Marathon Bancorp, Inc. /MD/

Previous wording

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.

Current wording

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.

Previous wording

Allowance for Credit Losses on Available for Sale (“AFS”) Securities.* Prior to implementation of CECL, unrealized losses on AFS debt securities caused by a credit event would require the direct write-down of the AFS security through the other-than-temporary impairment approach; however, the new standard requires credit losses to be presented as an ACL. The Company is still required to conduct an impairment evaluation on AFS securities to determine whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If these situations apply, the guidance continues to require the Company to reduce the security's amortized cost basis down to its fair value through earnings. The Company also evaluates the unrealized losses on AFS securities to determine if a security's decline in fair value below its amortized cost basis is due to credit factors. The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of a decline in the fair value of the security due to a credit factor. This includes, but is not limited to, the extent to which fair value is less than amortized cost, the current interest rate environment, changes to rating of security or security issuer, and adverse conditions specifically related to the security among other factors. If this assessment indicates that a credit loss exists, the present value of the expected cash flows of the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost, an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis under the CECL standard, and declines due to non-credit factors are recorded in AOCI, net of taxes. If a credit loss is recognized in earnings, subsequent improvements to the expectation of collectability will be recognized through the ACL. If the fair value of the security increases above its amortized cost, the unrealized gain will be recorded in accumulated other comprehensive income (“AOCI”), net of taxes, on the unaudited consolidated balance sheets. Accrued interest receivable on AFS securities is excluded from the estimate of credit losses. The Company did not record a cumulative-effect adjustment related to its AFS securities upon adoption of CECL on July 1, 2023. *See Note 3, Debt Securities, to the audited consolidated financial statements under Part II, Item 8, "Financial Statements and Supplementary Data," for a description of the Company’s investment securities and impairment evaluation.

Current wording

Allowance for Credit Losses on Available for Sale (“AFS”) Securities.* *Prior to implementation of CECL, unrealized losses on AFS debt securities caused by a credit event would require the direct write-down of the AFS security through the other-than-temporary impairment approach; however, the new standard requires credit losses to be presented as an ACL. The Company is still required to conduct an impairment evaluation on AFS securities to determine whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If these situations apply, the guidance continues to require the Company to reduce the security's amortized cost basis down to its fair value through earnings. The Company also evaluates the unrealized losses on AFS securities to determine if a security's decline in fair value below its amortized cost basis is due to credit factors. The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of a decline in the fair value of the security due to a credit factor. This

Previous wording

The following table sets forth average balances, average yields and costs, and certain other information for the years 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 were 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. Deferred loan fees accreted to interest income totaled $42,000 and $50,000 for the years ended June 30, 2024 and 2023, respectively.

Current wording

The following table sets forth average balances, average yields and costs, and certain other information for the years 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 were 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

Previous wording

General.* *Net loss was $187,000 for the year ended June 30, 2024, a decrease of $1.9 million, or 111.2%, from net income of $1.7 million for the year ended June 30, 2023. The decrease in net income (loss) for the year ended June 30, 2024 was primarily attributable to an increase in expenses associated with foreclosed assets of $1.0 million, a decrease of $859,000 in net-interest income, and a decrease of $576,000 in non-interest income. These changes were partially offset by a recovery of loan losses of $190,000 and a decrease in the provision for income taxes of $504,000.

Current wording

General*.*Net income was $42,000 for the year ended June 30, 2025, an increase of $229,000, or 122.7%, from a net loss of $187,000 for the year ended June 30, 2024. The increase in net income was primarily attributable to an increase in net interest income of $203,000 and a decrease in non-interest expenses of $128,000. Offsetting these increases in net income was a decrease in the provision for (recovery of) credit losses of $96,000.

Previous wording

Interest Income**.**Interest income increased by $453,000, or 5.0%, to $9.4 million for the year ended June 30, 2024 compared to $9.0 million for the year ended June 30, 2023 primarily due to an increase in loan interest income associated with an increase in the average yield on loans offset by a slight decrease in the average balance of the loan portfolio.

Current wording

Interest Income**.**Interest income increased by $120,000, or 1.3%, to $9.6 million for the year ended June 30, 2025 as compared to $9.4 million for the year ended June 30, 2024 primarily due to an increase in other interest income of $154,000 which was offset by a decrease in debt securities income of $45,000. Other interest income increased due to an increase in the average balance of cash and cash equivalents offset by a decrease in the average yield on cash and cash equivalents.

Previous wording

Loan interest income increased by $455,000, or 5.6%, to $8.6 million for the year ended June 30, 2024 from $8.2 million for the year ended June 30, 2023. The average yield on the loan portfolio increased by 28 basis points from 4.18% for the year ended June 30, 2023 to 4.46% for the year ended June 30, 2024 as a result of the high interest rate environment. The average balance of the loan portfolio decreased by $2.2 million, or 1.1%, from $195.7 million for the year ended June 30, 2023 to $193.5 million for the year ended June 30, 2024. The decrease in the average balance of the loan portfolio was primarily due to repayments exceeding new loan growth.

Current wording

Loan interest income increased slightly by $11,000, or 0.1%, for the year ended June 30, 2025 as compared to the year ended June 30, 2024. The average yield on loans increased by 27 basis points which was offset by a decrease in the average balance of the loan portfolio of $10.5 million, or 5.4%. The average yield on the loan portfolio increased by 27 basis points from 4.46% for the year ended June 30, 2024 to 4.73% for the year ended June 30, 2025 as a result of higher interest rates. The average balance of the loan portfolio decreased by $10.5 million, or 5.4%, to $183.0 million for the year ended June 30, 2025 from $193.5 million for the year ended June 30, 2024. The decrease in the average balance of the loan portfolio was primarily related to repayments exceeding new loan growth.

Previous wording

Interest Expense. Interest expense increased $1.3 million, or 57.6%, to $3.6 million for the year ended June 30, 2024 from $2.3 million for the year ended June 30, 2023, due to an increase of $766,000 in interest paid on deposits and an increase of $546,000 in interest paid on borrowings.

Current wording

Interest Expense. Interest expense decreased by $83,000, or 2.3%, to $3.5 million for the year ended June 30, 2025 as compared to the year ended June 30, 2024, due to a decrease of $179,000 in interest paid on borrowings offset by an increase of $96,000 in interest paid on deposits.

Previous wording

Interest paid on FHLB borrowings increased $545,000, from $103,000 for the year ended June 30, 2023 to $648,000 for the year ended June 30, 2024. The increase in interest paid on borrowings was due to the average balance of FHLB advances increasing by $13.6 million and an increase in the average rate paid on borrowings of 69 basis points from 3.15% for the year ended June 30, 2023 to 3.84% for the year ended June 30, 2024. We were able to obtain more favorable borrowing rates from the FHLB than the rates that customers were requesting for certificates of deposit while also improving liquidity.

Current wording

Interest paid on FHLB borrowings decreased $179,000, from $648,000 for the year ended June 30, 2024 to $469,000 for the year ended June 30, 2025. The decrease in interest paid on borrowings was due to the average balance of FHLB advances decreasing by $4.7 million to $12.1 million for the year ended June 30, 2025 from $16.8 million for the year ended June 30, 2024 as a result of repayments of borrowings. Offsetting the decrease in the average balance was an increase in the average rate paid on borrowings of two basis points from 3.84% for the year ended June 30, 2024 to 3.86% for the year ended June 30, 2025 due to an increase in borrowing costs.

Previous wording

Net Interest Income. Net interest income decreased by $859,000, or 12.8%, to $5.8 million for the year ended June 30, 2024 from $6.7 million for the year ended June 30, 2023. Net interest-earning assets decreased by $4.5 million, or 11.0%, to $36.2 million for the year ended June 30, 2024 from $40.7 million for the year ended June 30, 2023. Net interest rate spread decreased by 41 basis points to 2.40% for the year ended June 30, 2024 from 2.81% for the year ended June 30, 2023, reflecting a 77 basis points increase in the average rate paid on interest-bearing liabilities offset by a 36 basis points increase in the average yield on interest-earning assets. The net interest margin decreased 29 basis points to 2.75% for the year ended June 30, 2024 from 3.04% for the year ended June 30, 2023. The increase in the average yield on interest earning assets for the year ended June 30, 2024 compared to the year ended June 30, 2023 was primarily due to an increase in market interest rates. The increase in the average interest rate paid on interest-bearing liabilities was due to the Bank raising the interest rates on all deposit categories to maintain customers and keep the rates in line with what competitors were offering, to attract new funds to the Bank and an increase in market interest rates on borrowings.

Current wording

Net Interest Income. Net interest income increased by $203,000, or 3.8%, to $6.0 million for the year ended June 30, 2025 from $5.8 million for the year ended June 30, 2024. Net interest-earning assets increased by $1.8 million, or 4.8%, to $38.0 million for the year ended June 30, 2025 from $36.2 million for the year ended June 30, 2024. Net interest rate spread remained the same at 2.40% for the years ended June 30, 2025 and 2024. The net interest margin increased to 2.84% for the year ended June 30, 2025 compared to 2.75% for the year ended June 30, 2024. The increase in the average yield on interest earning assets for the year ended June 30, 2025 compared to the year ended June 30, 2024 was primarily due to an increase in the average yield of loans, the Bank’s largest interest-earning asset category.

Previous wording

Based on our evaluation of the above factors, we recorded a recovery of credit losses of $190,000 for the year ended June 30, 2024 compared to no provision for credit losses for the year ended June 30, 2023. The recovery was related to an improvement in the current and projected future economic conditions in our market area and the decline in the overall loan portfolio. We anticipate low unemployment and that the housing price index (HPI) will improve over the next two years due to continued high demand and the low inventory of residential real estate. These predictions align with the Bank’s historic charge-off history over the past 8-10 years. The allowance for credit losses was $1.8 million, or 0.97%, of loans outstanding at June 30, 2024 and $2.2 million, or 1.08%, of loans outstanding at June 30, 2023.

Current wording

Based on our evaluation of the above factors, we recorded a recovery of credit losses of approximately $94,000 for the year ended June 30, 2025 compared to a recovery of credit losses of $190,000 for the year ended June 30, 2024.

Previous wording

Provision for (Recovery from) Income Taxes. Income tax benefit was $59,000 for the year ended June 30, 2024, a decrease of $504,000, as compared to income tax expense of $445,000 for the year ended June 30, 2023. The decrease in income tax expense was primarily the result of a decrease in income (loss) before income taxes of $2.4 million which was offset by a change in Wisconsin tax law that provides for a subtraction from the Bank’s state taxable income for loan and fee interest income from certain commercial and agricultural loans. Based upon the provisions of this new state tax law, management determined that the Company was highly unlikely to incur a material Wisconsin tax liability in the foreseeable future, instead generating Wisconsin net operating loss carryforwards that would never be realized. Since the state rate at which net deferred tax assets are expected to be realized is 0%, the Company eliminated its state net deferred tax asset balances as of July 1, 2023, resulting in deferred tax expense of approximately $112,000 for the year ended June 30, 2024. A summary of income tax expense (benefit) compared to the federal income tax statutory rate is set forth in Note 12 to the Notes to the Audited Consolidated Financial Statements.

Current wording

Provision for (Recovery of) Income Taxes. Income tax benefit was $32,000 for the year ended June 30, 2025, a decrease of $27,000, as compared to an income tax benefit of $59,000 for the year ended June 30, 2024. The decrease in income tax benefit was primarily related to an increase in income (loss) before income tax expense (benefit) when comparing the year ended June 30, 2025 and 2024. This decrease was offset by a Wisconsin income tax provision of $112,000 related to a change in Wisconsin tax law that provides for a subtraction from the Bank’s state taxable income for loan and fee interest income from certain commercial and agricultural loans. Based upon the provisions of this new state tax law, management determined that the Company was highly unlikely to incur a material Wisconsin tax liability in the foreseeable future, instead generating Wisconsin net operating loss carryforwards that would never be realized. Since the state rate at which net deferred tax assets are expected to be realized is 0%, the Company eliminated its state net deferred tax asset balances as of July 1, 2023, resulting in deferred tax expense of approximately $112,000 for the year ended June 30, 2024.

Previous wording

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 June 30, 2024, we had a $79.5 million line of credit with the Federal Home Loan Bank of Chicago, which had $13.0 million in borrowings outstanding as of that date. The Bank also has $25.0 million available to borrow from the Federal Reserve Bank when pledging acceptable assets and an unsecured Federal Funds purchasing limit of $5.0 million with the Bank’s correspondent bank. There were no borrowings under these arrangements at June 30, 2024.

Current wording

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 June 30, 2025, we had a $82.8 million line of credit with the Federal Home Loan Bank of Chicago, which had $15.0 million in borrowings outstanding as of that date. The Bank also has $17.5 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 June 30, 2025.

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 operating activities was $417,000 and $2.0 million for the years ended June 30, 2024 and 2023, respectively. Net cash flows provided by (used in) investing activities, which consists primarily of disbursements for loan originations, the purchase of securities and the purchase of bank owned life insurance, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $17.7 million provided by investing activities for the year ended June 30, 2024 compared to $14.4 million used in investing activities for the year ended June 30, 2023. Net cash provided by (used in) financing activities, consisting of activity in deposit accounts and borrowings was $19.4 million used in financing activities compared to $15.8 million provided by financing activities for the years ended June 30, 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 operating activities was $1.4 million and $417,000 for the years ended June 30, 2025 and 2024, respectively. Net cash flows provided by (used in) investing activities, which consists primarily of disbursements for loan originations, the purchase of securities and the purchase of bank owned life insurance, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $15.6 million used in investing activities for the year ended June 30, 2025 compared to $17.7 million provided by investing activities for the year ended June 30, 2024. Net cash provided by (used in) financing activities, consisting of activity in stockholders’ equity accounts (capital raise), deposit accounts and borrowings was $18.0 million provided by financing activities compared to $19.4 million used in financing activities for the years ended June 30, 2025 and 2024, respectively.

Previous wording

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.

Current wording

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.

Previous wording

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 June 30, 2024, we had outstanding commitments to originate loans of $1.3 million, and outstanding commitments to sell loans of $418,000. 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 June 30, 2024 totaled $44.8 million. 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 Federal Home Loan Bank advances or other borrowings, which may result in higher levels of interest expense.

Current wording

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 June 30, 2025, we had outstanding commitments to originate loans of $4.8 million, and outstanding commitments to sell loans of $329,000. 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 at June 30, 2025 totaled $46.2 million. 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 Federal Home Loan Bank advances or other borrowings, which may result in higher levels of interest expense.

Previous wording

Please refer to Note 1 of the notes to consolidated the financial statements beginning on page 60 for a description of recent accounting pronouncements that may affect our financial condition and results of operations.

Current wording

Please refer to Note 1 of the notes to the audited consolidated the financial statements beginning on page 60 for a description of recent accounting pronouncements that may affect our financial condition and results of operations.