10-Q: EWSB Bancorp Reports Q2 Loss Amid Capital Ratio Focus

EWSB Bancorp, Inc. reported a net loss for the second quarter of 2026, with total assets decreasing slightly, while also highlighting efforts to bolster regulatory capital.

Summary

• EWSB Bancorp, Inc. reported a net loss of $314,524 for the three months ended June 30, 2026, and a net loss of $679,304 for the six months ended June 30, 2026.
• Total assets decreased by 1.8% to $266.0 million as of June 30, 2026, from $271.0 million at December 31, 2025.
• Net interest income increased by 8.7% for the three-month period and 15.0% for the six-month period, driven by improved yields and lower funding costs.
• The company's Tier 1 capital ratio to average assets was 7.1% as of June 30, 2026, which is below the board's designated minimum of 8.0%, though still above regulatory requirements.
• The bank's net worth ratio of 5.77% as of June 30, 2026, fell below the state of Wisconsin's minimum requirement of 6.0%.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as slightly negative due to the reported net loss for the period and the bank's net worth ratio falling below the state-mandated minimum, despite improvements in net interest income and capital ratios exceeding regulatory minimums.

Positives

• Net interest income increased by 8.7% to $1.2 million for the three months ended June 30, 2026, and by 15.0% to $2.4 million for the six months ended June 30, 2026.
• The bank's Tier 1 capital ratio to risk-weighted assets was 11.8% as of June 30, 2026, exceeding the regulatory requirement of 6.0%.
• Total capital to risk-weighted assets was 12.6% as of June 30, 2026, exceeding the regulatory requirement of 8.0%.
• Noninterest income increased by 11.2% to $400,333 for the three months ended June 30, 2026.
• Gain on sale of mortgage loans increased significantly by 78.3% for the three-month period and 126.6% for the six-month period.
• Total deposits increased by 3.5% to $224.9 million at June 30, 2026, from $217.2 million at December 31, 2025.

Negatives

• The company reported a net loss of $314,524 for the three months ended June 30, 2026, and $679,304 for the six months ended June 30, 2026.
• The bank's net worth ratio of 5.77% as of June 30, 2026, was below the state of Wisconsin's minimum requirement of 6.0%.
• The bank's Tier 1 capital ratio to average assets was 7.1% as of June 30, 2026, which is below the board's designated minimum of 8.0%.
• Total assets decreased by 1.8% to $266.0 million at June 30, 2026, from $271.0 million at December 31, 2025.
• Securities held-to-maturity decreased by 14.4% to $31.2 million at June 30, 2026.
• Provision for credit losses increased to $43,000 for the three months ended June 30, 2026, from $6,000 in the prior year period.

Risks

• Vulnerability to interest rate fluctuations impacting net interest margins and the fair value of financial instruments.
• General economic conditions, including potential recession, inflation, and supply chain disruptions, could negatively affect borrowers and increase loan delinquencies.
• Changes in the level and direction of loan delinquencies and write-offs, and the adequacy of the allowance for credit losses.
• Risks associated with cybersecurity threats, data breaches, and other operational or security system failures.
• Fluctuations in real estate values and residential real estate market conditions.
• Competition among financial institutions.
• Changes in laws or government regulations affecting financial institutions.

Future Outlook

The filing does not contain specific forward-looking guidance on future financial performance. However, it discusses strategies to manage interest rate risk, maintain liquidity, and grow deposits, implying a focus on operational stability and prudent financial management.

Management Comments

• Management believes the Bank meets all applicable statutory capital adequacy requirements as of June 30, 2026.
• Management has not changed its significant accounting and reporting policies from those disclosed in the audited financial statements for the year ended December 31, 2025.
• Management has the ability and intent to hold the securities for the foreseeable future and no declines are deemed to be related to credit losses for AFS securities.

Industry Context

StockSavvy.ai notes that EWSB Bancorp operates in a challenging banking environment characterized by fluctuating interest rates and evolving regulatory capital requirements. The company's focus on deposit growth and managing interest rate risk aligns with industry-wide strategies to maintain profitability and stability.

Comparison to Industry Standards

• The bank's Tier 1 capital ratio to risk-weighted assets (11.8%) and total capital ratio to risk-weighted assets (12.6%) as of June 30, 2026, exceed the minimum requirements for 'well-capitalized' status (4.5% and 8.0%, respectively).
• However, the bank's Tier 1 capital ratio to average assets (7.1%) falls below the board's internal target of 8.0%, indicating a potential area for improvement.
• The bank's net worth ratio (5.77%) is below the state of Wisconsin's minimum requirement of 6.0%, which is a significant concern compared to state-chartered savings banks.
• The net interest margin of 1.92% for the six months ended June 30, 2026, shows improvement but needs to be compared against peer group performance for a full assessment.

Legal Proceedings

• The Company is subject to various legal actions arising in the normal course of business, which management believes will not have a material adverse effect on financial condition or results of operations.

Related Party Transactions

• Loans to directors, executive officers, and their affiliates totaled $13,448 at June 30, 2026.
• Deposits from directors, executive officers, and their affiliates totaled $3,504,286 at June 30, 2026.

Stakeholder Impact

• Shareholders experienced dilution from the recent stock issuances.
• The net loss and below-minimum net worth ratio could negatively impact shareholder confidence.
• Customers may be affected by the bank's focus on deposit growth and potential adjustments to deposit rates.
• Creditors and counterparties may assess the bank's financial health based on its capital ratios and net worth.

Next Steps

• Continue to manage interest rate risk through various strategies including maintaining capital levels, liquidity, originating shorter-term or adjustable-rate loans, and managing wholesale funding.
• Focus on increasing core deposits and managing certificate of deposit terms.
• Emphasize asset quality to maximize interest-earning assets.
• Monitor and manage liquidity on a daily basis.
• Address the net worth ratio falling below the state-mandated minimum.

Key Dates

Recommendation

The company is showing signs of operational improvement with increased net interest income and a strong capital position relative to regulatory minimums. However, the reported net loss and the breach of the state-mandated net worth ratio are significant concerns that warrant a cautious 'hold' stance until these issues are resolved and a clear path to profitability is demonstrated.

Keywords

EWSB Bancorp, Quarterly Report, Financial Statements, Net Interest Income, Allowance for Credit Losses, Capital Ratios, Interest Rate Risk, Deposits