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Economy, Business and Finance

Marathon Bancorp Inc.

02/11/2026 | Press release | Distributed by Public on 02/11/2026 06:31

Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

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 Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K for the year ended June 30, 2025 as filed with the Securities and Exchange Commission on September 26, 2025.

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, include, but are not limited to:

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statements of our goals, intentions and expectations;

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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, tariffs 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;

●

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;

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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;

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our ability to prevent or mitigate fraudulent activity;

●

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

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political instability or civil unrest;

●

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

●

our ability to control operating costs and expenses, including compensation expense associated with equity allocated or awarded to our employees;

●

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

●

our inability to sell our foreclosed assets, net at an amount equal to or greater than the carrying amount.

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 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 December 31, 2025 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 weighted-average remaining maturity 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.

Changes in the Wisconsin unemployment rate, the Wisconsin annual housing price index and the Wisconsin annual gross domestic product could have a material impact on the model's estimation of the allowance for credit losses. Marathon Bank's methodology for maintaining its allowance for credit losses includes various levels within each of the aforementioned criteria. Set forth below is a hypothetical change to the next level within Marathon Bank's allowance calculation. Changing these levels as of December 31, 2025, from those actually used on December 31, 2025 to the next highest or lowest level resulted in an increase in Marathon Bank's allowance for credit losses of $182,000, or 10.9%.



As of December 31, 2025

Historical Actual	Hypothetical Change

Wisconsin Unemployment (2.4%-3.0%)		3.0%-3.6%
Wisconsin Annual Housing Price Index (4.6%-6.5%)		1.8%-4.6%
Wisconsin Annual Gross Domestic Product (2.5%-4.0%)		(-6.1%)-2.5%

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.

Allowance for Credit Losses-Available for Sale Debt Securities. For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will 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.

Allowance for Credit Losses-Held-to-Maturity Debt Securities. Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security group and any other risk characteristics used to segment the portfolio. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

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 December 31, 2025 and June 30, 2025

Total Assets. Total assets increased $9.2 million, or 3.8%, to $248.0 million at December 31, 2025, from $238.8 million at June 30, 2025. The increase was primarily due to an increase in loans, net of $11.1 million, or 5.5%, which was offset by decreases in debt securities available for sale and cash and cash equivalents of $1.1 million and $728,000, respectively. The remaining asset categories showed no significant changes when comparing December 31, 2025 with June 30, 2025.

Cash and Cash Equivalents. Total cash and cash equivalents decreased $728,000, or 5.1%, to $13.7 million at December 31, 2025, from $14.4 million at June 30, 2025, primarily due to an increase in loans, net of $11.1 million, or 5.5%. This increase was primarily offset by new borrowings of $4.0 million, or 26.7%, an increase in deposits of $3.1 million, or 1.8%, and a decrease in debt securities available for sale of $1.1 million, or 21.9%.

Debt Securities Available for Sale. Total debt securities available for sale decreased by $1.1 million, or 21.9%, to $4.1 million at December 31, 2025 due to $1.1 million of debt securities available for sale maturing or being called during the six months ended December 31, 2025.

Loans. Gross loans increased $11.1 million, or 5.5%, to $213.7 million at December 31, 2025, from $202.6 million at June 30, 2025. The increase was primarily due to an increase in one-to-four-family residential loans of $7.7 million, or 13.6%, and an increase in multi-family real estate loans of $3.9 million, or 8.1%. The increase in multi-family real estate loans and one-to-four-family residential loans was due to a strategic decision to grow both of these portfolios. The remaining categories of loans showed no substantial changes.

The following table presents the commercial real estate portfolio by industry sector at December 31, 2025 and June 30, 2025.


	Loans by Industry Sector					Loans by Industry Sector
	At December 31,			Percentage of		At June 30,			Percentage of
	2025			Total		2025			Total

	(Dollars in thousands)					(Dollars in thousands)
Commercial real estate loans:
Owner occupied real estate:
Office	$	1,175		%	1.29	$	1,212		%	1.32
Warehouse		966			1.06		990			1.08
Retail		1,389			1.53		1,576			1.72
Accommodation and food service		131			0.14		145			0.16
Mixed use		1,839			2.02		1,881			2.05
Other real estate		501			0.55		286			0.31
Total owner occupied real estate		6,001			6.61		6,090			6.63

Non-owner occupied real estate:
Office		6,802			7.49		6,934			7.55
Warehouse		583			0.64		1,539			1.68
Industrial		24,101			26.54		25,022			27.24
Retail		42,474			46.77		41,201			44.85
Accommodation and food service		7,586			8.35		7,657			8.33
Mixed use		1,599			1.76		1,612			1.75
Land		1,673			1.84		1,725			1.88
Other real estate		-			-		87			0.09
Total non-owner occupied real estate		84,818			93.39		85,777			93.37

Total commercial real estate loans	$	90,819		%	100.00	$	91,867		%	100.00

Foreclosed Assets. Foreclosed assets, net remained unchanged at $996,000 when comparing December 31, 2025 with June 30, 2025.

Deposits. Total deposits increased by $3.1 million, or 1.8%, to $178.4 million at December 31, 2025, from $175.2 million at June 30, 2025 primarily due to an increase in demand, NOW and money market deposits of $6.0 million, or 12.6%. This increase was offset by a decrease in certificates of deposit balances of $1.8 million, or 2.7%, and a decrease in non-interest-bearing demand deposits of $1.1 million, or 4.7%. Savings deposits showed no significant changes when comparing the two dates. The increase in demand, NOW and money market deposits was due to the Company's increased focus on relationship management by obtaining customers' deposit balances when granting loans to new customers. The decrease in certificates of deposit balances was related to customer funds being transferred to higher yielding certificate of deposit specials being offered by our competitors. The decrease in non-interest-bearing demand deposits was due to a combination of seasonal business cash management and increased consumer spending.

Federal Home Loan Bank (FHLB) Advances. FHLB advances increased by $4.0 million to $19.0 million at December 31, 2025 due to a new borrowing during the six months ended December 31, 2025.

Stockholders' Equity. Total stockholders' equity increased by $1.2 million to $46.9 million when comparing December 31, 2025 with June 30, 2025 primarily due to net income of $946,000.

Average Balance Sheets

The following tables set 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 December 31,
		2025								2024
		Average						Average		Average						Average
		Outstanding						Yield/Rate		Outstanding						Yield/Rate
		Balance			Interest			(1)		Balance			Interest			(1)

		(Dollars in thousands)
Interest-earning assets:
Loans		$	207,203		$	2,757		5.38	%	$	175,651		$	2,038		4.68	%
Debt securities			4,611			31		2.69	%		6,913			45		2.61	%
Cash and cash equivalents			12,919			135		4.21	%		13,764			159		4.66	%
Other			1,329			28		8.31	%		1,329			25		7.67	%
Total interest-earning assets			226,062			2,951		5.28	%		197,657			2,267		4.63	%
Noninterest-earning assets			18,943								18,684
Total assets		$	245,005							$	216,341
Interest-bearing liabilities:
Demand, NOW and money market deposits		$	55,144			220		1.59	%	$	44,803			163		1.45	%
Savings deposits			37,866			14		0.15	%		38,102			14		0.15	%
Certificates of deposit			65,722			518		3.16	%		68,314			587		3.45	%
Total interest-bearing deposits			158,732			752		1.89	%		151,219			764		2.02	%
FHLB advances and other borrowings			15,086			141		3.76	%		10,000			97		3.90	%
Total interest-bearing liabilities			173,818			893		2.05	%		161,219			861		2.14	%
Non-interest bearing demand deposits			29,634								22,824
Other non-interest bearing liabilities			3,301								2,563
Total liabilities			206,753								186,606
Total stockholders' equity			38,252								29,735
Total liabilities and stockholders' equity		$	245,005							$	216,341
Net interest income					$	2,058							$	1,406
Net interest rate spread (2)								3.23	%							2.49	%
Net interest-earning assets (3)		$	52,244							$	36,438
Net interest margin (4)								3.66	%							2.85	%
Average interest-earning assets to interest-bearing liabilities			130.06	%							122.60	%

(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.


		For the Six Months Ended December 31,
		2025								2024
		Average						Average		Average						Average
		Outstanding						Yield/Rate		Outstanding						Yield/Rate
		Balance			Interest			(1)		Balance			Interest			(1)

		(Dollars in thousands)
Interest-earning assets:
Loans		$	204,534		$	5,378		5.28	%	$	177,682		$	4,114		4.65	%
Debt securities			5,142			88		3.42	%		6,996			91		2.60	%
Cash and cash equivalents			14,372			307		4.27	%		12,804			320		5.02	%
Other			1,329			53		8.22	%		1,329			54		8.22	%
Total interest-earning assets			225,377			5,826		5.19	%		198,811			4,579		4.62	%
Noninterest-earning assets			18,809								19,457
Total assets		$	244,186							$	218,268
Interest-bearing liabilities:
Demand, NOW and money market deposits		$	54,241			450		1.65	%	$	44,630			341		1.52	%
Savings deposits			38,823			28		0.14	%		38,524			28		0.14	%
Certificates of deposit			65,830			1,056		3.21	%		68,440			1,166		3.41	%
Total interest-bearing deposits			158,894			1,534		1.92	%		151,594			1,535		2.02	%
FHLB advances and other borrowings			15,043			281		3.74	%		10,823			218		4.04	%
Total interest-bearing liabilities			173,937			1,815		2.08	%		162,417			1,753		2.15	%
Non-interest-bearing demand deposits			29,387								24,157
Other non-interest-bearing liabilities			2,602								2,112
Total liabilities			205,926								188,686
Total stockholders' equity			38,260								29,582
Total liabilities and stockholders' equity		$	244,186							$	218,268
Net interest income					$	4,011							$	2,826
Net interest rate spread (2)								3.11	%							2.47	%
Net interest-earning assets (3)		$	51,440							$	36,394
Net interest margin (4)								3.56	%							2.84	%
Average interest-earning assets to interest-bearing liabilities			129.57	%							122.41	%

(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 a verage total interest-earning assets.

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 December 31,									Six Months Ended December 31,
		2025 vs. 2024									2025 vs. 2024
		Increase (Decrease) Due to						Total			Increase (Decrease) Due to						Total
								Increase									Increase
		Volume			Rate			(Decrease)			Volume			Rate			(Decrease)

			(In thousands)									(In thousands)
Interest-earning assets:
Loans		$	369		$	350		$	719		$	623		$	641		$	1,264
Debt securities			(15)			1			(14)			(24)			21			(3)
Cash and cash equivalents			(10)			(14)			(24)			41			(54)			(13)
Other			-			3			3			(1)			-			(1)
Total interest-earning assets			344			340			684			639			608			1,247
Interest-bearing liabilities:
Demand, NOW and money market deposits			37			20			57			73			35			108
Savings deposits			-			-			-			-			-			-
Certificates of deposit			(22)			(47)			(69)			(43)			(66)			(109)
Total interest-bearing deposits			15			(27)			(12)			30			(31)			(1)
FHLB advances and other borrowings			50			(6)			44			85			(22)			63
Total interest-bearing liabilities			65			(33)			32			115			(53)			62
Change in net interest income		$	279		$	373		$	652		$	524		$	661		$	1,185

Comparison of Operating Results for the Three Months Ended December 31, 2025 and 2024

General. Net income was $501,000 for the three months ended December 31, 2025, an increase of $450,000, or 880.7%, from net income of $51,000 for the three months ended December 31, 2024. The increase in net income was primarily attributable to an increase in net interest income of $652,000. This increase was offset by an increase in non-interest expenses of $100,000 and an increase in the provision for income taxes of $87,000.

Interest Income. Interest income increased by $683,000, or 35.3%, to $3.0 million for the three months ended December 31, 2025 as compared to $2.3 million for the three months ended December 31, 2024 primarily due to an increase in loan interest income of $719,000.

Loan interest income increased by $719,000, or 26.3%, to $2.8 million for the three months ended December 31, 2025 as compared to $2.0 million for the three months ended December 31, 2024, due to an increase in the average yield on loans and an increase in the average balance of loans. The average yield on the loan portfolio increased by 70 basis points from 4.68% for the three months ended December 31, 2024 to 5.38% for the three months ended December 31, 2025. The average balance of the loan portfolio increased by $31.6 million, or 18.0%, to $207.2 million for the three months ended December 31, 2025 from $175.6 million for the three months ended December 31, 2024. The increase in the average yield on the loan portfolio was the result of higher interest rates on new loan originations. The increase in the average balance of the loan portfolio was primarily related to new loan growth.

Debt securities interest income decreased by $14,000, or 30.2%, to $31,000 for the three months ended December 31, 2025 from $45,000 for the three months ended December 31, 2024 due to a decrease in the average balance of debt securities of $2.3 million, which was offset by a slight increase in the average yield on the debt securities portfolio of eight basis points to 2.69% for the three months ended December 31, 2025 from 2.61% for the three months ended December 31, 2024. The decrease in the average balance of debt securities continues to be related to securities calls and paydowns. The increase in the average yield on the debt securities portfolio was primarily due to the change in the mix of the securities portfolio as a result of securities calls and paydowns.

Interest Expense.Interest expense increased $32,000, or 3.7%, to $893,000 for the three months ended December 31, 2025 from $861,000 for the three months ended December 31, 2024, due to an increase of $43,000 in interest paid on FHLB borrowings which was offset by a decrease of $11,000 in interest paid on deposits.

Interest expense on deposits decreased by $11,000, or 1.5%, to $752,000 for the three months ended December 31, 2025 from $763,000 for the three months ended December 31, 2024 due to a decrease in the average rate paid on deposits which was offset by an increase in the average balance of deposits. The average rate paid on deposits decreased by 13 basis points to 1.89% for the three months ended December 31, 2025 from 2.02% for the three months ended December 31, 2024 due to declining interest rates and a shift in customer funds from fixed-rate certificates of deposit into more liquid deposit products with variable rates. The increase in the average balance of deposits was the result of the initiation of new loan relationships which increased the average balances of demand, NOW and money market deposits while the decrease in the average balances of certificate of deposit account balances was related to customer funds being transferred to higher yielding certificate of deposit specials being offered by our competitors.

Interest paid on FHLB borrowings increased $43,000, from $98,000 for the three months ended December 31, 2024 to $141,000 for the three months ended December 31, 2025. The increase in interest paid on borrowings was due to the average balance of FHLB advances increasing by $5.1 million to $15.1 million for the three months ended December 31, 2025 from $10.0 million for the three months ended December 31, 2024. The average rate paid on borrowings decreased slightly from 3.90% for the three months ended December 31, 2024 to 3.76% for the three months ended December 31, 2025 due to a decrease in the federal funds rate.

Net Interest Income. Net interest income increased by $652,000, or 46.4%, to $2.1 million for the three months ended December 31, 2025 from $1.4 million for the three months ended December 31, 2024. Net interest rate spread increased by 74 basis points to 3.23% for the three months ended December 31, 2025 from 2.49% for the three months ended December 31, 2024, reflecting a 65 basis points increase in the average yield on interest-earning assets and a nine basis points decrease in the average interest rate paid on interest-bearing liabilities. The net interest margin increased to 3.66% for the three months ended December 31, 2025 from 2.85% for the three months ended December 31, 2024. The increase in the average yield on interest earning assets for the three months ended December 31, 2025 compared to the three months ended December 31, 2024 was primarily due to an increase in the average yield of all interest-earning asset categories (with the exception of cash and cash equivalents which decreased by 45 basis points due to a drop in the federal funds rate) associated with an increase in the percentage of commercial and multi-family real estate loans making up the total loan portfolio which generally carry higher interest rates than the other categories of loans. Also, the Company has been retaining higher rate mortgages in its one-to-four-family residential loan portfolio. Net interest-earning assets increased by $15.8 million, or 43.3%, to $52.2 million for the three months ended December 31, 2025 from $36.4 million for the three months ended December 31, 2024.

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 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 provision for credit losses of $33,000 for the three months ended December 31, 2025 compared to a provision for credit losses of $8,000 for the three months ended December 31, 2024. The increase in provision when comparing the two periods was primarily related to an increase in the loan portfolio for the three months ended December 31, 2025.

The allowance for credit losses was $1.7 million, or 0.80%, of loans outstanding at December 31, 2025 and $1.7 million, or 0.92%, of loans outstanding at December 31, 2024.

To the best of our knowledge, we have recorded our best estimate of expected losses in the loan portfolio and for unfunded commitments at December 31, 2025. 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
		December 31,						Change
		2025			2024			Amount			Percent

		(Dollars in thousands)
Service charges on deposit accounts		$	34		$	29		$	5		17.2	%
Mortgage banking			66			77			(11)		(14.3)	%
Increase in cash surrender value of BOLI			72			67			5		7.5	%
Other			18			7			11		157.1	%
Total non-interest income		$	190		$	180		$	10		5.6	%

Non-interest income increased slightly by $10,000 to $190,000 for the three months ended December 31, 2025 from $180,000 for the three months ended December 31, 2024. Other income increased by $11,000 as a result of the Company leasing the top floor of its Brookfield branch to new tenants. Mortgage banking income decreased as a result of less mortgage sales during the current three-month period.

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


		Three Months Ended
		December 31,						Change
		2025			2024			Amount			Percent

		(Dollars in thousands)
Salaries and employee benefits		$	904		$	835		$	69		8.3	%
Occupancy and equipment			210			210			-		-	%
Data processing and office			27			100			(73)		(73.0)	%
Professional fees			257			185			72		38.9	%
Marketing expenses			22			14			8		57.1	%
Foreclosed assets, net			13			5			8		160.0	%
Other			193			177			16		9.0	%
Total non-interest expenses		$	1,626		$	1,526		$	100		6.6	%

Non-interest expenses were $1.6 million for the three months ended December 31, 2025 and $1.5 million for the three months ended December 31, 2024. The increase was primarily related to an increase in salaries and employee benefits and professional fees which was offset by a decrease in data processing and office expenses. The salaries and employee benefits increase was associated with the new branch we opened in Brookfield, Wisconsin in January 2024. The increase in professional fees was related to timing of various legal expenses while the decrease in data processing and office expenses was related to a new contract with the Company's core software provider which started in September 2025. This new contract is expected to save the Company approximately $185,000 annually.

Provision for Income Taxes.Income tax expense was $87,000 for the three months ended December 31, 2025, an increase of $85,000, as compared to income tax expense of $2,000 for the three months ended December 31, 2024. The increase in income tax expense was primarily the result of an increase in income before provision for income taxes for the three months ended December 31, 2025 and the higher percentage of non-taxable income making up income before income taxes for the three months ended December 31, 2024.

Comparison of Operating Results for the Six Months Ended December 31, 2025 and 2024

General. Net income was $946,000 for the six months ended December 31, 2025, an increase of $720,000, or 318.4%, from net income of $226,000 for the six months ended December 31, 2024. The increase in net income was primarily attributable to an increase in net interest income of $1.2 million. This increase was offset by a decrease in the recovery of credit losses of $140,000, from a recovery of credit losses of $147,000 for the six months ended December 31, 2024 to a recovery of credit losses of $7,000 for the six months ended December 31, 2025, and an increase in non-interest expenses of $183,000. The provision for income taxes also increased by $148,000.

Interest Income. Interest income increased by $1.2 million, or 27.2%, to $5.8 million for the six months ended December 31, 2025 compared to the six months ended December 31, 2024 primarily due to an increase in loan interest income.

Loan interest income increased by $1.3 million, or 30.7%, to $5.4 million for the six months ended December 31, 2025, as compared to $4.1 million for the six months ended December 31, 2024, due to an increase in the average yield on loans and an increase in the average balance of loans. The average yield on the loan portfolio increased by 63 basis points from 4.65% for the six months ended December 31, 2024 to 5.28% for the six months ended December 31, 2025. The average balance of the loan portfolio increased by $26.9 million, or 15.1%, to $204.5 million for the six months ended December 31, 2025 from $177.7 million for the six months ended December 31, 2024. The increase in the average yield on the loan portfolio was the result of higher interest rates on new loan originations. The increase in the average balance of the loan portfolio was primarily related to new loan growth.

Debt securities interest income decreased by $3,000, or 3.5%, to $88,000 for the six months ended December 31, 2025 from $91,000 for the six months ended December 31, 2024 due to a decrease of $1.9 million in the average balance of debt securities to $5.1 million for the six months ended December 31, 2025 from $7.0 million for the six months ended December 31, 2024. This decrease was offset by an increase in the average yield on the debt securities portfolio of 82 basis points to 3.42% for the six months ended December 31, 2025 as compared to 2.60% for the six months ended December 31, 2024. The average balance of debt securities continued to decrease as a result of securities calls and paydowns. The increase in the average yield on the debt securities portfolio was due to a $1.0 million floating rate corporate bond that was called in October 2025 that had a coupon rate of 10.17% for the last three months prior to being called. It was purchased in May 2021.

Interest Expense.Interest expense increased $62,000, or 3.5%, to $1.8 million for the six months ended December 31, 2025 from $1.8 million for the six months ended December 31, 2024, due to an increase in interest paid on FHLB borrowings.

Interest expense on deposits remained substantially the same at $1.8 million when comparing the six months ended December 31, 2025 to the six months ended December 31, 2024. The decrease in the average rate paid on deposits was offset by an increase in the average balance of deposits. The average rate paid on deposits decreased by ten basis points to 1.92% for the six months ended December 31, 2025 from 2.02% for the six months ended December 31, 2024 due to declining interest rates and a shift in customer funds from fixed-rate certificates of deposit into more liquid deposit products with variable rates. The increase in the average balance of deposits was the result of the initiation of new loan relationships which increased the average balances of demand, NOW, money market and savings deposit accounts while the decrease in the average balances of certificate of deposit accounts was related to customer funds being transferred to higher yielding certificate of deposit specials being offered by our competitors.

Interest paid on FHLB borrowings increased $63,000, from $218,000 for the six months ended December 31, 2024 to $281,000 for the six months ended December 31, 2025. The increase in interest paid on borrowings was due to the average balance of FHLB advances increasing by $4.2 million to $15.0 million for the six months ended December 31, 2025 from $10.8 million for the six months ended December 31, 2024. The average rate paid on borrowings decreased from 4.04% for the six months ended December 31, 2024 to 3.74% for the six months ended December 31, 2025 due to a decrease in the federal funds rate.

Net Interest Income. Net interest income increased by $1.2 million, or 41.9%, to $4.0 million for the six months ended December 31, 2025 from $2.8 million for the six months ended December 31, 2024. Net interest rate spread increased by 64 basis points to 3.11% for the six months ended December 31, 2025 from 2.47% for the six months ended December 31, 2024, reflecting a 57 basis points increase in the average yield on interest-earning assets and a seven basis points decrease in the average interest rate paid on interest-bearing liabilities. The net interest margin increased to 3.56% for the six months ended December 31, 2025 from 2.84% for the six months ended December 31, 2024. The increase in the average yield on interest earning assets for the six months ended December 31, 2025 compared to the six months ended December 31, 2024 was primarily due to an increase in the average yield of all interest-earning asset categories (with the exception of cash and cash equivalents which decreased by 75 basis points due to a drop in the federal funds rate) was associated with an increase in the percentage of commercial and multi-family real estate loans making up the total loan portfolio which generally carry higher interest rates than the other categories of loans. Also, the Company has been retaining higher rate mortgages in its one-to-four-family residential loan portfolio. Net interest-earning assets increased by $15.0 million, or 41.3%, to $51.4 million for the six months ended December 31, 2025 from $36.4 million for the six months ended December 31, 2024.

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 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 $7,000 for the six months ended December 31, 2025 compared to a recovery of credit losses of $147,000 for the six months ended December 31, 2024. The decrease in recovery when comparing the two periods was primarily related to an increase in the loan portfolio for the six months ended December 31, 2025. The recovery continues to be related to the projected future economic conditions in our market area stabilizing over the next two years, an increase in prepayments in both consumer and commercial loans, which was impactful to the weighted average life of the loan portfolio and the continuous recoveries of two legacy charge-offs.

The allowance for credit losses was $1.7 million, or 0.80%, of loans outstanding at December 31, 2025 and $1.7 million, or 0.92%, of loans outstanding at December 31, 2024.

To the best of our knowledge, we have recorded our best estimate of expected losses in the loan portfolio and for unfunded commitments at December 31, 2025. 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.


		Six Months Ended
		December 31,						Change
		2025			2024			Amount			Percent

		(Dollars in thousands)
Service charges on deposit accounts		$	67		$	61		$	6		9.84	%
Mortgage banking			147			165			(18)		(10.9)	%
Increase in cash surrender value of BOLI			142			134			8		6.0	%
Other			24			14			10		71.43	%
Total non-interest income		$	380		$	374		$	6		1.60	%

Non-interest income increased slightly by $6,000 to $380,000 for the six months ended December 31, 2025 from $374,000 for the six months ended December 31, 2024. Other income increased by $10,000 as a result of the Company leasing the top floor of its Brookfield branch to new tenants. Mortgage banking income decreased as a result of less mortgage sales during the current six-month period.

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


		Six Months Ended
		December 31,						Change
		2025			2024			Amount			Percent

		(Dollars in thousands)
Salaries and employee benefits		$	1,802		$	1,670		$	132		7.9	%
Occupancy and equipment			426			451			(25)		(5.5)	%
Data processing and office			126			214			(88)		(41.1)	%
Professional fees			450			341			109		32.0	%
Marketing expenses			43			29			14		48.3	%
Foreclosed assets, net			30			23			7		(37.8)	%
Other			385			351			34		9.7	%
Total non-interest expenses		$	3,262		$	3,079		$	183		5.9	%

Non-interest expenses were $3.3 million for the six months ended December 31, 2025 compared to $3.1 million for the six months ended December 31, 2024. The increase was primarily related to an increase in salaries and employee benefits and professional fees which was offset by a decrease in data processing and office expenses. The salaries and employee benefits increase was associated with the new branch we opened in Brookfield, Wisconsin in January 2024. The increase in professional fees was related to timing of various legal expenses while the decrease in data processing and office expenses was related to a new contract with the Company's core software provider which started in September 2025. This new contract is expected to save the Company approximately $185,000 annually.

Provision for Income Taxes.Income tax expense was $190,000 for the six months ended December 31, 2025, an increase of $148,000, as compared to income tax expense of $42,000 for the six months ended December 31, 2024. The increase in income tax expense was primarily the result of an increase in income before provision for income taxes during the six months ended December 31, 2025. The effective tax rate for the six months ended December 31, 2025 and 2024 was 16.75% and 15.71%, respectively.

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 December 31, 2025								At June 30, 2025
		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		$	24		$	-		$	-	$	190		$	253		$	-		$	-		$	67
Multifamily			-			-			-		-			-			-			-			-
Commercial			-			-			-		-			-			-			-			-
Construction			-			-			-		-			-			-			-			-
Commercial and industrial			-			-			-		-			-			-			-			-
Consumer			-			-			-		-			-			-			-			-
Total		$	24		$	-		$	-	$	190		$	253		$	-		$	-		$	67

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


		At December 31,			At June 30,
		2025			2025

		(Dollars in thousands)
Non-accrual loans:
Real estate loans:
One- to four-family residential		$	190		$	67
Multifamily			-			-
Commercial			-			-
Construction			-			-
Commercial and industrial			-			-
Consumer			-			-
Total non-accrual loans			190			67
Accruing loans past due 90 days or more			-			-
Real estate owned:
One- to four-family residential			-			-
Multifamily			-			-
Commercial			-			-
Construction			996			996
Commercial and industrial			-			-
Consumer			-			-
Total real estate owned			996			996
Total non-performing assets		$	1,186		$	1,063
Total non-performing loans to total loans			0.09	%		0.03	%
Total non-performing loans to total assets			0.08	%		0.03	%
Total non-performing assets to total assets			0.48	%		0.45	%

Non-performing assets include other real estate owned of $996,000 at December 31, 2025 and June 30, 2025. 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 (OREO), 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 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. An offer to sell the property for $1.1 million was accepted by the Company in August 2025 resulting in a provision for valuation allowance of $378,767 being recorded during the year ended June 30, 2025. The sale contract was terminated during the current quarter and the Company has relisted the property for $1.5 million. Non-performing loans at December 31, 2025 consisted of two one-to four-family residential loans that were fully secured compared to one one-to four-family residential loan that was fully secured at June 30, 2025.

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.

Set forth below is a schedule of classified loans as of December 31, 2025 and June 30, 2025.


		December 31,		June 30,
		2025		2025

	(In thousands)
Classification of Loans:
Substandard	$	-	$	-
Doubtful		-		-
Loss		-		-
Total Classified Assets	$	-	$	-
Special Mention/Watch	$	653	$	1,151

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.

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


	For the Three Months Ended						For the Six Months Ended
	December 31,						December 31,
	2025			2024			2025			2024

	(Dollars in thousands)						(Dollars in thousands)
Allowance at beginning of period	$	1,669		$	1,642		$	1,708		$	1,797
Provision for (recovery of) credit losses		33			8			(7)			(147)
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		1			1			2			1
Total recoveries		1			1			2			1
Net (charge-offs) recoveries		1			1			2			1
Allowance at end of period	$	1,703		$	1,651		$	1,703		$	1,651
Allowance to non-performing loans		896.32	%		-	%		896.32	%		-	%
Allowance to total loans outstanding at the end of the period		0.80	%		0.92	%		0.80	%		0.92	%
Net (charge-offs) recoveries to average loans outstanding during the period		0.00	%		0.00	%		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	%		0.00	%		0.00	%

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 December 31, 2025							At June 30, 2025

					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		$	367		21.6	%	42.5	%	$	390		22.8	%	45.4	%
Commercial and industrial			10		0.6	%	1.7	%		11		0.6	%	1.9	%
Construction			1		0.1	%	0.4	%		4		0.2	%	0.4	%
One-to-four-family residential			1,100		64.6	%	29.9	%		1,123		65.7	%	27.8	%
Multi-family real estate			207		12.2	%	24.2	%		171		10.0	%	23.6	%
Consumer			18		1.1	%	1.3	%		9		0.5	%	0.9	%
Total		$	1,703		100	%	100	%	$	1,708		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 December 31, 2025, we had a $85.9 million line of credit with the Federal Home Loan Bank of Chicago, which had $19.0 million in borrowings outstanding as of that date. The Bank also has $16.5 million available to borrow from the Federal Reserve Bank which is pledged by multi-family loans and an unsecured Federal Funds purchasing limit of $5.0 million with the Bank's correspondent bank. There were no borrowings under these arrangements at December 31, 2025.

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 $1.9 million and $1.1 million of cash provided by operating activities for the six months ended December 31, 2025 and 2024, 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 $9.8 million used in investing activities compared to $7.2 million provided by investing activities for the six months ended December 31, 2025 and 2024, respectively. Net cash provided by (used in) financing activities, consisting of activity in deposit accounts and borrowings, was $7.1 million provided by financing activities compared to $2.6 million being used in financing activities for the six months ended December 31, 2025 and 2024, 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 December 31, 2025, Marathon Bank was classified as "well capitalized" for regulatory capital purposes. See Note 10-Minimum Regulatory Capital Requirements in the accompanying consolidated financial statements for additional information.

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 December 31, 2025, we had outstanding commitments to originate loans of $4.7 million, and no 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 December 31, 2025 totaled $43.6 million, which include $2.3 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.

Marathon Bancorp Inc. published this content on February 11, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 11, 2026 at 12:31 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]

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