Summary of Significant Accounting Policies

Principles of Consolidation

The financial statements include the accounts of EWSB Bancorp, Inc. and its subsidiary, East Wisconsin Savings Bank. All significant intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of reporting cash flows in the financial statements, cash and cash equivalents include cash on hand and interest-bearing and non-interest-bearing deposits in other financial institutions.

Debt Securities

Debt Securities

Debt Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income or loss, net of tax. Amortization of premiums and accretion of discounts are recognized in interest income using the interest method over the estimated lives or earliest call date of the debt securities, as applicable. Gains and losses on the sales of debt securities are recorded on the trade date and determined using the specific-identification method.

Transfers of investments into the held to maturity category from the available for sale category are made at fair value at the date of transfer. The net unrealized gains (losses), net of tax, are retained in other comprehensive income, and the carrying value of the held to maturity securities are amortized over the life of the securities in a manner consistent with the amortization of a premium or discount.

Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for credit losses, and any deferred fees or costs on originated loans. Interest on loans is accrued and credited to income based on the unpaid principal balance. Accrued interest receivable totaled $535,196 and $472,368 on December 31, 2024 and 2023, respectively and is reported in accrued interest receivable and other assets on the consolidated balance sheets and is excluded from the estimate of credit losses. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Accrual of interest income on all loans is discontinued and the respective loan is placed on non-accrual status at the time it is 90 days delinquent. Past-due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Non-accrual loans are individually evaluated for impairment. The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication the borrower may be unable to make payments as they become due.

All interest accrued but not received for loans placed on non-accrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Credit Losses

Allowance for Credit Losses

The allowance for credit losses (“ACL”) is an estimate of expected credit losses on the loans held for investment, held-to-maturity debt securities, unfunded loan commitments and available for sale debt securities portfolios.

Allowance for Credit Losses on Unfunded Loan Commitments

Allowance for Credit Losses on Unfunded Loan Commitments

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk by a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The ACL related to off-balance sheet credit exposures is estimated at each balance sheet date under the CECL model. The estimate for ACL on unfunded loan commitments includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

Allowance for Credit Losses on Securities Available for Sale

Allowance for Credit Losses on Securities Available for Sale

For available for sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will sell, the security before recovery of its amortized cost basis. If either of the aforementioned criteria exists, the Company will record an ACL related to securities available-for-sale with an offsetting entry to the provision for credit losses on securities on the income statement. If neither of these criteria exist, the Company will evaluate the securities individually to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors, such as market interest rate fluctuations.

In evaluating securities available for sale for potential credit loss, the Company considers many factors, including the financial condition and near-term prospects of the issuer, which for debt securities considers external credit ratings and recent downgrades; and its ability and intent to hold the security for a period of time sufficient for a recovery in value. The Company also considers the extent to which the securities are issued by the federal government or its agencies, and any guarantee of issued amounts by those agencies. The amount of the credit loss related to other factors is recognized in other comprehensive income (loss).

Accrued interest receivable on securities available for sale is excluded from the amortized cost basis of those securities for the purpose of determining the allowance for credit losses.

Transfers of Financial Assets

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Land Held for Sale

Land Held for Sale

Property owned by the Company for which its intended use has changed from operating purpose to being sold is transferred at the lower of cost or market value less estimated costs to sell. The cost of carrying the property and any decrease in market value after the transfer date are charged to operating expenses as incurred.

Federal Home Loan Bank ("FHLB") Stock

Federal Home Loan Bank ("FHLB") Stock

FHLB stock is carried at cost which approximates fair value. The Company is required to hold the stock as a member of the FHLB and transfer of the stock is substantially restricted. The stock is pledged as collateral for outstanding FHLB advances. FHLB stock is evaluated for impairment on an annual basis.

Loan Commitments and Related Financial Instruments

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Advertising

Advertising

Advertising costs are expensed as incurred.

Income Taxes

Income Taxes

Deferred taxes are recognized using the asset/liability method. Deferred tax assets are recognized for deductible temporary differences, operating loss, and tax credit carryforwards; deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the financial statement amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the financial statements. Interest and penalties related to unrecognized tax benefits are classified as income taxes.

Employee Stock Ownership Plan

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Employee Stock Ownership Plan

The ESOP shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Balance Sheets. As shares are committed to be released from collateral, the Bank reports compensation expense equal to the average market price of shares during the year, and the shares become outstanding for basic net income per common share computations. Dividends on allocated ESOP shares reduce retained earnings, dividends on unearned ESOP shares reduce the ESOP’s debt and accrued interest.

Operating Segments

Operating Segments

On November 27, 2023, the FASB issued ASU 2023-07, “Segment Reporting (ASC280): Improvements to Reportable Segment Disclosures”, intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Provisions in the amendment include: (1) Requirement that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provide to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”); (2) Requirement that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of it composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss; (3) Requirement that a public entity provide all

annual disclosures about a reportable segment’s profit or loss and assets currently required by ASC 280 in interim periods; (4) Clarification that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements; (5) Requirement that a public entity disclose the titles and position of the CODM and explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources; and (6) Requirement that a public entity that has a single reportable segment provide all the disclosures by the amendments in the update and all existing segment disclosures in ASC 280.

The amendments in the update are effective for the fiscal years beginning after December 15, 2023, including interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. For public business entities, amendments in the update should be applied retrospectively to all periods presented in the financial statements, and upon transition the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company adopted this standard effective January 1, 2024, and it did not have a material impact on the consolidated financial statements.

While the chief operating decision-makers monitor revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis. Discrete financial information is not available other than on a Company-wide basis. Accordingly, all financial service operations are considered by management to be aggregated in one reportable operating segment.