ThZeal - The Zeal

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 000-56269

MARATHON BANCORP, INC.

(Exact name of registrant as specified in its charter)


Maryland		86-2191258
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



500 Scott Street, Wausau, Wisconsin		54403
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (715) 845-7331

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ⌧ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ⌧ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	⌧	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

As of November 12, 2024, there were 2,134,487 shares of the registrant’s common stock issued and outstanding.

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MARATHON BANCORP, INC.

INDEX


		PAGE NO.
PART I - FINANCIAL INFORMATION		2

Item 1.	Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and June 30, 2024	2
	Consolidated Statements of Income for the Three months ended September 30, 2024 and 2023 (Unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) for the Three months ended September 30, 2024 and 2023 (Unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Three months ended September 30, 2024 and 2023 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Three months ended September 30, 2024 and 2023 (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44

PART II - OTHER INFORMATION		44

Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other information	45
Item 6.	Exhibits	46

SIGNATURES		47

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PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MARATHON BANCORP, INC.

CONSOLIDATED BALANCE SHEETS


	Unaudited		June 30,
	September 30, 2024		2024
Assets
Cash and due from banks	$	1,958,034	$	2,977,438
Federal funds sold		13,064,000		7,495,000
Cash and cash equivalents		15,022,034		10,472,438
Interest bearing deposits held in other financial institutions		319,260		199,888
Debt securities available for sale		6,599,610		6,606,761
Debt securities held to maturity, at amortized cost (fair value $421,745 and $394,081)		501,490		510,276
Loans, net of allowance of $1,642,056 and $1,797,116, respectively		176,155,458		183,447,633
Interest receivable		532,670		597,768
Foreclosed assets, net		1,397,460		1,397,460
Investment in restricted stock, at cost		1,329,413		1,329,413
Cash surrender value life insurance		9,039,781		8,972,785
Premises and equipment, net		4,011,116		4,085,752
Deferred tax assets		510,585		580,340
Other assets		1,031,466		1,033,499
Total assets	$	216,450,343	$	219,234,013
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing	$	23,148,856	$	25,936,461
Interest bearing		149,016,412		147,044,293
Total deposits		172,165,268		172,980,754
Federal Home Loan Bank (FHLB) advances		10,000,000		13,000,000
Other liabilities		2,697,828		1,958,475
Total liabilities		184,863,096		187,939,229
Commitments and Contingent Liabilities ( see note 14)		—		—
Stockholders' Equity
Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued		—		—
Common stock, $.01 par value, 20,000,000 shares authorized, 2,135,412 and 2,140,412 shares issued and outstanding at September 30, 2024 and June 30, 2024, respectively		20,920		20,970
Additional paid-in capital		7,251,607		7,254,534
Retained earnings		25,698,588		25,523,681
Unearned ESOP shares, at cost		(742,873)		(751,613)
Accumulated other comprehensive loss		(640,995)		(752,788)
Total stockholders' equity		31,587,247		31,294,784
Total liabilities and stockholders' equity	$	216,450,343	$	219,234,013

See accompanying notes to the consolidated financial statements.

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MARATHON BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited



	Three Months		Three Months
	Ended September 30,		Ended September 30,
	2024		2023
Interest Income
Loans, including fees	$	2,075,879	$	2,180,645
Debt securities		46,463		57,963
Other		189,855		166,529
Total interest income		2,312,197		2,405,137
Interest Expense
Deposits		771,355		762,801
Borrowings and other		120,748		79,016
Total interest expense		892,103		841,817
Net Interest Income		1,420,094		1,563,320
Provision for (Recovery of) Credit Losses		(155,000)		41,000
Net Interest Income After Provision for (Recovery of) Credit Losses		1,575,094		1,522,320
Non-Interest Income
Service charges on deposit accounts		31,639		31,279
Mortgage banking income		87,913		130,604
Increase in cash value of life insurance		66,996		59,974
Other income		6,686		6,382
Total non-interest income		193,234		228,239
Non-Interest Expenses
Salaries and employee benefits		835,188		772,790
Occupancy and equipment expenses		240,457		169,822
Data processing and office		114,734		109,644
Professional fees		156,619		170,736
Marketing expenses		14,712		15,189
Foreclosed assets, net		17,572		13,620
Other expenses		173,540		211,082
Total non-interest expenses		1,552,822		1,462,883
Income Before Income Taxes		215,506		287,676
Provision for Income Taxes		40,599		201,479
Net Income	$	174,907	$	86,197

Net income per common share-basic		$0.09		$0.04
Net income per common share-diluted		$0.09		$0.04
Weighted average number of common shares outstanding-basic		2,035,131		2,043,296
Weighted average number of common shares outstanding-diluted		2,035,131		2,046,349

See accompanying notes to the consolidated financial statements.

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MARATHON BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited


	Three Months Ended
	September 30,
	2024		2023
Net Income	$	174,907	$	86,197
Other comprehensive income (loss)
Unrealized gains (losses) on available for sale debt securities
Unrealized holding gains (losses) arising during the period		143,828		(118,316)
Tax effect		(30,204)		24,837
Net amount		113,624		(93,479)
Reclassification adjustment for amortization of stranded tax effect from change in tax legislation (b)		(3,088)		—
Amortization of unrealized losses on debt securities transferred from available for sale to held to maturity (a)		1,257		1,539
Other comprehensive income (loss)		111,793		(91,940)
Comprehensive Income (Loss)	$	286,700	$	(5,743)

(a)

The reclassification adjustment is reflected in the Consolidated Statement of Income as Interest Income - Debt Securities.

(b)

The reclassification is included in the Consolidated Statements of Income as Other Expenses.

See accompanying notes to the consolidated financial statements.

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MARATHON BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Unaudited


											Accumulated
					Additional				Unearned		Other
	Preferred		Common		Paid-in		Retained		ESOP		Comprehensive
	Stock		Stock		Capital		Earnings		Shares		Loss		Total
Balance, July 1, 2024	$	—	$	20,970	$	7,254,534	$	25,523,681	$	(751,613)	$	(752,788)	$	31,294,784
Net income		—		—		—		174,907		—		—		174,907
Other comprehensive income		—		—		—		—		—		111,793		111,793
ESOP shares committed to be released (874 shares)		—		—		1,747		—		8,740		—		10,487
Stock based compensation		—		—		39,776		—		—		—		39,776
Purchase and retirement of common stock shares (5,000 shares)		—		(50)		(44,450)		—		—		—		(44,500)
Balance, September 30, 2024	$	—	$	20,920	$	7,251,607	$	25,698,588	$	(742,873)	$	(640,995)	$	31,587,247


												Accumulated
						Additional				Unearned		Other
		Preferred		Common		Paid-in		Retained		ESOP		Comprehensive
		Stock		Stock		Capital		Earnings		Shares		Loss		Total
Balance, July 1, 2023	$	—	$	21,141	$	7,252,506	$	25,577,300	$	(786,572)	$	(784,857)	$	31,279,518
Cumulative effect adjustment for ASU 2016-13 Current Expected Credit Losses		—		—		—		133,375		—		—		133,375
Net income		—		—		—		86,197		—		—		86,197
Other comprehensive loss		—		—		—		—		—		(91,940)		(91,940)
ESOP shares committed to be released (874 shares)		—		—		1,716		—		8,740		—		10,456
Stock based compensation		—		—		39,775		—		—		—		39,775
Balance, September 30, 2023	$	—	$	21,141	$	7,293,997	$	25,796,872	$	(777,832)	$	(876,797)	$	31,457,381

See accompanying notes to the consolidated financial statements.

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MARATHON BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


	Three Months Ended
	September 30,
	2024		2023
Operating Activities
Net income	$	174,907	$	86,197
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		70,118		44,825
Provision for (recovery of) credit losses		(155,000)		41,000
Stock based compensation		39,775		39,775
ESOP expense		10,487		10,456
Net amortization of discounts and premiums on debt securities		13,919		24,044
Amortization of deferred loan fees, net		(13,100)		(11,561)
Net gain on sale of loans		(47,069)		(65,867)
Net change in deferred taxes		36,463		139,805
Earnings on cash value of life insurance		(66,996)		(59,974)
Decrease in interest receivable		65,098		78,537
Originations of loans held for sale		(1,815,159)		(2,601,000)
Proceeds from loans held for sale		1,862,228		2,666,867
Net change in operating leases		1,011		649
Net change in other assets		2,033		(362,649)
Net change in other liabilities		766,525		335,577
Net Cash Provided by Operating Activities		945,240		366,681
Investing Activities
Net change in interest-bearing deposits in other financial institutions		(119,372)		(179,130)
Proceeds from maturities, calls and repayments of debt securities available for sale		136,854		153,377
Proceeds from maturities and calls of debt securities held to maturity		10,250		7,509
Increase in restricted stock		—		(45,569)
Net decrease in loans		7,460,275		196,279
Purchases of property and equipment		(23,665)		(1,647,636)
Net Cash Provided by (Used in) Investing Activities		7,464,342		(1,515,170)
Financing Activities
Net change in deposits		(815,486)		(8,646,179)
Proceeds from FHLB advances		—		5,000,000
Repayments of FHLB advances		(3,000,000)		—
Purchase and retirement of common stock		(44,500)		—
Net Cash Used in Financing Activities		(3,859,986)		(3,646,179)
Net Change in Cash and Cash Equivalents		4,549,596		(4,794,668)
Cash and Cash Equivalents, Beginning of Year		10,472,438		11,775,088
Cash and Cash Equivalents, End of Period	$	15,022,034	$	6,980,420
Supplemental Disclosure of Cash Flow Information
Cash payments for
Interest	$	1,127,013	$	771,411
Taxes		—		191,000

See accompanying notes to the consolidated financial statements.

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MARATHON BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1- Basis of Presentation

Marathon Bancorp, Inc. (the “Company”) is a Maryland chartered mid-tier stock holding company and was formed in connection with the conversion of Marathon Bank (the “Bank”) from a mutual to the mutual holding company form of organization in April 2021, and it is a subsidiary of Marathon MHC (the “Mutual Holding Company”), a Wisconsin chartered mutual holding company. The Mutual Holding Company received 1,226,223 shares, or 55.0%, of the Company’s issued stock at the time of the reorganization. In connection with the reorganization, Marathon Bancorp, Inc. sold 1,003,274 shares of common stock to the public at $10.00 per share, representing 45.0% of its outstanding shares of common stock at the time of the reorganization. The Mutual Holding Company activity is not included in the accompanying consolidated financial statements. Marathon Bank is a wholly owned subsidiary of the Company. The same directors and officers, who manage the Bank, also manage the Company and the Mutual Holding Company.

The Bank is a Wisconsin stock savings bank, which conducts its business through five facilities. The Bank operates as a full-service financial institution with a primary market area including, but not limited to, Marathon County and Ozaukee County, Wisconsin. Its primary deposit products are demand deposits, savings, and certificates of deposit; and its primary lending products are commercial real estate, commercial and industrial, construction, one-to-four-family residential, multi-family real estate and consumer loans. In addition, the Bank has two nonbank subsidiaries for the purpose of temporarily holding a foreclosed property pending the liquidation of this property and to hold the real estate of its branch in Brookfield, Wisconsin.

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences could be material to the financial statements. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for credit losses, valuation of deferred tax assets, and fair value of financial assets and liabilities.

In the opinion of management, all adjustments considered necessary for fair presentation have been included. Operating results for the three month period ended September 30, 2024 are not necessarily indicative of the results for the year ending June 30, 2025 or any other period. For further information, refer to the consolidated financial statements and notes thereto for the years ended June 30, 2024 and 2023 contained in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on September 26, 2024.

Recent Accounting Pronouncements

This section provides a summary description of recent ASUs issued by the FASB to the ASC that had or that management expects may have an impact on the consolidated financial statements issued upon adoption. The Company is classified as an emerging growth company and has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Effective dates reflect this election.

Recently Issued, But Not Yet Effective Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The updated guidance requires enhanced disclosures for significant expenses by reportable operating segments. The significant expense categories would be those regularly provided to the Company's chief operating decision-maker ("CODM") and included in an operating segment's measures of profit or loss. Other required disclosures include the composition of other segment items, the title and

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position of the CODM and an explanation on how the CODM evaluates and uses the reportable segment's performance. This guidance for segment reporting is effective for fiscal years beginning after December 15, 2023 and interim periods with fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will adopt the new standard for the annual reporting period beginning July 1, 2024 and for interim periods beginning July 1, 2025. The Company is not currently required to report segment information and, as such, does not anticipate that the updated guidance will have a significant impact on its consolidated financial statements.

In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements.

Note 2- Earnings Per Share

Basic net income per common share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating earnings per common share until they are committed to be released. Diluted earnings per share is adjusted for the dilutive effects of stock based compensation and is calculated using the treasury stock method. Set forth below is the calculation of earnings per share.


	Unaudited
	For the Three Months
	Ended September 30,
	2024		2023


Net income applicable to common stock	$	174,907	$	86,197

Average number of shares outstanding		2,109,855		2,121,516
Less: Average unallocated ESOP shares		74,724		78,220

Average number of common shares outstanding used to calculate basic earnings per share		2,035,131		2,043,296
Effect of dilutive restricted stock awards		-		3,053
Average number of common shares outstanding used to calculate diluted earnings per share		2,035,131		2,046,349

Earnings per common share:
Basic	$	0.09	$	0.04
Diluted		0.09		0.04

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Note 3- Debt Securities

The amortized cost and fair value of debt securities, with gross unrealized gains and losses, are as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
September 30, 2024
Available for sale debt securities
States and municipalities	$	689,657	$	501	$	(855)	$	689,303
Mortgage-backed		1,208,509		24,228		(48,533)		1,184,204
Corporate bonds		5,527,021		—		(800,918)		4,726,103
	$	7,425,187	$	24,729	$	(850,306)	$	6,599,610
Held to maturity debt securities
Mortgage-backed	$	501,490	$	—	$	(79,745)	$	421,745


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
June 30, 2024
Available for sale debt securities
States and municipalities	$	689,588	$	26	$	(4,026)	$	685,588
Mortgage-backed		1,347,975		22,728		(77,796)		1,292,907
Corporate bonds		5,538,606		—		(910,340)		4,628,266
	$	7,576,169	$	22,754	$	(992,162)	$	6,606,761
Held to maturity debt securities
Mortgage-backed	$	510,276	$	—	$	(116,195)	$	394,081

There is no allowance for credit losses on available for sale and held to maturity debt securities at September 30, 2024 and June 30, 2024. Securities with a carrying value of approximately $182,000 and $223,000 as of September 30, 2024 and June 30, 2024, respectively, were pledged to secure public deposits and debt.

The amortized cost and fair value of debt securities by contractual maturity at September 30, 2024, follows:


	Available for Sale Debt Securities				Held to Maturity Debt Securities
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
September 30, 2024
Due in one year or less	$	1,245,363	$	1,235,766	$	—	$	—
Due from more than one to five years		369,686		369,603		—		—
Due from more than five to ten years		4,601,629		3,810,037		—		—
		6,216,678		5,415,406		—		—
Mortgage-backed securities		1,208,509		1,184,204		501,490		421,745
	$	7,425,187	$	6,599,610	$	501,490	$	421,745

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There were no sales of available for sale debt securities during the three month periods ended September 30, 2024 and 2023. The following table shows the gross unrealized losses and fair value of the Company’s securities for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2024 and June 30, 2024:


	Less than 12 Months				12 Months or More				Total
	Gross				Gross				Gross
	Unrealized				Unrealized				Unrealized
	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
September 30, 2024
Available for sale debt securities
States and municipalities	$	—	$	—	$	(855)	$	354,116	$	(855)	$	354,116
Mortgage-backed		—		—		(48,533)		993,482		(48,533)		993,482
Corporate bonds		—		—		(800,918)		4,726,103		(800,918)		4,726,103
	$	—	$	—	$	(850,306)	$	6,073,701	$	(850,306)	$	6,073,701


	Less than 12 Months				12 Months or More				Total
	Gross				Gross				Gross
	Unrealized				Unrealized				Unrealized
	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
June 30, 2024
Available for sale debt securities
States and municipalities	$	(341)	$	119,311	$	(3,685)	$	351,251	$	(4,026)	$	470,562
Mortgage-backed		(128)		16,339		(77,668)		1,167,758		(77,796)		1,184,097
Corporate bonds		—		—		(910,340)		4,628,266		(910,340)		4,628,266
	$	(469)	$	135,650	$	(991,693)	$	6,147,275	$	(992,162)	$	6,282,925

There were no securities in an unrealized loss position in the less than 12 months category and 46 securities in the 12 months or more category at September 30, 2024. There were 6 securities in an unrealized loss position in the less than 12 months category and 54 securities in the 12 months or more category at June 30, 2024. Unrealized losses have not been recognized into income because the decline in fair value is largely due to changes in interest rates and other market conditions. The contractual terms of the securities do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investment. The Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases, which may be maturity. Mortgage-backed securities held to maturity are backed by pools of mortgages that are insured or guaranteed by the Federal Home Mortgage Corporation. It is expected that the securities will not be settled at prices less than the amortized cost bases of the securities. Accordingly, no allowance for credit losses has been recorded.

Note 4- Loans

The Company’s loans are stated at their face amount, net of deferred fees and costs and discounts, and consist of the classes of loans included in the table below. The Company has elected to exclude accrued interest receivable, totaling $483,721 at September 30, 2024 and $513,782 as of June 30, 2024, from the amortized cost basis of loans.

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A summary of loans by major category follows:


	Unaudited
	September 30, 2024		June 30, 2024

	(Dollars in thousands)
Commercial real estate	$	70,361	$	74,316
Commercial and industrial		4,650		5,158
Construction		—		1,313
One-to-four-family residential		57,596		57,808
Multi-family real estate		43,704		45,088
Consumer		1,527		1,609
Total loans		177,838		185,292
Deferred loan fees		(41)		(47)
Allowance for credit losses		(1,642)		(1,797)
Loans, net	$	176,155	$	183,448

The following tables summarize the activity in the allowance for credit losses - loans by loan class for the three months ended September 30, 2024 and 2023:


	Allowance for Credit Losses-Loans-Three Months Ended September 30, 2024
	(Dollars in thousands)

										Provision for
										(Recovery of)
										Credit
		Beginning								Losses-		Ending
		Balance				Charge-offs		Recoveries		Loans		Balance
		July 1, 2024										September 30, 2024
Commercial real estate	$	259			$	—	$	—	$	(15)	$	244
Commercial and industrial		16				—		—		(1)		15
Construction		28				—		—		(28)		—
One-to-four-family residential		1,314				—		—		(104)		1,210
Multi-family real estate		175				—		—		(7)		168
Consumer		5				—		—		—		5
Total loans	$	1,797			$	—	$	—	$	(155)	$	1,642


	Allowance for Credit Losses-Loans-Three Months Ended September 30, 2023
	(Dollars in thousands)

		Beginning								Provision for
		Balance								(Recovery of)
		Prior to		Impact of						Credit
		Adoption of		Adoption of						Losses-		Ending
		ASC 326		ASC 326		Charge-offs		Recoveries		Loans		Balance
		July 1, 2023										September 30, 2023
Commercial real estate	$	1,196	$	(818)	$	—	$	—	$	2	$	380
Commercial and industrial		18		5		—		—		—		23
Construction		6		2		—		—		(2)		6
One-to-four-family residential		207		1,137		—		—		44		1,388
Multi-family real estate		365		(147)		—		—		7		225
Consumer		2		11		—		—		(10)		3
Unallocated		365		(365)		—		—		—		—
Total loans	$	2,159	$	(175)	$	—	$	—	$	41	$	2,025

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The following table presents a breakdown of the provision for (recovery of) credit losses for the periods indicated:


	Three Months
	Ended
	September 30,
	2024		2023
Provision for (recovery of) credit losses:
Provision for (recovery of) loans	$	(155,000)	$	41,000
Provision for unfunded commitments		—		—
Total provision for (recovery of) credit losses	$	(155,000)	$	41,000

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, collateral adequacy, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as commercial and industrial, commercial real estate loans and multi-family real estate loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:

Pass – Loans classified as pass represent loans that are evaluated and are performing under the stated terms. Pass rated assets are analyzed by the paying capacity, the current net worth, and the value of the loan collateral of the obligor.

Watch - A watch grade is assigned to any credit that is adequately secured and performing but monitored for a number of indicators. These characteristics may include, but are not limited to: any unexpected short-term adverse financial performance from budgeted projections or prior period results (i.e., declining profits, sales, margins, cash flow, or increased reliance on leverage, including adverse balance sheet ratios, trade debt issues, etc.), any managerial or personal problems of company management, a decline in the entire industry or local economic conditions, failure to provide financial information or other documentation as requested, issues regarding delinquency, overdrafts, or renewals, and any other issues that cause concern for the company.

Special Mention – The characteristics of a special mention asset have potential weaknesses that deserve the Company’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are considered criticized assets. Characteristics of special mention loans may include: continued adverse financial trends relating to declining sales, profits, margins, balance sheet ratios, increasing debt to worth, and trade debt issues; cash flows declining in coverage, a repeated lack of compliance with Bank requests for information, correction of a violation of loan covenants, lack of current or adequate financial information or documentation, or more serious managerial or declining industry conditions. Weakness identified in a special mention credit should be short-term in nature.

Substandard – Loans classified as substandard are inadequately protected by the current net worth, paying capacity of the obligor, or by the collateral pledged. Substandard loans must have a well-defined weakness or weaknesses that jeopardize the repayment of the debt as originally contracted. They are characterized by the distinct possibility that the Company will sustain a loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have the weaknesses of those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans in this category are individually evaluated for impairment or charged-off if deemed uncollectible.

Residential real estate and consumer loans are managed on a pool basis due to their homogeneous nature. Loans that are 90 days or more delinquent or are not accruing interest are considered nonperforming.

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The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of watch, special mention, substandard and doubtful within the Company’s internal risk rating system as of September 30, 2024 based on year of origination:


															Revolving
															Loans
													Revolving		Converted to
	2025		2024		2023		2022		2021		Prior		Loans		Term Loans		Total

	(Dollars in thousands)
Commercial real estate
Pass	$	159	$	4,711	$	4,409	$	25,355	$	19,871	$	14,861	$	333	$	—	$	69,699
Watch		—		—		662		—		—		—		—		—		662
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—
Total commercial real estate	$	159	$	4,711	$	5,071	$	25,355	$	19,871	$	14,861	$	333	$	—	$	70,361

Commercial and industrial
Pass	$	—	$	110	$	747	$	1,466	$	1,905	$	399	$	23	$	—	$	4,650
Watch		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—
Total commercial and industrial	$	—	$	110	$	747	$	1,466	$	1,905	$	399	$	23	$	—	$	4,650

Construction
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Watch		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—
Total construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Multi-family real estate
Pass	$	—	$	1,824	$	8,209	$	14,296	$	13,270	$	3,277	$	55	$	—	$	40,931
Watch		—		—		499		2,274		—		—		—		—		2,773
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—
Total multi-family real estate	$	—	$	1,824	$	8,708	$	16,570	$	13,270	$	3,277	$	55	$	—	$	43,704

One-to-four-family residential
Performing	$	836	$	3,259	$	11,146	$	11,088	$	13,606	$	17,661	$	—	$	—	$	57,596
Non-performing		—		—		—		—		—		—		—		—		—
Total one-to-four-family	$	836	$	3,259	$	11,146	$	11,088	$	13,606	$	17,661	$	—	$	—	$	57,596

Consumer
Performing	$	6	$	49	$	51	$	125	$	3	$	39	$	1,254	$	—	$	1,527
Non-performing		—		—		—		—		—		—		—		—		—
Total consumer	$	6	$	49	$	51	$	125	$	3	$	39	$	1,254	$	—	$	1,527

Total loans	$	1,001	$	9,953	$	25,723	$	54,604	$	48,655	$	36,237	$	1,665	$	—	$	177,838

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															Revolving
															Loans
													Revolving		Converted to
	2024		2023		2022		2021		2020		Prior		Loans		Term Loans		Total

	(Dollars in thousands)
Commercial real estate
Pass	$	4,785	$	5,096	$	25,584	$	23,385	$	8,326	$	6,823	$	317	$	—	$	74,316
Watch		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—
Total commercial real estate	$	4,785	$	5,096	$	25,584	$	23,385	$	8,326	$	6,823	$	317	$	—	$	74,316

Commercial and industrial
Pass	$	96	$	807	$	1,598	$	2,162	$	75	$	393	$	27	$	—	$	5,158
Watch		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—
Total commercial and industrial	$	96	$	807	$	1,598	$	2,162	$	75	$	393	$	27	$	—	$	5,158

Construction
Pass	$	—	$	1,313	$	—	$	—	$	—	$	—	$	—	$	—	$	1,313
Watch		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—
Total construction	$	—	$	1,313	$	—	$	—	$	—	$	—	$	—	$	—	$	1,313

Multi-family real estate
Pass	$	1,829	$	8,735	$	16,666	$	13,344	$	1,857	$	2,604	$	53	$	—	$	45,088
Watch		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—
Total multi-family real estate	$	1,829	$	8,735	$	16,666	$	13,344	$	1,857	$	2,604	$	53	$	—	$	45,088

One-to-four-family residential
Performing	$	3,345	$	11,209	$	11,459	$	13,756	$	6,035	$	12,004	$	—	$	—	$	57,808
Non-performing		—		—		—		—		—		—		—		—		—
Total one-to-four-family	$	3,345	$	11,209	$	11,459	$	13,756	$	6,035	$	12,004	$	—	$	—	$	57,808

Consumer
Performing	$	162	$	87	$	138	$	5	$	53	$	—	$	1,164	$	—	$	1,609
Non-performing		—		—		—		—		—		—		—		—		—
Total consumer	$	162	$	87	$	138	$	5	$	53	$	—	$	1,164	$	—	$	1,609

Total loans	$	10,217	$	27,247	$	55,445	$	52,652	$	16,346	$	21,824	$	1,561	$	—	$	185,292

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The following tables summarize the aging of the past due loans by loan class within the portfolio segments as of September 30, 2024 and June 30, 2024:


	Still Accruing
	30-59 Days		60-89 Days		Over 90 Days		Nonaccrual
	Past Due		Past Due		Past Due		Balance
September 30, 2024
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial		—		—		—		—
Construction		—		—		—		—
One-to-four-family residential		152,044		67,733		—		—
Multi-family real estate		—		—		—		—
Consumer		—		—		—		—
Total	$	152,044	$	67,733	$	—	$	—


	Still Accruing
	30-59 Days		60-89 Days		Over 90 Days		Nonaccrual
	Past Due		Past Due		Past Due		Balance
June 30, 2024
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial		—		—		—		—
Construction		—		—		—		—
One-to-four-family residential		68,031		—		—		—
Multi-family real estate		—		—		—		—
Consumer		—		—		—		—
Total	$	68,031	$	—	$	—	$	—

There were no loans during the three months ended September 30, 2024 and 2023 that were modified to borrowers experiencing financial difficulty. There were no collateral dependent loans as of September 30, 2024 or June 30, 2024.

The Company maintains a collateral pledge agreement with the FHLB covering secured advances whereby the Company has agreed to retain, free of all other pledges, liens, and encumbrances, commercial and industrial, commercial real estate, and one-to-four family residential real estate loans. The pledged loans are discounted at a factor of 24% to 38% when aggregating the amount of loans required by the pledge agreement. The amount of eligible collateral was $68,475,319 and $92,177,419 as of September 30, 2024 and June 30, 2024, respectively. There was also FHLB stock of $1,329,413 as of September 30, 2024 and June 30, 2024. The Company also has a collateral pledge agreement with the FRB securing multi-family real estate loans. These pledged loans have discounted margins applied ranging from 45% - 95% as required by the pledging agreement. The amount of eligible collateral was $17,161,119 as of September 30, 2024.

Note 5 - Leases

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable prepaid rent, initial direct costs and any incentives received from the lessor.

The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for

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residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The following tables present information about the Company’s leases as of and for the three months ended September 30, 2024 and 2023 and as of June 30, 2024:


	As of		As of
	September 30,		June 30,
	2024		2024
Right-to-use assets (included in premises and equipment on consolidated balance sheets)	$	501,484	$	529,366
Lease liability (included in other liabilities on consolidated balance sheets)		497,801		524,973
Weighted average remaining lease term		5.92 years		6.05 years
Weighted average discount rate		3.38%		3.38%

	Three Months		Three Months
	Ended		Ended
	September 30,		September 30,
	2024		2023
Operating lease costs	$	31,914	$	31,929
Short-term lease costs		9,570		9,570
Total lease costs	$	41,484	$	41,499

Cash paid for amounts included in measurement of lease liabilities	$	31,554	$	31,281


			As of
			September 30,
			2024
Lease payments due

Nine months ending June 30, 2025			$	89,015
Year ending June 30, 2026				119,825
Year ending June 30, 2027				110,555
Year ending June 30, 2028				44,542
Year ending June 30, 2029				43,200
Thereafter				144,000
Total				551,137
Discount				53,336
Lease liability			$	497,801

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Note 6 - Foreclosed Assets

Real estate owned activity was as follows:


	Three Months		Three Months
	Ended		Ended
	September 30, 2024		September 30, 2023
Balance July 1,	$	2,334,560	$	2,334,560
Loans transferred to real estate owned		—		—
Capitalized expenditures		—		—
Direct write-downs		—		—
Sales of real estate owned		—		—
Balance September 30,	$	2,334,560	$	2,334,560

Activity in the valuation allowance is as follows:


	Three Months		Three Months
	Ended		Ended
	September 30, 2024		September 30, 2023
Balance July 1,	$	937,100	$	—
Provisions/(recoveries) charged (credited) to expense		—		—
Reductions from sales of real estate owned		—		—
Direct write-downs		—		—
Balance September 30,	$	937,100	$	—

Expenses related to foreclosed assets include:


	Three Months		Three Months
	Ended		Ended
	September 30, 2024		September 30, 2023
Balance July 1,	$	—	$	—
Net loss (gain) on sales		—		—
Provisions for unrealized losses		—		—
Operating expenses, net of rental income		17,572		13,620
Balance September 30,	$	17,572	$	13,620

During the year ended June 30, 2023, the Company foreclosed on collateral supporting a construction loan which was valued at $2.3 million and was included in foreclosed assets, net. The valuation was based on independent appraisals subject to certain discounts less estimated costs to sell. A subsequent independent appraisal was obtained in April 2024 resulting in a new valuation of $2.1 million subject to certain discounts less estimated costs to sell. After adjusting for estimated costs to sell, the revised valuation was $1.4 million resulting in a provision for valuation allowance of $937,100 being recorded during the year ended June 30, 2024. The Bank is pursuing legal remedies against the previous owner of the property.

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Note 7 - Deposits

Major classifications of deposits are as follows as of September 30, 2024 and June 30, 2024. Brokered deposits totaled $13.4 million at September 30, 2024 and June 30, 2024.


	Unaudited
	At September 30, 2024				At June 30, 2024
	Amount		Percent		Amount		Percent
Non-interest-bearing demand accounts	$	23,148,856	13.45	%	$	25,936,461	14.99	%
Demand, NOW, money market accounts		41,479,921	24.09	%		39,570,222	22.88	%
Savings accounts		38,851,224	22.57	%		39,757,336	22.98	%
Certificates of deposit		68,685,267	39.89	%		67,716,735	39.15	%
Total	$	172,165,268	100.00	%	$	172,980,754	100.00	%

Note 8- Borrowings

There was $10.0 million in borrowings from the Federal Home Loan Bank of Chicago (FHLB) as of September 30, 2024 consisting of two - $5.0 million, 5-year term callable putable advances with maturity dates in August 2028 and December 2028 which have call dates beginning in September, 2024 and October, 2024. These putable advances can be called quarterly until maturity at the option of the FHLB. If any advance is terminated requiring repayment prior to stated maturity, the FHLB will offer replacement funding at the then-prevailing rate of interest for an advance product then offered by the FHLB, subject to normal FHLB credit and collateral requirements.

There was $13.0 million in borrowings from the Federal Home Loan Bank of Chicago (FHLB) as of June 30, 2024. The borrowings at June 30, 2024 consisted of a $3.0 million 6 month term advance maturing August 21, 2024 and two - $5.0 million 5-year term callable putable advances with maturity dates in August 2028 and December 2028 which have call dates beginning in September, 2024 and October, 2024. These putable advances can be called quarterly until maturity at the option of the FHLB. If any advance is terminated requiring repayment prior to stated maturity, the FHLB will offer replacement funding at the then-prevailing rate of interest for an advance product then offered by the FHLB, subject to normal FHLB credit and collateral requirements.

The Company maintains a collateral pledge agreement with the FHLB covering secured advances whereby the Company has agreed to retain, free of all other pledges, liens, and encumbrances, commercial, commercial real estate, and residential loans. The advances reprice daily at market rates. The pledged loans are discounted at a factor of 24% to 38% when aggregating the amount of loans required by the pledge agreement. The amount of eligible collateral was $68,475,319 and $92,177,419 as of September 30, 2024 and June 30, 2024, respectively. There was FHLB stock of $1,329,413 pledged as of September 30, 2024 and June 30, 2024. The Bank also has eligible collateral to borrow from the Federal Reserve Bank of $17,161,119. These pledged loans have discounted margins applied ranging from 45% - 95% as required by the pledge agreement. There is also an unsecured Federal Funds purchasing limit of $5.0 million with the Bank’s correspondent bank. There were no borrowings under these arrangements at September 30, 2024 and June 30, 2024.

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Note 9- Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component for the three months ended September 30, 2024 and 2023, follows:


	Unrealized
	Gains and		Unrealized
	Losses on		Losses on
	Available		Held to
	for Sale Debt		Maturity Debt
	Securities		Securities		Total
September 30, 2024
Balance, beginning of period	$	(712,843)	$	(39,945)	$	(752,788)
Other comprehensive income before reclassifications (net of tax)		113,624		—		113,624
Amortization of amounts transferred from debt securities available for sale to held to maturity (a)		—		1,257		1,257
Reclassification adjustment for amortization of stranded tax effect from change in tax legislation (b)		(3,088)		—		(3,088)
Balance, end of period	$	(602,307)	$	(38,688)	$	(640,995)

(a)	The reclassification adjustment is reflected in the Consolidated Statements of Income as Interest Income-Debt Securities.

(b)	The reclassification adjustment is included in the Consolidated Statements of Income as Other Expenses.


	Unrealized
	Gains and		Unrealized
	Losses on		Losses on
	Available		Held to
	for Sale Debt		Maturity Debt
	Securities		Securities		Total
September 30, 2023
Balance, beginning of period	$	(739,982)	$	(44,875)	$	(784,857)
Other comprehensive loss before reclassifications (net of tax)		(93,479)		—		(93,479)
Amortization of amounts transferred from debt securities available for sale to held to maturity (a)		—		1,539		1,539
Balance, end of period	$	(833,461)	$	(43,336)	$	(876,797)

(a)	The reclassification adjustment is reflected in the Consolidated Statements of Income as Interest Income-Debt Securities.

Note 10- Provision for Income Taxes

Income tax expense was $41,000 for the three months ended September 30, 2024, a decrease of $160,000, as compared to income tax expense of $201,000 for the three months ended September 30, 2023. The decrease in income tax expense was primarily the result of a change in Wisconsin tax law that provides for a subtraction from the Bank’s state taxable income for loan and fee interest income from certain commercial and agricultural loans. Based upon the provisions of this new state tax law, management determined that the Company was highly unlikely to incur a material Wisconsin tax liability in the foreseeable future, instead generating Wisconsin net operating loss carryforwards that would never be realized. Since the state rate at which net deferred tax assets are expected to be realized is 0%, the Company eliminated its state net deferred tax asset balances as of July 1, 2023, resulting in deferred tax expense of

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approximately $112,000 for the three months ended September 30, 2023. A summary of income tax expense compared to the federal income tax statutory rate is set forth below.


	2024		2023
At Federal statutory rate at 21%	$	45,626	$	60,412
Adjustments resulting from:
Wisconsin change in tax law		-		112,058
Earnings on bank owned life insurance		(14,069)		(12,594)
State tax, net of federal benefit		-		-
Other		9,042		41,603
Provision for Income Taxes	$	40,599	$	201,479

Note 11- Minimum Regulatory Capital Requirements

Bank regulatory authorities in the United States issue risk-based capital standards. These capital standards relate a banking company’s capital to the risk profile of its assets and provide the basis by which all banking companies and banks are evaluated in terms of capital adequacy.

The risk-based capital standards require financial institutions to maintain: (a) a minimum ratio of common equity tier 1 (“CET1”) to risk weighted assets of at least 4.5%, (b) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%; (c) a minimum ratio of total (that is, tier 1 plus tier 2) capital to risk-weighted assets of at least 8.0%; and (d) a minimum leverage ratio of 3.0%, calculated as the ratio of tier 1 capital balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter). In addition, the rules also limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” of 2.5% above the minimum standards stated in (a) - (c) above.

In September 2019, the FDIC finalized a rule to simplify the capital calculation for qualifying community banking organizations (i.e., the community bank leverage ratio (“CBLR”)), as required by the Economic Growth, Regulatory Relief and Consumer Protection Act. The CBLR framework is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. A qualifying community bank may elect to utilize the CBLR in lieu of the general capital requirements and will be considered well capitalized if it exceeds the minimum CBLR of 9.0%. The CBLR framework also provides a two-quarter grace period for qualifying banks whose leverage ratio falls no more than 1.00% below the required ratio for that reporting quarter. The Bank opted into the CBLR framework as of September 30, 2024 and June 30, 2024.

As of September 30, 2024 and June 30, 2024, management believes the Bank has met all capital adequacy requirements to which it is subject. As of September 30, 2024 and June 30, 2024, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the notification that management believes have changed the Bank’s category.

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The Bank’s actual capital amounts and ratios are presented in the following table (dollars in thousands):


										Minimum To Be Well
										Capitalized Under
					Minimum Capital					Prompt Corrective
	Actual				Requirements					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio

September 30, 2024	(Dollars in thousands)
Tier I Capital to Average Assets	$	29,606	13.42	%	$	17,649	>	8.0	%	$	19,855	>	9.0	%


										Minimum To Be Well
										Capitalized Under
					Minimum Capital					Prompt Corrective
	Actual				Requirements					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio

June 30, 2024	(Dollars in thousands)
Tier I Capital to Average Assets	$	29,380	13.04	%	$	18,025	>	8.0	%	$	20,278	>	9.0	%

A Wisconsin state-chartered savings bank is required by state law to maintain minimum net worth, as defined, in an amount equal to at least 6.0% of its total assets. At September 30, 2024, the Bank’s net worth was $29,294,407 and general loan loss reserve was $1,642,056 totaling 14.29% of total assets, which meets the state of Wisconsin’s minimum net worth requirements. At June 30, 2024, the Bank’s net worth was $28,955,130 and general loan loss reserve was $1,797,116, totaling 13.91% of total assets, which meets the state of Wisconsin’s minimum net worth requirements.

Note 12 - Employee Benefit Plans

The Company provides a 401(k) salary deferral plan to substantially all employees. Employees are allowed to make voluntary contributions to the plan up to 15% of their compensation. In addition, the Company provides discretionary matching and profit-sharing contributions as well as a safe harbor contribution.

Effective upon the completion of the Company’s initial public stock offering in April 2021, the Company established an Employee Stock Ownership Plan (“ESOP”) for all eligible employees. The ESOP used $873,970 in proceeds from a term loan obtained from the Company to purchase 87,397 shares of common stock in the initial public offering at a price of $10.00 per share. The ESOP loan will be repaid principally from the Company’s contribution to the ESOP in annual payments through 2045 at a fixed interest rate per annum at 3.25%. Shares are released to participants on a straight-line basis over the loan term and allocated based on participant compensation. The Company recognizes compensation benefit expense as shares are committed for release at their current market price. The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital. Dividends on allocated shares, if applicable, are recorded as a reduction of retained earnings and dividends on unallocated shares are recorded as a reduction of debt. The Company recognized $10,487 (upon the release of 874 shares) and $10,456 (upon the release of 874 shares) of compensation expense related to this plan for the three months ended September 30, 2024 and 2023, respectively. At September 30, 2024, there were 74,287 shares not yet released having an aggregate market value of approximately $668,583. Participants will become fully vested upon completion of three years of credited service. Eligible employees who were employed with the Company shall receive credit for vesting purposes for each year of continuous employment prior to adoption of the ESOP.

Note 13 - Stock Based Compensation

On May 24, 2022, the stockholders of Marathon Bancorp, Inc. approved the Company’s 2022 Equity Incentive Plan (the “Plan”), which provides for the grant of stock-based awards to officers, employees and directors of the Company and Marathon Bank. Under provisions of the Plan, while active, awards may consist of grants of incentive stock options, nonqualified stock options, restricted stock and restricted stock units. Stock options totaling 109,245 and restricted stock awards totaling 43,698 were authorized for award under the Plan.

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Stock Options

On June 28, 2022, a total of 73,194 stock option awards were granted to the Bank’s directors, executive officers, senior officers and other officers (18,572 and 54,622 options were awarded to directors and employees, respectively). Director awards are considered non-qualified stock options while employee awards are considered incentive stock options. During the year ended June 30, 2023, a director and employee retired resulting in the forfeiture of 7,647 options. The awards vest ratably over five years (20% per year for each year of the participant’s service with the Company) and will expire ten years from the date of the grant, or June 2032. The fair value of each option grant was established at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model used the following weighted average assumptions: risk-free interest rate of 3.27%; volatility factors of the expected market price of the Company's common stock of 20.76%; weighted average expected lives of the options of 6.5 years; cash dividend yield of 0%. Based upon these assumptions, the weighted average fair value of options granted was $3.33.

On May 16, 2023, a total of 39,330 stock option awards were granted to the Bank’s directors, executive officers, senior officers and other officers (4,368 and 34,962 options were awarded to directors and employees, respectively). The fair value of each option grant was established at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model used the following weighted average assumptions: risk-free interest rate of 3.53%; volatility factors of the expected market price of the Company's common stock of 20.71%; weighted average expected lives of the options of 6.5 years; cash dividend yield of 0%. Based upon these assumptions, the weighted average fair value of options granted was $2.72.

Stock option expense amortized to expense for the three months ended September 30, 2024 and 2023 was $16,262 and $16,262, respectively. At September 30, 2024, total unrecognized compensation expense related to stock options was $196,717, and will be amortized to expense over a period of 3.25 years. As of September 30, 2024, there were 4,368 stock option awards available for future awards under this plan.

The aggregate intrinsic value of a stock option represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options prior to the expiration date. The intrinsic value can change based on fluctuations in the market value of the Company’s stock.

A summary of stock option activity and related information for the three months ended September 30, 2024 was as follows.


				Weighted-Average
				Remaining	Aggregate
		Weighted-Average		Contractual Life	Intrinsic
	Options	Exercise Price		(in years)	Value
Outstanding, July 1, 2024	104,877	$	10.31	8.33	$	3,540
Granted	—		—	—		—
Exercised	—		—	—		—
Forfeited	—		—	—		—
Outstanding, September 30, 2024	104,877		10.31	8.06		3,933


Exercisable, September 30, 2024	40,640	$	10.54	7.98	$	1,114

Restricted Stock

On June 28, 2022, a total of 40,203 restricted stock awards were granted to the Bank’s directors, executive officers, senior officers and other officers under the Plan (9,614 and 30,589 shares were granted to directors and employees, respectively). On May 16, 2023, a total of 6,261 restricted stock awards were granted to the Bank’s directors, executive officers, senior officers and other officers under the Plan (1,311 and 4,950 shares were granted to directors and employees, respectively). During the year ended June 30, 2023, a director and employee retired resulting in the forfeiture of 3,059 restricted stock awards. The restricted stock awards vest ratably over five years (20% per year for each year of

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the participant’s service with the Company). Restricted stock expense was $23,513 and $23,513 for the three months ended September 30, 2024 and 2023, respectively. At September 30, 2024, future compensation expense related to non-vested restricted stock outstanding was $267,924 which will be amortized over a remaining period of 3.25 years. As of September 30, 2024, there were 293 shares of restricted stock available for issuance.

A summary of restricted stock activity and related information for the three months ended September 30, 2024, is as follows:


		Weighted-Average
	Number of	Grant Date
	Shares	Fair Value
Non-vested, July 1, 2024	27,299	$	10.75
Granted	—		—
Exercised	—		—
Forfeited	—		—
Outstanding, September 30, 2024	27,299	$	10.75

Note 14- Commitments and Contingencies

The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

As of September 30, 2024 and June 30, 2024, the following financial instruments were outstanding where contract amounts represent credit risk:


	September 30, 2024		June 30, 2024
Commitments to grant loans	$	842,500	$	1,341,500
Unused commitments under lines of credit		3,726,811		3,691,619
MPF credit enhancements		677,540		658,008

Commitments to grant loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

Mortgage Partnership Finance (MPF) credit enhancements allow the Company to share the credit risk associated with home mortgage finance with Federal Home Loan Bank (FHLB). MPF provides the Company the ability to originate, sell, and service fixed-rate, residential mortgage loans, and receive a Credit Enhancement Fee based on the performance of the loans. FHLB manages the liquidity, interest rate, and prepayment risks of the loans while the Company manages the credit risk of the loans. The Company will incur an obligation on a foreclosure loss only after a foreclosure loss exceeds the borrower’s equity, any private mortgage insurance, and the funded first loss account. Based on the delinquency results for states where properties are located and the Company’s historical loss experience, the estimated foreclosure losses are immaterial.

The Company, from time to time, may be a defendant in legal proceedings relating to the conduct of its banking business. Most of such legal proceedings are a normal part of the banking business and, in management’s opinion as of September 30, 2024, the financial condition and results of operations of the Company would not be materially affected by the outcome of such legal proceedings.

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Note 15- Fair Value of Assets and Liabilities

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value accounting guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

In accordance with this guidance, the Company groups its financial assets and liabilities generally measured at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities may include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

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The following table sets forth assets and liabilities measured at fair value on a recurring basis at September 30, 2024 and June 30, 2024:


			Quoted Prices in		Other Observable		Unobservable
			Active Markets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
September 30, 2024
Available for sale debt securities
States and municipalities	$	689,303	$	—	$	689,303	$	—
Mortgage-backed		1,184,204		—		1,184,204		—
Corporate bonds		4,726,103		—		3,226,103		1,500,000
Total assets	$	6,599,610	$	—	$	5,099,610	$	1,500,000


			Quoted Prices in		Other Observable		Unobservable
			Active Markets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
June 30, 2024
Available for sale debt securities
States and municipalities	$	685,588	$	—	$	685,588	$	—
Mortgage-backed		1,292,907		—		1,292,907		—
Corporate bonds		4,628,266		—		3,168,266		1,460,000
Total assets	$	6,606,761	$	—	$	5,146,761	$	1,460,000

For those available for sale debt securities where quoted prices are unavailable, fair values are calculated based on market prices of similar securities and, therefore, are classified as Level 2 within the valuation hierarchy.

The following table represents changes in the Company’s available for sale debt securities measured at fair value on a recurring basis using unobservable inputs (Level 3). The Company had one investment security measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at September 30, 2024 and June 30, 2024. The investment is valued on a quarterly basis by a third-party valuation expert. The Level 3 valuation is based on the 5/30 swap curve, floated at 1%, which is considered a significant unobservable input.


	Three Months		Three Months
	Ended September 30,		Ended September 30,
	2024		2023
Balance at July 1,	$	1,460,000	$	1,580,000

Unrealized gains (losses) included in other comprehensive income (loss)		40,000		(120,000)

Balance at September 30,	$	1,500,000	$	1,460,000

Under certain circumstances the Company may make adjustments to fair value for assets and liabilities although they are not measured at fair value on an ongoing basis. The Company had Level 3 financial assets measured at fair value on a nonrecurring basis, which are summarized below:

Unaudited

September 30,

June 30,

Valuation

Unobservable

Range

2024

Technique

Input

(Weighted Avg.)

Foreclosed assets (OREO)

1,397,460

Collateral valuation

Discount from market value

2024: 10%-75%

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estimated costs to sell, the revised valuation was $1.4 million resulting in a provision for valuation allowance of $937,100 being recorded during the year ended June 30, 2024.

Financial Disclosures about Fair Value of Financial Instruments

Accounting guidance requires disclosures of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate their fair values. Certain financial instruments and all non-financial instruments are excluded from the scope of the guidance.

The estimated fair values of financial instruments are as follows:


	September 30, 2024				June 30, 2024
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets
Cash and due from banks	$	1,958,034	$	1,958,034	$	2,977,438	$	2,977,438
Federal funds sold		13,064,000		13,064,000		7,495,000		7,495,000
Interest bearing deposits in other financial institutions		319,260		319,260		199,888		199,888
Available for sale debt securities		6,599,610		6,599,610		6,601,761		6,601,761
Held to maturity debt securities		501,490		421,745		510,276		394,081
Loans, net		176,155,458		167,632,000		183,447,633		172,191,000
Investment in restricted stock		1,329,413		1,329,413		1,329,413		1,329,413
Interest receivable		532,670		532,670		597,768		597,768
Financial Liabilities
Deposits	$	172,165,268	$	160,143,000	$	172,980,754	$	156,433,000
Federal Home Loan Bank (FHLB) advances		10,000,000		10,000,000		13,000,000		13,000,000
Accrued interest payable		538,709		538,709		287,072		287,072

The methods and assumptions that were used to estimate the fair value of financial assets and financial liabilities that are measured at fair value on a recurring and non-recurring basis have been previously disclosed. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below:

Cash and due from banks – Due to their short -term nature, the carrying amount of cash and due from banks approximates fair value and is categorized in level 1 of the fair value hierarchy.

Federal funds sold – Due to their short-term nature, the carrying amount of federal funds sold approximates the fair value and is categorized in level 1 of the fair value hierarchy.

Interest bearing deposits in other financial institutions- Due to their short -term nature, the carrying amount of interest- bearing deposits in other financial institutions approximates fair value and is categorized in level 1 of the fair value hierarchy.

Available for sale securities – For those available for sale debt securities where quoted prices are unavailable, fair values are calculated based on market prices of similar securities and, therefore, are classified as level 2 within the valuation hierarchy. For those available for sale debt securities where market prices of similar securities are not available because of the lack of observable market data, they are valued on a quarterly basis by a third-party valuation expert and, therefore, are classified as level 3 within the valuation hierarchy.

Held to maturity debt securities-The fair value is estimated using quoted market prices or by pricing models and is categorized as level 2 of the fair value hierarchy.

Loans– The fair value of variable rate loans that reprice frequently are based on carrying values. The fair value of other loans is estimated by discounting future cash flows using current rates at which similar loans would be made to

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borrowers with similar credit ratings and is categorized in level 3 of the fair value hierarchy. Loans held for sale are included with loans, net above, with fair value based on commitments on hand from investors or prevailing market prices and is categorized in level 3 of the fair value hierarchy.

Investments in restricted stock – No secondary market exists for FHLB stock. The stock is bought and sold at par by the FHLB and management believes the carrying amount approximates fair value and is categorized in level 2 of the fair value hierarchy.

Interest receivable – Due to their short -term nature, the carrying amount approximates fair value and is categorized in level 1 of the fair value hierarchy.

Deposits – Fair value of deposits with no stated maturity, such as demand deposits, savings, and money market accounts, by definition, is the amount payable on demand on the reporting date. Fair value of fixed rate time deposits is estimated using discounted cash flows applying interest rates currently offered on similar time deposits. Deposits are categorized in level 2 of the fair value hierarchy.

Federal Home Loan Bank (FHLB) advances – The carrying amount approximates fair value and is categorized in level 2 of the fair value hierarchy.

Accrued interest payable – Due to their short-term nature, the carrying amount approximates fair value and is categorized in level 1 of the fair value hierarchy.

The estimated fair value of fee income on letters of credit at September 30, 2024 and June 30, 2024 is insignificant. Loan commitments on which the committed interest rate is less than the current market rate are also insignificant at September 30, 2024 and June 30, 2024.

Note 16- Revenue Recognition

In accordance with FASB Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606) and all subsequent amendments, the Company’s services that fall within the scope of Topic 606 are presented within non-interest income and are recognized as revenue as the Company satisfies its obligation to the customer. All of the Company’s revenue from contracts with customers in the scope of Topic 606 is recognized within non-interest income which includes service charges on deposit accounts and the sale of foreclosed assets.

A description of the Company’s revenue streams accounted for under Topic 606 follows:

Service Charges on Deposit Accounts: Service charges on deposit accounts relate to fees generated from a variety of deposit products and services rendered to customers. Charges include, but are not limited to, overdraft fees, non-sufficient fund fees, dormant fees, and monthly service charges. Such fees are recognized concurrent with the event on a daily basis or on a monthly basis depending upon the customer’s cycle date.

Gains (Losses) on Sales of Foreclosed Assets: The Company records a gain or loss from a sale of foreclosed assets when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. If the Company finances the sale of foreclosed asset to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the foreclosed asset is derecognized, and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflects our consolidated 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 accompanying consolidated financial statements. You should read the information in this section in conjunction with the business and financial information regarding Marathon Bancorp, Inc. provided in this Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended June 30, 2024 as filed with the Securities and Exchange Commission on September 26, 2024.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains certain forward-looking statements, which are included pursuant to the “safeharbor” provisions of the Private Securities Litigation Reform Act of 1995, and reflect management’s beliefs and expectations based on information currently available. These 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,” “potential,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans, prospects, growth and operating strategies;

●

statements regarding the quality of our loan and investment portfolios; and

●

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q.

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

●

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

●

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

●

events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock;

●

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

●

our ability to 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;

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●

our ability to implement and change our business strategies;

●

competition among depository and other financial institutions;

●

adverse changes in the securities or secondary mortgage markets, including our ability to sell loans in the secondary market;

●

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

●

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

●

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

●

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

●

a failure or breach of our operational or security systems or infrastructure, including cyberattacks;

●

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;

●

any future FDIC insurance premium increases or special assessments may adversely affect our earnings;

●

our ability to prevent or mitigate fraudulent activity;

●

our ability to evaluate the amount and timing of recognition of future tax assets and liabilities;

●

political instability or civil unrest;

●

acts of war or terrorism or pandemics such as the recent COVID-19 pandemic;

●

our ability to control operating costs and expenses, including 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.

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Overview

Net Interest Income. Our primary source of income is net interest income. Net interest income is the difference between interest income, which is the income we earn on our loans and investments, and interest expense, which is the interest we pay on our deposits and borrowings.

Provision for (Recovery of) Credit Losses. We charge (credit) provisions for (recovery of) credit losses to operations in order to maintain our allowance for credit losses on loans and reserve for unfunded commitments at a level that is considered reasonable and necessary to absorb expected credit losses inherent in the loan portfolio and expected losses on commitments to grant loans that are expected to be advanced at the consolidated balance sheet date. In determining the level of the allowance for credit losses, we consider our past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and the levels of non-performing and other classified loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change. We assess the allowance for (recovery of) credit losses on a quarterly basis and make provisions for credit losses in order to maintain the allowance.

Non-interest Income. Our primary sources of non-interest income are mortgage banking income, service charges on deposit accounts and net gains in the cash surrender value of bank owned life insurance. Other sources of non-interest income sometimes include net gain or losses on sales and calls of securities, net gain or loss on disposal of foreclosed assets and other income.

Non-Interest Expenses. Our non-interest expenses consist of salaries and employee benefits, net occupancy and equipment, data processing and office, professional fees, marketing expenses, foreclosed assets and other general and administrative expenses, including premium payments we make to the FDIC for insurance of our deposits.

Provision for Income Taxes. Our income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized.

Summary of Significant Accounting Policies and Estimates

The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be significant accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

In 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

The following represent our significant accounting policies and estimates:

Allowance for Credit Losses. We establish the allowance for credit losses through charges (credits) to earnings in the form of a provision for (recovery of) credit losses. Loan losses are charged against the allowance for credit losses

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for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

The allowance for credit losses (“ACL”) at September 30, 2024 represents the Company’s current estimate of the lifetime credit losses expected from its loan portfolio. Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans’ expected remaining term.

Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. In addition, management’s estimate of expected credit losses is based on the discounted cash flows over the remaining life of loans held for investment, and changes in expected prepayment behavior may result in changes in the remaining life of loans and expected credit losses.

The allowance may be affected materially by a variety of qualitative factors that the Company considers to reflect its current judgement of various events and risks that are not measured in our statistical procedures. These qualitative risk factors include: (1) lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices; (2) changes in the value of underlying collateral for collateral dependent loans; (3) nature and volume of the portfolio and terms of loans; (4) volume and severity of past due, classified and nonaccrual loans as well as loan modifications; (5) existence and effect of any concentrations of credit and changes in the level of such concentrations; (6) experience, ability, and depth of lending department management and other relevant staff; (7) quality of loan review and board of directors oversight; (8) the effect of other external factors such as competition, legal and regulatory requirements; and (9) changes in national and local economic conditions related to unemployment, house price index, and gross domestic product. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. In evaluating the level of the allowance, we consider a range of possible assumptions and outcomes related to the various factors identified above. The level of the allowance is particularly sensitive to changes in the actual and forecasted probability of default of benchmarked banks and changes in current conditions or reasonably expected future conditions affecting the collectability of loans.

Although we believe that we use the best information available to establish the allowance for credit losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the FDIC and the WDFI, as an integral part of their examination process, periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses. However, regulatory agencies are not directly involved in establishing the allowance for credit losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Provision for Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 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.

We recognize the tax effects from an uncertain tax position in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized, upon ultimate settlement with the relevant tax authority. We recognize interest and penalties accrued or released related to uncertain tax positions in current income tax expense or benefit.

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Debt Securities. For available-for-sale and held to maturity 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 be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through a provision for credit losses. For debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

Foreclosed Assets. Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less estimated cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.

Comparison of Financial Condition at September 30, 2024 and June 30, 2024

Total Assets. Total assets decreased $2.8 million, or 1.3%, to $216.5 million at September 30, 2024 from $219.2 million at June 30, 2024. The decrease was primarily due to a decrease in net loans of $7.3 million, or 4.0%, which was offset by an increase in cash and cash equivalents of $4.5 million, or 43.4%. The remaining asset categories showed no significant changes when comparing September 30, 2024 with June 30, 2024.

Cash and Cash Equivalents. Total cash and cash equivalents increased $4.5 million, or 43.4%, to $15.0 million at September 30, 2024 from $10.5 million at June 30, 2024, primarily due to a decrease in net loans of $7.3 million which was offset by a decrease in borrowings of $3.0 million.

Debt Securities Available for Sale. Total debt securities available for sale remained substantially unchanged at $6.6 million when comparing September 30, 2024 with June 30, 2024.

Loans. Gross loans decreased $7.5 million, or 4.0%, to $177.8 million at September 30, 2024 from $185.3 million at June 30, 2024. The decrease was due to a decrease in all categories of loans. Commercial real estate loans decreased by $4.0 million or 5.3%. Multi-family real estate loans decreased by $1.4 million or 3.1%. Construction loans decreased by $1.3 million to no construction loans being held at September 30, 2024 compared to $1.3 million being held at June 30, 2024. The decrease in construction loans was primarily due to all construction loans being converted to permanent financings. The remaining categories of loan decreases (commercial real estate, multi-family real estate, commercial and industrial and one-to-four-family residential loans) were primarily due to repayments exceeding new loan growth.

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The following table presents the commercial real estate portfolio by industry sector at September 30, 2024 and June 30, 2024.


	Loans by Industry Sector				Loans by Industry Sector
	At September 30,		Percentage of		At June 30,		Percentage of
	2024		Total		2024		Total

	(Dollars in thousands)				(Dollars in thousands)
Commercial real estate loans:
Owner occupied real estate:
Office	$	1,259	%	1.79	$	1,278	%	1.72
Warehouse		1,028		1.46		1,041		1.40
Retail		646		0.92		692		0.93
Accommodation and food service		166		0.24		177		0.24
Mixed use		1,941		2.76		1,960		2.64
Other real estate		297		0.42		301		0.41
Total owner occupied real estate		5,337		7.59		5,449		7.33

Non-owner occupied real estate:
Office		7,234		10.28		7,333		9.87
Warehouse		1,604		2.28		1,594		2.14
Industrial		21,140		30.05		21,308		28.67
Retail		29,415		41.81		32,983		44.38
Accommodation and food service		1,678		2.38		1,694		2.28
Mixed use		1,632		2.32		1,639		2.21
Land		1,935		2.75		1,804		2.43
Other real estate		386		0.55		512		0.69
Total non-owner occupied real estate		65,024		92.41		68,867		92.67

Total commercial real estate loans	$	70,361	%	100.00	$	74,316	%	100.00

Foreclosed Assets. Foreclosed assets, net remained unchanged at $1.4 million when comparing September 30, 2024 with June 30, 2024.

Deposits. Total deposits decreased slightly by $815,000, or 0.5%, to $172.2 million at September 30, 2024 from $173.0 million at June 30, 2024. The decrease in deposits was related to customers who changed banks to obtain higher rates and the Bank being less aggressive in matching competitor interest rates. There was also a shift from non-interest bearing deposits to interest bearing deposits of approximately $2.0 million as customers moved their deposits to higher rate products at the Bank.

Federal Home Loan Bank (FHLB) Advances. FHLB advances decreased $3.0 million to $10.0 million at September 30, 2024 compared to $13.0 million in FHLB advances at June 30, 2024 as the Bank paid down a term borrowing of $3.0 million that matured in August 2024.

Stockholders’ Equity. Total stockholders’ equity increased by $292,000 when comparing September 30, 2024 with June 30, 2024 due to net income of $175,000 and a decrease in accumulated other comprehensive loss of $112,000 resulting from an increase in the fair market value of the debt securities available for sale portfolio due to favorable changes in market interest rates.

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Average Balance Sheets

The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans, if applicable, are included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable. Loan balances include loans held for sale.


	For the Three Months Ended September 30,
	2024							2023
	Average					Average		Average					Average
	Outstanding					Yield/Rate		Outstanding					Yield/Rate
	Balance			Interest		(1)		Balance			Interest		(1)

	(Dollars in thousands)
Interest-earning assets:
Loans	$	179,709		$	2,076	4.66	%	$	197,135		$	2,181	4.46	%
Debt securities		7,077			46	2.60	%		9,308			58	2.50	%
Cash and cash equivalents		11,844			161	5.50	%		12,756			153	4.84	%
Other		1,329			29	8.94	%		782			12	6.76	%
Total interest-earning assets		199,959			2,312	4.67	%		219,981			2,404	4.41	%
Noninterest-earning assets		20,234							18,232
Total assets	$	220,193						$	238,213
Interest-bearing liabilities:
Demand, NOW and money market deposits	$	44,456			178	1.60	%	$	47,172			160	1.35	%
Savings deposits		38,945			14	0.14	%		41,169			14	0.13	%
Certificates of deposit		68,565			579	3.39	%		84,785			588	2.78	%
Total interest-bearing deposits		151,966			771	2.03	%		173,126			762	1.76	%
FHLB advances and other borrowings		11,645			121	4.19	%		9,772			79	3.25	%
Total interest-bearing liabilities		163,611			892	2.18	%		182,898			841	1.84	%
Non-interest bearing demand deposits		25,490							24,284
Other non-interest bearing liabilities		1,662							1,820
Total liabilities		190,763							209,002
Total stockholders' equity		29,430							29,211
Total liabilities and stockholders' equity	$	220,193						$	238,213
Net interest income				$	1,420						$	1,563
Net interest rate spread (2)						2.49	%						2.57	%
Net interest-earning assets (3)	$	36,348						$	37,083
Net interest margin (4)						2.85	%						2.85	%
Average interest-earning assets to interest-bearing liabilities		122.22	%						120.28	%

(1)	Annualized.

(2)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(3)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4)	Net interest margin represents net interest income divided by average total interest-earning assets.

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The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.


	Three Months Ended September 30,
	2024 vs. 2023
	Increase (Decrease) Due to				Total
					Increase
	Volume		Rate		(Decrease)

		(In thousands)
Interest-earning assets:
Loans	$	(195)	$	90	$	(105)
Debt securities		(14)		2		(12)
Cash and cash equivalents		(11)		19		8
Other		9		8		17
Total interest-earning assets		(211)		119		(92)
Interest-bearing liabilities:
Demand, NOW and money market deposits		(9)		27		18
Savings deposits		(1)		1		—
Certificates of deposit		(113)		104		(9)
Total interest-bearing deposits		(123)		132		9
FHLB advances and other borrowings		15		27		42
Total interest-bearing liabilities		(108)		159		51
Change in net interest income	$	(103)	$	(40)	$	(143)

Comparison of Operating Results for the Three Months Ended September 30, 2024 and 2023

General. Net income was $175,000 for the three months ended September 30, 2024, an increase of $89,000, or 102.9%, from net income of $86,000 for the three months ended September 30, 2023. The increase in net income was primarily attributable to a decrease in the provision for (recovery of) credit losses from a provision for credit losses of $41,000 for the three months ended September 30, 2023 to a recovery of credit losses of $155,000 for the three months ended September 30, 2024. The provision for income taxes also decreased by $161,000. These increases were offset by a decrease in net interest income of $143,000, a decrease in non-interest income of $35,000 and an increase in non-interest expenses of $90,000.

Interest Income. Interest income decreased by $93,000, or 3.9%, to $2.3 million for the three months ended September 30, 2024 as compared to $2.4 million for the three months ended September 30, 2023 primarily due to a decrease in loan interest income of $105,000 offset by an increase in other interest income of $23,000. Income from debt securities decreased slightly by $12,000.

Loan interest income decreased by $105,000, or 4.8%, to $2.1 million for the three months ended September 30, 2024 as compared to $2.2 million for the three months ended September 30, 2023, due to a decrease in the average balance of the loan portfolio of $17.4 million, or 8.8%, which was offset by an increase in the average yield on loans of 20 basis points. The average balance of the loan portfolio decreased by $17.4 million, or 8.8%, to $179.7 million for the three months ended September 30, 2024 from $197.1 million for the three months ended September 30, 2023. The decrease in the average balance of the loan portfolio was primarily related to repayments exceeding new loan growth. The average yield on the loan portfolio increased by 20 basis points from 4.46% for the three months ended September 30, 2023 to 4.66% for the three months ended September 30, 2024 as a result of higher interest rates.

Debt securities interest income decreased by $12,000, or 20.7%, to $46,000 for the three months ended September 30, 2024 from $58,000 for the three months ended September 30, 2023 due to a decrease of $2.2 million in

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the average balance of debt securities to $7.1 million for the three months ended September 30, 2024 from $9.3 million for the three months ended September 30, 2023. Offsetting the decrease in average balance, was a ten basis points increase in the average yield on the debt securities portfolio to 2.60% for the three months ended September 30, 2024 from 2.50% for the three months ended September 30, 2023 as a result of the higher interest rate environment. The average balance of debt securities continued to decrease as a result of securities paydowns.

Interest Expense. Interest expense increased $50,000, or 6.0%, to $892,000 for the three months ended September 30, 2024 from $842,000 for the three months ended September 30, 2023, due to an increase of $42,000 in interest paid on borrowings and an increase of $9,000 in interest paid on deposits.

Interest expense on deposits increased $9,000, or 1.1%, to $771,000 for the three months ended September 30, 2024 from $763,000 for the three months ended September 30, 2023 due to an increase in the average rate paid on all deposit categories, offset by a decrease in the average balances of all deposit categories. The average rate paid on deposits increased by 27 basis points to 2.03% for the three months ended September 30, 2024 from 1.76% for the three months ended September 30, 2023. The increase in the average rate paid on all deposit categories was due to higher interest rates. All categories of deposit average balances decreased when comparing the three months ended September 30, 2024 with the three months ended September 30, 2023 with the average balance of deposits decreasing by $21.2 million, or 12.2%, to $152.0 million for the three months ended September 30, 2024. The decrease in the average balances of all deposits was related to customers who changed banks to obtain higher rates and the Bank being less aggressive in matching competitor interest rates. In addition, we had a $4.2 million brokered certificate of deposit that matured in March 2024.

Interest paid on FHLB borrowings increased $42,000, from $79,000 for the three months ended September 30, 2023 to $121,000 for the three months ended September 30, 2024. The increase in interest paid on borrowings was due to the average balance of FHLB advances increasing by $1.9 million to $11.6 million for the three months ended September 30, 2024 and an increase in the average rate paid on borrowings of 94 basis points from 3.25% for the three months ended September 30, 2023 to 4.19% for the three months ended September 30, 2024 due to an increase in borrowing costs.

Net Interest Income. Net interest income decreased by $143,000, or 9.2%, to $1.4 million for the three months ended September 30, 2024 from $1.6 million for the three months ended September 30, 2023. Net interest-earning assets decreased by $735,000, or 2.0%, to $36.3 million for the three months ended September 30, 2024 from $37.1 million for the three months ended September 30, 2023. Net interest rate spread decreased by eight basis points to 2.49% for the three months ended September 30, 2024 from 2.57% for the three months ended September 30, 2023, reflecting a 34 basis points increase in the average rate paid on interest-bearing liabilities which was offset by a 26 basis points increase in the average yield on interest-earning assets. The net interest margin remained unchanged at 2.85% for the three months ended September 30, 2024 and September 30, 2023. The increase in the average yield on interest earning assets for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily due to an increase in the average yield of all interest-earning asset categories related to the increase in market interest rates over the past year. The increase in the average interest rate paid on interest-bearing liabilities was due to the Bank raising the interest rates on all deposit categories to maintain customers and keep the rates in line with what the competitors were offering.

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such estimates as more information becomes available or conditions change. We assess the allowance for credit losses on a quarterly basis and make provisions for (recovery of) credit losses in order to maintain the allowance.

Based on our evaluation of the above factors, we recorded a recovery of credit losses of $155,000 for the three months ended September 30, 2024 compared to a provision for credit losses of $41,000 for the three months ended September 30, 2023. The recovery was related to the projected future economic conditions in our market area stabilizing over the next two years and a $7.5 million decline in the loan portfolio due primarily to repayments in the commercial real estate and multi-family real estate loan portfolios. These predictions align with the Bank’s historic charge-off history over the past 8-10 years.

The allowance for credit losses was $1.6 million, or 0.92%, of loans outstanding at September 30, 2024 and $2.0 million, or 1.01%, of loans outstanding at September 30, 2023.

To the best of our knowledge, we have recorded our best estimate of expected losses in the loan portfolio and for unfunded commitments at September 30, 2024. However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for credit losses. In addition, the WDFI and the FDIC, as an integral part of their examination process, will periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses. However, regulatory agencies are not directly involved in establishing the allowance for credit losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

Non-interest Income. Non-interest income information is as follows.


	Three Months Ended
	September 30,				Change
	2024		2023		Amount		Percent

	(Dollars in thousands)
Service charges on deposit accounts	$	32	$	31	$	1	3.2	%
Mortgage banking		88		131		(43)	(32.8)	%
Increase in cash surrender value of BOLI		67		60		7	11.7	%
Other		6		6		—	—	%
Total non-interest income	$	193	$	228	$	(35)	(15.4)	%

Non-interest income decreased by $35,000 to $193,000 for the three months ended September 30, 2024 from $228,000 for the three months ended September 30, 2023 due primarily to a decrease in mortgage banking income which was related to higher mortgage rates which led to less loan originations.

Non-interest Expenses. Non-interest expenses information is as follows.


	Three Months Ended
	September 30,				Change
	2024		2023		Amount		Percent

	(Dollars in thousands)
Salaries and employee benefits	$	835	$	773	$	62	8.0	%
Occupancy and equipment		240		170		70	41.2	%
Data processing and office		115		110		5	4.5	%
Professional fees		157		171		(14)	(8.2)	%
Marketing expenses		15		15		—	—	%
Foreclosed assets, net		18		14		4	28.6	%
Other		173		210		(37)	(17.6)	%
Total non-interest expenses	$	1,553	$	1,463	$	90	6.2	%

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Non-interest expenses were $1.6 million for the three months ended September 30, 2024 compared to $1.5 million for the three months ended September 30, 2023. The increase was primarily related to an increase in salaries and employee benefits and occupancy and equipment expenses related to the new branch which opened in January 2024.

Provision for Income Taxes. Income tax expense was $41,000 for the three months ended September 30, 2024, a decrease of $160,000, as compared to income tax expense of $201,000 for the three months ended September 30, 2023. The decrease in income tax expense was primarily the result of a change in Wisconsin tax law that provides for a subtraction from the Bank’s state taxable income for loan and fee interest income from certain commercial and agricultural loans. Based upon the provisions of this new state tax law, management determined that the Company was highly unlikely to incur a material Wisconsin tax liability in the foreseeable future, instead generating Wisconsin net operating loss carryforwards that would never be realized. Since the state rate at which net deferred tax assets are expected to be realized is 0%, the Company eliminated its state net deferred tax asset balances as of July 1, 2023, resulting in deferred tax expense of approximately $112,000 for the three months ended September 30, 2023.

Asset Quality

Loans Past Due and Non-Performing Assets. Loans are reviewed on a regular basis. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less estimated cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.

Delinquent Loans. The following table sets forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated.


	At September 30, 2024						At June 30, 2024
	30-59		60-89		90 Days				30-59		60-89		90 Days
	Days		Days		or More		Nonaccrual		Days		Days		or More		Nonaccrual
	Past Due		Past Due		Past Due		Balance		Past Due		Past Due		Past Due		Balance

	(In thousands)
Real estate loans:
One- to- four-family residential	$	152	$	68	$	—	$	—	$	68	$	—	$	—	$	—
Multifamily		—		—		—		—		—		—		—		—
Commercial		—		—		—		—		—		—		—		—
Construction		—		—		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—		—
Total	$	152	$	68	$	—	$	—	$	68	$	—	$	—	$	—

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Non-Performing Assets. The following table sets forth information regarding our non-performing assets.


	At September 30,			At June 30,
	2024			2024

	(Dollars in thousands)
Non-accrual loans:
Real estate loans:
One- to four-family residential	$	—		$	—
Multifamily		—			—
Commercial		—			—
Construction		—			—
Commercial and industrial		—			—
Consumer		—			—
Total non-accrual loans		—			—
Accruing loans past due 90 days or more		—			—
Real estate owned:
One- to four-family residential		—			—
Multifamily		—			—
Commercial		—			—
Construction		1,397			1,397
Commercial and industrial		—			—
Consumer		—			—
Total real estate owned		1,397			1,397
Total non-performing assets	$	1,397		$	1,397
Total non-performing loans to total loans		—	%		—	%
Total non-performing loans to total assets		—	%		—	%
Total non-performing assets to total assets		0.65	%		0.64	%

Non-performing assets include other real estate owned of $1.4 million, at September 30, 2024 and June 30, 2024. During the three months ended June 30, 2023, the Company foreclosed on collateral supporting a construction loan which was valued at $2.3 million and was included in foreclosed assets, net. The valuation was based on independent appraisals subject to certain discounts less estimated costs to sell. A subsequent independent appraisal was obtained in April 2024 resulting in a new valuation of $2.1 million subject to certain discounts less estimated costs to sell. After adjusting for estimated costs to sell, the revised valuation was $1.4 million resulting in a provision for valuation allowance of $937,100 being recorded during the year ended June 30, 2024.

Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of an allowance for credit loss is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” or “Watch” by our management. There were no loans classified as substandard, doubtful or loss in the Company’s loan portfolio as of September 30, 2024 or June 30, 2024.

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Allowance for Credit Losses

Allowance for Credit Losses. We establish the allowance for credit losses through charges (credits) to earnings in the form of a provision for (recovery of) credit losses. Credit losses are charged against the allowance for credit losses for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

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The following table sets forth activity in our allowance for credit losses for the periods indicated.


	For the Three Months Ended
	September 30,
	2024			2023

	(Dollars in thousands)
Allowance at beginning of period	$	1,797		$	2,159
Implementation of CECL		—			(175)
Provision for (recovery of) credit losses		(155)			41
Charge offs:
Real estate loans:
One- to four-family residential		—			—
Multifamily		—			—
Commercial		—			—
Construction		—			—
Commercial loans and industrial		—			—
Consumer		—			—
Total charge-offs		—			—
Recoveries:
Real estate loans:
One- to four-family residential		—			—
Multifamily		—			—
Commercial		—			—
Construction		—			—
Commercial and industrial		—			—
Consumer		—			—
Total recoveries		—			—
Net (charge-offs) recoveries		—			—
Allowance at end of period	$	1,642		$	2,025
Allowance to non-performing loans		—	%		—	%
Allowance to total loans outstanding at the end of the period		0.92	%		1.01	%
Net (charge-offs) recoveries to average loans outstanding during the period		0.00	%		0.00	%

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

Real estate loans:
One- to four-family residential		—	%		—	%
Multifamily		—	%		—	%
Commercial		—	%		—	%
Construction		—	%		—	%
Commercial and industrial		—	%		—	%
Consumer		—	%		—	%
Net (charge-offs) recoveries to average loans outstanding during the period		0.00	%		0.00	%

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Allocation of Allowance for Credit Losses. The following table sets forth the allowance for credit losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.


	At September 30, 2024						At June 30, 2024

			Percent of		Percent of Loans				Percent of		Percent of Loans
			Allowance to		In Category to Total				Allowance to		In Category to Total
	Amount		Total Allowance		Loans		Amount		Total Allowance		Loans

	(Dollars in thousands)
Commercial real estate	$	244	14.9	%	39.6	%	$	259	14.4	%	40.1	%
Commercial and industrial		15	0.9	%	2.6	%		16	0.9	%	2.8	%
Construction		—	—	%	—	%		28	1.6	%	0.7	%
One-to-four-family residential		1,210	73.7	%	32.4	%		1,314	73.1	%	31.2	%
Multi-family real estate		168	10.2	%	24.6	%		175	9.7	%	24.3	%
Consumer		5	0.3	%	0.9	%		5	0.3	%	0.9	%
Total	$	1,642	100	%	100	%	$	1,797	100.0	%	100.0	%

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Chicago. At September 30, 2024, we had a $77.3 million line of credit with the Federal Home Loan Bank of Chicago, which had $10.0 million in borrowings outstanding as of that date. The Bank also has $25.0 million available to borrow from the Federal Reserve Bank when pledging acceptable assets and an unsecured Federal Funds purchasing limit of $5.0 million with the Bank’s correspondent bank. At September 30, 2024, the Bank did not borrow any additional funds from the Federal Reserve or from the correspondent bank.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $945,000 and $367,000 of cash provided by operating activities for the three months ended September 30, 2024 and 2023, respectively. Net cash provided by (used in) investing activities, which consists primarily of disbursements for loan origination, the purchase of securities, and the purchase of premises and equipment offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $7.5 million provided by investing activities compared to $1.5 million used in investing activities for the three months ended September 30, 2024 and 2023, respectively. Net cash used in financing activities, consisting of activity in deposit accounts and borrowings, was $3.9 million used in financing activities compared to $3.6 million being used in financing activities for the three months ended September 30, 2024 and 2023, respectively.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience, current pricing strategy and regulatory restrictions, we anticipate that a substantial portion of maturing time deposits will be retained, and that we can supplement our funding with borrowings in the event that we allow these deposits to run off at maturity.

At September 30, 2024, Marathon Bank was classified as “well capitalized” for regulatory capital purposes. See Note 11-Minimum Regulatory Capital Requirements in the accompanying consolidated financial statements for additional information.

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Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At September 30, 2024, we had outstanding commitments to originate loans of $4.6 million, and $385,000 in outstanding commitments to sell loans. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in one year or less from September 30, 2024 totaled $46.3 million, which include $4.4 million in brokered certificates of deposit. Management expects that a substantial portion of the maturing time deposits will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize additional Federal Home Loan Bank advances or other borrowings, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

Recent Accounting Pronouncements

Please refer to Note 1 to the consolidated financial statements for a description of recent accounting pronouncements that may affect our financial condition and results of operations.

Impact of Inflation and Changing Price

The financial statements and related data presented herein have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

A smaller reporting company is not required to provide the information related to this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must necessarily reflect the fact that there are resource constraints and that management is required to apply its judgement in evaluating the benefits of possible controls and procedures relative to their costs.

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer , the Company has evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15 and 15d-15(e) under the Exchange Act as of September 30, 2024. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the first quarter of the fiscal year ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As of September 30, 2024, the Company is not currently a named party in a legal proceeding, the outcome of which would have a material effect on the financial condition or results of operations of the Company.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information related to this item.

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Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

On December 22, 2023, the Company announced it had adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to 107,875 shares of its common stock, or approximately 5.0% of the then outstanding shares. Shares may be repurchased in open market or private transactions, through block trades, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The repurchase program has no expiration date. Set forth below are repurchases made during the three months ended September 30, 2024. All shares of common stock repurchased will be retired.


							Approximate Number
					Total Number of Shares		of Shares That
					Repurchased as Part of		May Yet Be Purchased
	Total Number of Shares		Average Price Paid		Publicly Announced Plans		Under the Plans or
Period	Repurchased		Per Share		Or Programs		Programs
July 1-31, 2024		-	$	-		-	92,875
August 1-31,2024		5,000	$	8.850		5,000	87,875
September 1-30, 2024		-	$	-		-	87,875

Total		5,000	$	8.850		5,000		87,875

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the first fiscal quarter of 2025, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations.

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Item 6. Exhibits


Exhibit No.		Description

31.1		Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive Officer
31.2		Rule 13a-14(a) / 15d-14(a) Certification of the Chief Financial Officer
32.1		Section 1350 Certification of the Chief Executive Officer
32.2		Section 1350-Certification of the Chief Financial Officer
101		The following materials from Marathon Bancorp, Inc. Form 10-Q for the three months ended September 30, 2024 and 2023, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows, and (iv) related notes
104		Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Marathon Bancorp, Inc.

Date: November 13, 2024	By:	/s/ Nicholas W. Zillges
		Nicholas W. Zillges
		President and Chief Executive
		Officer (Principal Executive Officer)

Date: November 13, 2024	By:	/s/ Joy Selting-Buchberger
		Joy Selting-Buchberger
		Senior Vice President and Chief
		Financial Officer (Principal
		Financial and Accounting Officer)