Winchester Bancorp, Inc./MD/

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements of Winchester Bancorp, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim information. Accordingly, they do not include all the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the financial condition and results of operations for the periods have been included.

For additional information and disclosures required under U.S. GAAP, refer to the Company's Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2026.

Certain previously reported amounts have been reclassified to conform with current period's presentation.

Basis of consolidation and presentation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary Winchester Savings Bank (the “Bank”) and the Bank's wholly owned subsidiaries, Sachem Holdings, Inc., Aberjona Holdings, Inc., 1871 Company, LLC, and Wedgemere Holdings, LLC. Sachem Holdings, Inc. and Aberjona Holdings, Inc. function as Massachusetts security corporations that buy, sell and hold securities. 1871 Company, LLC's principal activity is holding of bank premises. Wedgemere Holdings, LLC's principal activity is the holding of properties acquired in settlement of loans.

All significant intercompany balances and transactions have been eliminated in consolidation.

As previously announced on July 30, 2026, the Board of Directors approved a change in the Company's fiscal year end from June 30 to December 31. The transition period of July 1, 2026 to December 31, 2026 will be covered on a Transition Report Form 10-KT.

Business

The Company is a Maryland corporation whose primary purpose is to act as the holding company for the Bank. The Bank provides a variety of financial services to individuals and small businesses through its offices in Winchester, Woburn, Danvers, Arlington, and Wakefield, Massachusetts. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are residential, commercial and multi-family real estate and construction loans.

Use of estimates

In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses.

Fair value hierarchy

The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted prices in active markets for identical assets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets.

Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets.

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

Defined benefit pension plan investments in hedge funds are measured using the net asset value per share (or its equivalent) as a practical expedient and have not been classified in the fair value hierarchy.

Accrued Interest Receivable

The Company elected not to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that this policy results in the timely reversal of uncollectible interest.

Allowance for Credit Losses-Loans

The allowance for credit losses 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.

Collectively evaluated loans

The allowance for credit losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. Credit losses are charged against the allowance when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the allowance. The Company estimates credit losses for financial assets on a collective basis for loans sharing similar risk characteristics. The Company segments financial assets with similar risk characteristics and has elected to segment its loans based on Federal Call codes used for reporting loans to the Federal Deposit Insurance Corporation as part of the Call Report process. These segments are collectively evaluated for expected credit losses using a quantitative DCF model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. The Company has elected to use this approach because DCF models allow for effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner and peer data is available for certain inputs such as the probability of default and the loss given default. The quantitative model utilizes a loss factor based approach to estimate expected credit losses, which are derived from industry peer loss experience. The model estimates expected credit losses using loan level data over the estimated life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the historical long-run average using the straight-line reversion method. Management periodically evaluates a reasonable and supportable forecast period and a reversion period to be appropriate for purposes of estimating expected credit losses. The qualitative risk factors impacting the expected risk of loss within the portfolio include the following:

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changes in the Company’s loan policies, procedures and strategies;

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changes in international, national, regional, and local economic and business conditions;

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changes in the nature and volume of the portfolio and terms of loans;

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changes in experience, depth, and ability of lending management;

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changes in the volume, trend, and severity of past due financial assets;

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changes in the quality of the organization’s loan review system;

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changes in the value of underlying collateral for collateral-dependent loans;

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the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and

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the effect of competition and legal/regulatory requirements on the portfolio.

Individually Evaluated Loans

Loans that do not share similar risk characteristics with any pools of assets are subject to individual evaluation and are removed from the collectively assessed pools to avoid double counting. This includes loans on non-accrual and loans that are 90 days or greater past due. For the loans that will be individually evaluated, the Company will use either a DCF approach or a fair value of collateral approach. The latter approach will be used for loans that are collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Unallocated component

An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of losses. The unallocated portion of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating collectively and individually evaluated loans in the portfolio.

Allowance for Credit Losses- Off-Balance Sheet Credit Exposures

The Company has off-balance sheet financial instruments, which include commitments to extend credit, standby letters of credit and commercial letters of credit. The Company estimates expected credit losses over the contractual period in which the Company is exposed to risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The Company’s allowance for credit losses on off-balance sheet credit exposures is recognized as a liability in accrued expenses and other liabilities on the consolidated balance sheets, with adjustments to the reserve recognized in the provision for credit losses in the consolidated statements of operations. The credit risk associated with these commitments is evaluated in a manner similar to the allowance for credit losses on loans with an additional assumption of probability of funding.

Recent accounting pronouncements

Management has not identified any Accounting Standards Updates that have been issued but are not yet effective and could have a significant impact on the Company’s financial reporting or disclosure requirements.

SECURITIES

The amortized cost and fair value of available for sale and held to maturity securities, at September 30, 2026 and June 30, 2026, with gross unrealized gains and losses, follows:

The amortized cost and fair value of debt securities by contractual maturity at September 30, 2026 are shown as follows. Expected maturities may differ from contractual maturities because the issuers, in certain instances, have the right to call or prepay obligations with or without call or prepayment penalties.

There wereno realized losses on securities for the three months ended September 30, 2026, compared to realized losses of $317,000 for the three months ended September 30,2025.

Allowance for Credit Losses-Securities

Available for sale “AFS” and held to maturity “HTM” securities, which are issued by the U. S. Treasury or are guaranteed by government agencies do not currently have an allowance for credit loss as the Company determined these securities are either backed by the full faith and credit of the U.S. government and/or there is an unconditional commitment to make interest payments and to return the principal investment in full to investors when a debt security reaches maturity. In assessing the Company’s investments in government-sponsored and U.S. government guaranteed mortgage-backed securities and government-sponsored enterprise obligations, the contractual cash flows of these investments are guaranteed by the respective government-sponsored enterprise. Accordingly, it is expected that the securities would not be settled at a price less than the par value of the Company’s investments. The Company will evaluate the securities portfolio no less than annually, however, certain items which may cause the Company to change this methodology include legislative changes that reduce or eliminate the U.S. government’s implicit guarantee on such securities. Any expected credit losses would be presented as an allowance for credit loss. For corporate and municipal bonds, whether they are AFS or HTM, a probability of default and a loss given default analysis is performed to determine whether an allowance for credit losses is needed. There wasno allowance for credit losses established on AFS or HTM securities during thethree months ended September 30, 2026 and 2025 .

Information pertaining to securities with gross unrealized losses at September 30, 2026 and June 30, 2026, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

The Company monitors the credit quality of securities through the use of credit ratings. Management evaluates debt securities for impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. For municipal securities and corporate bonds, the Company uses credit rating as the primary indicator of credit quality along side the geographic and sector distribution for municipal securities and key financial metrics for each corporate holding for the probability of default.

At September 30, 2026,166 debt securities have unrealized losses with aggregate depreciation of 5.51% of the Company’s amortized cost basis. The decline in market value is attributable to changes in interest rates and not to credit quality, and the Company currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments. Therefore, it is expected that the securities would not be settled at a price less than the par value of the investment. Because the Company does not intend to sell the securities and it is not “more likely than not” that the Company will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company does not consider these securities to be impaired at September 30, 2026.

Accrued Interest Receivable

There wereno write offs during thethree months ended September 30, 2026 and the year ended June 30, 2026. The balance of accrued interest receivable on investments was $905,000 and $1.0 millionat September 30, 2026 and June 30, 2026, respectively.

LOANS

A summary of the balances of loans follows:

The Company has sold mortgage loans in the secondary mortgage market and has retained the servicing responsibility and receives fees for the services provided. Total loans serviced for others at September 30, 2026 and June 30, 2026 amounted to $20.6 million and $20.9 million, respectively, and are not included on the accompanying consolidated balance sheets.

Activity in the allowance for credit losses, by segment, for thethree months ended September 30, 2026 follows:

The increase in the allowance for credit losses on loans during the three months ended September 30, 2026 was due to the overall growth in the loan portfolio.

The allowance for credit losses and total loans, by loan segment, at September 30, 2026 and June 30, 2026 follows:

Activity in the allowance for credit losses, by segment, for the three months ended September 30, 2025 follows:

The following is a summary of past due and non-accrual loans at September 30, 2026 and June 30, 2026:

There areno loans 90 days or greater past due and still accruing at September 30, 2026 and June 30, 2026. The balance of accrued interest receivable on loans was $2.9 million at September 30, 2026 and$3.0 million at June 30, 2026. There was $6,000 of accrued interest reversed on non-accrual loans during thethree months ended September 30, 2026 as compared tono accrued interest reversed on non-accrual loans during the three months ended September 30, 2025.

Interest income recognized on non-accrual loans for the three months ended September 30, 2026 was $4,000. Interest income recognized on non-accrual loans was $21,000 for the year ended June 30, 2026. No additional funds are committed to be advanced in connection with the individually evaluated loans. There wereno loan modifications to borrowers experiencing financial difficulty during thethree months ended September 30, 2026 and the year ended June 30, 2026.

Credit quality information

The Company has a ten-grade internal loan rating system for commercial real estate, multi-family, commercial, and construction loans as follows:

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Loans rated in the first six grades 1-6 are considered “pass” rated loans with low to average risk.

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Loans rated 7 are considered “watch.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

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Loans rated 8 are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

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Loans rated 9 are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of existing facts, conditions and values, highly questionable and improbable.

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Loans rated 10 are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

On a periodic basis, management formally reviews the ratings on all commercial real estate, multi-family, commercial, and construction loans. Annually, the Company engages an independent third party to review a significant portion of the loans within these segments. Management uses the results of these reviews as part of its internal review process.

Credit quality for residential real estate, home equity loans and lines-of-credit, and consumer loans is determined by monitoring delinquency reports and loan payment history, and through on-going communication with customers.

The following table presents the Company’s risk rated loans by year of origination and gross write-offs at and for thethree months ended September 30, 2026:

The following table presents the Bank’s risk rated loans by year of origination and gross write-offs at and for the year ended June 30, 2026:

4. MINIMUM REGULATORY CAPITAL REQUIREMENTS

The Bank has elected to comply with the community bank leverage ratio framework issued by the federal banking agencies. The framework provides for a simple measure of capital adequacy, calculated as Tier 1 capital divided by average total consolidated assets, which is consistent with how the Bank currently calculates its leverage ratio. Under this framework, a bank that maintains a community bank leverage ratio of greater than 8% is considered to have satisfied the risk-based and leverage capital ratios. As of September 30, 2026 and June 30, 2026, the Bank met the minimum requirement with a community bank leverage ratio of 9.38% and 9.63%, respectively. As a small bank holding company, the Company is exempt from required minimum regulatory capital requirements.

5. FAIR VALUES OF ASSETS AND LIABILITIES

Determination of fair value

The Company uses fair value measurements to record fair value adjustments to certain assets. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in some instances, quoted market prices may not be available. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques, including collateral value. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the assets.

The following methods and assumptions were used by the Company in estimating fair value:

Cash and Cash Equivalents – For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value.

Available for sale and held to maturity securities – The Company’s investment in debt securities is generally classified within Level 2 of the fair value hierarchy. For those securities, the Company obtains fair value measurements from independent pricing services which are not adjusted by management. The fair value measurements consider observable data that considers standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

FHLB Stock– The fair value of FHLB stock approximates the carrying amount based on the redemption provisions of the FHLB. These assets were classified as Level 2.

Loans– The fair value of loans is measured on an exit price basis incorporating discounts for credit, liquidity and marketability factors. Loans were classified as Level 3 since the valuation methodology utilizes significant unobservable inputs.

Accrued Interest Receivable – For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value. These assets were classified as Level 2.

Deposits– The fair value of deposits is valued using a replacement cost of funds approach and discounted to the market rates and based on weighted remaining maturity for maturing deposits. Deposits were classified as Level 3 since the valuation methodology utilizes significant unobservable inputs.

FHLB Advances – The fair value of the FHLB Advances approximates fair value amount of these liabilities were classified as Level 2.

Accrued Interest Payable and Mortgagor's escrow accounts– For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value. These liabilities were classified as Level 2.

Derivative Instruments– The fair value of derivative instruments is estimated by a third-party valuation expert using Level 2 inputs, primarily interest cash flow models, to calculate the termination value for settlement with the counterparty.

Financial instruments measured at fair value on a recurring basis

Financial instruments measured at fair value on a recurring basis are summarized below. There areno liabilities measured at fair value on recurring basis at September 30, 2026 and June 30, 2026.

Assets measured at fair value on a non-recurring basis

The Company may also be required, from time to time, to measure certain other assets and liabilities at fair value on a non-recurring basis in accordance with generally accepted accounting principles.

These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There wereno assets or liabilities measured at fair value on a non-recurring basis at September 30, 2026 and June 30, 2026.

Summary of Fair Values of Financial Instruments

The estimated fair values, and related carrying amounts, of the Bank’s financial instruments are as follows. Certain financial instruments and all non-financial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying fair value of the Company.

6. DERIVATIVES AND HEDGING ACTIVITIES

The Company is exposed to changes in the fair value of certain of its pools of fixed-rate assets due to changes in benchmark interest rates. The Company entered into an interest rate swap agreement to manage its exposure to changes in the fair value of these instruments attributable to changes in the designated benchmark interest rate. The interest rate swap agreement is designated as a fair value hedge and involves the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreement without the exchange of the underlying notional amount. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.

Interest Rate Swaps

An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. The Company has entered into an interest rate swap in which it pays fixed and receives floating rate interest in order to manage its interest rate risk exposure to the changes in fair value on certain fixed-rate investments. For interest rate swaps that are accounted for as fair value hedges, changes in fair value are included in net income. The following table reflects the Company’s derivative position for an interest rate swap which qualifies as a fair value hedge for accounting purposes as of September 30, 2026:

The table below presents the fair value of the Company’s derivative financial instrument, as well as the classification on the Consolidated Balance Sheet as of September 30, 2026:

The Company has an agreement with its derivative counterparty that contains a provision where if the Company defaults (or is capable of being declared in default) on any of its indebtedness, then the Company could also be declared in default on its derivative obligations, and it could be required to terminate its derivative positions with the counterparty. In order to mitigate counterparty default risk in conjunction with its derivative contract, the Company was required to maintain$200,000 of collateral in a deposit account with the counterparty as of September 30, 2026.

Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of the swap plus any initial margin collateral posted. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. As such, management believes the risk of incurring credit losses on the derivative contract with the counterparty is remote.

7. EARNINGS PER SHARE (EPS)

Basic EPS represents net income available to common stockholders divided by the weighted-average number of common shares outstanding during the period.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the Company. Diluted EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding for the year, plus the effect of potential dilutive common share equivalents computed using the treasury stock method.

There wereno securities that had a dilutive effect during the three months ended September 30, 2026 and September 30, 2025, and therefore the weighted-average common shares outstanding used to calculate both basic and diluted EPS are the same. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. For the three months ended September 30, 2026 and September 30, 2025, there wereno anti-dilutive shares.