Winchester Bancorp, Inc./MD/

Previous wording

Management’s discussion and analysis of financial condition and results of operations at December 31, 2024 and June 30, 2024 and for the three and six months ended December 31, 2024 and 2023 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Current wording

Management’s discussion and analysis of financial condition and results of operations at March 31, 2025 and June 30, 2024 and for the three and nine months ended March 31, 2025 and 2024 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Previous wording

We measure the allowance for credit losses on loans using the Scaled CECL Allowance for Losses Estimator (“SCALE”) method, which is a simple, spreadsheet-based method developed by the Federal Reserve Board to assist community banks in calculating a CECL compliant allowance for credit losses using proxy expected lifetime loss rates. The SCALE tool is a template designed for smaller community banks with total assets of less than $1 billion. It uses publicly available data to derive the initial proxy lifetime loss rates. Management uses judgment to further adjust the proxy expected lifetime loss rates with qualitative factors to reflect the facts and circumstances of our internal loss history and credit risk factors for each loan segment. The allowance for credit losses on loans is measured on a collective (pool) basis when similar characteristics exist. We segment our loan portfolio to correspond to call report classification to make peer data more useful.

Current wording

We measure the allowance for credit losses on loans using the SCALE method, which is a simple, spreadsheet-based method developed by the Federal Reserve Board to assist community banks in calculating a CECL compliant allowance for credit losses using proxy expected lifetime loss rates. The SCALE tool is a template designed for smaller community banks with total assets of less than $1 billion. It uses publicly available data to derive the initial proxy lifetime loss rates. Management uses judgment to further adjust the proxy expected lifetime loss rates with qualitative factors to reflect the facts and circumstances of our internal loss history and credit risk factors for each loan segment. The allowance for credit losses on loans is measured on a collective (pool) basis when similar characteristics exist. We segment our loan portfolio to correspond to call report classification to make peer data more useful.

Previous wording

The allowance for credit losses on loans is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. For example, an increase of 25 basis points as our adjustment to our lifetime loss rate for qualitative factors for all loan categories at December 31, 2024 would have increased our allowance for credit losses on loans at that date to $5.4 million from $3.6 million.

Current wording

The allowance for credit losses on loans is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. For example, an increase of 25 basis points as to our lifetime loss rate for qualitative factors for all loan categories at March 31, 2025 would have increased our allowance for credit losses on loans at that date to $5.4 million from $3.6 million.

Previous wording

Total Assets. Total assets increased $41.1 million, or 4.8%, to $894.1 million at December 31, 2024, from $853.0 million at June 30, 2024. The increase was primarily due to an increase in loans, partially offset primarily by a decrease in cash and cash equivalents and investment securities.

Current wording

Total Assets. Total assets increased $70.1 million, or 8.2%, to $923.1 million at March 31, 2025, from $853.0 million at June 30, 2024. The increase was primarily due to increases in loans and cash and cash equivalents.

Previous wording

Investment Securities. Investment securities, comprised of both available for sale and held to maturity securities, aggregated $85.7 million at December 31, 2024 compared to $86.6 million at June 30, 2024, as we used excess cash to fund loan growth instead of investing in securities.

Current wording

Investment Securities. Investment securities, comprised of both available for sale and held to maturity securities, aggregated $86.8 million at March 31, 2025 compared to $86.6 million at June 30, 2024, as we used excess cash to fund loan growth instead of investing in securities.

Previous wording

Gross Loans. Loans increased $43.4 million, or 6.3%, to $727.8 million at December 31, 2024 compared to $684.4 million at June 30, 2024. The primary increases were in construction loans ($13.4 million, or 13.2%), multi-family real estate loans ($12.0 million, or 9.6%), commercial real estate loans ($10.5 million, or 12.3%) and one- to four-family residential real estate loans ($10.2 million, or 3.0%) We continued our focus on originating construction and multi-family real estate loans at a higher point in the market interest rate cycle. Our strategy is to continue to grow our loan portfolio, with a focus on commercial real estate, multi-family residential real estate and construction loans, while continuing to originate single-family residential real estate loans to support local homebuyers. The recent increase in one- to four-family residential real estate loans was due to our establishing new broker relationships and our recent efforts to balance our concentration of commercial real estate loans, particularly with respect to our level of regulatory capital.

Current wording

Gross Loans. Loans increased $45.8 million, or 6.7%, to $730.1 million at March 31, 2025 compared to $684.4 million at June 30, 2024. The primary increases were in multi-family real estate loans ($24.1 million, or 19.4%), commercial real estate loans ($16.1 million, or 18.8%), one- to four-family residential real estate loans ($6.9 million, or 2.0%), and construction loans ($1.0 million, or 0.9%). We continued our focus on originating construction and multi-family real estate loans at a higher point in the market interest rate cycle. Our strategy is to continue to grow our loan portfolio, with a focus on commercial real estate, multi-family residential real estate and construction loans, while continuing to originate single-family residential real estate loans to support local homebuyers. The recent increase in one- to four-family residential real estate loans was due to our establishing new broker relationships and our recent efforts to balance our concentration of commercial real estate loans, particularly with respect to our level of regulatory capital. The allowance for credit losses on loans was $3.6 million at March 31, 2025 and $3.5 million at June 30, 2024,and represented 0.49% and 0.50% of total loans at March 31, 2025 and June 30, 2024,, respectively. The allowance for credit losses for off balance sheet commitments was $1.0 million at March 31, 2025 and $1.2 million at June 30, 2024,. The benefit for off balance sheet commitments related to lower balances of loan commitments as the commitments were converted to loans.

Previous wording

Total nonaccrual loans were $1.9 million at December 31, 2024, compared to $1.4 million at December 31, 2023. Total loans past due 30 days or greater were $2.4 million at December 31, 2024 compared to $1.9 million at December 31, 2023. As a percentage of nonperforming loans, the allowance for credit losses on loans was 187.86% at December 31, 2024 compared to 216.55% at December 31, 2023.

Current wording

Total nonaccrual loans were $1.9 million at March 31, 2025, compared to $1.4 million at June 30, 2024. Total loans past due 30 days or greater were $2.3 million at March 31, 2025 compared to $1.3 million at June 30, 2024. As a percentage of nonperforming loans, the allowance for credit losses on loans was 191.77% at March 31, 2025 compared to 245.44% at June 30, 2024.

Previous wording

Deposits. Deposits increased $25.6 million, or 4.0%, to $661.0 million at December 31, 2024 from $635.4 million at June 30, 2024. The increase was due primarily to an increase in certificates of deposit, which increased $25.3 million, or 9.7%, to $287.5 million at December 31, 2024 from $262.2 million at June 30, 2024, as customers continued to hold deposit products with higher interest rates. This increase was comprised of an increase of $30.7 million, or 30.2%, in certificates of deposit in amounts of $250,000 or greater (the limit for federal deposit insurance), and a decrease of $5.4 million, or 3.4%, in certificates of deposit in amounts of less than $250,000. As described above, all of our deposits are fully insured under the

Current wording

Deposits. Deposits increased $67.7 million, or 10.7%, to $703.1 million at March 31, 2025 from $635.4 million at June 30, 2024. The increase was due primarily to an increase in money market accounts, which increased $33.6 million, or 39.3%, to $119.1 million at March 31, 2025 from $85.5 million at June 30, 2024, as customers continued to hold deposit products with higher interest rates. The increase in deposits was also due to a $22.2 million, or 18.6% in NOW and demand deposits. NOW and demand deposits included $34.9 million of subscription funds from prospective investors in our initial public offering prior to the closing of the offering. Certificates of deposits increased $18.9 million, or 7.2%, to $281.1 million at March 31, 2025 from $262.2 million at June 30, 2024. This increase was comprised of an increase of $18.7 million, or 11.6%, in certificates of deposit in amounts of less than $250,000, and an increase of $272,000, or 0.3%, in certificates of deposit in amounts of $250,000 or greater (the limit for federal deposit insurance). All of our deposits are fully insured under the DIF.

Previous wording

Borrowings. Borrowings, which consisted solely of Federal Home Loan Bank of Boston advances, increased $16.0 million, or 12.4%, to $145.5 million at December 31, 2024, compared to $129.5 million from June 30, 2024. Advances were used to fund loan growth that exceeded our increase in deposits, described above.

Current wording

Borrowings. Borrowings, which consisted solely of Federal Home Loan Bank of Boston advances, increased $1.5 million, or 1.2%, to $131.0 million at March 31, 2025, compared to $129.5 million from June 30, 2024.

Previous wording

Total Surplus. Total surplus increased $37,000 and was $80.3 million at each December 31, 2024 and June 30, 2024. Total surplus increased due to a $296,000 decrease in accumulated other comprehensive loss to $1.5 million at December 31, 2024, partially offset by a net loss of $259,000 for the six months ended December 31, 2024.

Current wording

Total Surplus. Total surplus increased $626,000 and was $80.9 million at March 31, 2025 and $80.3 million at June 30, 2024. Total surplus increased due to a $580,000 decrease in accumulated other comprehensive loss to $1.2 million at March 31, 2025, and by a net income of $46,000 for the nine months ended March 31, 2025.

Previous wording

General. We recorded net income of $373,000 and $272,000 for the three months ended December 31, 2024 and 2023, respectively. The increase in net income was due to an increase in interest and dividend income and a decrease in operating expense, partially offset by an increase in interest expense, the provision for credit losses, and a decrease in other income.

Current wording

General. We recorded net income of $305,000 and $192,000 for the three months ended March 31, 2025 and 2024, respectively. The increase in net income was due to an increase in interest and dividend income and a decrease in provision for credit loss expense, partially offset by increases in interest expense, and operating expense, and a decrease in other income.

Previous wording

Interest and Dividend Income. Interest and dividend income increased $2.0 million, or 23.7%, to $10.5 million for the three months ended December 31, 2024, from $8.5 million for the three months ended December 31, 2023. Interest and fees on loans, which is our primary source of interest income, increased $1.7 million, or 22.2%, to $9.2 million for the three months ended December 31, 2023.

Current wording

Interest and Dividend Income. Interest and dividend income increased $1.6 million, or 17.4%, to $10.6 million for the three months ended March 31, 2025, from $9.0 million for the three months ended March 31, 2024. Interest and fees on loans, which is our primary source of interest income, increased $1.6 million, or 20.2%, to $9.5 million for the three months ended March 31, 2025.

Previous wording

The average balance of loans increased by $74.3 million, or 11.6%, to $716.3 million for the three months ended December 31, 2024, over the average balance for the three months ended December 31, 2023., while the average yield on loans increased by 45 basis points to 5.16% for the three months ended December 31, 2024, from 4.71% for the three months ended December 31, 2023. The increase in the average yield was due to increases in market interest rates as well as in improvement in the composition of our loan portfolio to include a higher percentage of higher yielding construction and commercial real estate loans, as well as multi-family residential real estate loans. The increase in average balance was due to our continuing to pursue new commercial relationships.

Current wording

The average balance of loans increased by $79.8 million, or 12.2%, to $735.3 million for the three months ended March 31, 2025, over the average balance for the three months ended March 31, 2024, while the average yield on loans increased by 35 basis points to 5.16% for the three months ended March 31, 2025, from 4.81% for the three months ended March 31, 2024. The increase in the average yield was due to increases in market interest rates as well as in improvement in the composition of our loan portfolio to include a higher percentage of higher yielding construction and commercial real estate loans, as well as multi-family residential real estate loans. The increase in average balance was due to our continuing to pursue new commercial relationships.

Previous wording

Interest Expense. Total interest expense increased $4.0 million, or 44.5%, to $12.9 million for the six months ended December 31, 2024, compared to $9.0 million for the six months ended December 31, 2023. Interest expense on deposits increased $2.9 million, or 41.1%, to $10.0 million for the six months ended December 31, 2024, from $7.1 million for the six months ended December 31, 2023. Our average balance of interest-bearing deposits increased $61.8 million, or 11.6%, to $594.7 million, while our average cost of deposits increased 70 basis points to 3.35% for the six months ended December 31, 2024, from 2.65% for the six months ended December 31, 2023. The increase in the average cost of deposits was due to increases in market interest rates as well as a higher percentage of our deposits consisting of certificates of deposit, which bear higher rates than other deposit categories.

Current wording

Interest Expense. Total interest expense increased $664,000, or 11.9%, to $6.2 million for the three months ended March 31, 2025, compared to $5.6 million for the three months ended March 31, 2024. Interest expense on deposits increased $370,000, or 8.6%, to $4.7 million for the three months ended March 31, 2025, from $4.3 million for the three months ended March 31, 2024. Our average balance of interest-bearing deposits increased $59.5 million, or 10.75%, to $612.6 million, while our average cost of deposits decreased six basis points to 3.06% for the three months ended March 31, 2025, from 3.12% for the three months ended March 31, 2024.

Previous wording

Interest expense on Federal Home Loan Bank advances increased $438,000, or 40.0%, to $1.5 million for the three months ended December 31, 2024, from $1.1 million for the three months ended December 31, 2023. The increase was due to increases in our average balance of Federal Home Loan Bank advances ($39.6 million, or 40.5%) while our average cost of borrowings decreased 2 basis points to 4.47% for the three months ended December 31, 2024, from 4.49% for the three months ended December 31, 2023. As described above, we increased Federal Home Loan Bank borrowings in recent periods primarily to fund loan growth.

Current wording

Interest expense on Federal Home Loan Bank advances increased $295,000, or 23.4%, to $1.6 million for the three months ended March 31, 2025, from $1.3 million for the three months ended March 31, 2024. The increase was due to increases in our average balance of Federal Home Loan Bank advances ($33.1 million, or 29.7%) while our average cost of borrowings decreased 22 basis points to 4.32% for the three months ended March 31, 2025, from 4.54% for the three months ended March 31, 2024. As described above, we increased Federal Home Loan Bank borrowings in recent periods primarily to fund loan growth.

Previous wording

Net Interest Income. Net interest income was $4.0 million for the three months ended December 31, 2024, compared to $3.5 million for the three months ended December 31, 2023, as our interest income increased faster than our interest expense. Our interest rate spread increased to 1.49% for the three months ended December 31, 2024 from 1.47% for the three months ended December 31, 2023, while our net interest margin was 1.92% for each period.

Current wording

Net Interest Income. Net interest income was $4.4 million for the three months ended March 31, 2025, compared to $3.5 million for the three months ended March 31, 2024, as our interest income increased faster than our interest expense. Our interest rate spread increased to 1.61% for the three months ended March 31, 2025 from 1.31% for the three months ended March 31, 2024. Our net interest margin increased to 2.02% for the three months ended March 31, 2025 from 1.79% for the three months ended March 31, 2024

Previous wording

Provision for Credit Losses. Based on an analysis of the factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Allowance for Credit Losses,” we recorded a provision for credit losses of $238,000 for the three months ended December 31, 2024, compared to a provision of $76,000 for the three months ended December 31, 2023. The increase in the provision for credit losses on loans for the three months ended December 31, 2024 was primarily due to an increase in loan balances. The allowance for credit losses on loans was

Current wording

Provision for Credit Losses. Based on an analysis of the factors described in “Critical Accounting Policies—Allowance for Credit Losses,” we recorded a benefit for credit losses of $21,000 for the three months ended March 31, 2025, compared to a provision of $100,000 for the three months ended March 31, 2024. The provision for credit losses on loans for the three months ended March 31, 2025 was $15,000 primarily due to an increase in loan balances, while there was a benefit for credit losses on off balance sheet commitments of $36,000 for the same period, due to lower off balance sheet commitments.

Previous wording

Gain on the sale of fixed assets during the 2023 period was related to the sale of a branch building. The decrease in gain on marketable equity securities, net, was due to more favorable market conditions in the prior period. The increase in income on bank owned life insurance was due to the purchase of $4.0 million of additional policies during the 2024 fiscal year.

Current wording

The decrease in gain on marketable equity securities, net, was due to more favorable market conditions in the prior period. The increase in income on bank owned life insurance was due to the purchase of $4.0 million of additional policies during the 2025 fiscal year.

Previous wording

The decrease in salaries and employee benefits was due to lower expenses related to the pension plan, while the increase in deposit insurance expense was due to an increase in FDIC insurance rates and our higher deposit levels.

Current wording

The increase in salaries and employee benefits was due to the addition of key finance staff, and higher expenses related to our health plan, while the increase in deposit insurance expense was due to an increase in FDIC insurance rates and our higher deposit levels.

Previous wording

Income Taxes. Income tax expense decreased to $41,000 for the three months ended December 31, 2024, compared to $56,000 the three months ended December 31, 2023. The effective tax rates were 9.9% and 17.0% for the three months ended December 31, 2024 and 2023, respectively, as we had lower levels of taxable income during the 2024 period.

Current wording

Income Taxes. Income tax expense increased to $67,000 for the three months ended March 31, 2025, compared to a benefit of $19,000 for the three months ended March 31, 2024. The effective tax rates were 18.0% and (11.0%) for the three months ended March 31, 2025 and 2024, respectively, as we had lower levels of taxable income during the 2024 period.

Previous wording

The following tables set forth average balance sheets, 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, and the average balance of loans includes non-accrual loans. The yields set forth below include the effect of deferred fees/costs, discounts, and premiums that are amortized or accreted to interest income.

Current wording

The following tables set forth average balance sheets, 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, and the average balance of loans includes non-accrual loans. The yields set forth below include the effect of deferred fees/costs, discounts, and premiums that are amortized or accreted to interest income. Deferred loan fees for the three months ended March 31, 2025 and 2024 were not material.

Previous wording

Comparison of Operating Results for the six months ended December 31, 2024 and 2023

Current wording

Comparison of Operating Results for the Nine Months ended March 31, 2025 and 2024

Previous wording

General. We recorded a net loss of $259,000 for the six months ended December 31, 2024 compared to net income of $485,000 for the six months ended December 31, 2023. The decrease in net income was due primarily to increases in interest expense and the provision for credit losses, partially offset by an increase in interest and dividend income and a decrease in income tax expense.

Current wording

General. We recorded a net income of $46,000 and $678,000 for the nine months ended March 31, 2025 and 2024. The decrease in net income was due primarily to increases in interest expense and the provision for credit losses, partially offset by an increase in interest and dividend income and a decrease in income tax expense.

Previous wording

Interest and Dividend Income. Interest and dividend income increased $4.4 million, or 27.3%, to $20.7 million for the six months ended December 31, 2024, from $16.3 million for the six months ended December 31, 2023. Interest and fees on loans, which is our primary source of interest income, increased $3.7 million, or 25.6%, to $18.3 million for the six months ended December 31, 2024, from $14.5 million for the six months ended December 31, 2023.

Current wording

Interest and Dividend Income. Interest and dividend income increased $6.0 million, or 23.8%, to $31.4 million for the nine months ended March 31, 2025, from $25.3 million for the nine months ended March 31, 2024. Interest and fees on loans, which is our primary source of interest income, increased $5.3 million, or 23.7%, to $27.7 million for the nine months ended March 31, 2025, from $22.4 million for the nine months ended March 31, 2024.

Previous wording

The average balance of loans increased by $80.5 million, or 12.8%, to $708.5 million for the six months ended December 31, 2024, over the average balance for the six months ended December 31, 2023, while the average yield on loans increased by 52 basis points to 5.15% for the six months ended December 31, 2024, from 4.63% for the six months ended December 31, 2023. The increase in the average yield was due to increases in market interest rates as well as changes in the composition of our loan portfolio to include a higher percentage of higher yielding construction and commercial real estate loans, as well as multi-family residential real estate loans. The increase in average balance was due to our continuing to pursue new commercial relationships.

Current wording

The average balance of loans increased by $80.3 million, or 12.6%, to $717.4 million for the nine months ended March 31, 2025, over the average balance for the nine months ended March 31, 2024, while the average yield on loans increased by 47 basis points to 5.16% for the nine months ended March 31, 2025, from 4.69% for the nine months ended March 31, 2024. The increase in the average yield was due to increases in market interest rates as well as changes in the composition of our loan portfolio to include a higher percentage of higher yielding construction and commercial real estate loans, as well as multi-family residential real estate loans. The increase in average balance was due to our continuing to pursue new commercial relationships.

Previous wording

Interest Expense. Total interest expense increased $1.6 million, or 31.5%, to $6.5 million for the three months ended December 31, 2024, compared to $4.9 million for the three months ended December 31, 2023. Interest expense on deposits increased $1.1 million, or 29.1%, to $4.9 million for the three months ended December 31, 2024, from $3.8 million for the three months ended December 31, 2023. Our average balance of interest-bearing deposits increased $63.7 million, or 11.9%, to $601.2 million, while our average cost of deposits increased 44 basis points to 3.29% for the three months ended December 31, 2024, from 2.85% for the three months ended December 31, 2023. The increase in the average cost of deposits was due to increases in market interest rates as well as a higher percentage of our deposits consisting of certificates of deposit, which bear higher rates than other deposit categories.

Current wording

Interest Expense. Total interest expense increased $4.6 million, or 32.0%, to $19.2 million for the nine months ended March 31, 2025, compared to $14.5 million for the nine months ended March 31, 2024. Interest expense on deposits increased $3.3 million, or 28.8%, to $14.6 million for the nine months ended March 31, 2025, from $11.4 million for the nine months ended March 31, 2024. Our average balance of interest-bearing deposits increased $61.0 million, or 11.3%, to $600.6 million, while our average cost of deposits increased 44 basis points to 3.25% for the nine months ended March 31, 2025, from 2.81% for the nine months ended March 31, 2024. The increase in the average cost of deposits was due to increases in market interest rates as well as a higher percentage of our deposits consisting of certificates of deposit, which bear higher rates than other deposit categories.

Previous wording

Interest expense on Federal Home Loan Bank advances increased $1.1 million, or 56.9%, to $3.0 million for the six months ended December 31, 2024, from $1.9 million for the six months ended December 31, 2023. The increase was due to increases in both our average balance of Federal Home Loan Bank advances ($43.8 million, or 49.3%) and our average cost of borrowings (22 basis points to 4.51% for the six months ended December 31, 2024, from 4.29% for the six months ended December 31, 2023). As described above, we increased Federal Home Loan Bank borrowings in recent periods primarily to fund loan growth. The increase in the average cost of borrowings was due to increases in market interest rates between the periods.

Current wording

Interest expense on Federal Home Loan Bank advances increased $1.4 million, or 43.5%, to $4.5 million for the nine months ended March 31, 2025, from $3.2 million for the nine months ended March 31, 2024. The increase was due to increases in both our average balance of Federal Home Loan Bank advances ($40.3 million, or 41.9%) and our average cost of borrowings (five basis points to 4.44% for the nine months ended March 31, 2025, from 4.39% for the nine months ended March 31, 2024).We increased Federal Home Loan Bank borrowings in recent periods primarily to fund loan growth. The increase in the average cost of borrowings was due to increases in market interest rates between the periods.

Previous wording

Net Interest Income. Net interest income was $7.8 million for the six months ended December 31, 2024, compared to $7.3 million for the six months ended December 31, 2023, as our interest income increased faster than our interest expense. Our interest rate spread decreased to 1.44% for the six months ended December 31, 2024 from 1.59% for the six months ended December 31, 2023, while our net interest margin decreased to 1.88% for the six months ended December 31, 2024 from 2.01% for the six months ended December 31, 2023. The interest rate spread and net interest margin were both adversely impacted by the increases in market interest rates during 2024.

Current wording

Net Interest Income. Net interest income was $12.1 million for the nine months ended March 31, 2025, compared to $10.8 million for the nine months ended March 31, 2024, as our interest income increased faster than our interest expense. Our interest rate spread increased to 1.50% for the nine months ended March 31, 2025 from 1.49% for the nine months ended March 31, 2024, while our net interest margin decreased to 1.93% for the nine months ended March 31, 2025 from 1.94% for the nine months ended March 31, 2024. The interest rate spread and net interest margin were both adversely impacted by the higher market interest rates for most of fiscal 2025.

Previous wording

Provision for Credit Losses. Based on an analysis of the factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Allowance for Credit Losses,” we recorded a provision for credit losses of $1.4 million for the six months ended December 31, 2024, compared to a provision of $139,000 for the six months ended December 31, 2023. The provision for credit losses on loans was $1.5 million while a benefit of $111,000 was recorded for off balance sheet commitments. The increase in the provision for credit losses on loans for the six months ended December 31, 2024 was primarily due to our charging off approximately 80% of a $1.6 million commercial loan as of September 30, 2024 due to the borrower’s filing for bankruptcy protection and terminating operations of the underlying business. The allowance for credit losses on loans was $3.6 million at December 31, 2024 and $3.1 million at December 31, 2023 and represented 0.50% and 0.47% of total loans at December 31, 2024 and 2023, respectively. The allowance for credit losses for off balance sheet commitments was $1.1 million at December 31, 2024 and $1.2 million at December 31, 2023. The benefit for off balance sheet commitments related to lower balances of loan commitments as they were converted to loans.

Current wording

Provision for Credit Losses. Based on an analysis of the factors described in “Critical Accounting Policies—Allowance for Credit Losses,” we recorded a provision for credit losses of $1.4 million for the nine months ended March 31, 2025, compared to a provision of $239,000 for the nine months ended March 31, 2024. The provision for credit losses on loans was $1.5 million while a benefit of $147,000 was recorded for off balance sheet commitments. The increase in the provision for credit losses on loans for the nine months ended March 31, 2025 was primarily due to our charging off approximately 85% of a $1.6 million commercial loan as of September 30, 2024 and an additional $50,000 in the current quarter ended March 31, 2025 due to the borrower’s filing for bankruptcy protection and terminating operations of the underlying business.

Previous wording

Gain on sale of fixed assets during the 2023 period was related to the sale of a bank branch. The increase in gain on marketable equity securities, net, was due to favorable market conditions during the 2024 period, while the increase in income on bank owned life insurance was due to the purchase of $4.0 million of additional policies during the 2024 fiscal year.

Current wording

Gain on sale of fixed assets during the 2024 period was related to the sale of a bank branch. The decrease in gain on marketable equity securities, net, was due to unfavorable market conditions during the 2025 period, while the increase in income on bank owned life insurance was due to the purchase of $4.0 million of additional policies during the 2025 fiscal year.

Previous wording

The increase in deposit insurance expense was due to an increase in FDIC insurance rates and our higher deposit levels, while the increase in data processing expense was due to our implementing a new program for electronic communications.

Current wording

The increase in deposit insurance expense was due to an increase in FDIC insurance rates and our higher deposit levels. The increase in salaries and employee benefits was due to the addition of key staff in finance and other areas, while the increase in data processing expense was due to our implementing a new program for electronic communications and online account opening.

Previous wording

Income Taxes. Income taxes decreased by $257,000 to a benefit of $157,000 for the six months ended December 31, 2024, compared to a provision of $100,000 for the six months ended December 31, 2023. The decrease in the income tax provision was due primarily to a net loss for the 2024 period. The effective tax rates were (37.7)% and 17.1% for the six months ended December 31, 2024 and 2023, respectively.

Current wording

Income Taxes. Income taxes decreased by $171,000 to a benefit of $90,000 for the nine months ended March 31, 2025, compared to a provision of $81,000 for the nine months ended March 31, 2024. The decrease in the income tax provision was due primarily to a net loss for the 2025 period.

Previous wording

include the effect of deferred fees/costs, discounts, and premiums that are amortized or accreted to interest income. Deferred loan fees for the six months ended December 31, 2024 and 2023 were not material.

Current wording

include the effect of deferred fees/costs, discounts, and premiums that are amortized or accreted to interest income. Deferred loan fees for the nine months ended March 31, 2025 and 2024 were not material.

Previous wording

The tables above indicate that at December 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 22.1% decrease in net interest income, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 7.7% increase in net interest income and at June 30, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 22.8% decrease in net interest income, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 8.9% increase in net interest income.

Current wording

The tables above indicate that at March 31, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 14.5% decrease in net interest income, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 2.1% increase in net interest income and at June 30, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 22.8% decrease in net interest income, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 8.9% increase in net interest income.

Previous wording

The tables above indicate that at December 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 31.0% decrease in EVE, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 11.1% increase in EVE, and at June 30, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 33.5% decrease in EVE, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 9.6% increase in EVE.

Current wording

The tables above indicate that at March 31, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 21.8% decrease in EVE, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 1.7% increase in EVE, and at June 30, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 33.5% decrease in EVE, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 9.6% increase in EVE.

Previous wording

Liquidity is our ability to meet current and future 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 and proceeds from maturities and calls of securities. We also have the ability to borrow from the Federal Home Loan Bank of Boston. At December 31, 2024, we had $145.5 million outstanding in advances from the Federal Home Loan Bank of Boston. At December 31, 2024, we had the ability to borrow $107.9 million in additional Federal Home Loan Bank of Boston advances. At December 31, 2024, we had a $5.3 million line of credit with the Federal Home Loan Bank of Boston, $4.5 million of which was drawn at December 31, 2024. Additionally, at December 31, 2024, we had a $11.1 million secured line of credit through the Federal Reserve Borrower in Custody program. At that date, there were no amounts outstanding.

Current wording

Liquidity is our ability to meet current and future 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 and proceeds from maturities and calls of securities. We also have the ability to borrow from the Federal Home Loan Bank of Boston. At March 31, 2025, we had $131.0 million outstanding in advances from the Federal Home Loan Bank of Boston. At March 31, 2025, we had the ability to borrow $125.0 million in additional Federal Home Loan Bank of Boston advances. At March 31, 2025, we had a $5.3 million line of credit with the Federal Home Loan Bank of Boston, which was not drawn at March 31, 2025. Additionally, at March 31, 2025, we had a $11.1 million secured line of credit through the Federal Reserve Borrower in Custody program. At that date, there were no amounts outstanding.

Previous wording

We seek minimum a monthly liquidity ratio of 4% to 6% of assets, and a minimum quarterly Primary Liquidity ratio of 15%. Primary Liquidity measures total liquid assets consisting of, Cash & Due from Banks, Federal Funds Sold and unpledged securities, to total assets. At December 31, 2024 and June 30, 2024, we were in compliance with both of these guidelines.

Current wording

We seek to maintain a minimum monthly liquidity ratio of 4% to 6% of assets, and a minimum quarterly Primary Liquidity ratio of 15%. At March 31, 2025 and June 30, 2024, we were in compliance with both of these guidelines.

Previous wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by (used in) operating activities was ($277,000) and $804,000 for the six months ended December 31, 2024 and 2023, respectively. Net cash used by investing activities, which consists primarily of disbursements for loan originations and the purchase of investment securities, offset by principal collections on loans and proceeds from maturing securities and pay downs on securities, was $44.1 million and $58.7 million for the six months ended December 31, 2024 and 2023, respectively. Net cash provided by financing activities was $41.9 million and $49.9 million for the six months ended December 31, 2024 and 2023, respectively.

Current wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by (used in) operating activities was $571,000 and $447,000 for the nine months ended March 31, 2025 and 2024, respectively. Net cash used by investing activities, which consists primarily of disbursements for loan originations and the purchase of investment securities, offset by principal collections on loans and proceeds from maturing securities and pay downs on securities, was $47.5 million and $75.1 million for the nine months ended March 31, 2025 and 2024, respectively. Net cash provided by financing activities was $69.4 million and $64.0 million for the nine months ended March 31, 2025 and 2024, respectively.