, Inc. and the Bank. This prospectus supplement provides information regarding the 401(k) Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference.

 

 

For a discussion of risks that you should consider, see “Risk Factors” beginning on page 17 of the accompanying prospectus and “Notice of Your Rights Concerning Employer Securities” below.

The interests in the 401(k) Plan and the offering of 1895 Bancorp Common Stock have not been approved or disapproved by the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission or any other federal or state agency. Any representation to the contrary is a criminal offense.

The securities offered in this prospectus supplement and in the prospectus are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

This prospectus supplement may be used only in connection with offers and sales by 1895 Bancorp of Wisconsin, Inc. of participation interests in shares of 1895 Bancorp Common Stock pursuant to the 401(k) Plan. No one may use this prospectus supplement to re-offer or resell participation interests or shares of 1895 Bancorp Common Stock acquired through the 401(k) Plan.

You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. 1895 Bancorp of Wisconsin, Inc., the Bank and the 401(k) Plan have not authorized anyone to provide you with information that is different.

This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of 1895 Bancorp Common Stock or participation interests representing an ownership interest in 1895 Bancorp Common Stock shall under any circumstances imply that there has been no change in the affairs of 1895 Bancorp of Wisconsin, Inc. or any of its subsidiaries or the 401(k) Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.

The date of this prospectus supplement is November 6, 2018.


Table of Contents

TABLE OF CONTENTS

 

THE OFFERING

     1  

Securities Offered

     1  

1895 Bancorp Stock Fund

     1  

Purchase Priorities

     1  

Purchases in the Offering and Oversubscriptions

     2  

Composition of 1895 Bancorp Stock Fund

     2  

Value of the 401(k) Plan Assets

     3  

Election to Purchase Stock in the Stock Offering

     3  

How to Order Stock in the Offering

     3  

Order Deadline

     4  

Irrevocability of Transfer Direction

     5  

Other Purchases in Your Account During the Offering Period

     5  

Additional Purchases of 1895 Bancorp Stock Fund Units after the Offering

     5  

Purchase Price of Common Stock in the Offering and After the Offering

     5  

Nature of a Participant’s Interest in the Common Stock

     5  

Voting Rights of Common Stock

     5  

DESCRIPTION OF THE 401(k) PLAN

     6  

Introduction

     6  

Eligibility and Participation

     6  

Contributions under the 401(k) Plan

     6  

Limitations on Contributions

     7  

Benefits under the 401(k) Plan

     7  

Investment of Contributions and Account Balances

     8  

Performance History

     8  

Description of the Investment Funds

     9  

1895 Bancorp Stock Fund

     12  

Withdrawals from the 401(k) Plan

     12  

Administration of the 401(k) Plan

     13  

Amendment and Termination

     13  

Merger, Consolidation or Transfer

     13  

Federal Income Tax Consequences

     13  

Notice of Your Rights Concerning Employer Securities

     14  

Additional ERISA Considerations

     15  

Securities and Exchange Commission Reporting and Short-Swing Profit Liability

     15  

Financial Information Regarding 401(k) Plan Assets

     15  

LEGAL OPINION

     15  

 


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THE OFFERING

 

Securities Offered   

1895 Bancorp of Wisconsin, Inc. is offering participants in the PyraMax Bank, FSB 401(k) Savings Plan (the “401(k) Plan”) the opportunity to purchase stock of 1895 Bancorp of Wisconsin, Inc. through the 401(k) Plan by purchasing “participation interests,” through the Stock Offering Fund established under the 401(k) Plan in connection with the stock offering (“Offering”). The 401(k) Plan may acquire up to 528,550 shares of 1895 Bancorp of Wisconsin, Inc. common stock (“1895 Bancorp Common Stock”) in the Offering. Your investment in 1895 Bancorp Common Stock in connection with the Offering through the Stock Offering Fund is subject to the purchase priorities contained in the PyraMax Bank, FSB Plan of Reorganization from a Mutual Savings Bank to a Mutual Holding Company and Stock Issuance Plan (the “Plan of Reorganization”).

 

Information with regard to the 401(k) Plan is contained in this prospectus supplement and information with regard to the financial condition, results of operations and business of 1895 Bancorp of Wisconsin, Inc. is contained in the accompanying prospectus. The address of the principal executive office of 1895 Bancorp of Wisconsin, Inc. and the Bank is 7001 West Edgerton Avenue, Greenfield, WI 53220. The Bank’s telephone number is (414) 421-8200.

 

All elections to purchase stock in the Stock Offering Fund in the stock offering under the 401(k) Plan and any questions about this prospectus supplement should be addressed to Monica Baker, Senior Vice President, Chief Brand Officer and Director, PyraMax Bank, FSB, 7001 West Edgerton Avenue, Greenfield, WI, 53220.

 

1895 Bancorp Stock Fund   

In connection with the Reorganization and Offering, you may elect to designate a percentage of your 401(k) Plan account balance (up to 50%) to the Stock Offering Fund, to be used to purchase common stock of 1895 Bancorp of Wisconsin, Inc. issued in the Offering at $10 per share. In making this determination, you should carefully consider the information set forth on page 14 of this prospectus supplement under “Notice of Your Rights Concerning Employer Securities — The Importance of Diversifying Your Retirement Savings.” The trustee of the Stock Offering Fund will purchase common stock of 1895 Bancorp of Wisconsin, Inc. at $10.00 per share to be held as stock in accordance with your directions.

 

Purchase Priorities   

401(k) Plan participants are eligible to direct a transfer of funds to the Stock Offering Fund. However, such directions are subject to the purchase priorities and purchase limitations in the Plan of Reorganization of PyraMax Bank, FSB, which provides for a subscription and community offering, as described below.

 

In the Offering, the purchase priorities are as follows and apply in the case more shares are ordered than are available for sale (an “oversubscription”):

 

Subscription offering:

 

(1)   First, to depositors of PyraMax Bank, FSB with $50 or more as of March 15, 2017.

 

(2)   Second, to PyraMax Bank, FSB’s and 1895 Bancorp of Wisconsin, Inc.’s tax-qualified plans, including the employee stock ownership plan and the 401(k) Plan.

 

(3)   Third, to depositors of PyraMax Bank, FSB with $50 or more on deposit as of September 30, 2018. (4) Fourth, to depositors of PyraMax Bank, FSB at the close of business on November 1, 2018 who do not qualify in one of the foregoing categories.

 

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If there are shares remaining after all of the orders in the subscription offering have been filled, shares will be offered in a community offering with a preference to natural persons residing in Wisconsin Counties of Milwaukee, Ozaukee and Waukesha.

 

If you fall into subscription offering categories (1), (3), or (4) above, you have subscription rights to purchase 1895 Bancorp Common Stock in the subscription offering. You will separately receive offering materials in the mail, including a Stock Order Form. If you wish to purchase stock outside of the 401(k) Plan, you must complete and submit the Stock Order Form and payment prior to the Offering deadline.

 

Additionally, or instead of placing an order outside of the 401(k) Plan through a Stock Order Form, as a 401(k) Plan participant, you may place an order for common stock through the 401(k) Plan, in the manner described below under “How to Order Stock in the Offering.”

 

Purchases in the Offering and Oversubscriptions   

The trustee of the 401(k) Plan will submit an order to purchase 1895 Bancorp Common Stock in the Offering based on the dollar amount or percentage you designate in your election. Once you make your election, the amount that you elect to transfer from your existing investment options for the purchase of 1895 Bancorp Common Stock in connection with the stock offering will be removed from your existing investment options and transferred to the Stock Offering Fund, which is an interest-bearing cash account in the 401(k) Plan, pending the formal closing of the stock offering, several weeks later.

 

After the end of the Offering period, we will determine whether all or any portion of your order may be filled (based on your purchase priority as described above and whether the Offering is oversubscribed). The amount that can be used toward your order will be applied to the purchase of participation interests and will be denominated in shares of 1895 Bancorp Common Stock in the 401(k) Plan.

 

In the event the Offering is oversubscribed, i.e. there are more orders for shares of 1895 Bancorp Common Stock than shares available for sale in the Offering, and the trustee is unable to use the full amount allocated by you to purchase shares of common stock in the Offering, the amount that cannot be invested in shares of common stock, and any interest earned, will be reinvested in the other investment funds of the 401(k) Plan in accordance with your then existing investment election (in proportion to your investment direction for future contributions). If you do not have an existing election as to the investment of future contributions, then such amounts will be transferred to and invested in the applicable Blackrock Lifepath Index Fund, based on your retirement age assumption, pending your reinvestment in another fund of your choice.

 

If you choose not to direct the investment of your account balances towards the purchase of any shares in the Offering, your account balances will remain in the investment funds of the 401(k) Plan as currently directed by you.

At the conclusion of the Offering, once the eligible assets in the Stock Offering Fund have been used to purchase 1895 Bancorp Common Stock, the shares will be transferred to and held in the 1895 Bancorp Stock Fund. Your interests in the 1895 Bancorp Stock Fund will be referred to as participation interests and will be denominated in shares of 1895 Bancorp Common Stock.

 

Composition of 1895 Bancorp Stock Fund    The value of one participation interest will equal one share of common stock of 1895 Bancorp of Wisconsin, Inc., which will be initially valued at $10.

 

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Following the close of the Offering, each day, the aggregate value of the 1895 Bancorp Stock Fund will be determined by dividing the total market value of the 1895 Bancorp Stock Fund at the end of the day by the total number of shares held in the 1895 Bancorp Stock Fund as of the previous day’s end. The change in share value reflects the day’s change in 1895 Bancorp Common Stock price, and the value of each participation interest should be the same as one share of 1895 Bancorp Common Stock. Your account in the 1895 Bancorp Stock Fund will be reported to you on your regular 401(k) Plan participant statements. You can also go online at any time to www.principal.com or call 1-800-547-7754 to review your account balances.

 

Value of the 401(k) Plan Assets   

As of July 31, 2018, the market value of the assets of the 401(k) Plan attributable to active and former employees of the Bank was approximately $10,570,976. The 401(k) Plan administrator informed each participant of the value of his or her account balance under the 401(k) Plan as of June 30, 2018, however participants can also go on-line and look at their account balances at any time.

 

Election to Purchase Stock in the Stock Offering   

In connection with the Offering, the 401(k) Plan will permit you to direct the trustee to transfer all or a portion of your account balance in the 401(k) Plan to the Stock Offering Fund for the purchase of shares of common stock of 1895 Bancorp of Wisconsin, Inc. in the offering at $10.00 each. The trustee of the 401(k) Plan will subscribe for common stock of 1895 Bancorp of Wisconsin, Inc. offered for sale in connection with the Offering, in accordance with each participant’s direction. In making this determination, you should carefully consider the information set forth on page 14 of this prospectus supplement under “Notice of Your Rights Concerning Employer Securities — The Importance of Diversifying Your Retirement Savings.”

 

How to Order Stock in the Offering   

You can elect to transfer (in whole percentages or dollar amounts) all or a portion of your account balance in the 401(k) Plan to the Stock Offering Fund. Please note the following conditions concerning this election:

 

•   You can direct up to 50% (in dollars or percentages) of your current account to the Stock Offering Fund.

 

•   Your election is subject to a minimum purchase of 25 shares of common stock, which equals $250.

 

•   Your election, plus any order you place outside the Plan, are together subject to a maximum purchase of 10,000 shares, which equals $100,000.

 

•   The election period closes at 3:00 p.m., Central Time, December 5, 2018.

 

•   Your election to purchase common stock in the Offering through the 401(k) Plan will be accepted by Principal Financial Group, the recordkeeper of the 401(k) Plan. After your election is accepted by Principal Financial Group, it will be rounded down to the closest dollar amount divisible by $10.00, and will be used by the trustee to purchase shares of common stock sold in the Offering. This difference will remain in the Stock Offering Fund until the formal closing of the Offering has been completed, several weeks after the election period ends. At that time, the common stock purchased based on your election will be transferred to the 1895 Bancorp Stock Fund and any remaining funds will be transferred out of the Stock Offering Fund account for investment in other funds under the 401(k) Plan, based on your election currently on file for future contributions. During the stock offering period, you will continue to have the ability to transfer amounts that are not directed to purchase stock in the 1895 Bancorp Stock Fund among all other investment funds.

 

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•   The amount you elect to transfer to the Stock Offering Fund will be held separately until the Offering closes. Therefore, this money is not available for distributions, loans, or withdrawals until the transaction is completed, which is expected to be several weeks after the closing of the subscription offering period.

 

•   During the stock offering period, you will continue to have the ability to transfer amounts not invested in the 1895 Bancorp Stock Fund among all the other investment funds on a daily basis. However, you will not be permitted to change the investment amounts that you designated to be transferred to the Stock Offering Fund.

 

Follow these steps to make your election to use up to 50% of your account balance in the 401(k) Plan to purchase shares of common stock in the stock offering:

 

•   Go to www.principal.com and log into your 401(k) Plan account. In Account Login, click on drop down and choose “Personal”, then “GO.” Enter your Username and Password. If you haven’t established your Username and Password, click on the link “Establish your Username and Password” and follow the prompts.

 

•   On your Personal Summary Page, choose the line for the PyraMax Bank, FSB 401(k) Savings Plan.

 

•   When you reach “Your Account Overview,” click on “Investments” across the top navigation of the screen, and then click on “change Investments.”

 

•   When you reach the “Change Investments” screen, click on the box titled “Move Balances.” Then click on Make a transfer.

 

•   If you want to transfer a percentage of some of your current investments, enter the percentage you would like to transfer “From” each investment. If you would like to transfer a dollar amount, click on “Advanced Transfer Features” and choose “dollars,” then enter the amount you would like to transfer “From” each investment. When you have completed transferring “From” each investment, choose “Continue.”

 

•   Enter the percentage or dollars that you will be transferring into the Stock Offering Fund. The Stock Offering Fund is a money market investment that will hold the funds until the stock offering is concluded. All of the funds that you transferred “From” other investments must be transferred “To” the Stock Offering Fund.

 

•   When you have completed the “To” portion of the transaction, click continue. You will be taken to a confirmation page. Please review your transaction for accuracy, if you need to make changes, click on “Cancel” or “Start Over” or “Previous” to make changes. If the information is correct, click on the box, “I confirm the information above and authorize Principal Life Insurance Company to process this request.” You will receive a communication in your Message Center confirming your transaction.

 

•   You must also complete the 401(k) Plan Stock Information Form and return a copy to Monica Baker, Senior Vice President, Chief Brand Officer and Director, PyraMax Bank, FSB at 7001 West Edgerton Avenue, Greenfield, WI 53220.

 

Order Deadline    If you wish to make an election to transfer a portion of your account to the Stock Offering Fund to purchase 1895 Bancorp Common Stock, then you must make your election online at www.principal.com and return your completed and signed 401(k) Plan Stock Information Form to Monica Baker by hand delivery, regular mail or by fax; no later than 3:00 p.m., Central Time, on December 5, 2018.

 

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   IF YOU FAIL TO BOTH MAKE YOUR STOCK PURCHASE ELECTION ONLINE AND RETURN YOUR 401(K) PLAN STOCK INFORMATION FORM BY 3:00 P.M. CENTRAL TIME ON DECEMBER 5, 2018, YOUR ELECTION WILL NOT BE PROCESSED AND YOUR ORDER WILL BE VOID.
Irrevocability of Transfer Direction    Your election is irrevocable. You will, however, continue to have the ability to transfer amounts not directed towards the purchase of 1895 Bancorp Common Stock in the Offering among all of the other investment funds on a daily basis.
Other Purchases in Your Account During the Offering Period    Whether or not you choose to purchase 1895 Bancorp Common Stock in the Offering through the 401(k) Plan, you will at all times have complete access to those amounts in your account that you do not apply towards purchases in the Offering. For example, you will be able to purchase other funds within the 401(k) Plan with that portion of your account balance that you do not apply towards purchases in the Offering during the Offering period. Such purchases will be made at the prevailing market price in the same manner as you make such purchases now, i.e., through telephone transfers and internet access to your account.
Additional Purchases of 1895 Bancorp Stock Fund Units after the Offering    After the Offering closes, you will have the opportunity to direct the 401(k) Plan trustee to sell any shares that you purchased in the Offering. You will also have the opportunity to purchase any additional shares in the open market, to the extent shares are available. 1895 Bancorp Common Stock is expected to be listed on the Nasdaq stock market under the symbol “BCOW”. Special restrictions may apply to transfers directed to and from the 1895 Bancorp Stock Fund by the participants who are subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, relating to the purchase and sale of securities by officers, directors and principal shareholders of 1895 Bancorp of Wisconsin, Inc.
Purchase Price of Common Stock in the Offering and After the Offering    The trustee will pay $10 per share of common stock in the Offering, which will be the same price paid by all other persons for a share of common stock in the Offering. No sales commission will be charged for common stock purchased in the Offering. After the stock offering, any additional purchases will be made in the open market at the prevailing price. In addition, a brokerage commission of $0.05 per share of stock purchased will be charged.
Nature of a Participant’s Interest in the Common Stock    The Common Stock acquired by the trustee at your direction will be allocated to your account and will be held in the 1895 Bancorp Stock Fund.
Voting Rights of Common Stock    You may direct the trustee as to how to vote your shares of 1895 Bancorp Common Stock held in the 1895 Bancorp Stock Fund. If the trustee does not receive your voting instructions, the trustee will be directed by PyraMax Bank, FSB to vote your shares in the same proportion as the voting instructions received from other participants related to their shares of 1895 Bancorp Common Stock held by the 401(k) Plan, provided that such vote is made in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). All voting instructions will be kept confidential.

 

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DESCRIPTION OF THE 401(k) PLAN

Introduction

PyraMax Bank, FSB originally adopted the 401(k) Plan effective as of February 13, 1989. The 401(k) Plan was last restated, effective July 1, 2017. In connection with the conversion of PyraMax Bank, FSB from the mutual to stock form of organization as the wholly owned subsidiary of 1895 Bancorp of Wisconsin, Inc., 1895 Bancorp of Wisconsin, Inc. and the Bank desire to allow participants to purchase common stock of 1895 Bancorp of Wisconsin, Inc. in their accounts in the 401(k) Plan. The 401(k) Plan is a tax-qualified plan with a cash or deferred compensation feature established in accordance with the requirements under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”).

The Bank intends that the 401(k) Plan, in operation, will comply with the requirements under Section 401(a) and Section 401(k) of the Code. The Bank will adopt any amendments to the 401(k) Plan that may be necessary to ensure the continuing qualified status of the 401(k) Plan under the Code and applicable Treasury Regulations.

Employee Retirement Income Security Act of 1974 (“ERISA”). The 401(k) Plan is an “individual account plan” other than a “money purchase pension plan” within the meaning of ERISA. As such, the 401(k) Plan is subject to all of the provisions of Title I (Protection of Employee Benefit Rights) and Title II (Amendments to the Code Relating to Retirement Plans) of ERISA, except to the funding requirements contained in Part 3 of Title I of ERISA, which by their terms do not apply to an individual account plan (other than a money purchase plan). The 401(k) Plan is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding requirements contained in Title IV of ERISA are not applicable to participants or beneficiaries under the 401(k) Plan.

Reference to Full Text of 401(k) Plan. The following portions of this prospectus supplement summarize certain provisions of the 401(k) Plan. They are not complete and are qualified in their entirety by the full text of the 401(k) Plan. Copies of the 401(k) Plan are available to all employees by filing a request with the 401(k) Plan Administrator c/o PyraMax Bank, FSB, Attn: Monica Baker, Senior Vice President, Chief Brand Officer. You are urged to read carefully the full text of the 401(k) Plan.

Eligibility and Participation

As an employee of the Bank, you are eligible to become a participant in the 401(k) Plan by making elective deferral contributions on the first day of the calendar month, coincident with or next following the date you attain age 18 and complete one month of service, measured from your date of hire, provided that you are an eligible employee at such time. Eligible employees will become participants with respect to profit sharing contributions on the next payroll date after attaining age 18 and completing six months of consecutive service. You will be eligible to receive a profit sharing contribution if you meet the eligibility requirements and have 1,000 hours of service during the plan year and are employed on the last day of the plan year. You will be eligible to receive “safe harbor contributions” (as defined below), if you are an eligible employee after six months of service and entry on the next payroll date. You are not an eligible employee if you are a member of the following classes of employees: (i) an employee who is included in a unit of employees covered by a collective bargaining agreement, if retirement benefits were the subject of good faith bargaining; (ii) any leased employee; (iii) any non-resident alien who received no earned income which constitutes income from services performed in the United States; and (iv) employees of South Milwaukee Investments, Inc. and “Temporary Employees” as classified by the Bank.

As of July 31, 2018, there were approximately 145 active and former employees with account balances in the 401(k) Plan.

Contributions under the 401(k) Plan

Elective Deferrals. You are permitted to defer on a pre-tax basis up to 100% of your Compensation (as defined in the 401(k) Plan), subject to certain restrictions imposed by the Code, and to have that amount contributed to the 401(k) Plan on your behalf. Your pre-tax deferrals are subject to certain restrictions imposed by the Code, and for 2018, you may defer up to $18,500 and you may defer an additional $6,000 if you qualify for catch-up contributions as described in the next paragraph. The Compensation of each participant taken into account under the 401(k) Plan is limited by the Code, and for 2018 the limit is $275,000 (this limit may change on an annual basis). Canceling or changing your contribution percentage can be accomplished either over the telephone or over the internet at any time.

If, after receiving a notice from the Bank, you do not make an elective deferral contribution election, you will be deemed to have made an election to defer 6% of your Compensation. This percentage election will increase each year by 1% until your elective deferral is 10%. You can prevent this automatic deferral contribution election if you turn in the applicable form to prevent such contributions. Similarly, you can withdraw contributions made without your consent for up to a brief period of time after the automatic contributions are first removed from your Compensation.

 

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Roth Elective Deferrals. You may elect to designate all or a portion of deferrals as Roth elective deferrals. Roth elective deferrals do not reduce your total taxable income or your current taxes. Because you pay taxes on these contribution when they are made, these contributions will not be taxed later when received as a benefit and distributed as a qualified distribution. A distribution will be a qualified distribution if (i) the distribution is made on or after you attain age 59 1 /2, on or after the date of your death, or as a result of you becoming disabled as defined by the Code; or (ii) the distribution is made after the end of the 5-taxable-year period beginning with the first taxable year in which you make a Roth elective deferral contribution to this plan.

Catch-up Contributions. If you have made the maximum amount of elective deferrals allowed by the 401(k) Plan or other legal limits and you have attained at least age 50 (or will reach age 50 prior to the end of the tax year, which is March 31), you are also eligible to make an additional catch-up contribution. In 2018, the maximum catch-up contribution is $6,000. You may authorize your employer to withhold a specified dollar amount of your compensation for this purpose.

Safe Harbor Matching Contributions. The Bank will make a safe harbor matching contribution to your account if you have satisfied the eligibility requirements and have made a “matched employee contribution during the plan year. A matched employee contribution is any elective deferral contribution or catch-up contribution that you may make. The safe harbor matching contribution is an amount equal to 100% of your matched employee contributions that are not in excess of six percent (6%) of your Compensation. The safe harbor matching contribution is subject to change from year to year, in the discretion of the Bank.

Profit Sharing Contributions. The Bank may, in its discretion, make profit sharing contributions to the accounts of eligible participants from time to time on a nondiscriminatory basis. The amount of any profit sharing contributions, if made, will be determined in the sole discretion of the Bank and will only be available to participants who have 1,000 hours of service during the plan year and are employed on the last of the plan year.

Qualified Non-Elective Contributions. In addition to the contributions described above, the Bank may make additional qualified non-elective contributions for the benefit of participants determined at the discretion of the Bank.

Rollover Contributions. The 401(k) Plan may accept a rollover contribution from another tax-qualified plan or eligible individual retirement account made on behalf of an eligible employee, regardless of whether such employee has met the age and service requirements of the Plan. An eligible employee who has not met the age and service requirements of the 401(k) Plan shall be considered a participant only with respect to the amount of his or her rollover contributions, if any.

Limitations on Contributions

Contribution Limits. For the tax year beginning January 1, 2018, the amount of your elective deferrals may not exceed $18,500 per calendar year, or $24,500 if you are eligible to make catch-up contributions. Contributions in excess of this limit are known as excess deferrals. If you defer amounts in excess of this limitation, your gross income for federal income tax purposes will include the excess in the year of the deferral. In addition, unless the excess deferral is distributed before April 15 of the following year, it will be taxed again in the year distributed. Income on the excess deferral distributed by April 15 of the immediately succeeding year will be treated, for federal income tax purposes, as earned and received by you in the tax year in which the contribution is made.

The total amount of contributions that you make and any contribution your employer makes on your behalf to your account in one year is limited to the lesser of 100% of your compensation or $55,000 (for 2018), or if applicable, $61,000 (for 2018) including catch-up contributions.

Rollovers. You may make a rollover contribution of an eligible rollover distribution from any other qualified retirement plan or an individual retirement arrangement (IRA). These funds will be maintained in a separate rollover account in which you will have a nonforfeitable vested interest.

Benefits under the 401(k) Plan

Vesting. At all times, you have a fully vested, nonforfeitable interest in your elective deferrals, including Roth elective deferrals, catch-up contributions, if any, safe harbor matching contributions, qualified non-elective contributions and rollover contributions.

 

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Your profit sharing contributions, if any, will vest in accordance with the following:    

Vesting Schedule

Profit Sharing Contributions

 

     Vested  
Period of Service    Percentage  

Less than 2 years

     0

2 years

     20

3 years

     40

4 years

     60

5 years

     100

6 years

     100

Distribution at Termination of Employment. You will be entitled to receive a distribution of the vested amounts in your account when your employment terminates for any reason. Your benefit will be equal to the vested balance of your account. The 401(k) Plan will make involuntary cash-out distributions of vested account balances in accordance with the 401(k) Plan. If you are not a 5% or more owner of your employer, your required benefit commencement date is the April 1st following the close of the year in which the later occurs: you attain age 70 ½ or you terminate employment.

Distribution after Death of Participant. In the event of your death, the value of your entire account will be payable to your beneficiary in accordance with the 401(k) Plan.

Investment of Contributions and Account Balances

All amounts credited to your accounts under the 401(k) Plan are held in the 401(k) Plan trust (the “Trust”), which is administered by the trustee of the 401(k) Plan. Prior to the effective date of the Offering, you were provided the opportunity to direct the investments of your account into one of the investment options described below.

Performance History

The following table provides performance data with respect to the investment funds in the 401(k) Plan:

 

     Average Annual Total Return  
     (as of 6/30/2018 quarter end)  

Investment Option Name

   YTD     1-Year     3-Year      5-Year      10-Year      Incept Date  

AB Global Bond Z Fund

     (0.64     0.27       3.14        3.21        4.58        10/2013  

AllianzGI NFJ Mid-Cap Value Institutional Fund

     (3.86     5.26       10.89        12.29        9.62        12/30/1997  

American Beacon International Equity Institutional Fund

     (3.45     6.50       3.59        5.86        3.39        08/07/1991  

American Beacon Small Cap Value Institutional Fund

     4.34       12.70       9.87        11.43        10.78        12/31/1998  

American Funds EuroPacific Growth R6 Fund

     (1.82     9.35       6.51        8.34        4.82        05/01/2009  

American Funds New World R6 Fund

     (2.56     10.45       7.46        6.71        3.90        05/01/2009  

Baird Aggregate Bond Institutional Fund

     (1.76     (0.34     2.10        2.81        4.43        09/29/2000  

Bond Market Index Separate Account-Z

     (1.74     (0.65     1.43        2.02        —          12/30/2009  

Delaware Corporate Bond Instl Fund

     (3.73     (1.28     2.40        3.31        6.69        09/15/1998  

Dodge & Cox Stock Fund

     0.96       11.85       10.95        12.81        9.70        01/04/1965  

Eaton Vance Floating Rate I Fund

     2.29       4.31       4.52        3.84        4.48        01/2001  

Global Real Estate Securities Separate Account-Z

     1.87       9.54       6.83        7.56        7.46        09/30/2013  

Goldman Sachs International Small Cap Insights Instl Fund

     (1.65     11.44       10.10        11.67        8.19        09/28/2007  

Harbor Capital Appreciation Inst Fund

     10.94       29.21       15.29        18.14        12.35        12/29/1987  

International Equity Index Separate Account-Z

     (2.55     6.22       4.62        6.14        —          12/30/2009  

Invesco Growth and Income R6 Fund

     (1.14     8.17       9.12        10.88        9.17        09/24/2012  

Ivy High Income N Fund

     1.91       4.78       5.64        5.26        8.03        07/2014  

LargeCap S&P 500 Index Separate Account-Z

     2.64       14.31       11.86        13.33        10.10        01/01/1990  

MFS Blended Research Core Equity R6 Fund

     0.83       12.05       9.14        12.40        9.61        01/14/1994  

MidCap S&P 400 Index Separate Account-Z

     3.45       13.40       10.79        12.58        10.67        08/31/1999  

PIMCO International Bond (US Dollar-Hedged) I Fund

     1.91       4.33       4.81        5.24        6.71        12/1992  

Oppenheimer Developing Markets Institutional Fund

     (1.09     12.63       7.59        6.04        5.67        12/2011  

PIMCO Real Return Instl Fund

     (0.25     2.05       1.97        1.64        3.36        01/29/1997  

Principal Fixed Income Guaranteed Option (no chart info)

               

 

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     Average Annual Total Return  
     (as of 6/30/2018 quarter end)  

Investment Option Name

   YTD     1-Year      3-Year      5-Year      10-Year      Incept Date  

Putnam Convertible Securities Y Fund

     4.07       10.73        6.27        8.26        7.32        12/1998  

SmallCap S&P 600 Index Separate Account-Z

     9.31       20.35        13.74        14.52        12.18        08/31/1999  

Vanguard Explorer Admiral Fund

     11.65       23.67        11.63        13.52        11.23        12/11/1967  

Western Asset Core Bond IS Fund

     (1.82     0.19        2.74        3.38        5.34        08/29/1990  

BlackRock Lifepath Index Retirement K Fund

     (0.28     4.74        4.80        5.55        —          05/31/2011  

BlackRock Lifepath Index 2020 K Fund

     (0.31     5.55        5.33        6.35        —          05/31/2011  

BlackRock Lifepath Index 2025 K Fund

     (0.05     6.75        6.21        7.19        —          05/31/2011  

BlackRock Lifepath Index 2030 K Fund

     0.12       7.92        6.92        7.90        —          5/31/2011  

BlackRock Lifepath Index 2035 K Fund

     0.21       8.92        7.61        8.54        —          05/31/2011  

BlackRock Lifepath Index 2040 K Fund

     0.37       9.86        8.22        9.14        —          05/31/2011  

BlackRock Lifepath Index 2045 K Fund

     0.49       10.52        8.64        9.59        —          05/31/2011  

BlackRock Lifepath Index 2050 K Fund

     0.49       10.72        8.76        9.85        —          05/31/2011  

BlackRock Lifepath Index 2055 K Fund

     0.49       10.75        8.79        10.04        —          05/31/2011  

BlackRock Lifepath Index 2060 K Fund

     0.50       10.80        —          —          —          02/29/2016  

Description of the Investment Funds

The following is a description of each of the funds:

AB Global Bond Z Fund. This fund seeks to generate current income consistent with preservation of capital. The fund invests at least 80% of its net assets in fixed-income securities. It invests significantly in fixed-income securities of non-U.S. companies. The fund normally invests in the fixed-income securities of companies located in at least three countries. It may invest in a broad range of fixed-income securities in both developed and emerging markets. The fund may invest across all fixed-income sectors, including U.S. and non-U.S. government and corporate debt securities.

AllianzGI NFJ Mid-Cap Value Institutional Fund. This fund seeks long-term growth of capital and income. The fund seeks to achieve its investment objective by normally investing at least 80% of its net assets (plus borrowings made for investment purposes) in common stocks and other equity securities of companies with medium market capitalizations. The manager currently defines medium market capitalization companies as companies with a market capitalization of at least $3 billion and up to the largest company held in the Russell Midcap Index.

American Beacon International Equity Institutional Fund. This fund seeks long-term capital appreciation. The fund normally invests at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in common stocks and securities convertible into common stocks of issuers based in at least three different countries located outside the United States. It primarily invests in countries comprising the Morgan Stanley Capital International Europe Australasia and Far East Index (“MSCI EAFE Index”). The MSCI EAFE Index is comprised of equity securities of companies from various industrial sectors whose primary trading markets are located outside the United States.

American Beacon Small Cap Value Institutional Fund. This fund seeks long-term appreciation and current income. Under normal circumstances, at least 80% of the fund’s net assets (plus the amount of any borrowings for investment purposes) are invested in equity securities of small market capitalization U.S. companies. These companies have market capitalizations of $5 billion or less at the time of investment. The fund’s investments may include common stocks, real estate investment trusts (“REITs”), American Depositary Receipts (“ADRs”) and U.S. dollar-denominated foreign stocks traded on U.S. exchanges.

American Funds EuroPacific Growth R6 Fund. This fund seeks long-term growth and capital. The fund invests primarily in common stocks of issuers in Europe and the Pacific Basin that This fund adviser believes have the potential for growth. Growth stocks are stocks that the investment adviser believes have the potential for above-average capital appreciation. It normally will invest at least 80% of its net assets in securities of issuers in Europe and the Pacific Basin. The fund may invest a portion of its assets in common stocks and other securities of companies in emerging markets.

American Funds New World R6 Fund. This fund seeks long-term capital appreciation. The fund invests primarily in common stock of companies with significant exposure to countries with developing economies and/or markets. Under normal market conditions, the fund will invest at least 35% of its assets in equity and debt securities of issuers primarily based in qualified countries that have developing economics and/or markets.

 

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Baird Aggregate Bond Institutional Fund. This fund seeks an annual rate of total return, before fund expenses, greater than the annual rate of total return of the Barclays U.S. Aggregate Bond Index. The fund normally invests at least 80% of its net assets in the following types of U.S. dollar-denominated debt obligations: U.S. government and other public-sector entities; asset-backed and mortgage-backed obligations of U.S. foreign issuers; corporate debt of U. S. and foreign issuers. It only invests in debt obligations rated investment grade at the time of purchase by at least one major rating agency or, if unrated, determined by Robert W. Baird & Co. incorporated to be investment grade.

Bond Market Index Separate Account-Z. This fund seeks to provide current income. The fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in debt securities held by the Barclay U.S. Aggregate Bond Index at the time of purchase. The index is composed of investment grade, fixed rate debt issues, including government, corporate, assets-backed, and mortgage-backed securities, with maturities of one year or more. It employs a passive investment approach designed to attempt to track the performance of the index.

Delaware Corporate Bond Instl Fund. This fund seeks total return. Under normal circumstances, the fund will invest at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in corporate bonds (“80% bonds”). It may also invest up to 20% of its net assets in high yield corporate bonds (“junk bonds”). In addition, the fund may invest up to 40% of its total assets in foreign securities, but the fund’s total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more that 25% of net assets.

Dodge & Cox Stock Fund. This fund seeks long-term growth of principal and income; a secondary objective is to achieve a reasonable current income. The fund invests primarily in a diversified portfolio of equity securities. It will invest at least 80% of its total assets in equity securities, including common stocks, depositary receipts evidencing ownership of common stocks, preferred stocks, securities convertible into common stocks, and securities that carry the right to buy common stocks. The fund may invest up to 20% of its total assets in U.S. dollar-denominated securities of non-U.S. issuers traded in the United States that are not in the S&P 500.

Eaton Vance Floating Rate I Fund. This fund seeks to provide a high level of current income. Under normal circumstances, the fund invests at least 80% of its total assets in income producing floating rate loans and other floating rate debt securities. It invests primarily in senior floating rate loans of domestic and foreign borrowers (“Senior Loans”). Senior Loans typically are of below investment grade quality and have below investment grade credit ratings, which ratings are associated with securities having high risk, speculative characteristics (sometimes referred to as “junk”).

Global Real Estate Securities Separate Account-Z. This investment seeks to generate a total return. Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of U.S. and non-U.S. companies principally engaged in the real estate industry at the time of purchase. For the fund’s investment policies, a real estate company has at least 50% of its assets, income or profits derived from products or services related to the real estate industry.

Goldman Sachs International Small Cap Insights Instl Fund. This fund seeks long-term growth of capital. The fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase) (“Net Assets”) in a broadly diversified portfolio of equity investments in small-cap non-U.S. issuers. The advisor uses a quantitative style of management in combination with a qualitative overlay at emphasizes fundamentally-based stock selection, careful portfolio construction and efficient implementation.

Harbor Capital Appreciation Inst Fund. This fund seeks long-term growth of capital. The fund invests primarily in equity securities, principally common and preferred stocks, of U.S. companies with market capitalizations of at least $1 billion at the time of purchase and that the Subadvisor considers having above average prospects for growth. The stocks of mid and large cap companies in the fund’s portfolio are those the Subadvisor expects to maintain or achieve above average earnings growth. The fund may invest up to 20% of its total assets in the securities of foreign issuers, including issuers located or doing business in emerging markets.

International Equity Index Separate Account-Z. This fund seeks long-term growth of capital. The fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in securities that compose the MSCI EEAFE NR Index at the time of purchase. The Index is a market-weighted equity index designed to measure the equity performance of developed markets, excluding the United States and Canada. The advisor employs a passive investment approach designed to attempt to track the performance of the index.

Invesco Growth and Income R6 Fund. This fund seeks total return through growth of capital and current income. Under normal market conditions, the fund’s investment adviser seeks to achieve the fund’s investment objective by investing primarily in income-producing equity securities, which include common stocks and convertible securities. It may invest in securities of issuers of all capitalization sizes; however, a substantial number of the issuers in which the fund invests are large-capitalization issuers. The fund may invest up to 25% of its net assets in securities of foreign issuers, which may include depositary receipts.

 

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Ivy High Income N Fund. This fund seeks to provide total return through a combination of high current income and capital appreciation. The fund invests primarily in a diversified portfolio of high-yield, high-risk, fixed-income securities, including secured and unsecured loan assignments, loan participations and other loan instruments (loans), of U.S. and foreign issuers, the risks of which are, in the judgment of the adviser consistent with the fund’s objective. It may invest up to 100% of its total assets in foreign securities that are denominated in U.S. dollars or foreign currencies.

LargeCap S&P 500 Index Separate Account-Z. This fund option normally invests the majority of assets in common stocks of companies that compose the S&P 500 Index. Management attempts to mirror the investment performance of the index by allocating assets in approximately the same weightings as the S&P 500 Index. Over the long-term, management seeks a very close correlation between the performance of the Separate Account before expenses and that of the S&P 500 Index.

MFS Blended Research Core Equity R6 Fund. This fund seeks capital appreciation. The fund normally invests at least 80% of the fund’s net assets in equity securities. Equity securities include common stocks and other securities that represent an ownership interest (or right to acquire an ownership interest) in a company or other issuer.

MidCap S&P 400 Index Separate Account-Z. The investment option normally invests the majority of assets in common stocks of companies that compose the S&P MidCap 400 Index. Management attempts to mirror the investment performance of the index by allocating assets in approximately the same weightings as the S&P MidCap 400 Index. Over the long-term, management seeks a very close correlation between the performance of the Separate Account before expenses and that of the S&P MidCap 400 Index.

Oppenheimer Developing Markets Institutional Fund. This fund seeks capital appreciation. The fund mainly invests in common stock of issuers in developing and emerging markets throughout the world and at times it may invest up to 100% of its total assets in foreign securities. Under normal market conditions, it will invest at least 80% of its net assets, plus borrowings for investment purposes, in equity securities of issuers whose principal activities are in a developing market, i.e. are in a developing market or are economically tied to a developing market country. The fund will invest in at least three developing markets.

PIMCO International Bond (US Dollar-Hedged) I Fund. This fund seeks maximum total return, consistent with preservation of capital and prudent investment management. The fund normally invests at least 80% of its assets in Fixed Income Instruments that are economically tied to foreign (non-U.S.) countries, representing at least three foreign countries, which may be represented by forwards or derivatives such as options, future contracts or swap arrangements. It invests primarily in investment-grade debt securities, but may invest up to 10% of its total assets in junk bonds as rated by Moody’s, S&P or Fitch, or, if unrated, as determined by PIMCO. The fund is non-diversified.

PIMCO Real Return Instl Fund. This fund seeks maximum real return, consistent with preservation of capital and prudent investment management. The fund normally invests at least 80% of its net assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities, and corporations, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements.

Principal Fixed Income Guaranteed Option. The Principal Fixed Income Guaranteed Option is a guaranteed general-account backed group annuity contract that has been issued by Principal Life Insurance Company (Principal Life) to Principal Trust Company as custodian.

Putnam Convertible Securities Y Fund. This fund seeks current income and capital appreciation; its secondary objective is conservation of capital. The fund invests mainly in convertible securities of U.S. companies. Convertible securities combine the investment characteristics of bonds and common stocks. Under normal circumstances, it invests at least 80% of the fund’s net assets in convertible securities. Convertible securities include bonds, preferred stocks and other instruments that can be converted into or exchanged for common stock or equivalent value. A significant portion of the convertible securities are below-investment-grade.

SmallCap S&P 600 Index Separate Account-Z. This fund seeks long-term growth of capital and normally invests the majority of assets in common stocks of companies that compose the S&P SmallCap 600 Index. Management attempts to mirror the investment performance of the index by allocating assets in approximately the same weightings as the S&P 600 Index. Over the long-term, management seeks a very close correlation between the performance of the Separate Account before expenses and that of the S&P 600 Index.

Vanguard Explorer Admiral Fund. This fund seeks to provide long-term capital appreciation. The fund invests mainly in the stocks of small and mid-size companies. These companies tend to be unseasoned but are considered by the fund’s advisors to have superior growth potential. Also, these companies often provide little or no dividend income. It uses multiple investment advisors.

 

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Western Asset Core Bond IS Fund. This fund seeks to maximize total return, consistent with prudent investment management and liquidity needs. The fund invests in a portfolio of fixed income securities of various maturities and, under normal market conditions, will invest at least 80% of its net assets in debt and fixed income securities. Although the fund may invest in debt and fixed income securities of any maturity, under normal market conditions the target dollar-weighted average effective duration for the fund is expected to range within 20% of the average duration of the domestic bond market as a whole as estimated by the fund’s subadvisor.

BlackRock Lifepath Index Retirement K Fund. This fund seeks to provide for retirement outcomes based on quantitatively measured risk. The fund is a “Feeder” fund that invests all of its assets in the Master Portfolio, a series of Master Investment Portfolio with a substantially identical investment objective, which allocates and reallocates its assets among a combination of equity and bond index funds and money market funds in propositions based on its own instruments that are components of or have economic characteristics similar to the securities included in its custom benchmark index.

BlackRock Lifepath Index 2020 K Fund

BlackRock Lifepath Index 2025 K Fund.

BlackRock Lifepath Index 2030 K Fund.

BlackRock Lifepath Index 2035 K Fund.

BlackRock Lifepath Index 2040 K Fund.

BlackRock Lifepath Index 2045 K Fund.

BlackRock Lifepath Index 2050 K Fund.

BlackRock Lifepath Index 2055 K Fund.

BlackRock Lifepath Index 2060 K Fund.

These funds seek to provide for retirement outcomes based on quantitatively measured risk. The funds are “Feeder” funds that invest all of their assets in the Master Portfolio, a series of Master Investment Portfolio (“MIP”) with substantially identical investment objectives, which allocate and reallocate their assets among a combination of equity and bond index funds and money market funds (the “underlying funds”) in proportions based on their own comprehensive investment strategy.

An investment in any of the funds listed above is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. As with any mutual fund investment, there is always a risk that you may lose money on your investment in any of the funds listed above.

1895 Bancorp Stock Fund

In connection with the stock offering, the 401(k) Plan now offers the 1895 Bancorp Stock Fund as an additional choice to the investment options described above. 1895 Bancorp Stock Fund invests primarily in the shares of common stock of 1895 Bancorp of Wisconsin, Inc. In connection with the stock offering, you may, in the manner described earlier, direct the trustee to invest up to 50% of your 401(k) Plan account in 1895 Bancorp Stock Fund as a one-time special election.

As of the date of this prospectus supplement, there is no established market for 1895 Bancorp Common Stock. Accordingly, there is no record of the historical performance of 1895 Bancorp Stock Fund. Performance of 1895 Bancorp Stock Fund depends on a number of factors, including the financial condition and profitability of 1895 Bancorp of Wisconsin, Inc. and the Bank and market conditions for shares of 1895 Bancorp Common Stock generally.

Investments in 1895 Bancorp Stock Fund involve special risks common to investments in the shares of common stock of 1895 Bancorp of Wisconsin, Inc. In making a decision to invest all or a part of your account balance in the 1895 Bancorp Stock Fund, you should carefully consider the information set forth on page 14 of this prospectus supplement under “Notice of Your Rights Concerning Employer Securities — The Importance of Diversifying Your Retirement Savings.”

For a discussion of material risks you should consider, see “Risk Factors” beginning on page 17 of the attached prospectus and the section of this prospectus supplement called “Notice of Your Rights Concerning Employer Securities” below.

Withdrawals from the 401(k) Plan

Applicable federal law requires the 401(k) Plan to impose substantial restrictions on the right of a 401(k) Plan participant to withdraw amounts held for his or her benefit under the 401(k) Plan prior to the participant’s termination of employment with the Bank. A substantial federal tax penalty may also be imposed on withdrawals made prior to the participant’s attainment of age 59 ½ regardless of whether such a withdrawal occurs during his or her employment with the Bank or after termination of employment.

 

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Withdrawal from your Account prior to Retirement. Once you have attained age 59 ½, you may request distribution of all or part of the amounts credited to your accounts attributable to elective deferrals, nonelective contributions and matching contributions.

Hardship Withdrawals. If you incur a financial hardship, you may request a withdrawal from the portion of your account attributable to your pre-tax and after-tax elective deferrals.

Rollover Contributions. You may withdraw amounts you contributed to the 401(k) Plan as a rollover contribution at any time.

Loan. You may request a loan from your account pursuant to the procedures established in the 401(k) Plan.

Administration of the 401(k) Plan

The Trustee and Custodian. The trustee of the 401(k) Plan is Principle Trust Company. A special trustee has also been appointed for the stock offering.

Plan Administrator. Pursuant to the terms of the 401(k) Plan, the 401(k) Plan is administered by the 401(k) Plan administrator. The address of the 401(k) Plan administrator is PyraMax Bank, FSB, 7001 West Edgerton Avenue, Greenfield, WI 53220. The 401(k) Plan administrator is responsible for the administration of the 401(k) Plan, interpretation of the provisions of the 401(k) Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the 401(k) Plan, maintenance of plan records, books of account and all other data necessary for the proper administration of the 401(k) Plan, preparation and filing of all returns and reports relating to the 401(k) Plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under Sections 104 and 105 of ERISA.

Reports to Plan Participants. The 401(k) Plan administrator will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses (if any). In addition, you can go on-line to www.principal.com or call 1-800-547-7754 at any time to review your account balances.

Amendment and Termination

It is the intention of the Bank to continue the 401(k) Plan indefinitely. Nevertheless, the Bank may terminate the 401(k) Plan at any time. If the 401(k) Plan is terminated in whole or in part, then regardless of other provisions in the 401(k) Plan, you will have a fully vested interest in your accounts. The Bank reserves the right to make any amendment or amendments to the 401(k) Plan which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that the Bank may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with ERISA.

Merger, Consolidation or Transfer

In the event of the merger or consolidation of the 401(k) Plan with another plan, or the transfer of the trust assets to another plan, the 401(k) Plan requires that you would receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer.

Federal Income Tax Consequences

The following is a brief summary of the material federal income tax aspects of the 401(k) Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the 401(k) Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. Please consult your tax advisor with respect to any distribution from the 401(k) Plan and transactions involving the 401(k) Plan.

As a “tax-qualified retirement plan,” the Code affords the 401(k) Plan special tax treatment, including:

(1) the sponsoring employer is allowed an immediate tax deduction for the amount contributed to the 401(k) Plan each year;

 

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(2) participants pay no current income tax on amounts contributed by the employer on their behalf; and

(3) earnings of the 401(k) Plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.

The Bank will administer the 401(k) Plan to comply with the requirements of the Code as of the applicable effective date of any change in the law.

Lump-Sum Distribution. A distribution from the 401(k) Plan to a participant or the beneficiary of a participant will qualify as a lump-sum distribution if it is made within one taxable year, on account of the participant’s death, disability or separation from service, or after the participant attains age 59 ½, and consists of the balance credited to participants under the 401(k) Plan and all other profit sharing plans (and in some cases all other stock bonus plans), if any, maintained by the Bank. The portion of any lump-sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump-sum distribution, less the amount of after-tax contributions, if any, you have made to this 401(k) Plan and any other profit sharing plans maintained by the Bank, which is included in the distribution.

1895 Bancorp of Wisconsin, Inc. Common Stock Included in Lump-Sum Distribution. If a lump-sum distribution includes 1895 Bancorp Common Stock, the distribution generally will be taxed in the manner described above, except that the total taxable amount may be reduced by the amount of any net unrealized appreciation with respect to 1895 Bancorp Common Stock, that is, the excess of the value of 1895 Bancorp Common Stock at the time of the distribution over its cost or other basis of the securities to the trust. The tax basis of 1895 Bancorp Common Stock, for purposes of computing gain or loss on its subsequent sale, equals the value of 1895 Bancorp Common Stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of 1895 Bancorp Common Stock, to the extent of the amount of net unrealized appreciation at the time of distribution, will constitute long-term capital gain, regardless of the holding period of 1895 Bancorp Common Stock. Any gain on a subsequent sale or other taxable disposition of 1895 Bancorp Common Stock, in excess of the amount of net unrealized appreciation at the time of distribution, will be considered long-term capital gain. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed by regulations to be issued by the Internal Revenue Service.

Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA. You may roll over virtually all distributions from the 401(k) Plan to another qualified plan or to an individual retirement account (IRA) in accordance with the terms of the other plan or account.

Notice of Your Rights Concerning Employer Securities

There has been an important change in Federal law that provides specific rights concerning investments in employer securities, such as 1895 Bancorp Common Stock. Because you may in the future have investments in 1895 Bancorp Stock Fund under the 401(k) Plan, you should take the time to read the following information carefully.

Your Rights Concerning Employer Securities. The 401(k) Plan must allow you to elect to move any portion of your account that is invested in the 1895 Bancorp Stock Fund from that investment into other investment alternatives under the 401(k) Plan. You may contact the 401(k) Plan Administrator shown above for specific information regarding this new right, including how to make this election. In deciding whether to exercise this right, you will want to give careful consideration to the information below that describes the importance of diversification. All of the investment options under the 401(k) Plan are available to you if you decide to diversify out of the 1895 Bancorp Stock Fund.

The Importance of Diversifying Your Retirement Savings. To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk.

In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the 401(k) Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerance for risk. Therefore, you should carefully consider the rights described here and how these rights affect the amount of money that you invest in 1895 Bancorp Common Stock through the 401(k) Plan.

 

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It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the 401(k) Plan to help ensure that your retirement savings will meet your retirement goals.

Additional ERISA Considerations

The 401(k) Plan is subject to certain provisions of ERISA, including special provisions relating to control over the 401(k) Plan’s assets by participants and beneficiaries. The 401(k) Plan’s feature that allows you to direct the investment of your account balances is intended to satisfy the requirements of Section 404(c) of ERISA relating to control over plan assets by a participant or beneficiary. The effect of this is two-fold. First, you will not be deemed a “fiduciary” because of your exercise of investment discretion. Second, no person who otherwise is a fiduciary, such as the Bank, the 401(k) Plan Administrator, or the 401(k) Plan’s trustee is liable under the fiduciary responsibility provision of ERISA for any loss which results from your exercise of control over the assets in your 401(k) Plan account.

Because you will be entitled to invest up to 50% of your account balance in the 401(k) Plan in 1895 Bancorp of Wisconsin, Inc. common stock, the regulations under Section 404(c) of ERISA require that the 401(k) Plan establish procedures that ensure the confidentiality of your decision to purchase, hold, or sell employer securities, except to the extent that disclosure of such information is necessary to comply with federal or state laws not preempted by ERISA. These regulations also require that your exercise of voting and similar rights with respect to the common stock be conducted in a way that ensures the confidentiality of your exercise of these rights.

Securities and Exchange Commission Reporting and Short-Swing Profit Liability

Section 16 of the Securities Exchange Act of 1934, as amended, imposes reporting and liability requirements on (i) officers, (ii) directors, and (iii) persons beneficially owning more than 10% of public companies such as 1895 Bancorp of Wisconsin, Inc. Section 16(a) of the Securities Exchange Act of 1934 requires the filing of reports of beneficial ownership. Within 10 days of becoming an officer, director or person beneficially owning more than 10% of the shares of 1895 Bancorp of Wisconsin, Inc. the individual must fill out a Form 3 reporting initial beneficial ownership and file it with the Securities and Exchange Commission. Changes in beneficial ownership, such as purchases, sales and gifts generally must be reported periodically, either on a Form 4 within two business days after the change occurs, or annually on a Form 5 within 45 days after the close of 1895 Bancorp of Wisconsin, Inc.’s fiscal year. Discretionary transactions in and beneficial ownership of the common stock through the 1895 Bancorp Stock Fund of the 401(k) Plan by officers, directors and persons beneficially owning more than 10% of the common stock of 1895 Bancorp of Wisconsin, Inc. generally must be reported to the Securities and Exchange Commission by such individuals.

In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934, as amended, provides for the recovery by 1895 Bancorp of Wisconsin, Inc. of profits realized by an officer, director or any person beneficially owning more than 10% of 1895 Bancorp of Wisconsin, Inc.’s common stock resulting from non-exempt purchases and sales of 1895 Bancorp of Wisconsin, Inc. common stock within any six-month period.

The Securities and Exchange Commission has adopted rules that provide exemptions from the profit recovery provisions of Section 16(b) for all transactions in employer securities within an employee benefit plan, provided certain requirements are met. These requirements generally involve restrictions upon the timing of elections to acquire or dispose of employer securities for the accounts of Section 16(b) persons.

Except for distributions of common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons affected by Section 16(b) are required to hold shares of common stock distributed from the 401(k) Plan for six months following such distribution and are prohibited from directing additional purchases within the 1895 Bancorp Stock Fund for six months after receiving such a distribution.

Financial Information Regarding 401(k) Plan Assets

Financial information representing the assets available for plan benefits at December 31, 2017, is available upon written request to the 401(k) Plan Administrator.

LEGAL OPINION

The validity of the issuance of the common stock has been passed upon by Luse Gorman, PC, Washington, D.C., which firm acted as special counsel to 1895 Bancorp of Wisconsin, Inc. in connection with 1895 Bancorp of Wisconsin, Inc.’s stock offering.

 

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PROSPECTUS

LOGO

(Proposed Holding Company for PyraMax Bank, FSB)

Up to 2,783,000 Shares of Common Stock

(Subject to increase to up to 3,200,450 shares)

1895 Bancorp of Wisconsin, Inc. is offering up to 2,783,000 shares of its common stock for sale at $10.00 per share on a best efforts basis in connection with the reorganization of PyraMax Bank, FSB into the mutual holding company form of ownership. There is no established market for our common stock. We expect that our common stock will be traded on the Nasdaq Capital Market under the symbol “BCOW” upon conclusion of the offering. We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

The shares being offered represent 44.0% of the shares of common stock of 1895 Bancorp of Wisconsin, Inc. that will be outstanding following the offering. After the offering, 55.0% of our outstanding common stock will be owned by 1895 Bancorp of Wisconsin, MHC, our federally chartered mutual holding company, and 1.0% will be contributed to our charitable foundation. These percentages will not be affected by the number of shares we sell in the offering. We must sell a minimum of 2,057,000 shares in order to complete the offering. We may sell up to 3,200,450 shares to reflect demand for the shares or changes in market conditions following the commencement of the offering, without resoliciting subscribers.

We are offering the shares of common stock in a “subscription offering” to eligible depositors of PyraMax Bank, FSB and to our tax-qualified employee benefit plans. Depositors who had accounts with aggregate balances of at least $50 at the close of business on March 15, 2017 will have first priority to purchase shares of common stock of 1895 Bancorp of Wisconsin, Inc. Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering.” To the extent any shares offered for sale are not purchased in the subscription or community offerings, they may be sold in a “syndicated community offering” to be managed by Keefe Bruyette & Woods, Inc., a Stifel Company (“KBW”).

The minimum number of shares of common stock you may order is 25 shares. The maximum number of shares of common stock that can be ordered by any person in the offering, or persons exercising subscription rights through a single deposit account, is 10,000 shares ($100,000), and no person together with an associate or group of persons acting in concert may purchase more than 15,000 shares ($150,000).

The offering is scheduled to expire at 1:00 p.m., Central Time, on December 13, 2018. We may extend the expiration date without notice to you, until January 15, 2019, or such later date as the Board of Governors of the Federal Reserve System may approve, which may not be beyond December 21, 2020. Once submitted, orders are irrevocable unless the offering is terminated or extended beyond January 15, 2019, or the number of shares of common stock to be sold is increased to more than 3,200,450 shares or decreased to less than 2,057,000 shares. If the offering is extended beyond January 15, 2019, all subscribers will be notified and given an opportunity to confirm, cancel or change their orders. If you do not respond to this notice, we will promptly return your funds with interest or cancel your deposit account withdrawal authorization. If the number of shares to be sold in the offering is increased to more than 3,200,450 shares or decreased to less than 2,057,000 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest. Funds submitted for the purchase of shares in the offering will be held in a segregated account at PyraMax Bank, FSB and will earn interest at 0.15% until completion or termination of the offering.

KBW will use its best efforts to assist us in selling our common stock, but is not obligated to purchase any of the common stock that is being offered for sale. In addition, our officers, directors and employees may participate in the solicitation of offers to purchase common stock in reliance upon Rule 3a4-1 under the Securities Exchange Act of 1934, as amended. Subscribers will not pay any commissions to purchase shares of common stock in the offering.

OFFERING SUMMARY

Price: $10.00 per share

     Minimum      Midpoint      Maximum      Adjusted Maximum  

Number of shares

     2,057,000        2,420,000        2,783,000        3,200,450  

Gross offering proceeds

   $ 20,570,000      $ 24,200,000      $ 27,830,000      $ 32,004,500  

Estimated offering expenses, excluding selling agent fees and expenses

   $ 1,185,000      $ 1,185,000      $ 1,185,000      $ 1,185,000  

Estimated selling agent fees and expenses (1) (2)

   $ 315,000      $ 315,000      $ 315,000      $ 315,000  

Estimated net proceeds (1)

   $ 19,070,000      $ 22,700,000      $ 26,330,000      $ 30,504,500  

Estimated net proceeds per share (1)

   $ 9.27      $ 9.38      $ 9.46      $ 9.53  

 

(1)

See “The Reorganization and Offering—Plan of Distribution and Marketing Arrangements” for a discussion of KBW’s compensation for this offering and the compensation to be received by KBW and the other broker-dealers who may participate in a syndicated community offering.

(2)

Excludes reimbursable expenses and records agent fees, which are included in estimated offering expenses.

This investment involves a degree of risk, including the possible loss of principal. Please read the “Risk Factors” beginning on page 17.

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. None of the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

LOGO

 

For assistance, please contact the Stock Information Center at 1-(877) 643-8217.

The date of this prospectus is November 6, 2018.


Table of Contents

LOGO


Table of Contents

TABLE OF CONTENTS

 

SUMMARY

     1  

RISK FACTORS

     17  

SELECTED FINANCIAL AND OTHER DATA

     29  

RECENT DEVELOPMENTS

     32  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     37  

HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

     39  

OUR POLICY REGARDING DIVIDENDS

     41  

MARKET FOR THE COMMON STOCK

     42  

HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

     43  

CAPITALIZATION

     44  

PRO FORMA DATA

     46  

COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH AND WITHOUT THE CHARITABLE FOUNDATION

     52  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PYRAMAX BANK, FSB

     54  

BUSINESS OF 1895 BANCORP OF WISCONSIN, INC.

     67  

BUSINESS OF 1895 BANCORP OF WISCONSIN, MHC

     67  

BUSINESS OF PYRAMAX BANK, FSB

     67  

TAXATION

     91  

REGULATION AND SUPERVISION

     92  

MANAGEMENT

     100  

SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS

     108  

THE REORGANIZATION AND OFFERING

     109  

1895 BANCORP OF WISCONSIN COMMUNITY FOUNDATION

     126  

RESTRICTIONS ON THE ACQUISITION OF 1895 BANCORP OF WISCONSIN, INC. AND PYRAMAX BANK, FSB

     128  

DESCRIPTION OF CAPITAL STOCK OF 1895 BANCORP OF WISCONSIN, INC.

     130  

TRANSFER AGENT AND REGISTRAR

     132  

LEGAL AND TAX MATTERS

     132  

EXPERTS

     132  

WHERE YOU CAN FIND MORE INFORMATION

     132  

REGISTRATION REQUIREMENTS

     132  

INDEX TO FINANCIAL STATEMENTS OF PYRAMAX BANK, FSB

     133  

 


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SUMMARY

The following summary provides material information regarding the reorganization, the offering of common stock by 1895 Bancorp of Wisconsin, Inc. and the business of PyraMax Bank, FSB. The summary may not contain all the information that is important to you. For additional information, you should read this entire prospectus carefully, including the financial statements and the notes to the financial statements of PyraMax Bank, FSB. In certain circumstances, where appropriate, the terms “we, “us” and “our” refer collectively to 1895 Bancorp of Wisconsin, MHC, 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB or to any of those entities, depending on the context.

The Companies

1895 Bancorp of Wisconsin, MHC

Upon completion of the reorganization and the offering, 1895 Bancorp of Wisconsin, MHC will become the federally chartered mutual holding company of 1895 Bancorp of Wisconsin, Inc. and will own 55% of 1895 Bancorp of Wisconsin’s common stock. 1895 Bancorp of Wisconsin, MHC is not currently an operating company and has not engaged in any business to date. 1895 Bancorp of Wisconsin, MHC will be formed upon completion of the reorganization. As a mutual holding company, 1895 Bancorp of Wisconsin, MHC will be a non-stock company that will have as its members all holders of deposit accounts at PyraMax Bank, FSB as of March 15, 2017. As a mutual holding company, 1895 Bancorp of Wisconsin, MHC is required by law to own a majority of the voting stock of 1895 Bancorp of Wisconsin, Inc.

1895 Bancorp of Wisconsin, Inc.

1895 Bancorp of Wisconsin, Inc. will be chartered under federal law and will own 100% of the issued and outstanding common stock of PyraMax Bank, FSB following the reorganization and offering. This offering is being made by 1895 Bancorp of Wisconsin, Inc. 1895 Bancorp of Wisconsin, Inc. is not currently an operating company and will be formed upon completion of the reorganization. Our corporate office will be located at 7001 West Edgerton Avenue, Greenfield, Wisconsin 53220, and our telephone number will be (414) 421-8200.

Upon completion of the offering, 1895 Bancorp of Wisconsin, MHC will own 55% and public stockholders will own 45% of 1895 Bancorp of Wisconsin, Inc.’s common stock and will not be able to exercise voting control over most matters put to a vote of stockholders. In addition, as a “controlled company” under the meaning of the Nasdaq corporate governance rules following the offering, 1895 Bancorp of Wisconsin, Inc. will be exempt from certain corporate governance requirements, including the requirement that a majority of our board of directors be independent under Nasdaq listing standards, and that executive compensation and director nominations be overseen by independent directors. However, at the present time, a majority of our directors would be considered independent under the applicable Nasdaq corporate governance listing standards.

PyraMax Bank, FSB

PyraMax Bank, FSB is a federally chartered mutual savings bank headquartered in Greenfield, Wisconsin. PyraMax Bank, FSB was established in 1895 as South Milwaukee Savings and Loan Association and has operated continuously in the Milwaukee metropolitan area since that time. In 1993, the bank changed its name to South Milwaukee Savings Bank, S.A. In May 2000, a merger between South Milwaukee Savings Bank and Mitchell Savings Bank officially formed PyraMax Bank, SSB. The bank changed to a federal savings bank charter in 2003, changing its name to PyraMax Bank, FSB.

From our founding in 1895, we operated as a traditional thrift institution, offering primarily residential mortgage loans and savings accounts, supplemented with multi-family and commercial real estate loans. In 2007, Richard Hurd was promoted to President and Chief Executive Officer of PyraMax Bank, FSB. Mr. Hurd began shifting PyraMax Bank, FSB’s focus to include more business-oriented products and services. In 2010, PyraMax Bank, FSB hired Charles Mauer as its Chief Credit Officer, continuing our increased focus on business-oriented lending.

Commercial real estate growth has been the primary source of recent loan growth, and commercial business loan originations have also been emphasized.

We conduct our operations from our six full-service banking offices in Milwaukee County, our two full-service banking offices in Waukesha County and our full-service banking office in Ozaukee County Wisconsin. We have entered into an agreement to sell our branch located at 1605 West Mitchell Street, Milwaukee, Wisconsin, and anticipate completing that branch sale in the first quarter of 2019, pending regulatory approval. We consider our primary lending market area to be Milwaukee, Waukesha and Ozaukee Counties,

 

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however, we occasionally make loans secured by properties located outside of our primary lending market, usually to borrowers with whom we have an existing relationship and who have a presence within our primary market.

At June 30, 2018, we had total assets of $482.6 million, total deposits of $404.6 million and total equity of $37.7 million. We had a net loss of $323,000 for the six months ended June 30, 2018 and a net income of $1.7 million for the year ended December 31, 2017. While our net interest income has remained steady during the last several years, we have had a series of non-recurring non-interest expenses that have negatively impacted our net income during these periods. For the six months ended June 30, 2018, non-interest expense included $230,000 of expenses associated with the pending sale of a branch office and a $400,000 expense relating to a large claim for non-covered procedures under our self-insured healthcare coverage program. For the year ended December 31, 2017, non-interest expense included a non-recurring $1.1 million valuation allowance recorded to write down the value of a branch office property owned by PyraMax Bank, FSB and $880,000 of conversion costs related to a core data processing systems conversion. For the year ended December 31, 2015, non-interest expense included a non-recurring $684,000 prepayment penalty related to the prepayment of $16.0 million of Federal Home Loan Bank advances. For the year ended December 31, 2014, non-interest expense included a non-recurring $3.1 million prepayment penalty related to the prepayment of $25.0 million of Federal Home Loan Bank advances and a non-recurring loss on the sale of a building of $349,000.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate loans, multi-family loans, commercial real estate loans, commercial, construction and land loans, and consumer loans.

PyraMax Bank, FSB is subject to comprehensive regulation and examination by its primary federal regulator, the Office of the Comptroller of the Currency.

PyraMax Bank, FSB’s corporate office is located at 7001 West Edgerton Avenue, Greenfield, Wisconsin 53220, and our telephone number at this address is (414) 421-8200. Our website address is www.pyramaxbank.com. Information on our website is not and should not be considered a part of this prospectus.

Our Reorganization into a Mutual Holding Company and the Offering

We do not have stockholders in our current mutual form of ownership. Our depositors currently have the right to vote on certain matters pertaining to PyraMax Bank, FSB, such as the election of directors and the proposed mutual holding company reorganization described in this prospectus. The mutual holding company reorganization is a series of transactions by which we will reorganize our corporate structure from our current status as a mutual savings bank to the mutual holding company form of ownership. The reorganization will be conducted pursuant to a plan of reorganization and stock issuance plan, which we refer to as the plan of reorganization. Following the reorganization, PyraMax Bank, FSB will become a federal stock savings bank subsidiary of 1895 Bancorp of Wisconsin, Inc., and 1895 Bancorp of Wisconsin, Inc. will be a majority-owned subsidiary of 1895 Bancorp of Wisconsin, MHC. After the reorganization, our depositors will become members of 1895 Bancorp of Wisconsin, MHC, and will continue to have the same voting rights in 1895 Bancorp of Wisconsin, MHC as they had in PyraMax Bank, FSB prior to the reorganization.

In connection with the reorganization, we are offering shares of common stock of 1895 Bancorp of Wisconsin, Inc. for sale in the offering. All investors will pay the same price per share in the offering. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual holding company reorganizations and stock offerings. See “—Terms of the Offering.”

The primary reasons for our decision to reorganize into a mutual holding company and conduct the offering are to establish an organizational structure that will enable us to:

 

   

increase our capital to support future growth and profitability, although we currently have capital well in excess of all applicable regulatory requirements;

 

   

compete more effectively in the financial services marketplace;

 

   

offer our customers, employees, management and directors an equity ownership interest in 1895 Bancorp of Wisconsin, Inc., our proposed stock holding company, and thereby an economic interest in our future success;

 

   

attract and retain qualified personnel by establishing stock-based benefit plans; and

 

   

increase our flexibility to structure and finance the expansion of our operations, including potential acquisitions of other financial institutions or branches thereof, or establishing de novo branches, although we have no current acquisitions or new branches planned.

The reorganization and the capital raised in the offering are expected to provide us with additional capital to support new loans and higher lending limits, support the growth of our banking franchise, provide an additional cushion against unforeseen risks and

 

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expand our asset and deposit base. The reorganization and offering also will allow us to establish stock benefit plans for management and other employees that we believe will permit us to attract and retain qualified personnel.

Unlike a standard mutual-to-stock conversion transaction in which all of the common stock of the holding company of the converting savings bank is sold to the public, only a minority of the stock is sold to the public in a mutual holding company reorganization. In a mutual holding company structure, federal law and regulations require that a majority of the outstanding common stock of 1895 Bancorp of Wisconsin, Inc. must be held by our mutual holding company. Consequently, the shares that we are permitted to sell in the offering represent a minority of the shares of 1895 Bancorp of Wisconsin, Inc. that will be outstanding upon the closing of the reorganization. As a result, a mutual holding company offering raises less than half the capital that would be raised in a standard conversion offering. Based on these restrictions and an evaluation of our capital needs, our board of directors has decided that 44% of our outstanding shares of common stock will be offered for sale in the offering, 1.0% of our outstanding shares will be contributed to the charitable foundation, and 55% of our outstanding shares will be retained by 1895 Bancorp of Wisconsin, MHC. Our board of directors has determined that offering 44% of our outstanding shares of common stock for sale in the offering will enable management to effectively invest the capital raised in the offering. See “—Possible Conversion of 1895 Bancorp of Wisconsin, MHC to Stock Form.”

The following chart shows our corporate structure following the reorganization and offering:

 

LOGO

Business Strategy

Our current business strategy consists of the following:

 

   

Grow our balance sheet and improve profitability. Given our attractive market area, we believe we are well-positioned to increase the size of our balance sheet without a proportional increase in overhead expense or operating risk. Accordingly, we intend to increase, on a managed basis, our assets and liabilities, particularly loans and deposits. As we grow our assets, particularly higher-yielding commercial loans, while controlling our expenses, we anticipate improving our earnings.

 

   

Grow our loan portfolio prudently with a focus on diversifying the portfolio, particularly in commercial real estate and commercial lending. Our principal business activity historically has been the origination of residential mortgage loans, supplemented with commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans). We intend to retain our presence as a mortgage lender in our market area and increase our focus on originating commercial real estate and commercial loans (which includes commercial and industrial loans). The capital we are raising in the offering will support an increase in our lending limits, which will enable us to originate larger loans to new and existing customers.

Increasing our commercial real estate loans and commercial business loans involves risk, as described in “Risk Factors—Risks Related to Our Business—We have a substantial amount of commercial real estate and commercial loans, and intend to continue to increase originations of these types of loans. These loans involve credit risks that could adversely affect our financial condition and results of operations” and “—Our portfolio of loans with a higher risk of loss is increasing, which may lead to additional provisions for loan losses or charge-offs, which would reduce our profits or cause losses.”

 

   

Continue to increase core deposits, with an emphasis on low cost demand deposits. We seek core deposits to provide a stable source of funds to support loan growth at costs consistent with improving our net interest rate spread and margin. Core deposits also help us maintain loan-to-deposit ratios at levels consistent with regulatory expectations. We consider our core deposits to include checking accounts, money market accounts and statement savings. In particular, our Treasury

 

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Management unit focuses on generating and retaining business deposits, which assists in generating fee income. Core deposits have increased to $205.8 million at June 30, 2018, from $188.9 million at December 31, 2015.

 

   

Manage credit risk to maintain a low level of non-performing assets. We believe strong asset quality is a key to our long-term financial success. Our strategy for credit risk management focuses on having an experienced team of credit professionals, well-defined policies and procedures, appropriate loan underwriting criteria and active credit monitoring. In recent years we have conducted an extensive review of, and have enhanced, our credit, underwriting and loan processing policies and procedures. Our nonperforming assets to total assets ratio was 0.38% at June 30, 2018, compared to 0.40% at December 31, 2017 and 0.67% at December 31, 2016. At June 30, 2018, the majority of our nonperforming assets were related to residential real estate.

 

   

Grow organically and through opportunistic bank or branch acquisitions or de novo branching. In addition to organic growth, we will also consider acquisition opportunities that we believe would enhance the value of our franchise and yield potential financial benefits for our stockholders. Although we believe opportunities exist to increase our market share in our historical markets, we expect to continue to expand into nearby markets in Wisconsin. We will consider expanding our branch network by establishing new (“de novo”) branches and/or through acquisitions, although we have no current acquisitions or new branches planned. The capital we are raising in the offering will also provide us the opportunity to make acquisitions of other financial institutions or branches thereof, and will help fund improvements in our operating facilities, credit reporting and customer delivery services in order to enhance our competitiveness.

 

   

Continue to provide value to our community. Our goal is to provide long-term value to our customers, employees and the communities we serve by executing a safe and sound service-oriented business strategy that produces increasing earnings. We believe there is a significant opportunity for a community-focused bank to provide a full range of financial services to commercial and retail customers in our market area, and the increased capital we will have after the completion of the offering will enable us to compete more effectively with other financial institutions.

A full description of our products and services can be found under “Business of PyraMax Bank, FSB.”

Terms of the Offering

We are offering between 2,057,000 and 2,783,000 shares of common stock of 1895 Bancorp of Wisconsin, Inc. to eligible depositors, our tax-qualified employee benefit plans and to the public to the extent shares remain available. The amount of capital we are raising in the offering is based on an appraisal of the pro forma market value of 1895 Bancorp of Wisconsin, Inc. We may increase the maximum number of shares that we sell in the offering by up to 15%, to 3,200,450 shares, as a result of demand for the shares of common stock in the offering or changes in market conditions, including those for financial institutions stocks. Subscription priorities have been established for the allocation of common stock to the extent the subscription offering is oversubscribed. See “The Reorganization and Offering—Offering of Common Stock—Subscription Rights” for a description of allocation procedures in the event of an oversubscription.

Unless the pro forma market value of 1895 Bancorp of Wisconsin, Inc. decreases below $46.8 million or increases above $72.7 million, or the offering is extended beyond January 15, 2019, you will not have the opportunity to change or cancel your stock order. The offering price of the shares of common stock is $10.00 per share. All investors will pay the same $10.00 purchase price per share. Investors will not be charged a commission to purchase shares of common stock. KBW, our financial advisor in connection with the reorganization and offering, will use its best efforts to assist us in selling our shares of common stock, but KBW is not obligated to purchase any shares in the offering.

Persons Who May Order Stock in the Offering

We are offering the shares of common stock of 1895 Bancorp of Wisconsin, Inc. in a “subscription offering” in the following descending order of priority:

 

  (1)

depositors who had accounts at PyraMax Bank, FSB with aggregate balances of at least $50 at the close of business on March 15, 2017;

 

  (2)

the tax-qualified employee benefit plans of PyraMax Bank, FSB (including our employee stock ownership plan and 401(k) Plan);

 

  (3)

depositors who had accounts at PyraMax Bank, FSB with aggregate balances of at least $50 at the close of business on September 30, 2018; and

 

  (4)

depositors of PyraMax Bank, FSB at the close of business on November 1, 2018.

 

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Any shares of our common stock that remain unsold in the subscription offering will be offered for sale in a community offering that may commence concurrently with, during or promptly after the subscription offering. The community offering must be completed by January 15, 2019, unless extended with Federal Reserve Board approval. Natural persons (including trusts of natural persons) residing in the Wisconsin Counties of Milwaukee, Waukesha and Ozaukee will have a purchase preference in any community offering. Shares also may be offered to the general public. We also may offer shares of common stock not purchased in the subscription offering or the community offering through a syndicate of brokers, in what is referred to as a “syndicated community offering,” managed by KBW. We have the right to accept or reject, in our sole discretion, any orders received in the community offering or the syndicated community offering.

To ensure proper allocation of stock, each eligible account holder must list on his or her stock order form all deposit accounts in which he or she had an ownership interest at March 15, 2017, September 30, 2018 or November 1, 2018, as applicable. Failure to list an account or providing incorrect information could result in the loss of all or part of a subscriber’s stock allocation. We will attempt to identify your ownership in all accounts, but cannot guarantee we will identify all accounts in which you had an ownership interest. Our interpretations of the terms and conditions of the stock issuance plan and of the acceptability of the order forms will be final.

If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. Shares of common stock will be allocated first to categories in the subscription offering in accordance with our plan of reorganization. A detailed description of share allocation procedures can be found in the section entitled “The Reorganization and Offering—Offering of Common Stock.”

Risks Associated with Ownership of Our Common Stock

Our business and this offering are subject to a number of substantial risks and uncertainties, which you should be aware of before making a decision to invest in our common stock. These risks are discussed more fully in the section entitled “Risk Factors.” Significant risk factors include, but are not limited to, the following:

 

   

Credit risk, including risks related to our commercial real estate and commercial loan portfolios;

 

   

Liquidity and funding risks;

 

   

Interest rate risk;

 

   

High operating expenses;

 

   

Operational risk, including risks related to cyber security;

 

   

Legal, accounting and compliance risks, including risks related to the extensive regulatory scheme under which we operate, changes in regulations, and the obligations associated with becoming a public company;

 

   

Fluctuation in the price of our common stock;

 

   

Illiquidity in the trading of our common stock; and

 

   

The inability of public stockholders to exercise voting control due to 1895 Bancorp of Wisconsin, MHC’s ownership of a majority of our common stock.

How We Determined the Offering Range and the $10.00 Price Per Share

Our decision to offer between 2,057,000 shares and 2,783,000 shares, which is our offering range, is based on an independent appraisal of our pro forma market value prepared by Keller & Company, Inc. (“Keller & Company”), a firm experienced in appraisals of financial institutions. Keller & Company is of the opinion that as of September 5, 2018, and assuming we sell a minority of our shares in the offering, the estimated pro forma market value of the common stock of 1895 Bancorp of Wisconsin, Inc. was $55.0 million. Based on applicable regulations, this market value forms the midpoint of a valuation range with a minimum of $46.8 million and a maximum of $63.3 million.

Our board of directors determined that the common stock should be sold at $10.00 per share and that 44% of the outstanding shares of 1895 Bancorp of Wisconsin, Inc. common stock should be offered for sale in the offering, 1% of the outstanding shares should be contributed to the charitable foundation, and 55% of the outstanding shares should be held by 1895 Bancorp of Wisconsin,

 

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MHC. Therefore, based on the valuation range, the number of shares of 1895 Bancorp of Wisconsin, Inc. common stock that will be sold in the offering will range from 2,057,000 shares to 2,783,000 shares. If demand for the shares or market conditions warrant, our appraised value can be increased by up to 15%, which would result in an appraised value of $72.7 million and an offering of 3,200,450 shares of common stock.

The appraisal is based in part on our financial condition and results of operations, the pro forma effect of the additional capital raised by the sale of shares of common stock in the offering, and an analysis of a peer group of 10 publicly traded savings and loan holding companies that Keller & Company considers comparable to 1895 Bancorp of Wisconsin, Inc. on a pro forma basis. See “The Reorganization and Offering – How We Determined the Stock Pricing and the Number of Shares to be Issued.” The appraisal peer group consists of the following companies, all of which are traded on the Nasdaq Stock Market. Total assets are as of June 30, 2018.

 

Company Name

   Ticker
Symbol
   Headquarters    Total Assets  
               (Dollars in thousands)  

Community First Bancshares, Inc.

   CFBI    Covington, GA    $ 292,476  

Eagle Financial Bancorp, Inc.

   EFBI    Cincinnati, OH      132,160  

Elmira Savings Bank

   ESBK    Elmira, NY      553,389  

Equitable Financial Corp.

   EQFN    Grand Island, NE      305,633  

FSB Bancorp, Inc.

   FSBC    Fairport, NY      312,853  

Hamilton Bancorp, Inc.

   HBK    Towson, MD      526,310  

HMN Financial, Inc.

   HMNF    Rochester, MN      722,080  

IF Bancorp, Inc.

   IROQ    Watseka, IL      619,310  

Prudential Bancorp, Inc.

   PBIP    Philadelphia, PA      944,329  

Severn Bancorp, Inc.

   SVBI    Annapolis, MD      801,183  

The independent appraisal will be updated before we complete the reorganization and offering. If the pro forma market value of the common stock at that time is either below $46.8 million or above $72.7 million, then 1895 Bancorp of Wisconsin, Inc., after consulting with the Federal Reserve Board, may terminate the plan of reorganization and return all funds promptly with interest; extend or hold a new subscription or community offering, or both; establish a new offering range and commence a resolicitation of subscribers; or take such other actions as may be permitted by the Federal Reserve Board and the Securities and Exchange Commission. If we resolicit subscribers in this instance, then all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest.

Two measures investors use to analyze an issuer’s stock are the ratio of the offering price to the issuer’s tangible book value and the ratio of the offering price to the issuer’s annual net income. Keller & Company considered these ratios, among other factors, in preparing its independent appraisal. Tangible book value is the same as total equity less any intangible assets, and represents the difference between the issuer’s assets and liabilities.

The following table presents a summary of selected pricing ratios for the peer group companies and for us on a non-fully converted basis (i.e. the table assumes that 45% of our outstanding shares of common stock is sold in the offering, including shares contributed to the charitable foundation, as opposed to 100% of our outstanding shares of common stock). These figures are from the Keller & Company appraisal report. Compared to the average pricing ratios of the peer group, and based upon the information in the following table, our pro forma pricing ratios at the midpoint of the offering range indicated no premium or discount based on a not meaningful price-to-earnings multiple on a non-fully converted price-to-earnings basis and a discount of 17.23% on a non-fully converted price-to-tangible-book value basis.

 

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     Non-Fully Converted
Pro Forma
Price-to-Earnings Multiple (1)
    Non-Fully Converted
Pro Forma
Price-to-Tangible Book
Value Ratio (1)
 

1895 Bancorp of Wisconsin, Inc.

    

Adjusted Maximum

     n/m       114.03

Maximum

     n/m       105.04  

Midpoint

     n/m       96.34  

Minimum

     n/m       86.73  

Valuation of peer group companies as of September 5, 2018

    

Averages

     37.56     116.40

Medians

     31.53       114.70  

 

n/m

Not meaningful

(1)

Information is based upon actual earnings for the 12 months ended June 30, 2018. These ratios are different from the ratios in “Pro Forma Data.”

The following table presents a summary of selected pricing ratios for the peer group companies, as of and for the same periods reflected in the above table, with such ratios adjusted to their fully converted equivalent basis, and the resulting pricing ratios for 1895 Bancorp of Wisconsin, Inc. on a fully converted equivalent basis. Compared to the average fully converted pricing ratios of the peer group, 1895 Bancorp of Wisconsin, Inc.’s pro forma fully converted pricing ratios at the midpoint of the offering range indicated no premium or discount based on a not meaningful price-to-earnings multiple on a fully converted price-to-earnings basis and a discount of 44.96% on a fully converted price-to-tangible-book value basis.

 

     Fully Converted
Pro Forma
Price-to-Earnings Multiple(1)
    Fully Converted
Pro Forma
Price-to-Book
Value Ratio
 

1895 Bancorp of Wisconsin, Inc.

    

Adjusted Maximum

     n/m       73.07

Maximum

     n/m       69.30  

Midpoint

     n/m       65.42  

Minimum

     n/m       60.81  

Valuation of peer group companies as of September 5, 2018

    

Averages

     37.56     108.65

Medians

     31.53       110.18  

 

n/m

Not meaningful

(1)

Information is based upon actual earnings for the 12 months ended June 30, 2018. These ratios are different from the ratios in “Pro Forma Data.”

The pro forma fully converted calculations for 1895 Bancorp of Wisconsin, Inc. include the following assumptions:

 

   

8% of the shares sold in a full conversion offering would be purchased by an employee stock ownership plan, with the expense to be amortized over 25 years;

 

   

4% of the shares sold in a full conversion offering would be purchased by a stock-based benefit plan, with the expense to be amortized over five years;

 

   

Options equal to 10% of the shares sold in a full conversion offering would be granted under a stock-based benefit plan, with option expense of $3.00 per option, and with the expense to be amortized over five years; and

 

   

offering expenses would equal 6.20% of the offering amount at the midpoint of the offering range.

The independent appraisal does not indicate market value. Do not assume or expect that 1895 Bancorp of Wisconsin, Inc.’s valuation as indicated above means that the common stock will trade at or above the $10.00 purchase price after the reorganization and offering. Furthermore, the pricing ratios presented in the appraisal were used by Keller & Company to estimate our pro forma appraised value for regulatory purposes and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location.

 

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For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see “The Reorganization and Offering—How We Determined the Stock Pricing and the Number of Shares to be Issued.”

How We Intend to Use the Proceeds from the Offering

We intend to invest at least 50% of the net proceeds from the offering in PyraMax Bank, FSB, fund the loan to our employee stock ownership plan to finance its purchase of shares of common stock in the offering, contribute $100,000 to the charitable foundation, contribute $100,000 to 1895 Bancorp of Wisconsin, MHC as its initial capitalization, and retain the remainder of the net proceeds from the offering at 1895 Bancorp of Wisconsin, Inc. Therefore, assuming we sell 2,783,000 shares of common stock at the maximum of the offering range, and we have net proceeds of $26.3 million, we intend to invest $13.2 million in PyraMax Bank, FSB, loan $2.5 million to our employee stock ownership plan to fund its purchase of an amount of the common stock equal to up to 3.92% of our outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and the charitable foundation), contribute $100,000 to 1895 Bancorp of Wisconsin, MHC, contribute $100,000 to the charitable foundation and retain the remaining $10.6 million of the net proceeds at 1895 Bancorp of Wisconsin, Inc.

1895 Bancorp of Wisconsin, Inc. expects to initially invest the net proceeds of the offering in securities issued by the U.S. government and its agencies or government sponsored enterprises, and as otherwise permitted under our investment policy. 1895 Bancorp of Wisconsin, Inc. may use a portion of the net proceeds to repurchase shares of our common stock in the future, although we are generally not permitted to do so during the first year following our reorganization, and may use a portion of the net proceeds to finance the possible acquisition of other financial institutions or other financial service businesses. We may also use the net proceeds for other general corporate purposes. PyraMax Bank, FSB generally intends to use the proceeds it receives to originate loans. It may also purchase securities as permitted under our investment policy, expand its banking franchise organically through de novo branching, or expand through acquisitions of other financial institutions, branch offices, or other financial service businesses. PyraMax Bank, FSB may also use the proceeds it receives to support new loan, deposit or other financial products and services, and for general corporate purposes.

Neither PyraMax Bank, FSB nor 1895 Bancorp of Wisconsin, Inc. has any plans or agreements for any specific acquisition transactions at this time. See “How We Intend to Use the Proceeds from the Offering.”

Limits on the Amount of Common Stock You May Purchase

The minimum purchase is 25 shares of common stock. Generally, no individual, or individuals through a single account held jointly, may purchase more than $100,000 of common stock. If any of the following persons purchase shares of common stock, their purchases when combined with your purchases cannot exceed $150,000 of common stock:

 

   

Any person who is related by blood or marriage to you and who either lives in your home or who is a director or officer of PyraMax Bank, FSB;

 

   

Companies or other entities in which you are an officer or partner or have a 10% or greater beneficial ownership interest;

 

   

Trusts or other estates in which you have a substantial beneficial interest or as to which you serve as a trustee or in another fiduciary capacity; and

 

   

Any other persons who may be your associates or persons acting in concert with you.

Persons having the same address and persons exercising subscription rights through qualifying accounts registered to the same address will be subject to this overall purchase limitation. We have the right to determine, in our sole discretion, whether prospective purchasers are associates or acting in concert.

We may, in our sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, increase the maximum purchase limitation to 9.9% of the number of shares sold in the offering, provided that the total number of shares purchased by persons, their associates and those persons with whom they are acting in concert, to the extent such purchases exceed 5% of the shares sold in the offering, shall not exceed, in the aggregate, 10% of the total number of the shares sold in the offering.

Subject to regulatory approval, we may increase or decrease the purchase limitations in the offering at any time. A detailed discussion of the limitations on purchases of common stock by an individual and persons acting in concert is set forth under the caption “The Reorganization and Offering—Offering of Common Stock—Limitations on Purchase of Shares.”

We expect that the employee stock ownership plan will purchase 3.92% of our outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation). Subject to the approval of the Federal Reserve

 

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Board, the employee stock ownership plan may purchase some or all of these shares in the open market following the completion of the offering. Our employee stock ownership plan purchases will range from 183,300 shares to 285,100 shares of common stock, respectively, at the minimum and adjusted maximum of the offering range.

How You May Purchase Shares of Common Stock in the Subscription and Community Offering

In the subscription offering and the community offering you may pay for your shares only by:

 

   

personal check, bank check or money order payable to 1895 Bancorp of Wisconsin, Inc. (cash and third-party checks will not be accepted); or

 

   

authorizing us to withdraw available funds (without any early withdrawal penalty) from the types of deposit account(s) maintained with PyraMax Bank, FSB designated on the stock order form.

PyraMax Bank, FSB is not permitted to knowingly lend funds for the purpose of purchasing shares of common stock in the offering. You may not pay by wire transfer, use a check drawn on a PyraMax Bank, FSB line of credit, or use a third-party check to pay for shares of common stock. Please do not submit cash.

You can subscribe for shares of common stock in the offering by delivering a signed and completed original stock order form, together with full payment, before the expiration date of the subscription offering. You may submit your stock order form in one of three ways: by mail, using the reply envelope provided; by overnight courier to the address indicated on the stock order form; or by bringing your stock order form and payment to PyraMax Bank, FSB’s corporate office located at 7001 W. Edgerton Avenue, Greenfield, Wisconsin. Please do not mail stock order forms to PyraMax Bank, FSB. Once submitted, your order is irrevocable. We do not intend to accept incomplete stock order forms, unsigned stock order forms, or copies or facsimiles of stock order forms. For orders paid for by check or money order, the funds must be available in the account. Funds received prior to the completion of the offering will be held in a segregated account at PyraMax Bank, FSB. Subscription funds will earn interest at 0.15%. If the offering is terminated, we will promptly return your subscription funds with interest.

Withdrawals from certificate of deposit accounts at PyraMax Bank, FSB for the purpose of purchasing common stock in the offering may be made without incurring an early withdrawal penalty. All funds authorized for withdrawal from deposit accounts with PyraMax Bank, FSB must be in the deposit accounts at the time the stock order form is received; no credit to purchase shares will be given for future interest to be earned on the funds in your deposit account or submitted for payment for the shares. However, funds will not be withdrawn from the accounts until the offering is completed and will continue to earn interest at the applicable deposit account rate until the completion of the offering. A hold will be placed on those funds when your stock order is received, making the designated funds unavailable to you. If a withdrawal results in a certificate of deposit account with a balance less than the applicable minimum balance requirement, the certificate of deposit will be canceled at the time of withdrawal without penalty, and the remaining balance will earn interest at 0.15% thereafter, until such funds are withdrawn. After we receive an order, the order cannot be revoked or changed.

By signing the stock order form, you are acknowledging receipt of this prospectus and that the shares of our common stock are not deposits or savings accounts that are federally insured or otherwise guaranteed by PyraMax Bank, FSB, the Federal Deposit Insurance Corporation (“FDIC”) or any other governmental agency.

Using Retirement Account Funds to Purchase Shares of Common Stock in the Subscription and Community Offerings

You may be able to subscribe for shares of common stock using funds in your IRA, or other retirement account. If you wish to use some or all of the funds in your IRA or other retirement account held at PyraMax Bank, FSB, the applicable funds must be transferred to a self-directed account maintained by an independent custodian or trustee, such as a brokerage firm, before you place your stock order. If you do not have such an account, you will need to establish one. A one-time and/or annual administrative fee may be payable to the independent custodian or trustee. Because individual circumstances differ and the processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the December 13, 2018 offering deadline, for assistance with purchases using funds in your IRA or other retirement account held at PyraMax Bank, FSB or elsewhere. Whether you may use such funds for the purchase of shares in the offering may depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

For a complete description of how to use IRA funds to purchase shares in the offering, see “The Reorganization and Offering—Procedure for Purchasing Shares—Using Retirement Account Funds.”

 

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You May Not Sell or Transfer Your Subscription Rights

Applicable regulations prohibit you from selling, giving, or otherwise transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the shares of common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal or state regulatory agencies, against anyone who we believe has sold or given away his or her subscription rights. We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights. On the stock order form, you cannot add the name(s) of person who do not have subscription rights or who qualify only in a lower purchase priority than you do. Doing so may jeopardize your subscription rights. In addition, the stock order form requires that you list all deposit accounts, giving all names on each account and the account number at the applicable eligibility record date. Your failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation, if there is an oversubscription. Eligible depositors who enter into agreements to allow ineligible investors to participate in the subscription offering may be violating federal and state law and may be subject to civil enforcement actions or criminal prosecution.

Deadline for Orders of Common Stock

The deadline for submitting orders to purchase shares of the common stock in the subscription and community offerings is 1:00 p.m., Central Time, on December 13, 2018, unless we extend this deadline. If you wish to purchase shares of common stock, your properly completed and signed original stock order form, together with full payment for the shares, must be received (not postmarked) by this time. Orders received after 1:00 p.m., Central Time, on December 13, 2018 will be rejected unless the offering is extended.

Although we will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 1:00 p.m., Central Time, on December 13, 2018, whether or not we have been able to locate each person entitled to subscription rights.

See “The Reorganization and Offering—Procedure for Purchasing Shares—Expiration Date” for a complete description of the deadline for purchasing shares in the offering.

Once Submitted, Your Stock Purchase Order May Not Be Revoked Except Under Certain Circumstances

Funds that you use to purchase shares of our common stock in the offering will be held in a segregated account until the termination or completion of the offering, including any extension of the expiration date. Because completion of the reorganization and offering is subject to the receipt of all required regulatory approvals, including an update of the independent appraisal, among other factors, there may be one or more delays in the completion of the reorganization. Any orders that you submit to purchase shares of our common stock in the offering are irrevocable, and you will not have access to subscription funds unless the offering is terminated, or extended beyond January 15, 2019, or the number of shares to be sold in the offering is increased to more than 3,200,450 shares or decreased to fewer than 2,057,000 shares.

Termination of the Offering

The subscription offering will expire at 1:00 p.m., Central Time, on December 13, 2018. We expect that the community offering, if one is conducted, would expire at the same time. We may extend this expiration date without notice to you until January 15, 2019, or such later date as the applicable regulators may approve. If the subscription offering and/or community offering are extended beyond January 15, 2019, we will be required to resolicit subscriptions before proceeding with the offering. In such event, all subscribers will be afforded the opportunity to confirm, cancel or change their orders. If you choose to cancel your order or you do not respond to the resolicitation notice, your funds will be promptly returned to you with interest and deposit account withdrawal authorizations will be cancelled. All further extensions, in the aggregate, may not last beyond December 21, 2020, which is two years after the special meeting of members of PyraMax Bank, FSB to be held on December 21, 2018 to vote on the plan of reorganization.

Steps We May Take If We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive orders for at least 2,057,000 shares of common stock, we may take several steps in order to sell the minimum number of shares of common stock in the offering range. Specifically, we may (a) increase the purchase limitations, (b) seek regulatory approval to extend the offering beyond the January 15, 2019 expiration date, and/or (c) reduce the valuation and offering range, provided that any such extension or reduction will require us to resolicit subscriptions received in the offering and provide subscribers with the opportunity to increase, decrease or cancel their subscriptions. If the offering is extended beyond January 15, 2019, subscribers will have the right to confirm, cancel or change their orders. If the number of shares to be sold in the offering is

 

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increased to more than 3,200,450 shares or decreased to less than 2,057,000 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest.

Market for the Common Stock

We have never issued capital stock and there is no established market for our common stock. We expect that our common stock will be traded on the on the Nasdaq Capital Market under the symbol “BCOW” upon conclusion of the offering. See “Market for the Common Stock.”

Our Dividend Policy

We do not currently intend to pay dividends on our common stock following completion of the offering. In the event that we do determine to pay dividends in the future, the payment and amount of any dividends will depend upon a number of factors, including the following: regulatory capital requirements; our financial condition and results of operations; our other uses of funds for the long-term value of stockholders; tax considerations; the Federal Reserve Board’s current regulations restricting the waiver of dividends by mutual holding companies; statutory and regulatory limitations; and general economic conditions. See “Our Policy Regarding Dividends” in this prospectus for additional information regarding our dividend policy.

Possible Change in the Offering Range

Keller & Company will update its appraisal before we complete the offering. If, as a result of demand for the shares or changes in market conditions, Keller & Company determines that our pro forma market value has increased, we may sell up to 3,200,450 shares in the offering without further notice to you. If our pro forma market value at that time is either below $46.8 million or above $72.7 million, then, after consulting with the Federal Reserve Board, we may:

 

   

terminate the offering, cancel deposit account withdrawal authorizations and promptly return all funds received in the offering with interest at 0.15%;

 

   

set a new offering range; or

 

   

take such other actions as may be permitted by the Federal Reserve Board, the Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission.

If we set a new offering range, we will promptly return funds, with interest at 0.15% for funds received in the offering, cancel deposit account withdrawal authorizations and commence a resolicitation. In connection with the resolicitation, we will notify subscribers of their right to place a new stock order for a specified period of time.

Possible Termination of the Offering

We may terminate the offering at any time prior to the special meeting of members of PyraMax Bank, FSB that is being called to vote on the reorganization and offering, and at any time after member approval with applicable regulatory approval. If we terminate the offering, we will promptly return your funds, with interest at 0.15%, and we will cancel deposit account withdrawal authorizations.

Our Officers, Directors and Employees Will Receive Additional Benefits and Compensation After the Reorganization and Offering

In connection with the reorganization, we are establishing an employee stock ownership plan, and, subject to stockholder approval, we intend to implement a stock-based benefits plan that will provide for grants of stock options and restricted stock.

Employee Stock Ownership Plan. The board of directors of PyraMax Bank, FSB has adopted an employee stock ownership plan, which will award shares of our common stock to eligible employees primarily based on their compensation. Our board of directors will, at the completion of the offering, ratify the loan to the employee stock ownership plan and the issuance of the common stock to the employee stock ownership plan. It is expected that our employee stock ownership plan will purchase an amount of shares equal to 3.92% of our outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) from the proceeds of the loan made by 1895 Bancorp of Wisconsin, Inc. to the plan.

Stock-Based Benefit Plan. In addition to shares purchased by the employee stock ownership plan, we intend to adopt a stock-based benefit plan. The plan will be designed to attract and retain qualified personnel in key positions and provide directors, officers and key employees with an ownership interest in 1895 Bancorp of Wisconsin, Inc., which will be an incentive to contribute to our success, and will reward key employees for their performance. The number of options granted and shares of restricted common stock

 

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awarded under a stock-based benefit plan may not exceed 4.90% and 1.96%, respectively, of our total outstanding shares, including shares issued to 1895 Bancorp of Wisconsin, MHC, provided that if PyraMax Bank, FSB’s tangible capital at the time of adoption of the stock-based benefit plan is less than 10% of its assets, then the amount of shares of restricted common stock may not exceed 1.47% of our outstanding shares. The number of options granted or shares of restricted common stock awarded under the stock-based benefit plan, when aggregated with any subsequently adopted stock-based benefit plans (exclusive of any shares held by any employee stock ownership plan), may not exceed 25% of the shares of common stock held by persons other than 1895 Bancorp of Wisconsin, MHC. Under applicable regulations, the exercise price of options granted within one year of the completion of the offering must be equal to the then fair market value of the common stock on the date the options are granted.

A stock-based benefit plan will not be established sooner than six months after the offering, and if adopted within one year after the offering, the plan must be approved by a majority of the votes eligible to be cast by our stockholders, as well as a majority of the votes eligible to be cast by our stockholders other than 1895 Bancorp of Wisconsin, MHC. If a stock-based benefit plan is established more than one year after the offering, it must be approved by a majority of votes cast by our stockholders, as well as a majority of votes cast by our stockholders other than 1895 Bancorp of Wisconsin, MHC.

The following additional restrictions would apply to our stock-based benefit plan only if such plan is adopted within one year after the offering:

 

   

non-employee directors in the aggregate may not receive more than 30% of the options and shares of restricted common stock authorized under the plan;

 

   

no non-employee director may receive more than 5% of the options and shares of restricted common stock authorized under the plan;

 

   

no individual may receive more than 25% of the options and shares of restricted common stock authorized under the plan;

 

   

options and shares of restricted common stock may not vest more rapidly than 20% per year, beginning on the first anniversary of stockholder approval of the plan; and

 

   

accelerated vesting is not permitted except for death, disability or upon a change in control of PyraMax Bank, FSB or 1895 Bancorp of Wisconsin, Inc.

We have not determined whether we will present a stock-based benefit plan for stockholder approval prior to or more than 12 months after the completion of the offering. In the event federal regulators change their regulations or policies regarding stock-based benefit plans, including any regulations or policies restricting the size of awards and vesting of benefits as described above, the restrictions described above may not be applicable.

We may obtain the shares needed for our stock-based benefit plan by issuing additional shares of common stock from authorized but unissued shares or through stock repurchases.

Equity Plan Expenses. The implementation of an employee stock ownership plan and a stock-based benefit plan will increase our future compensation costs, thereby reducing our earnings. For example, we will be required to recognize an expense each year under our employee stock ownership plan equal to the fair market value of the shares committed to be released for that year to the participating employees. Similarly, if we issue restricted stock awards under a stock-based benefit plan, we would be required to recognize an expense as the shares vest equal to their fair market value on the grant date. Finally, if we issue stock options, we would be required to recognize an expense as the options vest, equal to their estimated value on the grant date. See “Risk Factors—Risks Related to the Offering—Our stock-based benefit plans will increase our costs, which will reduce our net income” and “Management —Future Stock Benefit Plans.”

Benefits to Management. The following table summarizes the stock benefits that our officers, directors and employees may receive following the reorganization and offering, at the adjusted maximum of the offering range and assuming that our employee stock ownership plan purchases 3.92% of our outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) and that we implement a stock-based benefit plan granting options to purchase 4.90% of the total shares of common stock of 1895 Bancorp of Wisconsin, Inc. issued in connection with the reorganization (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) and awarding shares of restricted common stock equal to 1.96% of the total shares of common stock of 1895 Bancorp of Wisconsin, Inc. issued in connection with the reorganization (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation).

 

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Plan

   Individuals Eligible to Receive Awards      Percent of
Outstanding Shares
    Value of Benefits Based on
Adjusted Maximum of
Offering Range
(Dollars in Thousands)
 

Employee stock ownership plan

     All employees        3.92   $ 2,850  

Stock awards

     Directors, officers and employees        1.96       1,426  

Stock options

     Directors, officers and employees        4.90       1,069 (1)  
     

 

 

   

 

 

 

Total

        10.78   $ 5,345  
     

 

 

   

 

 

 

 

(1)

The fair value of stock options has been estimated at $3.00 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; no dividend yield; expected option life of 10 years; risk free interest rate of 2.71%; and a volatility rate of 13.89% based on an index of publicly traded thrift institutions.

The actual value of the shares of restricted common stock awarded under the stock-based benefit plan would be based on the price of 1895 Bancorp of Wisconsin, Inc.’s common stock at the time the shares are awarded. The following table presents the total value of all shares of restricted common stock to be available for award and issuance under the stock-based benefit plan, assuming receipt of stockholder approval and that the shares are awarded in a range of market prices from $8.00 per share to $14.00 per share.

 

Share Price

    91,600 Shares
Awarded at Minimum
of Offering Range
    107,800 Shares
Awarded at Midpoint of
Offering Range
    124,000 Shares
Awarded at Maximum
of Offering Range
    142,600 Shares
Awarded at Adjusted
Maximum of Offering
Range
 
(Dollars in thousands, except share price information)  
$  8.00     $ 733     $ 862     $ 992     $ 1,141  
$ 10.00     $ 916     $ 1,078     $ 1,240     $ 1,426  
$ 12.00     $ 1,099     $ 1,294     $ 1,488     $ 1,711  
$ 14.00     $ 1,282     $ 1,509     $ 1,736     $ 1,996  

The grant-date fair value of the options granted under the stock-based benefit plan will be based in part on the price of shares of 1895 Bancorp of Wisconsin, Inc.’s common stock at the time the options are granted. The value will also depend on the various assumptions utilized in the option pricing model ultimately adopted. The following table presents the total estimated value of the options to be available for grant under the stock-based benefit plan, assuming receipt of stockholder approval, using a Black-Scholes option pricing model, and assuming the market price and exercise price for the stock options are equal and the range of market prices for the shares is $8.00 per share to $14.00 per share. The Black-Scholes option pricing model provides an estimate only of the fair value of the options, and the actual value of the options may differ significantly from the value set forth in this table.

 

Market/Exercise
Price
    Grant-Date Fair
Value Per Option
    229,075 Options at
Minimum of
Offering Range
    269,500 Options at
Midpoint of
Offering Range
    309,925 Options at
Maximum of
Offering Range
     356,414 Options at
Adjusted
Maximum of
Offering Range
 
(Dollars in thousands, except market/exercise price and fair value information)  
$  8.00     $ 2.40     $ 550     $ 647     $ 744      $ 855  
$ 10.00     $ 3.00     $ 687     $ 809     $ 930      $ 1,069  
$ 12.00     $ 3.59     $ 822     $ 968     $ 1,113      $ 1,280  
$ 14.00     $ 4.19     $ 960     $ 1,129     $ 1,299      $ 1,493  

Restrictions on the Acquisition of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB

Federal regulations, as well as provisions contained in the charter and bylaws of PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, Inc., restrict the ability of any person, firm or entity to acquire 1895 Bancorp of Wisconsin, Inc., PyraMax Bank, FSB, or their respective capital stock. These restrictions include the requirement that a potential acquirer of common stock obtain the prior approval of the Federal Reserve Board and/or the Office of the Comptroller of the Currency before acquiring in excess of 10% of the voting stock of 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB, as well as a provision in each of 1895 Bancorp of Wisconsin, Inc.’s and PyraMax Bank, FSB’s respective charters that generally provides that for a period of five years from the closing of the offering, no person, other than 1895 Bancorp of Wisconsin, MHC, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of equity security of 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB held by persons other than 1895 Bancorp of Wisconsin, MHC, and, with respect to PyraMax Bank, FSB, other than 1895 Bancorp of

 

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Wisconsin, Inc., and that any shares acquired in excess of this limit would not be entitled to be voted and would not be counted as voting stock in connection with any matters submitted to the stockholders for a vote.

Because a majority of the shares of outstanding common stock of 1895 Bancorp of Wisconsin, Inc. must be owned by 1895 Bancorp of Wisconsin, MHC, any acquisition of 1895 Bancorp of Wisconsin, Inc. must be approved by 1895 Bancorp of Wisconsin, MHC. Furthermore, 1895 Bancorp of Wisconsin, MHC would not be required to pursue or approve a sale of 1895 Bancorp of Wisconsin, Inc. even if such sale were favored by a majority of 1895 Bancorp of Wisconsin, Inc.’s public stockholders. Finally, although a mutual holding company may be acquired by a mutual institution or another mutual holding company in what is known as a “remutualization” transaction, current regulatory policy may make such transactions unlikely because of the heightened regulatory scrutiny given to the structure and pricing of such transactions. Specifically, current regulatory policy views remutualization transactions as raising significant issues concerning disparate treatment of minority stockholders and mutual members of the target entity, and raising issues concerning the effect on the mutual members of the acquiring entity. As a result, a remutualization transaction for 1895 Bancorp of Wisconsin, Inc. is unlikely unless the applicant can clearly demonstrate that the regulatory concerns are not warranted in the particular case.

Proposed Stock Purchases by Management

1895 Bancorp of Wisconsin, Inc.’s directors and executive officers and their associates are expected to purchase, for investment purposes, approximately 46,000 ($460,000) shares of common stock in the offering, which represents 2.19% of the shares to be offered for sale to the public and contributed to the charitable foundation, and 0.98% of the total shares to be outstanding after the offering (including shares sold to the public, contributed to the charitable foundation and owned by 1895 Bancorp of Wisconsin, MHC), each at the minimum of the offering range, respectively. Like all of our eligible depositor purchasers, our directors and executive officers and their associates have subscription rights based on their deposits and, in the event of an oversubscription, their orders will be subject to the allocation provisions set forth in our plan of reorganization.

The plan of reorganization provides that the aggregate number of shares acquired in the offering by our directors and executive officers (and their associates) may not exceed 26% of the outstanding shares held by persons other than 1895 Bancorp of Wisconsin, MHC, except with the approval of federal regulators. We may seek approval from the federal regulators to allow purchases by our directors and executive officers (and their associates) to exceed the 26% limit to the extent needed to enable us to sell the minimum number of shares of common stock in the offering range.

Directors and executive officers will pay the same $10.00 per share price paid by all other persons who purchase shares in the offering. These shares will be counted in determining whether the minimum of the offering range is reached.

Conditions to Completing the Reorganization and Offering

We cannot complete the reorganization and offering unless:

 

   

we sell at least 2,057,000 shares, the minimum of the offering range;

 

   

the members of PyraMax Bank, FSB vote to approve the reorganization and offering; and

 

   

we receive final approval from the Federal Reserve Board to complete the reorganization and offering, as well as any additional required approvals from the Office of the Comptroller of the Currency and the FDIC.

Federal Reserve Board, Office of the Comptroller of the Currency or FDIC approval does not constitute a recommendation or endorsement of an investment in our stock.

Possible Conversion of 1895 Bancorp of Wisconsin, MHC to Stock Form

In the future, 1895 Bancorp of Wisconsin, MHC may convert from the mutual to capital stock form of ownership, in a transaction commonly referred to as a “second-step conversion.” In a second-step conversion, members of 1895 Bancorp of Wisconsin, MHC would have subscription rights to purchase common stock of 1895 Bancorp of Wisconsin, Inc. or its successor, and the public stockholders of 1895 Bancorp of Wisconsin, Inc. would be entitled to exchange their shares of common stock for an equal percentage of shares of the converted 1895 Bancorp of Wisconsin, MHC. This percentage may be adjusted to reflect any assets owned by 1895 Bancorp of Wisconsin, MHC.

Our board of directors has no current plans to undertake a second-step conversion transaction. Any second-step conversion transaction would require the approval of holders of a majority of the outstanding shares of 1895 Bancorp of Wisconsin, Inc. common stock (excluding shares held by 1895 Bancorp of Wisconsin, MHC) and the approval of the depositor members of 1895 Bancorp of Wisconsin, MHC. Public stockholders will not be able to force a merger or second-step conversion transaction of 1895 Bancorp

 

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of Wisconsin, MHC without the consent of 1895 Bancorp of Wisconsin, MHC since such transactions would require the approval of a majority of the outstanding shares of 1895 Bancorp of Wisconsin, Inc.’s common stock.

Delivery of Prospectus

To ensure that each person receives a prospectus at least 48 hours before the deadline for orders for common stock, we may not mail prospectuses any later than five days prior to such date or hand-deliver prospectuses later than two days prior to that date. Stock order forms may only be delivered if accompanied or preceded by a prospectus. We are not obligated to deliver a prospectus or stock order form by means other than U.S. mail.

We will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights. The subscription offering and all subscription rights will expire at 1:00 p.m., Central Time, on December 13, 2018, whether or not we have been able to locate each person entitled to subscription rights.

Our Contribution of Cash and Shares of Common Stock to the Charitable Foundation

To further our commitment to our local community, we intend to establish and fund a charitable foundation as part of the reorganization and offering. Assuming we receive regulatory approval, we intend to contribute to the charitable foundation $100,000 in cash and 1.0% of our outstanding shares, or 55,000 shares of our common stock at the midpoint of the offering range (for an aggregate contribution of $650,000, at the midpoint of the offering range, based on the $10.00 per share offering price). As a result of the contribution, we expect to record an after-tax expense of approximately $514,000, at the midpoint of the offering range, during the quarter in which the reorganization and offering is completed.

The charitable foundation will be dedicated exclusively to supporting charitable causes and community development activities in the communities in which we operate. The contribution of common stock and cash to the charitable foundation will:

 

   

with respect to the contribution of shares of common stock, dilute the voting interests of purchasers of shares of our common stock in the offering; and

 

   

result in an expense, and a reduction in capital, during the quarter in which the contribution is made, equal to the full amount of the contribution to the charitable foundation, which we expect to be offset in part by a corresponding tax benefit.

The amount of common stock that we would offer for sale would be greater if the offering were to be completed without the establishment and funding of the charitable foundation. For a further discussion of the financial impact of the charitable foundation, including its effect on those who purchase shares in the offering, see “Risk Factors —Risks Related to the Charitable Foundation —The contribution to the charitable foundation will dilute your ownership interest and adversely affect net income in 2019,” “Risk Factors —Risks Related to the Charitable Foundation —Our contribution to the charitable foundation may not be tax deductible, which could reduce our profits.”

Delivery of Shares of Common Stock

All shares of common stock sold will be issued in book entry form. Stock certificates will not be issued. A statement reflecting ownership of shares of common stock issued in the subscription and community offerings will be mailed by our transfer agent to the persons entitled thereto at the registration address noted by them on their stock order forms as soon as practicable following consummation of the offering. Shares of common stock sold in the syndicated community offering may be delivered electronically through the services of The Depository Trust Company, subject to any necessary regulatory approval. We expect trading in the stock to begin on the day of completion of the offering or the next business day. Until a statement reflecting ownership of shares of common stock is available and delivered to purchasers, purchasers might not be able to sell the shares of common stock that they purchased, even though the common stock will have begun trading. Your ability to sell your shares of common stock before receiving your statement will depend on arrangements you may make with a brokerage firm.

Tax Consequences

PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, Inc. have received an opinion of counsel, Luse Gorman, PC, regarding the material federal income tax consequences of the reorganization, including an opinion that it is more likely than not that the fair market value of the nontransferable subscription rights to purchase the common stock will be zero and, accordingly, no gain or loss will be recognized by members upon the distribution to them of the nontransferable subscription rights to purchase the common stock and no taxable income will be realized by depositor members as a result of the exercise of the nontransferable subscription rights. PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, Inc. have also received an opinion of Wipfli LLP regarding the material

 

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Wisconsin state tax consequences of the reorganization. As a general matter, the reorganization will not be a taxable transaction for purposes of federal or state income taxes to PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, Inc. or persons eligible to subscribe in the subscription offering. See the section of this prospectus entitled “Taxation” for additional information regarding taxes.

Emerging Growth Company Status

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we are an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies. See “Risk Factors—Risks Related to the Offering—We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors” and “Regulation and Supervision—Emerging Growth Company Status.”

An emerging growth company may elect to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company. We have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

How You May Obtain Additional Information Regarding the Reorganization and Offering

Our banking personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the reorganization and offering, please call the Stock Information Center at 1-(877) 643-8217. The Stock Information Center will be open Monday through Friday between 9:00 a.m. and 3:00 p.m., Central Time. The Stock Information Center will be closed on bank holidays.

 

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RISK FACTORS

You should consider carefully the following risk factors, in addition to all other information in this prospectus, in

evaluating an investment in our common stock.

Risks Related to Our Business

We have a substantial amount of commercial real estate and commercial loans, and intend to continue to increase originations of these types of loans. These loans involve credit risks that could adversely affect our financial condition and results of operations.

At June 30, 2018, commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans) totaled $182.7 million, or 49.3% of our loan portfolio, and commercial loans (which includes commercial and industrial loans) totaled $32.5 million, or 8.8% of our loan portfolio. Of this aggregate amount, we had $70.4 million in non-owner occupied non-residential real estate, $57.9 million in multi-family residential real estate, $36.1 million in owner occupied non-residential real estate, $11.6 million in non-owner occupied residential real estate and $6.7 million in commercial real estate construction loans. We intend to increase originations of these types of loans. Given their larger balances and the complexity of the underlying collateral, commercial real estate and commercial loans generally have more risk than the one- to four-family residential real estate loans we originate. Because the repayment of commercial real estate and commercial loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the local, regional and national real estate market or economy. A downturn in the real estate market or the local, regional and national economy could adversely impact the value of properties securing the loan or the revenues from the borrower’s business, thereby increasing the risk of non-performing loans. Further, unlike residential mortgage loans, commercial real estate loans and commercial loans may be secured by collateral other than real estate, such as inventory and accounts receivable, the value of which may depreciate over time, may be more difficult to appraise or liquidate and may be more susceptible to fluctuation in value at default. In addition, the physical condition of non-owner occupied properties may be below that of owner occupied properties due to lax property maintenance standards, which have a negative impact on the value of the collateral properties. As our commercial real estate and commercial loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase.

Our portfolio of loans with a higher risk of loss is increasing, which may lead to additional provisions for loan losses or charge-offs, which would reduce our profits or cause losses.

Our commercial real estate loan portfolio has increased to $182.7 million, or 49.3% of total loans, at June 30, 2018 from $101.5 million, or 36.6% of total loans, at December 31, 2013. We intend to continue our emphasis on originating commercial real estate and commercial loan originations. Many of these loans have not been subjected to unfavorable economic conditions. As a result, it is difficult to predict the future performance of this part of our loan portfolio. These loans may have delinquency or charge-off levels above our historical experience, which could adversely affect our future performance.

The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.

The FDIC, the Federal Reserve Board and the OCC have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors (i) total reported loans for construction, land development and other land represent 100% or more of total capital, or (ii) total reported loans secured by multi-family and non-farm non-residential properties, loans for construction, land development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. The particular focus of the guidance is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. We have concluded that we have a concentration in commercial real estate lending under the foregoing standards because our balance in commercial real estate loans at June 30, 2018 represents more than 300% of total capital. Owner occupied commercial real estate totals 93% of total capital, while non-owner occupied commercial real estate totals an additional 378% of total capital. While we believe we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this

 

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guidance, bank regulators could require is to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us.

Our business strategy includes managed growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively. Growing our operations could also cause our expenses to increase faster than our revenues.

Our business strategy includes growth in loans and deposits. Achieving such growth will require us to attract customers that currently bank at other financial institutions in our market area. Our ability to successfully grow will depend on a variety of factors, including the ability of our executive officers to execute our business strategy to increase commercial real estate and commercial loans and to increase our new and existing customers’ deposit relationships, our ability to attract and retain experienced bankers, the continued availability of desirable business opportunities, competition from other financial institutions in our market area and our ability to manage our growth. Growth opportunities may not be available or we may not be able to manage our growth successfully. If we do not manage our growth effectively, our financial condition and operating results could be negatively affected. Furthermore, there can be considerable costs involved in expanding lending capacity, and generally a period of time is required to generate the necessary revenues to offset these costs, especially in areas in which we do not have an established presence. Accordingly, any such business expansion can be expected to negatively impact our earnings until certain economies of scale are reached.

Our utilization of time deposits, including brokered certificates of deposit, as a source of funds for loans and our other liquidity needs could have an adverse effect on our operating results.

We rely primarily on deposits for funds to make loans and provide for our other liquidity needs, including time deposits and brokered certificates of deposit. As of June 30, 2018, brokered deposits, represented approximately 16.8% of our total deposits. Such deposits may not be as stable as other types of deposits and, in the future, depositors may not renew those time deposits when they mature, or we may have to pay a higher rate of interest to attract or keep them or to replace them with other deposits or with funds from other sources. Not being able to attract those deposits or to keep or replace them as they mature would adversely affect our liquidity. Additionally, we are regulated by the OCC, which requires us to maintain certain capital levels to be considered “well capitalized.” If we fail to maintain these capital levels, we could lose our ability to obtain funding through brokered deposits. In addition, we may also be restricted from paying higher deposit rates to attract, keep or replace those deposits, which could have a negative effect on our operating results and the value of our common stock.

Our cost of operations is high relative to our revenues.

The cost of generating our income is measured by our efficiency ratio (the ratio of non-interest expense to the sum of net interest income and non-interest income). Our efficiency ratio was 106.86%, 112.19% and 91.79% for the six months ended June 30, 2018 and the years ended December 31, 2017 and 2016, respectively. Our efficiency ratio lags our peer group as our competitors for loans and deposits are often larger banks who can offer very competitive terms to originate and retain commercial real estate and commercial loans, as well as very competitive rates on deposit products. Additionally, our interest expense is higher than our peer group as our sources of funding tend to rely on higher-cost brokered certificates of deposit and Federal Home Loan Bank (“FHLB”) advances more than our competitors. We have also had a series of significant one-time expenses over the last several years, including core data processing conversion, branch sale costs and expenses related to our self-insured healthcare coverage. The additional costs associated with being a public company will adversely affect our efficiency ratio. We anticipate, however, that the net proceeds from this offering will increase our capital levels, which will also allow us to increase interest-earning assets, such as loans and investments, and our interest income, which should benefit our efficiency ratio.

Costs related to our self-insured healthcare coverage may adversely affect our results of operations and financial condition.

We provide self-insured healthcare coverage to our employees and their dependents. We are self-insured with respect to substantially all of our healthcare coverage. We maintain reserves (recorded in “Other Liabilities” on our balance sheet) to cover our estimated liabilities for healthcare claims. The reserve was $534,000 as of June 30, 2018. The determination of these reserves is based upon a number of factors, including current and historical claims activity, claims payment patterns and medical cost trends. Accordingly, reserves do not represent an exact calculation of liability. Reserves can be affected by both internal and external events, such as adverse developments in existing claims or changes in medical costs, medical conditions of claimants, claims handling procedures, administrative costs and legal fees, inflation, and legal trends and legislative changes. Reserves are adjusted from time to time to reflect new claims, claim developments, or systemic changes, and such adjustments are reflected in the results of the periods in which the reserves are changed. Our estimated accrual for healthcare coverage claims is based upon an actuarial estimate provided by our independent actuary. The estimated accrual does not include an estimated provision for the incidence of unknown catastrophic claims. Moreover, because of the uncertainties that surround estimating healthcare requirements and expenses, we cannot be certain that our reserves are adequate. If the number or severity of claims for which we are self-insured increases, or if our reserves are

 

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insufficient to cover our actual healthcare coverage expenses, we would incur charges to our earnings that could be material to our results of operations and financial condition.

We face additional risks due to our mortgage banking activities that could negatively impact net income and liquidity.

We sell the majority of the fixed-rate conforming and eligible jumbo one-to four-family residential real estate loans that we originate. The sale of these loans generates noninterest income and are a source of liquidity for PyraMax Bank, FSB. Disruption in the secondary market for residential mortgage loans could result in our inability to sell mortgage loans, which could negatively impact our liquidity position and earnings. In addition, declines in real estate values or increases in interest rates could reduce the potential for robust mortgage originations, which could negatively impact our earnings. As we do sell mortgage loans, we also face the risk that such loans may have been made in breach of our representations and warranties to the buyers and we could be forced to repurchase such loans or pay other damages.

We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.

We are dependent upon the services of the members of our senior management team who direct our strategy and operations. Our executive officers and lending personnel possess expertise in our markets and key business relationships, and have been integral in the restructuring of our operations, including the implementation of a more aggressive sales culture within our institution. Any one of them could be difficult to replace. Our loss of these persons, or our inability to hire additional qualified personnel, could impact our ability to implement our business strategy and could have a material adverse effect on our results of operations and our ability to compete in our markets. See “Management.”

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.

We maintain an allowance for loan losses, which is established through a provision for loan losses, that represents management’s best estimate of probable losses within the existing portfolio of loans. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. In determining the adequacy of the allowance for loan losses, we rely on our experience and our evaluation of economic conditions. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio and adjustment may be necessary to allow for different economic conditions or adverse developments in our loan portfolio. Consequently, a problem with one or more loans could require us to significantly increase the level of our provision for loan losses. In addition, federal regulators periodically review our allowance for loan losses and as a result of such reviews, we may decide to adjust our allowance for loan losses or recognize further loan charge-offs. However, regulatory agencies are not directly involved in the process of establishing the allowance for loan losses, as the process is our responsibility and any adjustment of the allowance is the responsibility of management. Material additions to the allowance would materially decrease our net income.

We may be adversely affected by recent changes in U.S. tax laws.

Changes in tax laws contained in the Tax Cuts and Jobs Act, which was enacted in December 2017, include a number of provisions that will have an impact on the banking industry, borrowers and the market for single-family residential real estate. Changes include (i) a lower limit on the deductibility of mortgage interest on single-family residential mortgage loans, (ii) the elimination of interest deductions for home equity loans, (iii) a limitation on the deductibility of business interest expense and (iv) a limitation on the deductibility of property taxes and state and local income taxes. The recent changes in the tax laws may have an adverse effect on the market for, and valuation of, residential properties, and on the demand for such loans in the future, and could make it harder for borrowers to make their loan payments. If home ownership becomes less attractive, demand for mortgage loans could decrease. The value of the properties securing loans in our loan portfolio may be adversely impacted as a result of the changing economics of home ownership, which could require an increase in our provision for loan losses, which would reduce our profitability and could materially adversely affect our business, financial condition and results of operations.

A worsening of economic conditions in our market area could reduce demand for our products and services and/or result in increases in our level of non-performing loans, which could adversely affect our operations, financial condition and earnings.

Local economic conditions have a significant impact on the ability of our borrowers to repay loans and the value of the collateral securing loans. A deterioration in economic conditions could have the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations:

 

   

demand for our products and services may decline;

 

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loan delinquencies, problem assets and foreclosures may increase;

 

   

collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and

 

   

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.

Moreover, a significant decline in general local, regional or national economic conditions caused by inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

Our size makes it more difficult for us to compete.

Our asset size makes it more difficult to compete with other financial institutions that are larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers. Because our principal source of income is the net interest income we earn on our loans and investments after deducting interest paid on deposits and other sources of funds, our ability to generate the revenues needed to cover our expenses and finance such investments is limited by the size of our loan and investment portfolios. Accordingly, we are not always able to offer new products and services as quickly as our competitors. Our lower earnings may also make it more difficult to offer competitive salaries and benefits. In addition, our smaller customer base may make it difficult to generate meaningful non-interest income from such activities as securities brokerage. Finally, as a smaller institution, we are disproportionately affected by the continually increasing costs of compliance with new banking and other regulations.

We face significant operational risks because the financial services business involves a high volume of transactions and because of our reliance on technology.

Our business requires us to collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and our own business, operations, plans and business strategies. Our operational and security systems infrastructure, including our computer systems, data management and internal processes, as well as those of third parties, are integral to our performance. Our operational risks include the risk of malfeasance by employees or persons outside our company, errors relating to transaction processing and technology, systems failures or interruptions, breaches of our internal control systems and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards or customer attrition due to potential negative publicity.

In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, or a breach of our security systems, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, face regulatory action, civil litigation and/or suffer damage to our reputation. Although to date we have not experienced any technology failures, cyber attacks or other information or security breaches, there can be no assurance that we will not suffer such losses or other consequences in the future. Our risk and exposure to these matters remain heightened because of, among other things, the evolving nature of these threats and our role as a provider of financial services, our continuous transmission of sensitive information to, and storage of such information by, third parties, including our vendors and regulators, the outsourcing of some of our business operations, threats of cyber terrorism, and system and customer account updates and conversions. As a result, cyber-security and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority.

Our information technology systems may be subject to failure, interruption or security breaches.

Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, securities investments, deposits, and loans. We have established policies and procedures to prevent or limit the impact of system failures, interruptions and security breaches, including privacy breaches and cyber attacks, and, although we have not experienced any such events to date, such failures, interruptions or breaches may still occur or may not be adequately addressed if they do occur.

There have been increasing efforts by third parties to breach data security at financial institutions. Such attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other

 

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information, damages to systems, or other material disruptions to network access or business operations. There have been several recent instances involving financial services and consumer-based companies reporting the unauthorized disclosure of client or customer information or the destruction or theft of corporate data. Although we take protective measures, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber attacks that could have an impact on information security. Because the techniques used to cause security breaches change frequently, we may be unable to proactively address these techniques or to implement adequate preventative measures.

In addition, we outsource a majority of our data processing requirements to certain third-party providers. If these third-party providers encounter difficulties, or if we have difficulty communicating with those service providers, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel. To our knowledge, the services and programs provided to us by third parties have not suffered any security breaches. However, the existence of cyber attacks or security breaches at third parties with access to our data, such as vendors, may not be disclosed to us in a timely manner.

The occurrence of any system failures, interruption, or breach of security could damage our reputation and result in a loss of customers and business, subject us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.

Future changes in interest rates could reduce our profits and asset values.

Net income is the amount by which net interest income and non-interest income exceed non-interest expense and the provision for loan losses. Net interest income makes up a majority of our net income and is based on the difference between:

 

   

the interest income we earn on interest-earning assets, such as loans and securities; and

 

   

the interest expense we pay on interest-bearing liabilities, such as deposits and borrowings.

The rates we earn on our assets and the rates we pay on our liabilities are generally fixed for a contractual period of time. Like many savings institutions, our liabilities generally have shorter contractual maturities than our assets. This imbalance can create significant earnings volatility because market interest rates change over time. In a period of rising interest rates, the interest income we earn on our assets may not increase as rapidly as the interest we pay on our liabilities. In a period of declining interest rates, the interest income we earn on our assets may decrease more rapidly than the interest we pay on our liabilities, as borrowers prepay mortgage loans, and mortgage-backed securities and callable investment securities are called, requiring us to reinvest those cash flows at lower interest rates.

In addition, changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A decline in interest rates results in increased prepayments of loans and mortgage-backed and related securities as borrowers refinance their debt to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Furthermore, an inverted interest rate yield curve, where short-term interest rates (which are usually the rates at which financial institutions borrow funds) are higher than long-term interest rates (which are usually the rates at which financial institutions lend funds for fixed-rate loans) can reduce a financial institution’s net interest margin and create financial risk for financial institutions that originate longer-term, fixed-rate mortgage loans. At June 30, 2018, 70.1% of our loan portfolio consisted of fixed-rate loans.

Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. Changes in the level of interest rates also may negatively affect the value of our assets and ultimately affect our earnings.

We monitor interest rate risk through the use of simulation models, including estimates of the amounts by which the fair value of our assets, liabilities and equity (our economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. As of June 30, 2018, in the event of an instantaneous 200 basis point increase in interest rates, we estimate that we would experience a 16.7% decrease in EVE. For further discussion of how changes in interest rates could impact us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations of PyraMax Bank, FSB—Management of Market Risk.”

Strong competition within our market areas may limit our growth and profitability.

Competition in the banking and financial services industry is intense. In our market area, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and securities brokerage firms and unregulated or less regulated non-banking entities, operating locally and elsewhere. Many of these competitors

 

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have substantially greater resources and higher lending limits than we have and offer certain services that we do not or cannot provide. In addition, some of our competitors offer loans with lower interest rates and fees on more attractive terms than loans we offer. Competition also makes it increasingly difficult and costly to attract and retain qualified employees. Our profitability depends upon our continued ability to successfully compete in our market area. If we must raise interest rates paid on deposits or lower interest rates charged on our loans due to competition, our net interest margin and profitability could be adversely affected.

The financial services industry could become even more competitive as a result of new legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. For additional information see “Business of PyraMax Bank, FSB—Market Area” and “—Competition.”

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.

PyraMax Bank, FSB is subject to extensive regulation, supervision and examination by the Office of the Comptroller of the Currency, and 1895 Bancorp of Wisconsin, Inc. will be subject to extensive regulation, supervision and examination by the Federal Reserve Board. Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the federal deposit insurance fund and the depositors of PyraMax Bank, FSB, rather than for our stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firm. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of operations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has significantly changed the regulation of banks and savings institutions and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies have exercised significant discretion in drafting the implementing rules and regulations. It will be some time before the full effect of the Dodd-Frank Act and the regulations thereunder can be assessed. Compliance with the Dodd-Frank Act and its implementing regulations and policies has already resulted in changes to our business and operations, as well as additional costs, and has diverted management’s time from other business activities, all of which have adversely affected our financial condition and results of operations.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are suspected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on pursuing acquisitions or establishing new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations. Furthermore, these rules and regulations continue to evolve and expand.

 

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We have become subject to more stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares.

Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and defines “capital” for calculating these ratios. The minimum capital requirements are: (i) a common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. The regulations also establish a “capital conservation buffer” of 2.5%, and, when fully phased in, will result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%; (ii) a Tier 1 to risk-based assets capital ratio of 8.5%; and (iii) a total capital ratio of 10.5%. The capital conservation buffer requirement began being phased in January 2016 at 0.625% of risk-weighted assets and is increasing each year until fully implemented in January 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the then applicable buffer amount.

The application of more stringent capital requirements could, among other things, result in lower returns on equity, and result in regulatory actions if we are unable to comply with such requirements. Specifically, following the completion of the offering, PyraMax Bank, FSB’s ability to pay dividends to 1895 Bancorp of Wisconsin, Inc. will be limited if it does not have the capital conservation buffer required by the new capital rules, which may further limit 1895 Bancorp of Wisconsin, Inc.’s ability to pay dividends to stockholders. See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements.”

The cost of additional finance and accounting systems, procedures, compliance and controls in order to satisfy our new public company reporting requirements will increase our expenses.

As a result of the completion of this offering, we will become a public reporting company. We expect that the obligations of being a public company, including the substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a stand-alone public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes Oxley Act”) requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we would expect to file with the Securities and Exchange Commission. Any failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business and stock price. In addition, we may need to hire additional compliance, accounting and financial staff with appropriate public company experience and technical knowledge, and we may not be able to do so in a timely fashion. As a result, we may need to rely on outside consultants to provide these services for us until qualified personnel are hired. These obligations will increase our operating expenses and could divert our management’s attention from our operations.

Changes in accounting standards could affect reported earnings.

The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board, the Securities and Exchange Commission and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our financial statements. In some cases, we could be required to apply new or revised guidance retroactively. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations.

Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results.

In preparing this prospectus as well as periodic reports we will be required to file under the Securities Exchange Act of 1934, including our consolidated financial statements, our management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date. These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for loan losses and our determinations with respect to amounts owed for income taxes.

Legal and regulatory proceedings and related matters could adversely affect us.

We have been and may in the future become involved in legal and regulatory proceedings. We consider most of the proceedings to be in the normal course of our business or typical for the industry; however, it is inherently difficult to assess the outcome of these matters, and we may not prevail in any proceedings or litigation. There could be substantial costs and management diversion in such

 

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litigation and proceedings, and any adverse determination could have a materially adverse effect on our business, brand or image, or our financial condition and results of our operations.

We are subject to environmental liability risk associated with lending activities or properties we own.

A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties, or with respect to properties that we own in operating our business. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Our policies, which require us to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

We are a community bank, and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected.

Risks Related to the Offering

The future price of our common stock may be less than the purchase price in the offering.

If you purchase shares of common stock in the offering, you may not be able to sell them later at or above the $10.00 purchase price in the offering. In many cases, shares of common stock issued by newly converted savings institutions or mutual holding companies have traded below the initial offering price. The aggregate purchase price of the shares of common stock sold in the offering will be based on an independent appraisal. The independent appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. The independent appraisal is based on certain estimates, assumptions and projections, all of which are subject to change from time to time. After the shares begin trading, the trading price of our common stock will be determined by the marketplace, and may be influenced by many factors, including prevailing interest rates, the overall performance of the economy, changes in federal tax laws, new regulations, investor perceptions of 1895 Bancorp of Wisconsin, Inc. and the outlook for the financial services industry in general. Price fluctuations in our common stock may be unrelated to our operating performance.

The capital we raise in the offering may negatively impact our return on equity until we can fully implement our business plan. This could negatively affect the trading price of our shares of common stock.

Net income divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers. Although we anticipate increasing net interest income using proceeds of the offering, our return on equity will be reduced by the capital raised in the offering, higher expenses from the costs of being a public company, and added expenses associated with our employee stock ownership plan and the stock-based benefit plans we intend to adopt. Until we can implement our business plan and increase our net interest income through investment of the proceeds of the offering, we expect our return on equity to remain relatively low compared to our peer group, which may reduce the value of our shares.

We have broad discretion in using the proceeds of the offering. Our failure to effectively deploy the net proceeds of the offering may have an adverse effect on our financial performance and the value of our common stock.

We intend to invest between $9.5 million and $15.3 million of the net proceeds of the offering in PyraMax Bank, FSB. We also expect to use a portion of the net proceeds we retain to fund a loan to the employee stock ownership plan for the purchase of shares of

 

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common stock in the offering by the employee stock ownership plan, and will contribute $100,000 to 1895 Bancorp of Wisconsin, MHC as a part of our formation of the mutual holding company and will contribute $100,000 to the charitable foundation that we are establishing in connection with the reorganization. We may use the remaining net proceeds to invest in short-term and other investments, repurchase shares of our common stock, pay dividends, although we currently do not intend to pay dividends, or for other general corporate purposes. PyraMax Bank, FSB intends to use the net proceeds it receives to fund new loans, enhance existing products and services, invest in securities, expand its banking franchise, or for other general corporate purposes. However, with the exception of the loan to the employee stock ownership plan and the contributions to 1895 Bancorp of Wisconsin, MHC and to the charitable foundation, we have not allocated specific amounts of the net proceeds for any of these purposes, and we will have significant flexibility in determining the amount of the net proceeds we apply to different uses and the timing of such applications. Also, certain of these uses, such as any potential acquisition, paying dividends and repurchasing common stock, may require the approval of or non-objection from the Office of the Comptroller of the Currency or the Federal Reserve Board. We have not established a timetable for investing the net proceeds, and, accordingly, we may not invest the net proceeds at the time that is most beneficial to 1895 Bancorp of Wisconsin, Inc., PyraMax Bank, FSB or the stockholders. For additional information see “How We Intend To Use The Proceeds From The Offering.”

There may be a limited trading market in our common stock, which would hinder your ability to sell our common stock and may lower the market price of the stock.

We have never issued capital stock and there is no established market for our common stock. We expect that our common stock will be quoted on the Nasdaq Capital Market under the symbol “BCOW” upon conclusion of the offering, subject to completion of the offering and compliance with certain conditions, including having 300 “round lot” stockholders (stockholders owning more than 100 shares) and at least three companies making a market for our common stock. The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. In addition, our public “float,” which is the total number of our outstanding shares less the shares held by 1895 Bancorp of Wisconsin, MHC, our employee stock ownership plan and our directors and executive officers, is likely to be quite limited. As a result, it is unlikely that an active trading market for the common stock will develop or that, if it develops, it will continue. If you purchase shares of common stock, you may not be able to sell them at or above $10.00 per share. Purchasers of common stock in this offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock. This may make it difficult to sell the common stock after the offering and may have an adverse impact on the price at which the common stock can be sold.

Our stock-based benefit plans will increase our costs, which will reduce our net income.

We anticipate that our employee stock ownership plan will purchase in the offering shares of our common stock equal to up to 3.92% of our outstanding shares (including the shares held by 1895 Bancorp of Wisconsin, MHC and the charitable foundation) We will record annual employee stock ownership plan expenses in an amount equal to the fair value of shares of common stock committed to be released to employees. If shares of common stock appreciate in value over time, compensation expense relating to the employee stock ownership plan will increase.

We also intend to adopt a stock-based benefit plan after the offering, under which participants would be awarded shares of restricted common stock (at no cost to them) and/or options to purchase shares of our common stock. Under federal regulations, we are authorized to grant awards of stock or options under a stock-based benefit plan in an amount up to 25% of the shares of common stock held by persons other than 1895 Bancorp of Wisconsin, MHC. The number of shares of common stock or options granted under any initial stock-based benefit plan may not exceed 1.96% and 4.90%, respectively, of our total outstanding shares, including shares issued to 1895 Bancorp of Wisconsin, MHC and contributed to the charitable foundation.

The shares of restricted common stock granted under the stock-based benefit plan will be expensed by us over their vesting period based on the fair market value of the shares on the date they are awarded. If the shares of restricted common stock to be granted under the stock-based benefit plan are repurchased in the open market (rather than issued directly from authorized but unissued shares by 1895 Bancorp of Wisconsin, Inc.) and cost the same as the purchase price in the offering, the reduction to stockholders’ equity due to the plan would be between $916,000 at the minimum of the offering range and approximately $1.4 million at the adjusted maximum of the offering range. To the extent we repurchase shares of common stock in the open market to fund the grants of shares of restricted common stock under the plan, and the price of such shares exceeds the offering price of $10.00 per share, the reduction to stockholders’ equity would exceed the range described above. Conversely, to the extent the price of such shares is below the offering price of $10.00 per share, the reduction to stockholders’ equity would be less than the range described above.

 

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We will generally recognize as an expense in our income statement the grant-date fair value of stock options as such options vest. When we record an expense related to the grant of options using the fair value method, we will incur significant compensation and benefits expense. As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of PyraMax Bank, FSB,” and based on certain assumptions discussed therein, we estimate this annual pre-tax expense, assuming it is amortized over a 10-year vesting period, would be approximately $101,000, assuming we sell 3,200,450 shares in the offering.

The implementation of a stock-based benefit plan may dilute your ownership interest.

We intend to adopt a stock-based benefit plan following the reorganization and offering. The stock-based benefit plan will be funded through either open market purchases, if permitted, or from the issuance of authorized but unissued shares. Public stockholders would experience a reduction in ownership interest totaling 6.31% in the event newly issued shares are used to fund stock options and restricted stock awards in an amount equal to 4.90% and 1.96%, respectively, of the total shares issued in the reorganization and offering (including shares issued to 1895 Bancorp of Wisconsin, MHC and the charitable foundation).

Persons who purchase stock in the offering will own a minority of 1895 Bancorp of Wisconsin, Inc.’s common stock and will not be able to exercise voting control over most matters put to a vote of stockholders.

Public stockholders will own a minority of the outstanding shares of 1895 Bancorp of Wisconsin, Inc.’s common stock. As a result, stockholders other than 1895 Bancorp of Wisconsin, MHC will not be able to exercise voting control over most matters put to a vote of stockholders. 1895 Bancorp of Wisconsin, MHC will own a majority of 1895 Bancorp of Wisconsin, Inc.’s common stock after the offering and, through its board of directors, will be able to exercise voting control over most matters put to a vote of stockholders. Generally, the same directors and officers who manage PyraMax Bank, FSB will also manage 1895 Bancorp of Wisconsin, Inc. and 1895 Bancorp of Wisconsin, MHC. Our board of directors, officers or 1895 Bancorp of Wisconsin, MHC may take actions that the public stockholders believe to be contrary to their interests, including whether or not the mutual holding company should convert to stock form in a “second-step” transaction. The only matters as to which stockholders other than 1895 Bancorp of Wisconsin, MHC will be able to exercise voting control currently include any proposal to implement a stock-based benefit plan or a “second-step” conversion. In addition, 1895 Bancorp of Wisconsin, MHC may exercise its voting control to prevent a sale or merger transaction in which stockholders could receive a premium for their shares.

Our stock value may be negatively affected by our mutual holding company structure and federal regulations restricting takeovers.

1895 Bancorp of Wisconsin, MHC, as the majority stockholder of 1895 Bancorp of Wisconsin, Inc., will be able to control the outcome of virtually all matters presented to stockholders for their approval, including any proposal to acquire 1895 Bancorp of Wisconsin, Inc. Accordingly, 1895 Bancorp of Wisconsin, MHC may prevent the sale of control or merger of 1895 Bancorp of Wisconsin, Inc. or its subsidiaries even if such a transaction were favored by a majority of the public stockholders of 1895 Bancorp of Wisconsin, Inc. The board of directors of PyraMax Bank, FSB has decided to form a mutual holding company rather than undertake a standard conversion to stock form in part because the mutual holding company structure will allow our board of directors to control the future of 1895 Bancorp of Wisconsin, Inc. and its subsidiaries. Additionally, although federal regulations permit a mutual holding company to be acquired by a mutual institution in a remutualization transaction, such transactions may be unlikely because of the heightened regulatory scrutiny given to such transactions.

For three years following the offering, federal regulations prohibit any person from acquiring or offering to acquire more than 10% of our common stock without the prior written approval of the Federal Reserve Board and/or the Office of the Comptroller of the Currency. Moreover, current Federal Reserve Board and Office of the Comptroller of the Currency policy prohibits the acquisition of a mutual holding company subsidiary by any person or entity other than a mutual holding company or a mutual institution, and restricts the terms of permissible acquisitions. See “Restrictions on the Acquisition of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB” for a discussion of applicable Federal Reserve Board regulations regarding acquisitions.

The corporate governance provisions in our charter and bylaws may prevent or impede the holders of a minority of our common stock from obtaining representation on our board of directors and may also prevent or impede a change in control.

Provisions in our charter and bylaws may prevent or impede holders of a minority of our common stock from obtaining representation on our board of directors. For example, our board of directors will be divided into three classes with staggered three-year terms. A classified board makes it more difficult for stockholders to change a majority of the directors because it generally takes at least two annual elections of directors for this to occur. Second, our charter provides that there will not be cumulative voting by stockholders for the election of our directors, which means that 1895 Bancorp of Wisconsin, MHC, as the holder of a majority of the shares eligible to be voted at a meeting of stockholders, may elect all of our directors to be elected at that meeting. Also, we have the ability to issue preferred stock with voting rights to third parties who may be friendly to our board of directors.

 

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In addition, a section in 1895 Bancorp of Wisconsin, Inc.’s charter will generally provide that, for a period of five years from the closing of the offering, no person, other than 1895 Bancorp of Wisconsin, MHC, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of equity security of 1895 Bancorp of Wisconsin, Inc. held by persons other than 1895 Bancorp of Wisconsin, MHC, and that any shares acquired in excess of this limit will not be entitled to be voted and will not be counted as voting stock in connection with any matters submitted to the stockholders for a vote. PyraMax Bank, FSB’s charter will contain a similar provision, except the ownership restriction will apply to persons other than 1895 Bancorp of Wisconsin, MHC and 1895 Bancorp of Wisconsin, Inc.

Our management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business.

Our management team has limited experience managing a publicly traded company or complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to a public company, which will be subject to significant regulatory oversight and reporting obligations under the federal securities laws. In particular, these new obligations will require substantial attention from our management team and may divert their attention away from the day-to-day management of our business, which could materially and adversely impact our business operations.

You may not receive dividends on our common stock.

Holders of our common stock are only entitled to receive such dividends as our board of directors may declare out of funds legally available for such payments. We do not currently intend to pay dividends on our common stock following completion of our offering. The declaration and payment of future cash dividends will be subject to, among other things, regulatory restrictions, our then current and projected consolidated operating results, financial condition, tax considerations, future growth plans, general economic conditions, and other factors our board of directors deems relevant. In particular, we will be limited in our ability to pay dividends only to our public stockholders, under the regulations that have been implemented by the Federal Reserve Board following the enactment of the Dodd-Frank Act with regard to dividend waivers by mutual holding companies. See “Our Policy Regarding Dividends,” “Regulation and Supervision—Federal Banking Regulation—Capital Requirements,” “—Federal Banking Regulation—Capital Distributions” and “—Holding Company Regulation—Waivers of Dividends by 1895 Bancorp of Wisconsin, MHC.”

1895 Bancorp of Wisconsin, Inc. will depend primarily upon the proceeds it retains from the offering as well as earnings of PyraMax Bank, FSB to provide funds to pay dividends on our common stock. The payment of dividends by PyraMax Bank, FSB also is subject to certain regulatory restrictions. Federal law generally prohibits a depository institution from making any capital distributions (including payment of a dividend) to its parent holding company if the depository institution would thereafter be or continue to be undercapitalized, and dividends by a depository institution are subject to additional limitations.

As a result, any payment of dividends in the future by 1895 Bancorp of Wisconsin, Inc. will depend, in large part, on PyraMax Bank, FSB’s ability to satisfy these regulatory restrictions and its earnings, capital requirements, financial condition and other factors.

Under current law, if we declare dividends on our common stock, 1895 Bancorp of Wisconsin, MHC will be restricted from waiving the receipt of dividends.

1895 Bancorp of Wisconsin, Inc.’s board of directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements. If 1895 Bancorp of Wisconsin, Inc. pays dividends to its stockholders, it also will be required to pay dividends to 1895 Bancorp of Wisconsin, MHC, unless 1895 Bancorp of Wisconsin, MHC is permitted by the Federal Reserve Board to waive the receipt of dividends. The Federal Reserve Board’s current regulations significantly restrict the ability of newly organized mutual holding companies to waive dividends declared by their subsidiaries. Accordingly, because dividends would likely be required to be paid to 1895 Bancorp of Wisconsin, MHC along with all other stockholders, the amount of dividends available for all other stockholders will be less than if 1895 Bancorp of Wisconsin, MHC were to waive the receipt of dividends.

You may not be able to sell your shares of common stock until you have received a statement reflecting ownership of shares, which will affect your ability to take advantage of changes in the stock price immediately following the offering.

A statement reflecting ownership of shares of common stock purchased in the offering may not be delivered for several days after the completion of the offering and the commencement of trading in the common stock. Your ability to sell the shares of common stock before receiving your ownership statement will depend on arrangements you may make with a brokerage firm, and you may not be able to sell your shares of common stock until you have received your ownership statement. As a result, you may not be able to take advantage of fluctuations in the price of the common stock immediately following the offering.

 

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We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

We are an emerging growth company, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation or on any golden parachute payments not previously approved. As an emerging growth company, we also will not be subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require that our independent auditors review and attest as to the effectiveness of our internal control over financial reporting. We have also elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

We could remain an “emerging growth company” for up to five years, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

As a result, our stockholders may not have access to certain information they may deem important, and investors may find our common stock less attractive if we choose to rely on these exemptions. This could result in a less active trading market for our common stock and the price of our common stock may be more volatile.

Risks Related to the Charitable Foundation

The contribution to the charitable foundation will dilute your ownership interest and adversely affect net income in 2019.

We intend to establish and fund a new charitable foundation in connection with the reorganization and offering. We intend to contribute $100,000 in cash and 1.0% of our outstanding shares, or 55,000 shares at the midpoint of the offering range (for an aggregate contribution of $650,000, at the midpoint of the offering range, based on the $10.00 per share offering price) to this charitable foundation. The contribution will have an adverse effect on our net income for the quarter and year in which we make the issuance and contribution to the charitable foundation. The after-tax expense of the contribution is expected to reduce net income in the year of the contribution by approximately $514,000, at the midpoint of the offering range. Our 2017 net income was $1.7 million.

Our contribution to the charitable foundation may not be tax deductible, which could reduce our profits.

We may not have sufficient profits to be able to fully use the tax deduction from our contribution to the charitable foundation. Under the Internal Revenue Code, an entity is permitted to deduct up to 10% of its taxable income (generally income before federal income taxes and charitable contributions expense) in any one year for charitable contributions. Any contribution in excess of the 10% limit may be deducted for federal income tax purposes over each of the five years following the year in which the charitable contribution is made. Accordingly, a charitable contribution could, if necessary, be deducted over a six-year period and expires thereafter.

 

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SELECTED FINANCIAL AND OTHER DATA

The following tables set forth selected historical financial and other data for PyraMax Bank, FSB at the dates and for the periods indicated. It is only a summary and it should be read in conjunction with the business and financial information contained elsewhere in this prospectus, including the financial statements beginning on page F-1. The information at June 30, 2018 and for the six months ended June 30, 2018 and 2017 is not audited but, in the opinion of management, includes all adjustments necessary for a fair presentation. All adjustments are normal and recurring. The results of operations for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the entire year. The information at December 31, 2017 and 2016 and for the years ended December 31, 2017 and 2016 is derived in part from the audited financial statements appearing in this prospectus. The information at and for the years ended December 31, 2015, 2014 and 2013 is derived in part from financial statements not appearing in this prospectus.

 

     At June 30,
2018
     At December 31,  
     2017      2016      2015      2014      2013  
     (Dollars in thousands)  

Selected Financial Condition Data:

                 

Total assets

   $ 482,617      $ 468,361      $ 450,173      $ 425,674      $ 414,448      $ 429,927  

Cash and cash equivalents

     7,995        12,497        7,779        7,192        9,790        12,997  

Securities available-for-sale

     69,296        88,955        96,458        73,010        83,885        106,712  

Loans held for sale

     1,170        217        479        339        246        953  

Loans receivable, net

     368,021        331,206        312,523        314,000        288,794        274,018  

Premises and equipment, net

     7,601        7,661        8,925        9,115        9,491        10,695  

Mortgage servicing rights, net

     2,163        2,270        2,421        2,476        2,673        2,454  

Federal Home Loan Bank stock

     1,818        1,436        2,170        1,720        2,091        2,091  

Accrued interest receivable

     1,144        1,214        1,163        1,160        1,219        1,362  

Bank owned life insurance

     13,931        13,732        13,321        12,872        12,426        11,991  

Other assets

     9,478        9,173        4,934        3,790        3,833        6,654  

Total liabilities

     444,927        429,367        412,833        388,841        378,367        392,418  

Deposits

     404,560        389,291        358,882        352,979        350,575        345,398  

Federal Home Loan Bank advances

     27,677        34,693        48,224        31,452        22,795        41,820  

Accrued interest payable

     346        340        276        208        173        333  

Other liabilities

     12,344        5,043        5,451        4,202        4,824        4,867  

Total equity

     37,690        38,994        37,340        36,833        36,081        37,509  

 

     For the Six Months
Ended June 30,
    For the Year Ended December 31,  
     2018     2017     2017     2016      2015     2014     2013  
     (Dollars in thousands)  

Selected Operating Data:

               

Interest and dividend income

   $ 8,013     $ 7,500     $ 15,256     $ 13,797      $ 13,856     $ 14,654     $ 14,808  

Interest expense

     1,948       1,591       3,361       2,685        2,556       3,139       3,761  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net interest income

     6,065       5,909       11,895       11,112        11,300       11,515       11,047  

Provision for loan losses

     —         —         —         —          (684     —         (600
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     6,065       5,909       11,895       11,112        11,984       11,515       11,647  

Non-interest income

     1,483       1,465       2,892       4,155        3,004       2,243       4,421  

Non-interest expense (1)

     8,065       6,936       16,590       14,013        14,223       16,946       14,850  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income (loss) before income tax expense (benefit) (2)

     (517     438       (1,803     1,254        765       (3,188     1,218  

Income tax expense (benefit) (3)

     (194     (4,589     (3,462     —          —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (323   $ 5,027     $ 1,659     $ 1,254      $ 765     $ (3,188   $ 1,218  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

(1)

For the six months ended June 30, 2018, non-interest expense included $230,000 of expenses associated with the pending sale of a branch office and a $400,000 expense relating to a large claim for non-covered procedures under our self-insured healthcare coverage program. For the year ended December 31, 2017, non-interest expense included a non-recurring $1.1 million valuation allowance recorded to write

 

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  down the value of a branch office property owned by PyraMax Bank, FSB and $880,000 of conversion costs related to a core data processing systems conversion. For the year ended December 31, 2015, non-interest expense included a non-recurring $684,000 prepayment penalty related to the prepayment of $16.0 million of Federal Home Loan Bank advances. For the year ended December 31, 2014, non-interest expense included a non-recurring $3.1 million prepayment penalty related to the prepayment of $25.0 million of Federal Home Loan Bank advances and a non-recurring loss on the sale of a building of $349,000.
(2)

For the six months ended June 30, 3018, excluding the non-recurring expenses described above, PyraMax Bank, FSB would have recorded pre-tax income of $113,000. For the year ended December 31, 2017, excluding the non-recurring expenses described above, PyraMax Bank, FSB would have recorded pre-tax income of $171,000. For the year ended December 31, 2015, excluding the non-recurring expenses described above, PyraMax Bank, FSB would have recorded pre-tax income of $1.4 million. For the year ended December 31, 2014, excluding the non-recurring expenses described above, PyraMax Bank, FSB would have recorded pre-tax income of $258,000.

(3)

For the years ended December 31, 2016, 2015, 2014 and 2013, the recorded income tax expense and the reversal of our deferred tax asset valuation allowance resulted in a net income tax expense of $0. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of PyraMax Bank, FSB — Comparison of Operating Results for the Years Ended December 31, 2017 and 2016 — Income Tax Expense (Benefit).”

 

     At or For the Six Months
Ended June 30,
    At or For the Year Ended December 31,  
     2018     2017     2017     2016     2015     2014     2013  

Performance Ratios (1):

              

Return on average assets (2)

     (0.14 )%      2.22     0.36     0.29     0.18     (0.74 )%      0.29

Return on average equity (3)

     (1.68 )%      25.42     4.02     3.26     2.06     (8.33 )%      3.14

Interest rate spread (4)

     2.65     2.71     2.67     2.70     2.83     2.79     2.71

Net interest margin (5)

     2.79     2.83     2.80     2.81     2.94     2.89     2.83

Efficiency ratio (6)

     106.86     94.06     112.19     91.79     99.43     123.17     96.00

Average interest-earning assets to

average interest-bearing liabilities

     114.99     116.08     116.31     116.80     115.78     113.48     112.50

Average loans to average deposits

     90.05     84.77     85.85     87.74     89.78     83.38     80.62

Equity to assets (7)

     8.16     8.75     8.95     9.02     8.94     8.86     9.13

Capital Ratios:

              

Tier 1 capital (to adjusted total assets)

     7.46     8.52     7.35     8.41     8.50     8.40     8.79

Tier I capital (to risk-weighted assets)

     9.70     12.27     11.07     11.31     11.53     10.98     11.90

Total capital (to risk-weighted assets)

     10.55     13.24     12.05     12.22     12.52     12.16     13.11

Common equity Tier 1 capital (to risk-weighted assets)

     9.70     12.27     11.07     11.31     11.53     10.98     11.90

Asset Quality Ratios:

              

Allowance for loan losses as a percent of total loans

     0.83     0.95     0.93     0.95     0.97     1.28     1.38

Allowance for loan losses as a percent of non-performing loans

     167.40     143.98     163.90     100.39     66.35     74.69     37.49

Net charge-offs (recoveries) to average outstanding loans during the period

     —       0.01     0.03     (0.03 )%      0.01     (0.03 )%      (0.35 )% 

Non-performing loans as a percent of total loans

     0.50     0.66     0.57     0.96     1.47     1.71     3.69

Non-performing assets as a percent of total assets

     0.38     0.46     0.40     0.67     1.09     1.21     2.82

Other Data:

              

Number of offices (8)

     9       9       9       8       8       8       8  

Number of full-time equivalent employees

     118       116       111       113       104       107       111  

 

(1)

Performance ratios for the six months ended June 30, 2018 and 2017 are annualized.

 

(footnotes continued on following page)

 

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(2)

Represents net income divided by average total assets. For the six months ended June 30, 2017 and the year ended December 31, 2017, reflects the reversal of our deferred tax asset valuation in the amount of $4.8 million.

(3)

Represents net income divided by average equity. For the six months ended June 30, 2017 and the year ended December 31, 2017, reflects the reversal of our deferred tax asset valuation in the amount of $4.8 million.

(4)

Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-bearing liabilities. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 29% for 2018 and 42% for the previous periods.

(5)

Represents net interest income as a percent of average interest-earning assets. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 29% for 2018 and 42% for the previous periods.

(6)

Represents non-interest expense divided by the sum of net interest income and non-interest income.

(7)

Represents average equity divided by average total assets.

(8)

We have entered into an agreement to sell our branch located at 1605 West Mitchell Street, Milwaukee, Wisconsin, and anticipate completing that branch sale in the first quarter of 2019, pending regulatory approval.

 

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RECENT DEVELOPMENTS

The following tables set forth selected historical financial and other data for PyraMax Bank, FSB at the dates and for the periods indicated. The information at December 31, 2017 was derived from the audited financial statements of PyraMax Bank, FSB included elsewhere in this prospectus. The information at and for the three and nine months ended September 30, 2018 and 2017 is not audited but, in the opinion of management, includes all adjustments necessary for a fair presentation. All adjustments are normal and recurring. The results of operations for the three and nine months ended September 30, 2018 and 2017 are not necessarily indicative of the results that may be expected for the entire year. The following information is only a summary and should be read in conjunction with PyraMax Bank, FSB’s financial statements and the notes to the financial statements beginning on page F-1 of this prospectus.

 

     At September 30, 2018      At December 31, 2017  
     (Dollars in thousands)  

Selected Financial Condition:

     

Total assets

   $ 482,844      $ 468,361  

Cash and cash equivalents

     8,956        12,497  

Securities available-for-sale

     66,875        88,955  

Loans held for sale

     901        217  

Loans receivable, net

     369,973        331,206  

Premises and equipment, net

     7,851        7,661  

Mortgage servicing rights, net

     2,137        2,270  

Federal Home Loan Bank stock

     1,525        1,436  

Accrued interest receivable

     1,223        1,214  

Bank owned life insurance

     13,302        13,732  

Other assets

     10,101        9,173  

Total liabilities

     445,095        429,367  

Deposits

     392,296        389,291  

Federal Home Loan Bank advances

     36,668        34,693  

Accrued interest payable

     343        340  

Other liabilities

     15,788        5,043  

Total equity

     37,749        39,994  

 

     For the Three Months Ended
September 30,
     For the Nine Months Ended
September 30,
 
     2018      2017      2018      2017  
     (Dollars in thousands)  

Selected Operating Data:

           

Interest and dividend income

   $ 4,236      $ 3,771      $ 12,249      $ 11,271  

Interest expense

     1,100        850        3,048        2,441  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     3,136        2,921        9,201        8,830  

Provision for loan losses

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income after provision for loan losses

     3,136        2,921        9,201        8,830  

Non-interest income

     794        740        2,277        2,205  

Non-interest expense

     3,677        3,390        11,742        10,326  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income tax expense (benefit)

     253        271        (264      709  

Income tax expense (benefit)

     8        86        (186      (4,503
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 245      $ 185      $ (78    $ 5,212  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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     At or For the Three
Months Ended
September 30,
    At or For the Nine
Months Ended
September 30,
 
     2018     2017     2018     2017  

Performance Ratios (1):

        

Return on average assets (2)

     0.21     0.16     (0.02 )%      1.53

Return on average equity (3)

     2.58     1.71     (0.27 )%      17.03

Interest rate spread (4)

     2.67     2.63     2.66     2.68

Net interest margin (5)

     2.84     2.76     2.80     2.81

Efficiency ratio (6)

     93.55     92.61     102.29     93.58

Average interest-earning assets to average interest-bearing liabilities

     116.43     116.41     115.55     116.19

Average loans to average deposits

     91.13     85.21     91.22     86.55

Equity to assets (7)

     7.95     9.40     8.09     8.97

Capital Ratios:

        

Average equity to average assets

     7.95     9.40     8.09     8.97

Tier 1 capital (to adjusted total assets)

     7.41     8.43     7.41     8.43

Tier 1 capital (to risk-weighted assets)

     9.62     12.00     9.62     12.00

Total capital (to risk-weighted assets)

     10.51     12.96     10.51     12.96

Common equity Tier 1 capital (to risk-weighted assets)

     9.62     12.00     9.62     12.00

Asset Quality Ratios:

        

Allowance for loan losses as a percent of total gross loans

     0.87     0.93     0.87     0.93

Allowance for loan losses as a percent of non-performing loans

     198.56     153.60     198.56     153.60

Net charge-offs (recoveries) to average loans outstanding during the period

     (0.04 )%      (0.02 )%      (0.04 )%      (0.02 )% 

Non-performing loans as a percent of total gross loans

     0.44     0.61     0.44     0.61

Non-performing assets as a percent of total assets

     0.34     0.43     0.34     0.43

Other Data:

        

Number of full-service offices (8)

     9       9       9       9  

Number of full-time equivalent employees

     118       113       118       118  

 

(1)

Performance ratios are annualized.

(2)

Represents net income divided by average total assets. For the three and nine months ended September 30, 2017, reflects the reversal of our deferred tax asset valuation in the amount of $0 and $4.8 million, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of PyraMax Bank, FSB— Comparison of Operating Results for the Years Ended December 31, 2017 and 2016— Income Tax Expense (Benefit).”

(3)

Represents net income divided by average equity. For the three and nine months ended September 30, 2017, reflects the reversal of our deferred tax asset valuation in the amount of $0 and $4.8 million, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of PyraMax Bank, FSB— Comparison of Operating Results for the Years Ended December 31, 2017 and 2016— Income Tax Expense (Benefit).”

(4)

Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-bearing liabilities. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 29% for the 2018 periods and 42% for the 2017 periods.

(5)

Represents net interest income as a percent of average interest-earning assets. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 29% for the 2018 periods and 42% for the 2017 periods.

(6)

Represents non-interest expense divided by the sum of net interest income and non-interest income.

(7)

Represents average equity divided by average total assets.

(8)

We have entered into an agreement to sell our branch located at 1605 West Mitchell Street, Milwaukee, Wisconsin, and anticipate completing that branch sale in the first quarter of 2019, pending regulatory approval.

 

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Comparison of Financial Condition at September 30, 2018 and December 31, 2017

Total Assets. Total assets increased $14.5 million, or 3.1%, to $482.8 million at September 30, 2018 from $468.4 million at December 31, 2017. The increase resulted primarily from an increase in net loans of $38.8 million, partially offset by decreases in available-for-sale securities of $22.1 million and cash and cash equivalents of $3.5 million.

Cash and Cash Equivalents. Cash and cash equivalents decreased $3.5 million, or 28.3%, to $9.0 million at September 30, 2018 from $12.5 million at December 31, 2017. The decrease resulted primarily from normal seasonal fluctuations in mortgage escrow accounts.

Net Loans. Net loans increased $38.8 million, or 11.7%, to $370.0 million at September 30, 2018 from $331.2 million at December 31, 2017. The increase resulted from increases in commercial, commercial real estate and residential real estate–first mortgages of $13.1 million, $27.4 million and $3.3 million respectively. These increases were the result of increased marketing efforts, as well as a strong local economy, which drove increased demand for rental units. These increases were partially offset by decreases in home equity and lines of credit and other consumer loans of $4.5 million and $500,000 respectively.

Securities Available-for-Sale. Securities available-for-sale decreased $22.1 million, or 24.8%, to $66.9 million at September 30, 2018 from $89.0 million at December 31, 2017. During this period, $14.4 million of securities were sold to generate liquidity to support loan growth while $7.7 million of principle payments were received.

Deposits. Deposits increased $3.0 million, or 0.8%, to $392.3 million at September 30, 2018 from $389.3 million at December 31, 2017. Money market, certificate of deposit and interest–bearing checking accounts increased $6.5 million, $1.2 million and $100,000 respectively. Money market accounts increased significantly in 2018 due to the addition of two large accounts totaling $18.0 million sourced from the Treasury Management department. These accounts are of a short-term nature and are expected to liquidate by December 31, 2018. Our strategy for deposit generation is to use targeted, special duration certificates of deposit and money market accounts which do not have a negative impact on our normal pricing structure for existing accounts. These increases were partially offset by decreases in non-interest bearing checking accounts and statement savings accounts of $2.8 million and $2.0 million respectively.

Borrowings. Borrowings, consisting entirely of Federal Home Loan Bank advances, totaled $36.7 million at September 30, 2018 compared to $34.7 million at December 31, 2017.

Other Liabilities. Other liabilities increased $10.7 million, or 213.1%, to $15.8 million at September 30, 2018 from $5.0 million at December 31, 2017. Included in Other Liabilities were mortgage escrow accounts which increased $10.6 million as tax and insurance escrow payments were received.

Total Equity. Total equity decreased $2.2 million, or 5.6%, to $37.7 million at September 30, 2018 from $39.0 million at December 31, 2017. The decrease primarily resulted from $1.2 million net of tax unrealized losses on available-for-sale securities and a net operating loss of $78,000 for the nine months ended September 30, 2018.

Comparison of Operating Results for the Three Months Ended September 30, 2018 and 2017

General. We recorded net income of $245,000 for the three months ended September 30, 2018, compared to net income of $185,000 for the three months ended September 30, 2017, an increase of $60,000, or 32.4%. The increase in net income was primarily due to a $215,000 increase in net interest income and a $78,000 decrease in income tax expense in the 2018 period.

Interest and Dividend Income. Interest and dividend income increased $465,000, or 12.3%, to $4.2 million for the three months ended September 30, 2018 from $3.8 million for the three months ended September 30, 2017. The increase was primarily attributable to an increase in the average balance of loans of $44.0 million from $326.9 million for the 2017 period to $370.9 million for the 2018 period.

Interest Expense. Interest expense increased $250,000, or 29.4%, to $1.1 million for the three months ended September 30, 2018, from $850,000 for the three months ended September 30, 2017, as the average balance of interest bearing liabilities increased $16.2 million from $363.7 million for the 2017 period to $379.9 million for the 2018 period, and rates on interest bearing liabilities increased 22 basis points.

Net Interest Income. Net interest income increased $215,000, or 7.4%, to $3.1 million for the three months ended September 30, 2018 from $2.9 million for the three months ended September 30, 2017. Average interest-earning assets increased $18.9 million, or 4.5%, to $442.3 million for the 2018 quarter from $423.4 million for the 2017 quarter. The increase was due primarily to an increase in the average balance of loans. Our net interest rate spread increased to 2.67% for the three months ended September 30,

 

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2018 from 2.63% for the three months ended September 30, 2017, and our net interest margin increased to 2.84% for the 2018 quarter from 2.76% for the 2017 quarter.

Provision for Loan Losses. We recorded no provision for loan losses for the three months ended September 30, 2018 or September 30, 2017, respectively. The allowance for loan losses was $3.2 million, or 0.87% of total loans, at September 30, 2018, compared to $3.1 million, or 0.93% of total loans, at September 30, 2017. Non-performing loans constituted 0.44% of total gross loans at September 30, 2018, compared to 0.61% of total gross loans at September 30, 2017. Net recoveries for the three months ended September 30, 2018 were $150,000 compared to net recoveries of $62,000 for the prior year period.

Non-interest Income. Non-interest income increased $54,000, or 7.3%, to $794,000 for the three months ended September 30, 2018 from $740,000 for the three months ended September 30, 2017.

Non-interest Expense. Non-interest expense increased $287,000, or 8.5%, to $3.7 million for the three months ended September 30, 2018 from $3.4 million for the three months ended September 30, 2017. The increase was due primarily to a 284,000, or 18.5%, increase in salary and incentive payment costs and a $79,000, or 36.9%, increase in health insurance costs. We anticipate that our healthcare insurance costs will decrease in the fourth quarter of this year as large claims for non-covered procedures have already been paid. Given that we self-insure for health insurance, increases in healthcare coverage costs are recorded as non-interest expense when they become probable and reasonably estimable. We evaluate the cost of self-insurance versus traditional indemnity insurance annually.

Upon consummation of the reorganization and stock offering, we expect non-interest expense to increase because of costs associated with operating as a public company and increased compensation costs related to possible implementation of a stock-based benefit plan, if approved by our stockholders.

Income Tax Expense. We recorded an income tax expense of $8,000 for the three months ended September 30, 2018 compared to an income tax expense of $86,000 for the three months ended September 30, 2017, a decrease of $78,000, or 90.7%, resulting from a $120,000 increase in non-taxable income and a reduction in the combined State and Federal tax rate from 42% in 2017 to 29% in 2018.

Comparison of Operating Results for the Nine Months Ended September 30, 2018 and 2017

General. We had a net loss of $78,000 for the nine months ended September 30, 2018, compared to net income of $5.2 million for the nine months ended September 30, 2017, a decrease of $5.3 million, or 101.5%. The decrease in net income was primarily due to the due to the reversal of a $4.5 million deferred tax valuation allowance during the nine months ended September 30, 2017 compared to an income tax benefit of $186,000 during the nine months ended September 30, 2018.

Interest and Dividend Income. Interest and dividend income increased $978,000, or 8.7%, to $12.2 million for the nine months ended September 30, 2018 from $11.3 million for the nine months ended September 30, 2017. The increase was primarily attributable to a $39.0 million, or 12.1%, increase in the average balance of loans outstanding.

Interest Expense. Interest expense increased $607,000, or 24.9%, to $3.0 million for the nine months ended September 30, 2018, from $2.4 million for the nine months ended September 30, 2017, as the average balance of interest bearing liabilities increased $17.5 million, or 4.8%, to $378.6 million for the 2018 period from $361.1 million for the 2017 period, and rates on interest bearing liabilities increased 17 basis points.

Net Interest Income. Net interest income increased $371,000, or 4.2%, to $9.2 million for the nine months ended September 30, 2018 from $8.8 million for the nine months ended September 30, 2017. Average interest-earning assets increased $17.9 million, or 4.3%, to $437.4 million for the 2018 period from $419.5 million for the 2017 period. The increase was due primarily to an increase in the average balance of loans. Our net interest rate spread decreased to 2.66% for the nine months ended September 30, 2018 from 2.68% for the nine months ended September 30, 2017, and our net interest margin decreased to 2.80% for the 2018 period from 2.81% for the 2017 period.

Provision for Loan Losses. We recorded no provision for loan losses for the nine months ended September 30, 2018 or September 30, 2017, respectively. The allowance for loan losses was $3.2 million, or 0.87% of total loans, at September 30, 2018, compared to $3.1 million, or 0.93% of total loans, at September 30, 2017. Non-performing loans constituted 0.44% of total gross loans at September 30, 2018, compared to 0.61% of total gross loans at September 30, 2017. Net recoveries for the nine months ended September 30, 2018 were $149,000 compared to net recoveries of $61,000 for the prior year period.

Non-interest Income. Non-interest income increased $72,000, or 3.3%, to $2.3 million for the nine months ended September 30, 2018 from $2.2 million for the nine months ended September 30, 2017.

 

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Non-interest Expense. Non-interest expense increased $1.4 million, or 13.7%, to $11.7 million for the nine months ended September 30, 2018 from $10.3 million for the nine months ended September 30, 2017. The increase was due primarily to a $825,000, or 17.8%, increase in salary and incentive payment costs and a $566,000, or 71.3%, increase in health insurance costs. We anticipate that our healthcare insurance costs will decrease in the fourth quarter of this year as large claims for non-covered procedures have already been paid. Given that we self-insure for health insurance, increases in healthcare coverage costs are recorded as non-interest expense when they become probable and reasonably estimable. We evaluate the cost of self-insurance versus traditional indemnity insurance annually.

Upon consummation of the reorganization and stock offering, we expect non-interest expense to increase because of costs associated with operating as a public company and increased compensation costs related to possible implementation of a stock-based benefit plan, if approved by our stockholders.

Income Tax Benefit. We recorded an income tax benefit of $186,000 for the nine months ended September 30, 2018 compared to an income tax benefit of $4.8 million for the nine months ended September 30, 2017, a decrease of $4.3 million, or 95.9%, resulting from the reversal of a $4.5 million deferred tax valuation allowance during the nine months ended September 30, 2017 and a reduction in the combined State and Federal tax rate from 42% in 2017 to 29% in 2018. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of PyraMax, FSB – Comparison of Operating Results for the Years Ended December 31, 2017 and 2016 – Income Tax Expense (Benefit).”

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus 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 prospectus.

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

 

   

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

 

   

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

 

   

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;

 

   

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

 

   

adverse changes in the securities or secondary mortgage markets;

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

changes in consumer spending, borrowing and savings habits;

 

   

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

 

   

our ability to retain key employees;

 

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

 

   

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

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Please see “Risk Factors” beginning on page 17.

 

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HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

Although we will not be able to determine the amount of actual net proceeds we will receive from the sale of shares of common stock until the offering is completed, we anticipate that the net proceeds will be between $19.1 million and $26.3 million, or $30.5 million if the offering is increased by 15%.

1895 Bancorp of Wisconsin, Inc. intends to distribute the net proceeds from the offering as follows:

 

     Based Upon the Sale at $10.00 Per Share of  
     2,057,000 Shares at
Minimum of Offering
Range
    2,420,000 Shares at
Midpoint of Offering
Range
    2,783,000 Shares at
Maximum of Offering
Range
    3,200,450 Shares at
Adjusted Maximum of
Offering Range (1)
 
     Amount     Percent of
Net
Proceeds
    Amount     Percent of
Net
Proceeds
    Amount     Percent of
Net
Proceeds
    Amount     Percent of
Net
Proceeds
 
     (Dollars in thousands)  

Offering proceeds

   $ 20,570       $ 24,200       $ 27,830       $ 32,005    

Less: estimated offering expenses

     (1,500       (1,500       (1,500       (1,500  
  

 

 

     

 

 

     

 

 

     

 

 

   

Net offering proceeds

   $ 19,070       100.00   $ 22,700       100.00   $ 26,330       100.00   $ 30,505       100.00
  

 

 

     

 

 

     

 

 

     

 

 

   

Less:

                

Amount contributed to 1895 Bancorp of Wisconsin, MHC

   $ (100     (0.52 )%    $ (100     (0.44 )%    $ (100     (0.38 )%    $ (100     (0.33 )% 

Cash contribution to foundation

   $ (100     (0.52 )%    $ (100     (0.44 )%    $ (100     (0.38 )%    $ (100     (0.33 )% 

Proceeds contributed to PyraMax Bank, FSB

   $ (9,535     (50.00 )%    $ (11,350     (50.00 )%    $ (13,165     (50.00 )%    $ (15,253     (50.00 )% 

Proceeds used for loan to employee stock ownership plan (2)

   $ (1,833     (9.61 )%    $ (2,156     (9.50 )%    $ (2,479     (9.42 )%    $ (2,851     (9.35 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Proceeds retained by 1895 Bancorp of Wisconsin, Inc.

   $ 7,502       39.34   $ 8,994       39.62   $ 10,486       39.83   $ 12,201       40.00
  

 

 

     

 

 

     

 

 

     

 

 

   

 

(1)

As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2)

The employee stock ownership plan (“ESOP”) will purchase 3.92% of our outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) with the ESOP obtaining the funds to purchase the shares from a loan made available by 1895 Bancorp of Wisconsin, Inc. to the ESOP. The loan will be repaid principally through PyraMax Bank, FSB’s contribution to the ESOP and dividends payable on common stock held by the ESOP over the anticipated 25-year term of the loan. The interest rate for the ESOP loan is expected to be equal to the prime rate, as published in The Wall Street Journal, on the closing date of the offering.

The net proceeds may vary because total expenses relating to the reorganization and offering may be more or less than our estimates. For example, our expenses would increase if a syndicated community offering were used to sell shares of common stock not purchased in the subscription offering and the community offering. See “The Reorganization and Offering—Plan of Distribution and Marketing Arrangements” for a discussion of fees to be paid in the event that shares are sold in a syndicated community offering. Payments for shares made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will result in a reduction of PyraMax Bank, FSB’s deposits. PyraMax Bank, FSB will receive at least 50% of the net proceeds of the offering.

Use of Proceeds Retained by 1895 Bancorp of Wisconsin, Inc.

1895 Bancorp of Wisconsin, Inc.:

 

   

intends to initially invest the proceeds that it retains in interest-earning deposits and in securities, including securities issued by the U.S. government and its agencies or government sponsored enterprises, mortgage-backed securities, and other securities as permitted by our investment policy. See “Business of PyraMax Bank, FSB—Investment Activities;”

 

   

may, in the future, use a portion of the proceeds that it retains to pay cash dividends or to repurchase shares of our common stock, although under current federal regulations we may not repurchase shares of our common stock during the

 

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first year following the reorganization and offering, except to fund stock-based benefit plans or when extraordinary circumstances exist with prior regulatory approval;

 

   

may, in the future, use a portion of the proceeds that it retains to finance acquisitions of financial institutions, or branches thereof, or other financial services businesses, or to expand through de novo branching, although no specific transactions are being considered at this time and no specific expansion is being considered at this time; and

 

   

expects to use the proceeds that it retains from time to time for other general corporate purposes.

Use of Proceeds Received by PyraMax Bank, FSB

PyraMax Bank, FSB:

 

   

intends to use a portion of the proceeds received to increase our lending capacity by providing us with additional capital to support new loans and higher lending limits;

 

   

intends to use a portion of the proceeds received to fund new one- to four-family residential mortgage loans, commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans) and commercial loans (which includes commercial and industrial loans) and, to a lesser extent, other loans, in accordance with our business plan and lending guidelines. See “Business of PyraMax Bank, FSB—Lending Activities;”

 

   

may use a portion of the proceeds received to support new loan, deposit and other financial products and services if our board of directors determines that such products will help us compete more effectively in our market area or increase our financial performance;

 

   

may invest a portion of the proceeds received in securities issued by the U.S. government and its agencies or government sponsored enterprises, mortgage-backed securities, and other securities as permitted by our investment policy. See “Business of PyraMax Bank, FSB—Investment Activities;”

 

   

may, in the future, use a portion of the proceeds received to expand our retail banking franchise, by acquiring other financial institutions, branch offices or other financial services businesses, or establishing new branches or loan production offices, although no specific transactions are being considered at this time; and

 

   

expects to use the proceeds received from time to time for other general corporate purposes.

The use of the proceeds by 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB may change based on changes in interest rates, equity markets, laws and regulations affecting the financial services industry, our relative position in the financial services industry, the attractiveness of potential acquisitions to expand our operations, and overall market conditions.

 

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OUR POLICY REGARDING DIVIDENDS

We do not currently intend to pay dividends on our common stock following completion of the offering. In the event that we do determine to pay dividends in the future, the payment and amount of any dividends will depend upon a number of factors, including the following: regulatory capital requirements; our financial condition and results of operations; our other uses of funds for the long-term value of stockholders; tax considerations; the Federal Reserve Board’s current regulations restricting the waiver of dividends by mutual holding companies; statutory and regulatory limitations; and general economic conditions.

The Federal Reserve Board has issued a policy statement providing that dividends should be paid only out of current earnings and only if our prospective rate of earnings retention is consistent with our capital needs, asset quality and overall financial condition. Regulatory guidance also provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the holding company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the holding company’s overall rate or earnings retention is inconsistent with its capital needs and overall financial condition. In addition, PyraMax Bank, FSB’s ability to pay dividends will be limited if it does not have the capital conservation buffer required by the new capital rules, which may limit our ability to pay dividends to stockholders. See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements.” No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future. Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the Office of the Comptroller of the Currency, may be paid in addition to, or in lieu of, regular cash dividends.

1895 Bancorp of Wisconsin, Inc. will file a consolidated federal tax return with PyraMax Bank, FSB. Accordingly, it is anticipated that any cash distributions that 1895 Bancorp of Wisconsin, Inc. makes to its stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal and state tax purposes. Additionally, pursuant to regulations of the Federal Reserve Board, during the three-year period following the offering, 1895 Bancorp of Wisconsin, Inc. will not take any action to declare an extraordinary dividend to its stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.

Pursuant to our charter, we are authorized to issue preferred stock. If we issue preferred stock, the holders thereof may have a priority over the holders of our shares of common stock with respect to the payment of dividends. For a further discussion concerning the payment of dividends on our shares of common stock, see “Description of Capital Stock of 1895 Bancorp of Wisconsin, Inc.—Common Stock.” Dividends we can declare and pay will depend, in part, upon receipt of dividends from PyraMax Bank, FSB, because initially we will have no source of income other than dividends from PyraMax Bank, FSB and earnings from the investment of the net proceeds from the sale of shares of common stock retained by 1895 Bancorp of Wisconsin, Inc. and interest payments received in connection with the loan to the employee stock ownership plan. Regulations of the Federal Reserve Board and the Office of the Comptroller of the Currency impose limitations on “capital distributions” by savings institutions. See “Regulation and Supervision—Federal Banking Regulation—Capital Distributions.”

Any payment of dividends by PyraMax Bank, FSB to 1895 Bancorp of Wisconsin, Inc. that would be deemed to be drawn out of PyraMax Bank, FSB’s bad debt reserves, if any, would require a payment of taxes at the then-current tax rate by PyraMax Bank, FSB on the amount of earnings deemed to be removed from the reserves for such distribution. PyraMax Bank, FSB does not intend to make any distribution to 1895 Bancorp of Wisconsin, Inc. that would create such a federal tax liability. See “Taxation.”

If 1895 Bancorp of Wisconsin, Inc. pays dividends to its stockholders, it will likely pay dividends to 1895 Bancorp of Wisconsin, MHC. The Federal Reserve Board’s current regulations significantly restrict the ability of mutual holding companies organized after December 1, 2009 to waive dividends declared by their subsidiaries. Accordingly, we do not currently anticipate that 1895 Bancorp of Wisconsin, MHC will waive dividends paid by 1895 Bancorp of Wisconsin, Inc. See “Risk Factors—Risks Related to the Offering—Under current law, if we declare dividends on our common stock, 1895 Bancorp of Wisconsin, MHC will be restricted from waiving the receipt of dividends.”

 

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MARKET FOR THE COMMON STOCK

1895 Bancorp of Wisconsin, Inc. is a to-be-formed company and has never issued capital stock. PyraMax Bank, FSB, as a mutual institution, has never issued capital stock. Accordingly, there is no established market for our common stock. 1895 Bancorp of Wisconsin, Inc. expects that its common stock will be quoted on the Nasdaq Capital Market under the symbol “BCOW” upon completion of the offering.

The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. Furthermore, we cannot assure you that, if you purchase shares of common stock, you will be able to sell them at or above $10.00 per share. Purchasers of common stock in this offering should have long-term investment intent and should recognize that there may be a limited trading market in the common stock. This may make it difficult to sell the common stock after the offering and may have an adverse impact on the price at which the common stock can be sold.

 

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HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

At June 30, 2018, PyraMax Bank, FSB exceeded all of the applicable regulatory capital requirements and was considered “well capitalized.” The table below sets forth the historical equity capital and regulatory capital of PyraMax Bank, FSB at June 30, 2018, and the pro forma equity capital and regulatory capital of PyraMax Bank, FSB after giving effect to the sale of shares of common stock at $10.00 per share. The table assumes the receipt by PyraMax Bank, FSB of 50% of the net proceeds. See “How We Intend to Use the Proceeds from the Offering.”

 

     PyraMax Bank, FSB
    Pro Forma at June 30, 2018, Based Upon the Sale in the Offering of (1)  
     Historical at
June 30, 2018
    2,057,000 Shares     2,420,000 Shares     2,783,000 Shares     3,200,450 Shares (2)  
     Amount      Percent of
Assets (3)(4)
    Amount      Percent of
Assets (3)
    Amount      Percent of
Assets (3)
    Amount      Percent of
Assets (3)
    Amount      Percent of
Assets (3)
 
     (Dollars in thousands)  

Equity

   $ 37,690        7.8   $ 44,476        9.1   $ 45,806        9.3   $ 47,136        9.6   $ 48,666        9.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Tier 1 leverage capital

   $ 35,552        7.5   $ 42,338        8.7   $ 43,668        8.9   $ 44,998        9.2   $ 46,528        9.5

Tier 1 leverage capital
requirement

     23,830        5.0       24,307        5.0       24,397        5.0       24,488        5.0       24,592        5.0  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Excess

   $ 11,722        2.5   $ 18,031        3.7   $ 19,271        3.9   $ 20,510        4.2   $ 21,936        4.5
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Tier 1 risk-based capital (5)

   $ 35,552        9.7   $ 42,338        11.5   $ 43,668        11.8   $ 44,998        12.2   $ 46,528        12.6

Tier 1 risk-based requirement

     29,313        8.0       29,466        8.0       29,495        8.0       29,524        8.0       29,557        8.0  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Excess

   $ 6,239        1.7   $ 12,872        3.5   $ 14,173        3.8   $ 15,474        4.2   $ 16,971        4.6
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total risk-based capital (5)

   $ 38,644        10.5   $ 45,430        12.3   $ 46,760        12.7   $ 48,090        13.0   $ 49,620        13.4

Total risk-based requirement

     36,641        10.0       36,832        10.0       36,868        10.0       36,905        10.0       36,946        10.0  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Excess

   $ 2,003        0.5   $ 8,598        2.3   $ 9,892        2.7   $ 11,185        3.0   $ 12,674        3.4
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Common equity tier 1 risk-based capital (5)

   $ 35,552        9.7   $ 42,338        11.5   $ 43,668        11.8   $ 44,998        12.2   $ 46,528        12.6

Common equity tier 1 risk-based requirement

     23,817        6.5       23,941        6.5       23,964        6.5       23,988        6.5       24,015        6.5  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Excess

   $ 11,735        3.2   $ 18,397        5.0   $ 19,704        5.3   $ 21,010        5.7   $ 22,513        6.1
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Reconciliation of capital infused into PyraMax Bank, FSB:

                         

Net offering proceeds

        $ 19,070        $ 22,700        $ 26,330        $ 30,505     
       

 

 

      

 

 

      

 

 

      

 

 

    

Proceeds to PyraMax Bank, FSB

        $ 9,535        $ 11,350        $ 13,165        $ 15,253     

Less: Common stock acquired by employee stock ownership plan

          1,833          2,156          2,479          2,851     

Less: Common stock acquired by stock-based benefit plans

          916          1,078          1,240          1,426     
       

 

 

      

 

 

      

 

 

      

 

 

    

Pro forma increase

        $ 6,786        $ 8,116        $ 9,446        $ 10,976     
       

 

 

      

 

 

      

 

 

      

 

 

    

 

(1)

Pro forma capital levels assume that the employee stock ownership plan purchases 3.92% of our total outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) with funds we lend and that one or more stock-based benefit plans purchases 1.96% of our total outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) for restricted stock awards. Pro forma capital calculated under U.S. generally accepted accounting principles (“U.S. GAAP”) and regulatory capital have been reduced by the amount required to fund these plans. See “Management” for a discussion of the employee stock ownership plan.

(2)

As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(3)

Tier 1 leverage capital levels are shown as a percentage of total adjusted assets. Risk-based capital levels are shown as a percentage of risk-weighted assets.

(4)

Based on total assets of $480.3 million for the purposes of the GAAP capital ratio, total assets of $476.6 million, for the purposes of the Tier 1 leverage capital requirement and risk-weighted assets of $366.4 million, for the purposes of the Tier 1 risk-based and total risk-based capital requirements.

(5)

Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk weighting.

 

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CAPITALIZATION

The following table presents the historical capitalization of PyraMax Bank, FSB at June 30, 2018, and the pro forma consolidated capitalization of 1895 Bancorp of Wisconsin, Inc. after giving effect to the offering, based upon the sale of the number of shares of common stock indicated in the table and the other assumptions set forth under “Pro Forma Data.”

 

     PyraMax Bank,
FSB Historical
Capitalization
at June 30,
2018
    Pro Forma Consolidated Capitalization at June 30, 2018
of 1895 Bancorp of Wisconsin,  Inc.
Based Upon the Sale for $10.00 Per Share of
 
    2,057,000
Shares
    2,420,000
Shares
    2,783,000
Shares
    3,200,450
Shares (1)
 
     (Dollars in thousands)  

Deposits (2)

   $ 404,560     $ 404,560     $ 404,560     $ 404,560     $ 404,560  

Borrowings

     27,677       27,677       27,677       27,677       27,677  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

   $ 432,237     $ 432,237     $ 432,237     $ 432,237     $ 432,237  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ equity:

          

Preferred Stock, $0.01 par value per share: 1,000,000; shares authorized (post offering); none to be issued

   $ —       $ —       $ —       $ —       $ —    

Common Stock, $0.01 par value per share:

          

19,000,000 shares authorized (post offering);
shares to be issued as reflected (3)

     —         47       55       63       73  

Additional paid-in capital (3)

     —         19,023       22,645       26,267       30,432  

Retained earnings (4)

     39,459       39,459       39,459       39,459       39,459  

Accumulated other comprehensive loss, net

     (1,769     (1,769     (1,769     (1,769     (1,769

Stock contribution to foundation

     —         468       550       633       727  

Less:

          

After-tax expense of contribution to charitable foundation (5)

     —         370       435       500       574  

Assets retained by 1895 Bancorp of Wisconsin,
MHC (6)

     —         100       100       100       100  

Cash contribution to foundation (after-tax)

     —         79       79       79       79  

Common stock acquired by employee stock ownership plan (7)

     —         1,833       2,156       2,479       2,851  

Common stock acquired by stock-based benefit
plans (8)

     —         916       1,078       1,240       1,426  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

   $ 37,690     $ 53,930     $ 57,092     $ 60,255     $ 63,892  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total tangible stockholders’ equity

   $ 37,690     $ 53,930     $ 57,092     $ 60,255     $ 63,892  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma shares of common stock outstanding:

          

Shares offered for sale

     —         2,057,000       2,420,000       2,783,000       3,200,450  

Shares issued to charitable foundation

     —         46,750       55,000       63,250       72,738  

Shares issued to 1895 Bancorp of Wisconsin, MHC

     —         2,571,250       3,025,000       3,478,750       4,000,562  

Total shares outstanding

     —         4,675,000       5,500,000       6,325,000       7,273,750  

Total stockholders’ equity as a percentage of pro forma total assets

     7.81     10.81     11.37     11.93     12.56

Total stockholders’ tangible equity as a percentage of pro forma total assets

     7.81     10.81     11.37     11.93     12.56

 

(1)

As adjusted to give effect to a 15% increase in the number of shares of common stock outstanding after the offering, which could occur due to an increase in the maximum of the independent valuation to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2)

Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock in the offering. Such withdrawals would reduce pro forma deposits by the amount of such withdrawals.

(footnotes continued on following page)

 

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Table of Contents
(3)

The sum of the par value and additional paid-in capital equals the net offering proceeds. No effect has been given to the issuance of additional shares of common stock pursuant to stock options under one or more stock-based benefit plans that 1895 Bancorp of Wisconsin, Inc. expects to adopt. The plan of reorganization permits 1895 Bancorp of Wisconsin, Inc. to adopt one or more stock benefit plans, subject to stockholder approval, in an amount up to 25% of the shares of common stock held by persons other than 1895 Bancorp of Wisconsin, MHC.

(4)

The retained earnings of PyraMax Bank, FSB will be substantially restricted after the offering. See “Regulation and Supervision– Federal Banking Regulation – Capital Distributions.”

(5)

Represents the expense of the contribution to the charitable foundation based on a 21.0% tax rate. The realization of the deferred tax benefit is limited annually to a maximum deduction for charitable donations equal to 10% of our annual taxable income, subject to our ability to carry forward any unused portion of the deduction for five years following the year in which the contribution is made.

(6)

Pro forma stockholders’ equity reflects a $100,000 initial capitalization of 1895 Bancorp of Wisconsin, MHC.

(7)

Assumes that 3.92% of the shares of common stock outstanding following the reorganization and offering (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) will be purchased by the employee stock ownership plan at a price of $10.00 per share and that the funds used to acquire the employee stock ownership plan shares will be borrowed from 1895 Bancorp of Wisconsin, Inc. and will represent unearned compensation, reflected as a reduction of capital The common stock acquired by the employee stock ownership plan is reflected as a reduction of stockholders’ equity. PyraMax Bank, FSB will provide the funds to repay the employee stock ownership plan loan. See “Management—Benefit Plans and Agreements.”

(8)

Assumes that subsequent to the offering, 1.96% of the shares of common stock issued in the reorganization and offering (including shares of common stock issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) are purchased by 1895 Bancorp of Wisconsin, Inc. for stock awards under a stock-based benefit plan in the open market. The shares of common stock to be purchased by 1895 Bancorp of Wisconsin, Inc. for the stock-based benefit plan are reflected as a reduction of stockholders’ equity. See “Pro Forma Data” and “Management.” The plan of reorganization permits 1895 Bancorp of Wisconsin, Inc. to adopt a stock-based benefit plan that awards stock or stock options, in an aggregate amount up to 25% of the shares of common stock held by persons other than 1895 Bancorp of Wisconsin, MHC. The stock-based benefit plan will not be implemented for at least six months after the reorganization and offering and until it has been approved by stockholders.

 

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Table of Contents

PRO FORMA DATA

The following tables summarize historical data of PyraMax Bank, FSB and pro forma data of 1895 Bancorp of Wisconsin, Inc. at and for the six months ended June 30, 2018 and the year ended December 31, 2017. This information is based on assumptions set forth below and in the table and related footnotes, and should not be used as a basis for projections of market value of the shares of common stock following the conversion.

The net proceeds disclosed in the tables are based upon the following assumptions:

 

  (i)

our employee stock ownership plan will purchase an amount of shares equal to 3.92% of our outstanding shares, including shares held by 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation, with a loan from 1895 Bancorp of Wisconsin, Inc. The loan will be repaid in substantially equal principal payments over a period of 25 years. Interest income that we earn on the loan will offset the interest paid by PyraMax Bank, FSB; and

 

  (ii)

expenses of the offering, including fees and expenses to be paid to KBW, will be $1.5 million.

We calculated the pro forma consolidated net income of 1895 Bancorp of Wisconsin, Inc. for the year as if the shares of common stock had been sold at the beginning of the year and the net proceeds had been invested at 2.85% (2.25% on an after-tax basis), which is equal to the yield on the five-year U.S. Treasury Note as of June 30, 2018. In light of current interest rates, we consider this rate to more accurately reflect the pro forma reinvestment rate than the arithmetic average method, which assumes reinvestment of the net proceeds at a rate equal to the average of the yield on interest-earning assets and the cost of deposits for those periods.

We further believe that the reinvestment rate is factually supportable because:

 

   

the yield on the U.S. Treasury Note can be determined and/or estimated from third-party sources; and

 

   

we believe that U.S. Treasury securities are not subject to credit losses due to a U.S. Government guarantee of payment of principal and interest.

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of net income and stockholders’ equity by the indicated number of shares of common stock. For pro forma calculations, we adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts for each period as if the common stock was outstanding at the beginning of the periods, but we did not adjust per share historical or pro forma stockholders’ equity to reflect the earnings on the estimated net proceeds.

The pro forma tables give effect to the implementation of one or more stock-based benefit plans. We have assumed that the stock-based benefit plans will acquire an amount of common stock equal to 1.96% of our outstanding shares of common stock (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) at the same price for which they were sold in the offering. We assume that shares of common stock are granted under the plan in awards that vest over a five-year period. The plan of reorganization provides that we may grant awards of restricted stock under one or more stock benefit plans in an aggregate amount up to 25% of the shares of common stock held by persons other than 1895 Bancorp of Wisconsin, MHC.

We have also assumed that the stock-based benefit plans will grant options to acquire common stock equal to 4.90% of our outstanding shares of common stock (including shares of common stock issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation). In preparing the following tables, we also assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $3.00 for each option. In addition to the terms of the options described above, the Black-Scholes option pricing model incorporated an estimated volatility rate of 13.89% for the common stock based on an index of publicly traded thrifts, no dividend yield, an expected option life of 10 years and a risk-free interest rate of 2.71%. The plan of reorganization provides that we may grant awards of stock or options under one or more stock benefit plans in an amount up to 25% of the shares of common stock held by persons other than 1895 Bancorp of Wisconsin, MHC.

As disclosed under “How We Intend to Use the Proceeds from the Offering,” 1895 Bancorp of Wisconsin, Inc. intends to contribute 50% of the net proceeds from the offering to PyraMax Bank, FSB. 1895 Bancorp of Wisconsin, Inc. will contribute $100,000 to 1895 Bancorp of Wisconsin, MHC and $100,000 to the charitable foundation and will retain the remainder of the net proceeds from the offering. 1895 Bancorp of Wisconsin, Inc. will use a portion of the proceeds it retains for the purpose of making a loan to the employee stock ownership plan and retain the rest of the proceeds for future use.

 

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Table of Contents

The pro forma table does not give effect to:

 

   

withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the offering;

 

   

1895 Bancorp of Wisconsin, Inc.’s results of operations after the offering;

 

   

increased fees and expenses that we would pay KBW and other broker-dealers if we conducted a syndicated offering; or

 

   

changes in the market price of the shares of common stock after the offering.

The following pro forma information may not represent the financial effects of the offering at the date on which the offering actually occurs and you should not use the tables to indicate future results of operations. Pro forma stockholders’ equity represents the difference between the stated amounts of assets and liabilities of 1895 Bancorp of Wisconsin, Inc., computed in accordance with U.S. GAAP. We did not increase or decrease stockholders’ equity to reflect the difference between the carrying value of loans and other assets and their market value. Pro forma stockholders’ equity is not intended to represent the fair market value of the common stock, and may be different than the amounts that would be available for distribution to stockholders if we were liquidated. Pro forma stockholders’ equity does not give effect to the impact of tax bad debt reserves in the event we were to be liquidated.

 

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Table of Contents
     At or For the Six Months Ended June 30, 2018
Based Upon the Sale at $10.00 Per Share of
 
     2,057,000
Shares at
Minimum of
Offering
Range
    2,420,000
Shares at
Midpoint of
Offering
Range
    2,783,000
Shares at
Maximum of
Offering
Range
    3,200,450
Shares at
Adjusted
Maximum of
Offering
Range (1)
 
     (Dollars in thousands, except per share amounts)  

Gross proceeds of the offering

   $ 20,570     $ 24,200     $ 27,830     $ 32,005  

Market value of shares issued to foundation

     468       550       633       727  

Market value of shares issued to 1895 Bancorp of Wisconsin, MHC

     25,712       30,250       34,787       40,006  
  

 

 

   

 

 

   

 

 

   

 

 

 

Market value of 1895 Bancorp of Wisconsin, Inc.

   $ 46,750     $ 55,000     $ 63,250     $ 72,738  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross proceeds of the offering

   $ 20,570     $ 24,200     $ 27,830     $ 32,005  

Estimated expenses

     (1,500     (1,500     (1,500     (1,500
  

 

 

   

 

 

   

 

 

   

 

 

 

Estimated net proceeds

     19,070       22,700       26,330       30,505  

1895 Bancorp of Wisconsin, MHC capitalization

     (100     (100     (100     (100

Cash contribution to foundation

     (100     (100     (100     (100

Common stock acquired by employee stock ownership plan (2)

     (1,833     (2,156     (2,479     (2,851

Common stock acquired by stock-based benefit plans (3)

     (916     (1,078     (1,240     (1,426
  

 

 

   

 

 

   

 

 

   

 

 

 

Estimated net proceeds as adjusted

   $ 16,121     $ 19,266     $ 22,411     $ 26,028  
  

 

 

   

 

 

   

 

 

   

 

 

 

For the six months ended June 30, 2018

        

Consolidated net income:

        

Historical

   $ (323   $ (323   $ (323   $ (323

Income on adjusted net proceeds

     181       217       252       293  

Employee stock ownership plan (2)

     (29     (34     (39     (45

Shares granted under stock-based benefit plans (3)

     (72     (85     (98     (113

Options granted under stock-based benefit plans (4)

     (33     (38     (44     (51
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net income

   $ (276   $ (263   $ (252   $ (239
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Historical

   $ (0.07   $ (0.06   $ (0.05   $ (0.05

Income on net proceeds

     0.04       0.04       0.04       0.04  

Employee stock ownership plan (2)

     (0.01     (0.01     (0.01     (0.01

Shares granted under stock-based benefit plans (3)

     (0.02     (0.02     (0.02     (0.02

Options granted under stock-based benefit plans (4)

     (0.01     (0.01     (0.01     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma earnings per share

   $ (0.07   $ (0.06   $ (0.05   $ (0.05
  

 

 

   

 

 

   

 

 

   

 

 

 

Offering price to pro forma earnings per share

     (71.43 )x      (83.33 )x      (100.00 )x      (100.00 )x 

Number of shares used in earnings per share calculations (2)

     4,495,405       5,288,712       6,082,019       6,994,322  

At June 30, 2018

        

Stockholders’ equity:

        

Historical

   $ 37,690     $ 37,690     $ 37,690     $ 37,690  

Estimated net proceeds

     19,070       22,700       26,330       30,505  

Capitalization of 1895 Bancorp of Wisconsin, MHC

     (100     (100     (100     (100

Stock contribution to foundation

     468       550       633       727  

After tax cost of foundation

     (449     (514     (579     (653

Common stock acquired by employee stock ownership plan (2)

     (1,833     (2,156     (2,479     (2,851

Common stock acquired by stock-based benefit plans (3)

     (916     (1,078     (1,240     (1,426
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma stockholders’ equity (5)

   $ 53,930     $ 57,092     $ 60,255     $ 63,892  
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma tangible stockholders’ equity

   $ 53,930     $ 57,092     $ 60,255     $ 63,892  
  

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ equity per share:

        

Historical

   $ 8.06     $ 6.85     $ 5.96     $ 5.18  

Estimated net proceeds

     4.08       4.13       4.16       4.19  

Capitalization of 1895 Bancorp of Wisconsin, MHC

     (0.02     (0.02     (0.02     (0.02

Shares issued to foundation

     0.10       0.10       0.10       0.10  

After tax cost of foundation

     (0.10     (0.09     (0.09     (0.09

Common stock acquired by employee stock ownership plan (2)

     (0.39     (0.39     (0.39     (0.39

Common stock acquired by stock-based benefit plans (3)

     (0.20     (0.20     (0.20     (0.20
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma stockholders’ equity per share (3)(5)

   $ 11.53     $ 10.38     $ 9.52     $ 8.77  
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma tangible stockholders’ equity per share

   $ 11.53     $ 10.38     $ 9.52     $ 8.77  
  

 

 

   

 

 

   

 

 

   

 

 

 

Offering price as a percentage of pro forma stockholders’ equity per share

     86.73     96.34     105.04     114.03

Offering price as a percentage of pro forma tangible stockholders’ equity per share

     86.73     96.34     105.04     114.03

Number of shares outstanding for pro forma equity per share calculations

     4,675,000       5,500,000       6,325,000       7,273,750  

(footnotes begin on following page)

 

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Table of Contents
(1)

As adjusted to give effect to a 15% increase in the number of shares outstanding after the offering, which could occur due to an increase in the maximum of the independent valuation as a result of demand for the shares or changes in market conditions following the commencement of the offering.

(2)

It is assumed that 3.92% of the shares outstanding following the offering will be purchased in the offering by the employee stock ownership plan at a price of $10.00 per share. For purposes of this table, the funds used to acquire such shares are assumed to have been borrowed by the employee stock ownership plan from 1895 Bancorp of Wisconsin, Inc. The amount to be borrowed is reflected as a reduction of stockholders’ equity. PyraMax Bank, FSB intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the principal and interest requirement of the debt. PyraMax Bank, FSB’s total annual payment of the employee stock ownership plan debt is based upon 25 equal annual installments of principal and interest. The pro forma net earnings information makes the following assumptions: (i) PyraMax Bank, FSB’s contribution to the employee stock ownership plan is equivalent to the debt service requirement for the period presented and was made at the end of the period; (ii) the employee stock ownership plan acquires 183,300, 215,600, 247,900 and 285,100 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range; (iii) 3,665, 4,312, 4,959 and 5,703 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range (based on a 25-year loan term), were committed to be released during the quarter ended June 30, 2018 at an average fair value equal to the price for which the shares are sold in the offering; and (iv) only the employee stock ownership plan shares committed to be released were considered outstanding for purposes of the net earnings per share calculations, resulting in a reduction from total outstanding shares (which is also the number of shares outstanding for pro forma equity per share calculations) of 4,491,740, 5,284,400, 6,077,060 and 6,988,619 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range, to determine the number of shares outstanding for earnings per share calculations.

(3)

Gives effect to one or more stock-based benefit plans expected to be adopted following the offering. We have assumed that these plans acquire a number of shares of common stock equal to 1.96% of the shares issued in the reorganization and offering (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) either through open market purchases or from authorized but unissued shares of common stock or treasury stock of 1895 Bancorp of Wisconsin, Inc., if any. Funds used by the stock-based benefit plan to purchase the shares will be contributed to the plan by 1895 Bancorp of Wisconsin, Inc. In calculating the pro forma effect of the stock-based benefit plan, it is assumed that the shares were acquired by the plan in open market purchases at the beginning of the year presented for a purchase price equal to the price for which the shares are sold in the offering, and that 20% of the amount contributed was an amortized expense (based upon a five-year vesting period) during the year ended December 31, 2017. The actual purchase price of the shares granted under the stock-based benefit plan may not be equal to the subscription price of $10.00 per share. If shares are acquired from the issuance of authorized but unissued shares of common stock of 1895 Bancorp of Wisconsin, Inc., there would be a dilutive effect of up to 1.93% on the ownership interest of persons who purchase common stock in the offering. The above table shows pro forma net income per share and pro forma stockholders’ equity per share, assuming all the shares to fund the stock-based benefit plan are obtained from authorized but unissued shares.

(4)

Gives effect to one or more stock-based benefit plans expected to be adopted following the offering. We have assumed that options will be granted to acquire common stock equal to 4.90% of the shares of common stock issued in the reorganization and offering (including shares of common stock issued to 1895 Bancorp of Wisconsin, MHC). In calculating the pro forma effect of the stock-based benefit plans, it is assumed that the exercise price of the stock options and the trading price of the stock at the date of grant were $10.00 per share, the estimated grant-date fair value pursuant to the application of the Black-Scholes option pricing model was $3.00 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options, and that 25% of the amortization expense (the assumed portion relating to options granted to directors) resulted in a tax benefit using an assumed tax rate of 21.0%. Under the above assumptions, the adoption of stock-based benefit plans will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. The actual exercise price of the stock options may not be equal to the $10.00 price per share. If a portion of the shares issued to satisfy the exercise of options under stock-based benefit plans are obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share will decrease. This will also have a dilutive effect of up to 4.67% on the ownership interest of persons who purchase common stock in the offering.

(5)

The retained earnings of PyraMax Bank, FSB will continue to be substantially restricted after the offering. See “Regulation and Supervision—Federal Banking Regulation.”

 

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Table of Contents
     At or For the Year Ended December 31, 2017
Based Upon the Sale at $10.00 Per Share of
 
     2,057,000
Shares at
Minimum of
Offering
Range
    2,420,000
Shares at
Midpoint of
Offering
Range
    2,783,000
Shares at
Maximum of
Offering
Range
    3,200,450
Shares at
Adjusted
Maximum of
Offering
Range (1)
 
     (Dollars in thousands, except per share amounts)  

Gross proceeds of the offering

   $ 20,570     $ 24,200     $ 27,830     $ 32,005  

Market value of shares issued to foundation

     468       550       633       727  

Market value of shares issued to 1895 Bancorp of Wisconsin, MHC

     25,712       30,250       34,787       40,006  
  

 

 

   

 

 

   

 

 

   

 

 

 

Market value of 1895 Bancorp of Wisconsin, Inc.

   $ 46,750     $ 55,000     $ 63,250     $ 72,738  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross proceeds of the offering

   $ 20,570     $ 24,200     $ 27,830     $ 32,005  

Estimated expenses

     (1,500     (1,500     (1,500     (1,500
  

 

 

   

 

 

   

 

 

   

 

 

 

Estimated net proceeds

     19,070       22,700       26,330       30,505  

1895 Bancorp of Wisconsin, MHC capitalization

     (100     (100     (100     (100

Cash contribution to foundation

     (100     (100     (100     (100

Common stock acquired by employee stock ownership plan (2)

     (1,833     (2,156     (2,479     (2,851

Common stock acquired by stock-based benefit plans (3)

     (916     (1,078     (1,240     (1,426
  

 

 

   

 

 

   

 

 

   

 

 

 

Estimated net proceeds as adjusted

   $ 16,121     $ 19,266     $ 22,411     $ 26,028  
  

 

 

   

 

 

   

 

 

   

 

 

 

For the year ended December 31, 2017

        

Consolidated net income:

        

Historical (4)

   $ 1,659     $ 1,659     $ 1,659     $ 1,659  

Income on adjusted net proceeds

     363       433       504       586  

Employee stock ownership plan (2)

     (58     (68     (78     (90

Shares granted under stock-based benefit plans (3)

     (145     (170     (196     (225

Options granted under stock-based benefit plans (5)

     (65     (77     (88     (101
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net income

   $ 1,754     $ 1,777     $ 1,801     $ 1,829  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Historical

   $ 0.37     $ 0.31     $ 0.27     $ 0.24  

Income on net proceeds

     0.08       0.08       0.08       0.08  

Employee stock ownership plan (2)

     (0.01     (0.01     (0.01     (0.01

Shares granted under stock-based benefit plans (3)

     (0.03     (0.03     (0.03     (0.03

Options granted under stock-based benefit plans (5)

     (0.01     (0.01     (0.01     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma earnings per share

   $ 0.40     $ 0.34     $ 0.30     $ 0.27  
  

 

 

   

 

 

   

 

 

   

 

 

 

Offering price to pro forma earnings per share

     25.00x       29.41x       33.33x       37.04x  

Number of shares used in earnings per share calculations (2)

     4,499,070       5,293,024       6,086,978       7,000,024  

At December 31, 2017

        

Stockholders’ equity:

        

Historical (4)

   $ 38,994     $ 38,994     $ 38,994     $ 38,994  

Estimated net proceeds

     19,070       22,700       26,330       30,505  

Capitalization of 1895 Bancorp of Wisconsin, MHC

     (100     (100     (100     (100

Stock contribution to foundation

     468       550       633       727  

After tax cost of foundation

     (449     (514     (579     (653

Common stock acquired by employee stock ownership plan (2)

     (1,833     (2,156     (2,479     (2,851

Common stock acquired by stock-based benefit plans (3)

     (916     (1,078     (1,240     (1,426
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma stockholders’ equity (6)

   $ 55,234     $ 58,396     $ 61,559     $ 65,196  
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma tangible stockholders’ equity

   $ 55,234     $ 58,396     $ 61,559     $ 65,196  
  

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ equity per share:

        

Historical

   $ 8.34     $ 7.09     $ 6.17     $ 5.36  

Estimated net proceeds

     4.08       4.13       4.16       4.19  

Capitalization of 1895 Bancorp of Wisconsin, MHC

     (0.02     (0.02     (0.02     (0.01

Shares issued to foundation

     0.10       0.10       0.10       0.10  

After tax cost of foundation

     (0.10     (0.09     (0.09     (0.09

Common stock acquired by employee stock ownership plan (2)

     (0.39     (0.39     (0.39     (0.39

Common stock acquired by stock-based benefit plans (3)

     (0.20     (0.20     (0.20     (0.20
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma stockholders’ equity per share (3)(6)

   $ 11.81     $ 10.62     $ 9.73     $ 8.96  
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma tangible stockholders’ equity per share

   $ 11.81     $ 10.62     $ 9.73     $ 8.96  
  

 

 

   

 

 

   

 

 

   

 

 

 

Offering price as a percentage of pro forma stockholders’ equity per share

     84.67     94.16     102.77     111.61

Offering price as a percentage of pro forma tangible stockholders’ equity per share

     84.67     94.16     102.77     111.61

Number of shares outstanding for pro forma equity per share calculations

     4,675,000       5,500,000       6,325,000       7,273,750  

(footnotes begin on following page)

 

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Table of Contents
(1)

As adjusted to give effect to a 15% increase in the number of shares outstanding after the offering, which could occur due to an increase in the maximum of the independent valuation as a result of demand for the shares or changes in market conditions following the commencement of the offering.

(2)

It is assumed that 3.92% of the shares outstanding following the offering will be purchased in the offering by the employee stock ownership plan at a price of $10.00 per share. For purposes of this table, the funds used to acquire such shares are assumed to have been borrowed by the employee stock ownership plan from 1895 Bancorp of Wisconsin, Inc. The amount to be borrowed is reflected as a reduction of stockholders’ equity. PyraMax Bank, FSB intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the principal and interest requirement of the debt. PyraMax Bank, FSB’s total annual payment of the employee stock ownership plan debt is based upon 25 equal annual installments of principal and interest. The pro forma net earnings information makes the following assumptions: (i) PyraMax Bank, FSB’s contribution to the employee stock ownership plan is equivalent to the debt service requirement for the period presented and was made at the end of the period; (ii) the employee stock ownership plan acquires 183,300, 215,600, 247,900 and 285,100 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range; (iii) 7,330, 8,624, 9,918 and 11,405 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range (based on a 25-year loan term), were committed to be released during the year ended December 31, 2017 at an average fair value equal to the price for which the shares are sold in the offering; and (iv) only the employee stock ownership plan shares committed to be released were considered outstanding for purposes of the net earnings per share calculations, resulting in a reduction from total outstanding shares (which is also the number of shares outstanding for pro forma equity per share calculations) of 4,491,740, 5,284,400, 6,077,060 and 6,988,619 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range, to determine the number of shares outstanding for earnings per share calculations.

(3)

Gives effect to one or more stock-based benefit plans expected to be adopted following the offering. We have assumed that these plans acquire a number of shares of common stock equal to 1.96% of the shares issued in the reorganization and offering (including shares issued to 1895 Bancorp of Wisconsin, MHC) either through open market purchases or from authorized but unissued shares of common stock or treasury stock of 1895 Bancorp of Wisconsin, Inc., if any. Funds used by the stock-based benefit plans to purchase the shares will be contributed to the plan by 1895 Bancorp of Wisconsin, Inc. In calculating the pro forma effect of the stock-based benefit plans, it is assumed that the shares were acquired by the plan in open market purchases at the beginning of the year presented for a purchase price equal to the price for which the shares are sold in the offering, and that 20% of the amount contributed was an amortized expense (based upon a five-year vesting period) during the year ended December 31, 2017. The actual purchase price of the shares granted under the stock-based benefit plans may not be equal to the subscription price of $10.00 per share. If shares are acquired from the issuance of authorized but unissued shares of common stock of 1895 Bancorp of Wisconsin, Inc., there would be a dilutive effect of up to 1.93% on the ownership interest of persons who purchase common stock in the offering. The above table shows pro forma net income per share and pro forma stockholders’ equity per share, assuming all the shares to fund the stock-based benefit plans are obtained from authorized but unissued shares.

(4)

Derived from PyraMax Bank, FSB’s audited December 31, 2017 financial statements included elsewhere in this prospectus.

(5)

Gives effect to one or more stock-based benefit plans expected to be adopted following the offering. We have assumed that options will be granted to acquire common stock equal to 4.90% of the shares of common stock issued in the reorganization and offering (including shares of common stock issued to 1895 Bancorp of Wisconsin, MHC and shares of common stock contributed to the charitable foundation). In calculating the pro forma effect of the stock-based benefit plans, it is assumed that the exercise price of the stock options and the trading price of the stock at the date of grant were $10.00 per share, the estimated grant-date fair value pursuant to the application of the Black-Scholes option pricing model was $3.00 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options, and that 25% of the amortization expense (the assumed portion relating to options granted to directors) resulted in a tax benefit using an assumed tax rate of 21.0%. Under the above assumptions, the adoption of stock-based benefit plans will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. The actual exercise price of the stock options may not be equal to the $10.00 price per share. If a portion of the shares issued to satisfy the exercise of options under stock-based benefit plans are obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share will decrease. This will also have a dilutive effect of up to 4.67% on the ownership interest of persons who purchase common stock in the offering.

(6)

The retained earnings of PyraMax Bank, FSB will continue to be substantially restricted after the offering. See “Regulation and Supervision—Federal Banking Regulation.”

 

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Table of Contents

COMPARISON OF VALUATION AND PRO FORMA INFORMATION

WITH AND WITHOUT THE CHARITABLE FOUNDATION

As reflected in the table below, if the charitable foundation is not established and funded in connection with the reorganization and offering, a greater number of shares of common stock would be sold in the offering. At the minimum, midpoint, maximum, and adjusted maximum of the valuation range, the amount of the stock sold in the offering is $20.6 million, $24.2 million, $27.8 million and $32.0 million, respectively, with the charitable foundation, as compared to $21.0 million, $24.8 million, $28.5 million and $32.7 million, respectively, without the charitable foundation. However, due to the size of the contribution to the charitable foundation, Keller & Company determined that the additional capital that would be received, assuming the offering occurs without the charitable foundation, was immaterial to the pro forma valuation; and accordingly, the valuation is unchanged with or without the charitable foundation.

For comparative purposes only, set forth below are certain pricing ratios, financial data and ratios at and for the six months ended June 30, 2018, at the minimum, midpoint, maximum, and adjusted maximum of the offering range, assuming the offering was completed at the beginning of the period, with and without the charitable foundation.

 

     Minimum of Offering Range     Midpoint of Offering Range     Maximum of Offering Range     Adjusted Maximum of
Offering Range
 
     With
Foundation
    Without
Foundation
    With
Foundation
    Without
Foundation
    With
Foundation
    Without
Foundation
    With
Foundation
    Without
Foundation
 
     (Dollars in thousands, except per share amounts)  

Estimated offering amount

   $ 20,570     $ 21,038     $ 24,200     $ 24,750     $ 27,830     $ 28,463     $ 32,005     $ 32,732  

Pro forma market capitalization

     46,750       46,750       55,000       55,000       63,250       63,250       72,738       72,738  

Total assets

     498,857       499,306       502,020       502,533       505,182       505,760       508,818       509,472  

Total liabilities

     444,927       444,926       444,928       444,927       444,927       444,927       444,927       444,927  

Pro forma shareholders’ equity

     53,930       54,380       57,092       57,606       60,255       60,833       63,892       64,545  

Pro forma net income (1)

     (276     (269     (263     (256     (252     (244     (239     (230

Pro forma shareholders’ equity per share

     11.53       11.63       10.38       10.47       9.52       9.61       8.77       8.87  

Pro forma net income per share

     (0.07     (0.07     (0.06     (0.06     (0.05     (0.05     (0.05     (0.05

Pro forma pricing ratios:

                

Offering price as a percentage of pro forma shareholders’ equity per share

     86.73     85.97     96.34     95.48     105.04     103.97     114.03     112.74

Offering price as a percentage of pro forma price to earnings

     (71.43 )%      (71.43 )%      (83.33 )%      (83.33 )%      (100.00 )%      (100.00 )%      (100.00 )%      (100.00 )% 

Offering price to pro forma assets per share

     9.37     9.36     10.96     10.94     12.52     12.51     14.30     14.28

Pro forma financial ratios:

                

Return on assets (annualized)

     (0.11 )%      (0.11 )%      (0.10 )%      (0.10 )%      (0.10 )%      (0.10 )%      (0.09 )%      (0.09 )% 

Return on equity (annualized)

     (1.03 )%      (0.99 )%      (0.92 )%      (0.89 )%      (0.84 )%      (0.80 )%      (0.75 )%      (0.71 )% 

Equity to assets

     10.81     10.89     11.37     11.46     11.93     12.03     12.56     12.67

(footnote begin on following page)

 

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(1)

The following table shows the estimated after-tax expense associated with the contribution to the charitable foundation, as well as pro forma net (loss), pro forma net (loss) per share, pro forma (loss) on assets and pro forma (loss) on shareholders’ equity assuming the contribution to the charitable foundation was expensed during the six months ended June 30, 2018.

 

     Minimum of
Offering Range
    Midpoint of
Offering Range
    Maximum of
Offering Range
    Adjusted
Maximum of
Offering Range
 

After-tax expense of stock and cash contribution to foundation

   $ 449,000     $ 514,000     $ 579,000     $ 653,000  

Pro forma net (loss)

   $ (276,000   $ (263,000   $ (252,000   $ (239,000

Pro forma net (loss) per share

   $ (0.07   $ (0.06   $ (0.05   $ (0.05

Offering price to pro forma net income (loss) per share

     (71.43 )x      (83.33 )x      (100.00 )x      (100.00 )x 

Pro forma (loss) on assets (annualized)

     (0.11 )%      (0.10 )%      (0.10 )%      (0.09 )% 

Pro forma (loss) on equity (annualized)

     (1.02 )%      (0.92 )%      (0.83 )%      (0.74 )% 

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS OF PYRAMAX BANK, FSB

This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited and unaudited financial statements, which appear beginning on page F-1 of this prospectus. You should read the information in this section in conjunction with the business and financial information regarding PyraMax Bank, FSB provided in this prospectus.

Overview

PyraMax Bank, FSB is a federally chartered mutual savings bank headquartered in Greenfield, Wisconsin. PyraMax Bank, FSB was established in 1895 as South Milwaukee Savings and Loan Association and has operated continuously in the Milwaukee metropolitan area since that time. In 1993, the bank changed its name to South Milwaukee Savings Bank, S.A. In May 2000, a merger between South Milwaukee Savings Bank and Mitchell Savings Bank officially formed PyraMax Bank, SSB. The bank changed to a federal savings bank charter in 2003, changing its name to PyraMax Bank, FSB.

From our founding in 1895, we operated as a traditional thrift institution, offering primarily residential mortgage loans and savings accounts, supplemented with multi-family and commercial real estate, multi-family and commercial business loans. In 2007, Richard Hurd was promoted to President and Chief Executive Officer of PyraMax Bank, FSB. Mr. Hurd began shifting PyraMax Bank, FSB’s focus to include more business-oriented products and services. In 2010, PyraMax Bank, FSB hired Charles Mauer as its Chief Credit Officer, continuing our increased focus on business-oriented lending.

Commercial real estate growth has been the primary source of recent loan growth, and commercial business loan originations have also been emphasized.

We conduct our operations from our six full-service banking offices in Milwaukee County, our two full-service banking offices in Waukesha County and our full-service banking office in Ozaukee County Wisconsin. We have entered into an agreement to sell our branch located at 1605 West Mitchell Street, Milwaukee, Wisconsin, and anticipate completing that branch sale in the first quarter of 2019, pending regulatory approval. We consider our primary lending market area to be Milwaukee, Waukesha and Ozaukee Counties, however, we occasionally make loans secured by properties located outside of our primary lending market, usually to borrowers with whom we have an existing relationship and who have a presence within our primary market.

At June 30, 2018, we had total assets of $482.6 million, total deposits of $404.6 million and total equity of $37.7 million. We had a net loss of $323,000 for the six months ended June 30, 2018 and a net income of $1.7 million for the year ended December 31, 2017.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate loans, commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans), commercial loan (which includes commercial and industrial loans) and consumer loans.

Subject to market conditions, we expect to increase our focus on originating commercial real estate and commercial business loans in an effort to continue to diversify our overall loan portfolio, increase the overall yield earned on our loans and assist in managing interest rate risk. We also invest in securities, which have historically consisted of mortgage-backed securities issued by U.S. government sponsored enterprises, state and municipal securities, asset-backed securities and corporate collateralized mortgage-backed securities. We offer a variety of deposit accounts, including checking accounts, savings accounts and certificate of deposit accounts. Additionally, we have used borrowings, primarily advances from the Federal Home Loan Bank of Chicago, to fund our operations.

PyraMax Bank, FSB is subject to comprehensive regulation and examination by its primary federal regulator, the Office of the Comptroller of the Currency.

Our corporate office is located at 7001 West Edgerton Avenue, Greenfield, Wisconsin 53220, and our telephone number at this address is (414) 421-8200. Our website address is www.pyramaxbank.com. Information on our website is not and should not be considered a part of this prospectus.

 

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Business Strategy

Our current business strategy consists of the following:

 

   

Grow our balance sheet and improve profitability. Given our attractive market area, we believe we are well-positioned to increase the size of our balance sheet without a proportional increase in overhead expense or operating risk. Accordingly, we intend to increase, on a managed basis, our assets and liabilities, particularly loans and deposits. As we grow our assets, particularly higher-yielding commercial loans, while controlling our expenses, we anticipate improving our earnings.

 

   

Grow our loan portfolio prudently with a focus on diversifying the portfolio, particularly in commercial real estate and commercial lending. Our principal business activity historically has been the origination of residential mortgage loans, supplemented with commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans). We intend to retain our presence as a mortgage lender in our market area and increase our focus on originating commercial real estate and commercial loans (which includes commercial and industrial loans). The capital we are raising in the offering will support an increase in our lending limits, which will enable us to originate larger loans to new and existing customers.

Increasing our commercial real estate and business loans involves risk, as described in “Risk Factors – Risks Related to Our Business – We have a substantial amount of commercial real estate and commercial loans, and intend to continue to increase originations of these types of loans. These loans involve credit risks that could adversely affect our financial condition and results of operations” and “—Our portfolio of loans with a higher risk of loss is increasing, which may lead to additional provisions for loan losses or charge-offs, which would reduce our profits or cause losses.”

 

   

Continue to increase core deposits, with an emphasis on low cost demand deposits. We seek core deposits to provide a stable source of funds to support loan growth at costs consistent with improving our net interest rate spread and margin. Core deposits also help us maintain loan-to-deposit ratios at levels consistent with regulatory expectations. We consider our core deposits to include checking accounts, money market accounts and statement savings. In particular, our Treasury Management unit focuses on generating and retaining business deposits, which assists in generating fee income. Core deposits have increased to $205.8 million at June 30, 2018, from $188.9 million at December 31, 2015.

 

   

Manage credit risk to maintain a low level of non-performing assets. We believe strong asset quality is a key to our long-term financial success. Our strategy for credit risk management focuses on having an experienced team of credit professionals, well-defined policies and procedures, appropriate loan underwriting criteria and active credit monitoring. In recent years we have conducted an extensive review of, and have enhanced, our credit, underwriting and loan processing policies and procedures. Our nonperforming assets to total assets ratio was 0.38% at June 30, 2018, compared to 0.40% at December 31, 2017 and 0.67% at December 31, 2016. At June 30, 2018, the majority of our nonperforming assets were related to resi