Monroe Federal Bancorp (MFBI) details loan mix, credit quality in 2026 10-K
Rhea-AI Filing Summary
Monroe Federal Bancorp, Inc., the holding company for Monroe Federal Savings and Loan Association, reports full-year results as a small community-focused thrift. At March 31, 2026, it had total assets of $142.4 million, loans of $110.5 million, deposits of $124.5 million, and stockholders’ equity of $12.4 million.
Lending is concentrated in one- to four-family mortgages, which were $68.0 million or 60.9% of total loans, with commercial real estate at $27.3 million or 24.5%. Credit quality metrics appear conservative: non-performing assets were $250,000, equal to 0.22% of total loans and 0.18% of total assets, while the allowance for credit losses was $799,000 or 0.72% of loans.
Funding is primarily core deposits, including $41.3 million of certificates of deposit and $29.6 million in money market accounts. Uninsured deposits totaled $40.9 million. The bank also uses Federal Home Loan Bank advances, with $3.8 million outstanding and access to an additional $47.4 million, and reported a Community Bank Leverage Ratio of 9.6%, above the required level.
Positive
- None.
Negative
- None.
Key Figures
Key Terms
Community Bank Leverage Ratio financial
non-performing assets financial
allowance for credit losses financial
qualified thrift lender regulatory
Federal Home Loan Bank of Cincinnati regulatory
non-accrual loans financial
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the fiscal year ended
OR
re
Commission File No.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
(Address of Principal Executive Offices) | (Zip Code) |
(
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share
Title of each class | Trading symbol(s) | Name of Each Exchange on Which Registered |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act YES ☐ ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ | Accelerated filer | ☐ | |||
☒ | Smaller reporting company | ||||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES
The aggregate market value of the common shares of Monroe Federal Bancorp, Inc., held by non-affiliates was $
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
TABLE OF CONTENTS
| Page | |
PART I | ||
Item 1. Business | 3 | |
Item 1A. Risk Factors | 28 | |
Item 1B. Unresolved Staff Comments | 28 | |
Item 1C. Cybersecurity | 28 | |
Item 2. Properties | 29 | |
Item 3. Legal Proceedings | 30 | |
Item 4. Mine Safety Disclosures | 30 | |
PART II | ||
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 31 | |
Item 6. (Reserved) | 31 | |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 | |
Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 44 | |
Item 8. Financial Statements and Supplementary Data | 45 | |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 85 | |
Item 9A. Controls and Procedures | 85 | |
Item 9B. Other Information | 85 | |
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 85 | |
PART III | ||
Item 10. Directors, Executive Officers and Corporate Governance | 86 | |
Item 11. Executive Compensation | 86 | |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 86 | |
Item 13. Certain Relationships and Related Transactions, and Director Independence | 87 | |
Item 14. Principal Accounting Fees and Services | 87 | |
PART IV | ||
Item 15. Exhibits and Financial Statement Schedules | 87 | |
Item 16. Form 10-K Summary | 88 | |
Signatures | 89 | |
Table of Contents
PART I
Item 1. Business
Forward Looking Statements
This annual report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:
| ● | statements of our goals, intentions and expectations; |
| ● | statements regarding our business plans, prospects, growth and operating strategies; |
| ● | statements regarding the asset quality of our loan and investment portfolios; and |
| ● | estimates of our risks and future costs and benefits. |
These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this annual report.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
| ● | general economic conditions, either nationally or in our market area, which are worse than expected; |
| ● | changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; |
| ● | our ability to access cost-effective funding; |
| ● | our ability to maintain adequate liquidity, primarily through deposits; |
| ● | fluctuations in real estate values and in the conditions of the residential real estate and commercial real estate markets; |
| ● | demand for loans and deposits in our market area; |
| ● | our ability to implement and change our business strategies; |
| ● | competition among depository and other financial institutions; |
| ● | inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of our financial instruments, or our level of loan originations, or increase the level of defaults, losses and prepayments within our loan portfolio; |
| ● | adverse changes in the securities markets; |
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| ● | changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums; |
| ● | changes in the quality or composition of our loan or investment portfolios; |
| ● | technological changes that may be more difficult or expensive than expected; |
| ● | the inability of third-party providers to perform as expected; |
| ● | a failure or breach of our operational or information security systems or infrastructure, including cyberattacks; |
| ● | our ability to manage market risk, credit risk and operational risk; |
| ● | our ability to enter new markets successfully and capitalize on growth opportunities; |
| ● | changes in consumer spending, borrowing and savings habits; |
| ● | changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; |
| ● | our ability to retain key employees; and |
| ● | changes in the financial condition, results of operations or future prospects of issuers of securities that we own. |
Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.
Monroe Federal Bancorp, Inc.
Monroe Federal Bancorp, Inc. (“Monroe Federal Bancorp,” the “Company” or “we”) was incorporated in May 2024 and became the holding company for Monroe Federal Savings and Loan Association (“Monroe Federal” or the “Bank”) upon the conversion of Monroe Federal from the mutual form of organization to the stock form of organization (the “Conversion”). The Conversion was completed on October 23, 2024, on which date the Company sold 526,438 shares of common stock at a price of $10.00 per share.
The Company is a registered savings and loan holding company subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The Company conducts its operations primarily through its wholly owned subsidiary, Monroe Federal. At March 31, 2026, the Company, on a consolidated basis, had total assets of $142.4 million, loans of $110.5 million, deposits of $124.5 million, and stockholders’ equity of $12.4 million.
The Company’s principal office is located at 24 East Main Street, Tipp City, Ohio 45371, and the telephone number at that address is (937) 667-8461. Our website address is www.monroefederal.com. Information on our website is not and should not be considered a part of this annual report.
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Monroe Federal Savings and Loan Association
Originally chartered in 1875, Monroe Federal is a federally-chartered mutual savings association with its main office in Tipp City, Ohio. In addition to the main office, we conduct our operations from three branch offices located in Tipp City, Dayton, and Vandalia, Ohio. Tipp City is located on Interstate 75 approximately 25 miles north of Dayton, Ohio. Vandalia is also located on Interstate 75 approximately 12 miles north of Dayton, Ohio. Our business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations, primarily in one- to four-family residential mortgage loans and, to a lesser extent, commercial real estate loans, both secured by properties located in our primary market area. To a significantly lesser extent, we also originate multi-family mortgage loans, construction and land development loans, commercial and industrial loans, home equity loans and lines of credit, and consumer loans. Historically, we have not sold loans we have originated. Our primary revenue source is interest income earned on loans and investments. Noninterest income is not a significant revenue source.
Monroe Federal is subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency (the “OCC”), its primary federal regulator, and the Federal Deposit Insurance Corporation (the “FDIC”), and is a member of the Federal Home Loan Bank system.
Market Area
We consider Miami and Montgomery Counties, and contiguous areas, to be our primary market area for loan originations and deposit gathering. Wright-Patterson Air Force Base, home of the 88th Air Base Wing, located outside Dayton, is a major employer in our primary market area. In terms of population, based on published statistics, Miami County has a 2025 population of approximately 113,000 and Montgomery County has a 2025 population of approximately 540,000.
Primary areas of employment in Miami County and Montgomery County include healthcare, manufacturing, professional services, and retail trade. Major employers in Miami County include Upper Valley Medical Center, Clopay Corporation (manufacturing) and F&P America (manufacturing). In addition to Wright-Patterson Air Force Base, part of which is located in Montgomery County, other major employers in Montgomery County include CareSource (healthcare), Dayton Children’s Hospital, and The Reynolds and Reynolds Company (business services).
Competition
We face strong competition within our primary market area both in making loans and attracting retail deposits. Our market area includes large money center and regional banks, community banks and savings institutions, and credit unions including Wright-Patt Credit Union which is affiliated with Wright-Patterson Air Force Base. We also face competition for loans from mortgage banking firms, consumer finance companies, credit unions, and fintech companies and, with respect to deposits, from money market funds, brokerage firms, mutual funds and insurance companies. At June 30, 2025 (the most recent date for which Federal Deposit Insurance Corporation, referred to as the “FDIC” throughout this prospectus, is publicly available), we were ranked 11th among the 14 FDIC-insured financial institutions with offices in Miami County, with a deposit market share of 2.8%, and 13th among the 20 FDIC-insured financial institutions with offices in Montgomery County, with a deposit market share of 0.61%. Our ability to compete in our primary market area does not depend on any existing relationship.
Lending Activities
General. Our loan portfolio consists primarily of one-to four-family residential mortgage loans and, to a lesser extent, commercial real estate loans. To a substantially lesser extent, we also originate multi-family loans, construction and land development loans, commercial and industrial loans, home equity loans and lines of credit, and consumer loans. Historically, we have not sold the loans we have originated, other than participation interests in loans we have originated. We have developed the infrastructure necessary to sell one- to four-family residential mortgage loans, particularly longer-term loans to help mitigate our interest rate risk exposure. We anticipate beginning to sell one-to-four family residential mortgage loans early in fiscal year 2027.
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Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated. There were no loans held for sale at any date indicated.
| At March 31, |
| |||||||||
2026 | 2025 |
| |||||||||
Amount | | Percent | | Amount | | Percent |
| ||||
(Dollars in thousands) |
| ||||||||||
Real estate loans: |
| |
| |
| |
| | |||
One- to four-family | $ | 67,988 |
| 60.9 | % | $ | 69,902 |
| 64.6 | % | |
Multi-family |
| 1,830 |
| 1.6 |
| 1,599 |
| 1.5 | |||
Commercial |
| 27,308 |
| 24.5 |
| 24,188 |
| 22.4 | |||
Construction and land development |
| 2,100 |
| 1.9 |
| 2,510 |
| 2.3 | |||
Commercial and industrial loans |
| 6,305 |
| 5.7 |
| 4,256 |
| 3.9 | |||
Home equity loans and lines of credit |
| 4,942 |
| 4.4 |
| 4,405 |
| 4.1 | |||
Consumer loans |
| 1,108 |
| 1.0 |
| 1,290 |
| 1.2 | |||
| 111,581 |
| 100.00 | % |
| 108,150 |
| 100.00 | % | ||
Less: |
| |
| |
| |
| | |||
Net deferred loan fees |
| 253 |
| 301 |
| | |||||
Allowance for credit losses |
| 799 |
| 853 |
| | |||||
Loans, net | $ | 110,529 | $ | 106,996 |
| | |||||
Contractual Maturities. The following table sets forth the contractual maturities of our total loan portfolio at March 31, 2026. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Because the tables present contractual maturities and do not reflect repricing or the effect of prepayments, actual maturities may differ.
| One- to | | | | Construction | | Commercial | ||||||||
Four-Family | Multi-family | Commercial | and Land | and | |||||||||||
Residential | Residential | Real Estate | Development | Industrial | |||||||||||
(In thousands) | |||||||||||||||
Amounts due in: |
| |
| |
| |
| |
| | |||||
One year or less | $ | 124 | $ | 600 | $ | 1,608 | $ | 1,603 | $ | 1,164 | |||||
After one year through two years |
| 21 |
| — |
| 305 |
| 144 |
| 227 | |||||
After two years through three years |
| 249 |
| — |
| 2,246 |
| — |
| 415 | |||||
After three years through five years |
| 426 |
| — |
| 191 |
| — |
| 2,470 | |||||
After five years through 10 years |
| 5,034 |
| 494 |
| 2,337 |
| 300 |
| 1,577 | |||||
After 10 years through 15 years |
| 8,427 |
| 87 |
| 5,008 |
| 53 |
| 452 | |||||
After 15 years |
| 53,707 |
| 649 |
| 15,613 |
| — |
| — | |||||
Total | $ | 67,988 | $ | 1,830 | $ | 27,308 | $ | 2,100 | $ | 6,305 | |||||
| Home | | | ||||||
Equity | |||||||||
Loans and | |||||||||
Lines of | |||||||||
Credit | Consumer | Total | |||||||
(In thousands) | |||||||||
Amounts due in |
| |
| |
| | |||
One year or less | $ | 1,016 | $ | 29 | $ | 6,144 | |||
After one year through two years |
| 39 |
| 50 |
| 786 | |||
After two years through three years |
| 3 |
| 205 |
| 3,118 | |||
After three years through five years |
| 65 |
| 437 |
| 3,589 | |||
After five years through 10 years |
| 321 |
| 387 |
| 10,450 | |||
After 10 years through 15 years |
| 3,498 |
| — |
| 17,525 | |||
After 15 years |
| — |
| — |
| 69,969 | |||
Total | $ | 4,942 | $ | 1,108 | $ | 111,581 | |||
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The following table sets forth our fixed and adjustable-rate loans at March 31, 2026, that are contractually due after March 31, 2027.
| Due after March 31, 2027 | ||||||||
Fixed | | Adjustable | | Total | |||||
(In thousands) | |||||||||
Real estate loans: |
| |
| |
| | |||
One- to four-family | $ | 60,204 | $ | 7,660 | $ | 67,864 | |||
Multi-family |
| — |
| 1,230 |
| 1,230 | |||
Commercial |
| 1,623 |
| 24,077 |
| 25,700 | |||
Construction and land development |
| 53 |
| 444 |
| 497 | |||
Commercial and industrial loans |
| 4,463 |
| 678 |
| 5,141 | |||
Home equity loans and lines of credit |
| — |
| 3,926 |
| 3,926 | |||
Consumer loans |
| 1,079 |
| — |
| 1,079 | |||
Total loans | $ | 67,422 | $ | 38,015 | $ | 105,437 | |||
One- to Four-Family Residential Mortgage Loans. At March 31, 2026, one-to four-family residential mortgage loans totaled $68.0 million, or 60.9% of total loans. Our one- to four-family residential real estate loans are primarily secured by owner-occupied properties located in our primary market area.
Beginning in fiscal year 2027, our one- to four-family residential real estate loans will generally be underwritten to secondary market guidelines. One- to four-family residential real estate loans are generally for terms up to 30 years and have a negotiated fixed interest rate. We generally limit the loan-to-value ratios of our residential mortgage loans to 80% of the purchase price or appraised value, whichever is lower. Loans over 80% of the purchase price or appraised value will be required to have private mortgage insurance (PMI). We may make loans with a loan-to-value ratio between 80% and 90% of the purchase price or appraised value without requiring PMI, but those loans will not be sold to the secondary market.
We do not offer “interest only” residential mortgage loans, where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan. We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan.
We offer “subprime loans” on one- to four-family residential real estate loans (i.e., generally loans to borrowers with credit scores less than 620). At March 31, 2026, subprime loans amounted to $3.2 million. All subprime loans are reported to Monroe Federal’s board of directors each quarter, until the subprime loan has had 24 consecutive months of on-time payments. At that time, the subprime loan is no longer reported quarterly to the board of directors.
Multi-Family Real Estate Loans. At March 31, 2026, multi-family real estate loans totaled $1.8 million, or 1.6% of total loans. Our multi-family real estate loans are primarily secured by properties located in our primary market area. Multi-family real estate loans are generally adjustable-rate loans based on the Five-Year Constant Maturity Treasury Rate and with amortization terms up to 20 years. Generally, the interest rate is fixed for the initial term of five years and then adjusts every five years thereafter. We generally limit the loan-to-value ratios of our multi-family real estate to 80% of the purchase price or appraised value, whichever is lower. At March 31, 2026, our largest multi-family real estate loan had an outstanding balance of $600,000 and it was performing according to its original terms.
Commercial Real Estate Loans. At March 31, 2026, commercial real estate loans totaled $27.3 million, or 24.5% of total loans. Our commercial real estate loans are secured by both owner-occupied and non-owner-occupied properties located primarily in our market area, including warehouses, storage units, and store fronts. At March 31, 2026, commercial real estate loans secured by owner-occupied properties totaled $19.0 million and commercial real estate loans secured by non-owner-occupied properties totaled $8.3 million. At March 31, 2026, we had no other material concentrations within our commercial real estate loan portfolio. Commercial real estate loans are generally adjustable-rate loans based on the Five-Year Constant Maturity Treasury Rate and with amortization terms up to 20 years. Generally, the interest rate is fixed for the initial term of five years and then adjusts every five years thereafter. We
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generally limit the loan-to-value ratios of our commercial mortgage loans to 75% of the purchase price or appraised value, whichever is lower.
At March 31, 2026, our two largest commercial real estate loans each had a credit exposure of $2.0 million. One of the loans had an outstanding balance of $2.0 million as of March 31, 2026, while no funds had been disbursed from the other commercial real estate loan as of the same date. The loan with the $2.0 million outstanding balance at March 31, 2026 is secured by real estate across Eastern Indiana. The loan with no principal balance outstanding as of March 31, 2026 is secured by real estate in Fairborn, Ohio. At March 31, 2026, both loans were performing according to their original terms.
We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property, and the debt service coverage ratio (the ratio of net operating income to debt service). Generally, we require that the debt service coverage ratio be at least 1.2x. The significant majority of our commercial real estate loans are appraised by outside independent appraisers approved by the board of directors. Personal guarantees are generally obtained from the principals of the borrowers.
Construction and Land Development Loans. At March 31, 2026, construction and land development loans totaled $2.1 million, or 1.9% of total loans. We make residential construction loans, primarily to individuals for the construction of their primary residences and occasionally to contractors and builders of single-family homes. Our residential construction loans are structured as construction/permanent loans where after an 11-month construction period the loan converts to a permanent one-to four-family residential mortgage loan. Our residential construction loans are underwritten to the same guidelines for permanent residential mortgage loans. At March 31, 2026, our largest non-speculative residential construction loan amounted to $800,000, of which $736,000 had been disbursed.
We occasionally make speculative residential construction loans, which are construction loans to a builder where there is not a contract in place for the purchase of the home at the time the construction loan is originated. We generally make speculative construction loans only to a small group of local builders with whom we have an established relationship and a satisfactory track record. At March 31, 2026, we had one speculative construction loan with a credit exposure of $884,000, of which $739,000 had been disbursed. The collateral for this loan consists of both speculative and nonspeculative 1-4 family property.
We occasionally make commercial construction loans, which are structured as construction/permanent loans where after a one-year construction period the loan converts to a permanent commercial mortgage loan. Our commercial construction loans are underwritten to the same guidelines for commercial mortgage loans. At March 31, 2026, there were no commercial construction loans outstanding.
Construction loans generally can be made with a maximum loan-to-value ratio of 80% of the estimated appraised market value upon completion of the project. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser. We also generally require inspections of the property before disbursements of funds during the term of the construction loan.
We also make a limited amount of land development loans to complement our construction lending activities, as such loans are generally secured by lots that will be used for residential development. At March 31, 2026, our largest land development loan had a credit exposure of $750,000, of which $129,000 was outstanding as of that date. At March 31, 2026, this loan was performing according to its original terms.
Commercial and Industrial Loans. At March 31, 2026, commercial loans totaled $6.3 million, or 5.7% of total loans. Commercial and industrial loans include both term loans and lines of credit. Term loans generally have fixed or variable rates and have terms of up to six years. Lines of credit are generally variable rate demand loans with no maturity
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date. We review lines of credit annually. These loans are generally secured by business assets, such as equipment, inventory and accounts receivable. Depending on the collateral used to secure the loans, commercial and industrial loans are made in amounts of up to 100% of the value of the collateral securing the loan.
When making commercial and industrial loans, we consider the financial statements of the borrower, our lending history with the borrower, the debt service capabilities and global cash flows of the borrower and other guarantors, the projected cash flows of the business and the value of the collateral, accounts receivable, inventory and equipment.
At March 31, 2026, our largest commercial and industrial loan totaled $1,6 million. This loan is secured by business assets, including equipment, and a life insurance policy. At March 31, 2026, this loan was performing according to its original terms.
We are part of a network of community banks nationwide that purchase commercial and industrial loans from Bankers Healthcare Group, LLC (BHG). As of March 31, 2026, the aggregate balance of BHG purchased loans totaled $1.6 million. BHG originates loans nationwide to licensed or unlicensed or otherwise skilled healthcare and other business professionals for business development, practice improvement, debt consolidation, working capital, equipment purchases, and, occasionally, business purchases. BHG typically originates loans at fixed interest rates and without a prepayment penalty provision. BHG underwrites and funds the loans, which are typically secured by a Uniform Commercial Code blanket lien on the borrowers’ business assets. When we purchase a loan from BHG, we purchase 100% of the loan and BHG establishes a reserve deposit account with us equal to 3% of the loan balance and we remit 97% of the loan balance to BHG. We also become an additional secured party to the loan. The borrower services the loan by authorizing us to withdraw funds electronically from the borrower’s deposit account established at the borrower’s financial institution. If a loan becomes delinquent, BHG handles all collection activity and bears all associated costs. During the delinquency period, we withdraw from the reserve deposit account to service the loan. When a delinquent payment is collected, the collected funds are used to replenish the reserve deposit account. If a loan becomes 90 days delinquent, BHG typically replaces the delinquent loan with a performing loan of equal or greater balance (although this is not a contractual obligation of BHG). As of March 31, 2026, no BHG purchased loans were delinquent. At March 31, 2026, our largest BHG purchased loan totaled $306,000 and it was performing according to its original terms.
Home Equity Loans and Lines of Credit. At March 31, 2026, home equity loans and lines of credit totaled $4.9 million, or 4.4% of total loans. Home equity loans are generally fixed-rate loans for terms of up to 180 months. The interest rate for home equity lines of credit is based on the prime rate, with a floor rate of 3% and a ceiling rate of 24%. The loan to value ratio for home equity loans and lines of credit is generally up to 90%, taking into account any superior mortgage on the collateral property.
Consumer Loans. At March 31, 2026, consumer loans totaled $1.1 million, or 1.0% of total loans. Our consumer loan portfolio generally consists of loans secured predominately by automobiles (new and used). Consumer loans have fixed interest rates and terms up to 72 months (for a new automobile). Our loan policy does not specify loan to value ratios for consumer loans.
Loan Underwriting Risks
Subprime One- to Four-Family Residential Mortgage Loans. Subprime loans are generally defined as loans made to borrowers with credit scores of less than 620. Subprime loans expose us to higher delinquency risk and default risk and a higher potential for losses than loans made to borrowers with more favorable credit scores and credit risk profiles.
Commercial Real Estate Loans and Multi-family Real Estate Loans. Loans secured by commercial real estate or multi-family properties generally have larger balances and involve a greater degree of risk than one- to four-family residential real estate loans. The primary concern in commercial real estate lending and multi-family lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the underlying business or multi-family property. Payments on loans secured by income producing properties often depend on successful operation and
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management of the properties. As a result, repayment of such loans may be subject, to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors to provide quarterly, semi-annual or annual financial statements, depending on the size of the loan, on commercial real estate loans. In reaching a decision on whether to make a commercial real estate loan or multi-family loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property. We have generally required that the properties securing these real estate loans have an aggregate debt service ratio, including the guarantor’s cash flows and the borrower’s other projects, of at least 1.2x. An environmental phase one report is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.
If we foreclose on a commercial real estate loan or a multi-family loan, the marketing and liquidation period to convert the real estate asset to cash can be lengthy with substantial holding costs. In addition, vacancies, deferred maintenance, repairs and market stigma can result in prospective buyers expecting sale price concessions to offset their real or perceived economic losses for the time it takes them to return the property to profitability. Depending on the individual circumstances, initial charge-offs and subsequent losses on these loans can be unpredictable and substantial.
Commercial and Industrial Loans. Unlike residential real estate loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial and industrial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business, and the collateral securing these loans may fluctuate in value. Our commercial and industrial loans are originated primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. Collateral for commercial and industrial loans typically consists of equipment, accounts receivable, or inventory. Credit support provided by the borrower for most of these loans is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value. As a result, the availability of funds for the repayment of commercial and industrial loans may depend substantially on the success of the business itself.
Construction and Land Development Loans. Construction and land development lending involves additional risks when compared with permanent lending because funds are advanced upon the security of the project, which is of uncertain value before its completion. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. In addition, generally during the term of a construction loan, interest may be funded by the borrower or disbursed from an interest reserve set aside from the construction loan budget. These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest. If the appraised value of a completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss. Land development loans have substantially similar risks.
Consumer Loans. Consumer loans may entail greater risk than residential real estate loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as automobiles. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.
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Loan Originations, Purchases and Sales
We originate loans through employee marketing and advertising efforts, our existing customer base, walk-in customers and referrals from customers.
As discussed under “– Lending Activities – Commercial and Industrial Loans,” we purchase loans from Bankers Healthcare Group, LLC. We occasionally purchase participation interests in loans originated by other financial institutions acting as the lead lender. At March 31, 2026, our two largest purchased participation loans each had credit exposures of $2.0 million. One of the loans had an outstanding balance of $2.0 million as of March 31, 2026 and is secured by real estate across Eastern Indiana. The other loan had no funds disbursed as of March 31, 2026 and is secured by real estate in Fairborn, Ohio.
Prior to and including March 31, 2026, we generally did not sell the one- to four-family mortgage loans we originated, but retained them in our loan portfolio and did not sell the servicing rights. Historically, we have not sold loans we have originated. We have recently developed the infrastructure necessary to sell one- to four-family residential mortgage loans, particularly longer term loans to help mitigate our interest rate risk exposure. We hired two additional employees for this purpose, and we expect to hire one additional employee. This increased our noninterest expenses for the fiscal year-ended March 31, 2026. Occasionally, we sell participation interests in commercial real estate loans and other commercial loans we originate as lead lender so that our retained interest is within our legal lending limit.
Loan Approval Procedures and Authority
Our lending is subject to written, non-discriminatory underwriting standards and origination procedures. Decisions on loan applications are made on the basis of detailed applications submitted by the prospective borrower and property valuations. Our policies require that for all real estate loans that we originate, property valuations must be performed by outside independent state-licensed appraisers approved by our board of directors. The loan applications are designed primarily to determine the borrower’s ability to repay the requested loan, and the more significant items on the application are verified through use of credit reports, financial statements and tax returns.
By law, the aggregate amount of loans that we are permitted to make to any one borrower or a group of related borrowers is generally limited to 15% of Monroe Federal’s unimpaired capital and surplus (25% if the amount in excess of 15% is secured by “readily marketable collateral” or 30% for certain residential development loans). At March 31, 2026, our two largest credit relationships to one borrower each had total credit exposures of $2.0 million, one of which $2.0 million was outstanding at March 31, 2026 and is secured by real estate across Eastern Indiana and the other had no funds disbursed at March 31, 2026 and is secured by real estate in Fairborn Ohio. At March 31, 2026, these loans were performing according to their original terms.
We have three tiers of lending authority: individual lending authority (President, Vice President – Commercial Lending, Vice President – Retail Banking, and Vice President – Business Development); the Officers Loan Committee (consisting of at least the President, Vice President – Commercial Lending, Vice President – Retail Banking, and Vice President – Business Development); the Board Loan Committee (consisting of at least four members of the Board of Directors and the members of the Officers Loan Committee); and the full Board of Directors. Depending on the loan type, individual lending authorities are up to $250,000 per loan ($500,000 aggregate credit exposure), Officers Loan Committee lending authority is up to $750,000 per loan ($750,000 aggregate credit exposure) and Board Loan Committee lending authority is up to $1.0 million ($1.0 million aggregate credit exposure). All loans that exceed the approval authority of the Board Loan Committee are submitted to the full Board of Directors for review and disposition.
Generally, we require property and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan. In addition, we require an escrow for flood insurance (where appropriate) and generally request an escrow for property taxes and insurance. We allow borrowers to pay their own taxes and property and casualty insurance as long as proof of payment is provided.
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Delinquencies, Classified Assets and Nonperforming Assets
Delinquency Procedures. When a borrower becomes 30 days past due on a loan, we attempt to contact the borrower by telephone. Delinquency letters are mailed to borrowers at delinquency intervals of 11 days for consumer loans and 16 days for residential and commercial loans. Once the loan is considered in default, generally at 90 days past due, a letter is generally sent to the borrower explaining that the entire balance of the loan is due and payable, the loan is placed on non-accrual status, and additional efforts are made to contact the borrower. If the borrower does not respond, we generally initiate foreclosure proceedings when the loan is 120 days past due. If the loan is reinstated, foreclosure proceedings will be discontinued and the borrower will be permitted to continue to make payments. In certain instances, we may modify the loan or grant a limited exemption from loan payments to allow the borrower to reorganize his or her financial affairs. All delinquent loans are reported to the board of directors each month.
When we acquire real estate as a result of foreclosure or by deed in lieu of foreclosure, the real estate is classified as other real estate owned until it is sold. The real estate is recorded at estimated fair value at the date of acquisition, less estimated costs to sell, and any write-down resulting from the acquisition is charged to the allowance for credit losses. Subsequent decreases in the value of the property are charged to operations. After acquisition, all costs in maintaining the property are expensed as incurred. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value, less estimated costs to sell. At March 31, 2026, we had no real estate acquired as a result of foreclosure or by deed in lieu of foreclosure, but we did have one real estate property in process of foreclosure. The property is collateral for a 1-4 family residential loan and a home equity LOC. The total outstanding balance of the two loans was $154,000 at March 31, 2026. Our internal valuation has set the net realizable value of the property at $197,000 at March 31, 2026.
Modifications Made to Borrowers Experiencing Financial Difficulty. We occasionally modify loans to extend the term or make other concessions to help a borrower stay current on his or her loan and to avoid foreclosure. We consider modifications only after analyzing the borrower’s current repayment capacity, evaluating the strength of any guarantors based on documented current financial information, and assessing the current value of any collateral pledged. We generally do not forgive principal or interest on loans, but may do so if it is in our best interest and increases the likelihood that we can collect the remaining principal balance. We may modify the terms of loans to lower interest rates (which may be at below market rates), to provide for fixed interest rates on loans where fixed rates are otherwise not available, to provide for longer amortization schedules, or to provide for interest-only terms. These modifications are made only when a workout plan has been agreed to by the borrower that we believe is reasonable and attainable and in our best interests. At March 31, 2026, we had $5.9 million of modified loans.
Delinquent Loans. The following table sets forth our loan delinquencies (including non-accrual loans), by type and amount, at the dates indicated.
| At March 31, | |||||||||||||||||
2026 | | 2025 | ||||||||||||||||
30-59 | | 60-89 | | 90 Days | 30-59 | | 60-89 | | 90 Days | |||||||||
Days Past | Days Past | or More | Days Past | Days Past | or More | |||||||||||||
Due | Due | Past Due | Due | Due | Past Due | |||||||||||||
(In thousands) | ||||||||||||||||||
Real estate loans: |
| |
| |
| |
| |
| |
| | ||||||
One- to four-family | $ | 188 | $ | — | $ | 130 | $ | — | $ | — | $ | — | ||||||
Multi-family |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
Commercial |
| 259 |
| — |
| — |
| — |
| — |
| — | ||||||
Construction and land development |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
Commercial and industrial loans |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
Home equity loans and lines of credit |
| — |
| — |
| 24 |
| — |
| — |
| — | ||||||
Consumer loans |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
Total | $ | 447 | $ | — | $ | 154 | $ | — | $ | — | $ | — | ||||||
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Non-Performing Assets. The following table sets forth information regarding our non-performing assets at the dates indicated. As of March 31, 2026 and 2025, there were no non-accruing loans made to borrowers experiencing financial difficulty included in non-accrual loans.
| At March 31, |
| |||||
2026 | | 2025 |
| ||||
(Dollars in thousands) |
| ||||||
Non-accrual loans: |
| |
| | |||
Real estate loans: |
| |
| | |||
One- to four-family | $ | 130 | $ | 420 | |||
Multi-family |
| — |
| — | |||
Commercial |
| — |
| — | |||
Construction and land development |
| — |
| — | |||
Commercial and industrial loans |
| 8 |
| 13 | |||
Home equity loans and lines of credit |
| 112 |
| 114 | |||
Consumer loans |
| — |
| 82 | |||
Total non-accrual loans | $ | 250 | $ | 629 | |||
Accruing loans past due 90 days or more |
| — |
| — | |||
Foreclosed assets |
| — |
| — | |||
Other nonperforming assets |
| — |
| — | |||
Total non-performing assets | $ | 250 | $ | 629 | |||
Total non-performing loans to total loans |
| 0.22 | % |
| 0.58 | % | |
Total non-accruing loans to total loans |
| 0.22 | % |
| 0.58 | % | |
Total non-performing assets to total assets |
| 0.18 | % |
| 0.44 | % | |
Classified Assets. Federal regulations provide that loans and other assets of lesser quality should be classified as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific allowance for credit losses is not warranted. Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention.”
When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover losses that were both probable and reasonable to estimate. General allowances represent allowances which have been established to cover accrued losses associated with lending activities that were both probable and reasonable to estimate, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific allowances.
In connection with the filing of our periodic regulatory reports and according to our classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification according to applicable regulations. If a problem loan deteriorates in asset quality, the classification is changed to “substandard,” “doubtful” or “loss” depending on the circumstances and the evaluation. Generally, loans 90 days or more past due are placed on nonaccrual status and classified “substandard.”
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Our classified and special mention assets at the dates indicated were as follows:
| At March 31, | |||||
2026 | | 2025 | ||||
(In thousands) | ||||||
Substandard assets | $ | 1,630 | $ | 128 | ||
Doubtful assets |
| — |
| — | ||
Loss assets |
| — |
| — | ||
Total classified assets | $ | 1,630 | $ | 128 | ||
Special mention assets | $ | 123 | $ | 1,439 | ||
Foreclosed real estate and other repossessed assets | $ | — | $ | — | ||
Other Loans of Concern. At March 31, 2026, except for loans included in the above table, there were no other loans of concern for which we had information about possible credit problems of borrowers that caused us to have serious doubts about the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure of such loans in the future.
Allowance for Credit Losses
The allowance for credit losses on loans and unfunded commitments represents management’s estimate of lifetime credit losses on loans and unfunded commitments as of the reporting date. Management uses relevant available information, from both internal and external sources, related to historical experience, current conditions and reasonable and supportable forecasts. Expected credit losses are measured on a pool basis when similar risk characteristics exist by applying a loss rate based on historical data to each loan pool over the estimated remaining life of the loan pool. The loss rate is adjusted for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience, including adjustments for lending management experience and risk tolerance, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, industry concentrations, trends in underlying collateral, external factors and other economic conditions. Loans that do not share risk characteristics are measured on an individual basis. When a borrower is experiencing financial difficulty and repayment is expected to be provided through the operation or sale of the collateral, the expected credit loss is based on the fair value of collateral at the reporting date, adjusted for costs to sell. The allowance is increased by a provision for credit losses, which is charged to expense and reduced by full and partial charge-offs, net of recoveries. Changes in the allowance relating to individually evaluated loans are charged or credited to the provision for credit losses.
The determination of the allowance for credit losses is complex and requires extensive judgement by management regarding matters that are inherently uncertain. Factors influencing the allowance for credit losses include, but are not limited to, loan volume, loan asset quality, delinquency and nonperforming loan trends, historical credit losses, economic and forecasted data. Changes in factors used in evaluating the overall loan portfolio may result in significant changes in the allowance for credit losses and it is reasonably possible that management’s estimate of probable credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term.
As an integral part of their examination process, the OCC will periodically review our allowance for credit losses, and as a result of such reviews, we may determine to adjust our allowance for credit losses. However, the OCC is not directly involved in the process for establishing the allowance for credit losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of our management.
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The following table sets forth activity in our allowance for credit losses on loans for the periods indicated.
| At or For the Years Ended March 31, |
| |||||
2026 | | 2025 |
| ||||
(Dollars in thousands) |
| ||||||
Allowance for credit losses on loans at beginning of period | $ | 853 | $ | 856 | |||
Recovery of credit losses on loans |
| (53) |
| (5) | |||
Charge-offs: |
| |
| | |||
Real estate loans: |
| |
| | |||
One- to four-family |
| — |
| — | |||
Multi-family |
| — |
| — | |||
Commercial |
| — |
| — | |||
Construction and land development |
| — |
| — | |||
Commercial and industrial loans |
| — |
| — | |||
Home equity loans and lines of credit |
| — |
| — | |||
Consumer loans |
| (1) |
| — | |||
Total charge-offs |
| (1) |
| — | |||
Recoveries: |
| |
| | |||
Real estate loans: |
| |
| | |||
One- to four-family |
| — |
| — | |||
Multi-family |
| — |
| — | |||
Commercial |
| — |
| 1 | |||
Construction and land development |
| — |
| — | |||
Commercial and industrial loans |
| — |
| — | |||
Home equity loans and lines of credit |
| — |
| — | |||
Consumer loans |
| — |
| 1 | |||
Total recoveries |
| — |
| 2 | |||
Net (charge-offs) recoveries |
| (1) |
| 2 | |||
Allowance for credit losses on loans at end of period | $ | 799 | $ | 853 | |||
Allowance for credit losses on loans as a percentage of non-performing loans at end of period |
| 319.60 | % |
| 73.74 | % | |
Allowance for credit losses on loans as a percentage of total loans outstanding at end of period |
| 0.72 | % |
| 0.79 | % | |
Net (charge-offs) recoveries as a percentage of average loans outstanding during period |
| 0.00 | % |
| 0.00 | % | |
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Allocation of Allowance for Credit Losses on Loans. The following tables set forth the allowance for credit losses on loans allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance for credit losses on loans allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
| At March 31, |
| |||||||||||||
2026 | 2025 |
| |||||||||||||
| Percent of | | | | Percent of | |
| ||||||||
Allowance | Percent of | Allowance | Percent of |
| |||||||||||
in Each | Loans in | in Each | Loans in |
| |||||||||||
Allowance | Category | Each | Allowance | Category | Each |
| |||||||||
for Credit | to Total | Category | for Credit | to Total | Category |
| |||||||||
Losses on | Allocated | to Total | Losses on | Allocated | to Total |
| |||||||||
Loans | Allowance | Loans | Loans | Allowance | Loans |
| |||||||||
(Dollars in thousands) |
| ||||||||||||||
Real estate loans: |
| |
| |
| |
| |
| |
| | |||
Residential | $ | 332 |
| 41.6 | % | 60.9 | % | $ | 378 |
| 44.3 | % | 64.6 | % | |
Multi-family |
| 9 |
| 1.1 |
| 1.6 |
| 7 |
| 0.9 |
| 1.5 | |||
Commercial |
| 325 |
| 40.7 |
| 24.5 |
| 337 |
| 39.5 |
| 22.4 | |||
Construction and land development |
| 31 |
| 3.9 |
| 1.9 |
| 38 |
| 4.5 |
| 2.3 | |||
Commercial and industrial loans |
| 53 |
| 6.6 |
| 5.7 |
| 39 |
| 4.6 |
| 3.9 | |||
Home equity loans and lines of credit |
| 25 |
| 3.1 |
| 4.4 |
| 24 |
| 2.8 |
| 4.1 | |||
Consumer loans |
| 24 |
| 3.0 |
| 1.0 |
| 30 |
| 3.4 |
| 1.2 | |||
Total allocated allowance | $ | 799 |
| 100.0 | % | 100.0 | % | $ | 853 |
| 100.0 | % | 100.0 | % | |
Unallocated allowance |
| — |
| |
| — |
| | |||||||
Total allowance for credit losses on loans | $ | 799 |
| | $ | 853 |
| | |||||||
Although we believe that we use the best information available to establish the allowance for credit losses on loans, future adjustments to it may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for credit losses on loans may not be adequate and management may determine that increases in the allowance are necessary if the quality of any portion of our loan portfolio deteriorates as a result. Furthermore, as an integral part of its examination process, the OCC will periodically review our allowance for credit losses on loans. The OCC may have judgments different than those of management, and we may determine to increase our allowance for credit losses on loans as a result of these regulatory reviews. Any material increase in the allowance for credit losses on loans may adversely affect our financial condition and results of operations.
Investment Activities
General. The goal of our investment policy is to maximize portfolio yield over the long term in a manner that is consistent with minimizing risk, meeting liquidity needs, meeting pledging requirements, and managing asset/liability management and interest rate risk strategies. Subject to loan demand and our interest rate risk analysis, we will increase the balance of our investment securities portfolio when we have excess liquidity.
Our investment policy is adopted by our board of directors and is reviewed annually by the board of directors. We use an independent investment advisory firm, registered with the Securities and Exchange Commission, to execute investment transactions in accordance with our investment policy, perform pre-purchase analysis, and provide portfolio analysis on a quarterly basis. All investment transactions executed by the independent investment advisory firm must be pre-approved by our President and Chief Executive Officer. On a quarterly basis, Monroe Federal’s board of directors reviews activity in the investment portfolio and investment strategies.
Our current investment policy permits, with certain limitations, investments in U.S. Treasury and federal agency securities; securities issued by the U.S. government and its agencies or government sponsored enterprises
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including mortgage-backed securities; state and municipal securities; interest-bearing time deposits in other financial institutions; among other investments.
At March 31, 2026, our investment portfolio consisted primarily of U.S. government agency securities, mortgage-backed securities issued by U.S. government-sponsored enterprises, and state and municipal securities. At March 31, 2026, we also owned $583,000 of Federal Home Loan Bank of Cincinnati stock. As a member of Federal Home Loan Bank of Cincinnati, we are required to purchase stock in the Federal Home Loan Bank of Cincinnati, which is carried at cost and classified as a restricted investment.
For additional information regarding our investment securities portfolio, see note 2 to the notes to consolidated financial statements.
Sources of Funds
General. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We may also use borrowings to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds. In addition, we receive funds from scheduled loan payments, investment maturities, loan prepayments, retained earnings and income on earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.
Deposits. Our deposits are generated primarily from our primary market area. We offer a selection of deposit accounts, including savings accounts, money market accounts, checking accounts, certificates of deposit and individual retirement accounts. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate.
Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. We rely upon personalized customer service, long-standing relationships with customers, and our favorable reputation in the community to attract and retain local deposits. We also seek to obtain deposits from our commercial loan customers.
The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. The variety of deposit accounts offered allows us to be competitive in obtaining funds and responding to changes in consumer demand. Based on experience, we believe that our deposits are relatively stable. However, the ability to attract and maintain deposits and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions. See “Risk Factors – Risks Related to Operational Matters – Our funding sources may prove insufficient to meet our liquidity needs and support our future growth.”
The following table sets forth the distribution of total deposits, by account type, at the dates indicated.
| At March 31, |
| |||||||||||||
2026 | | 2025 |
| ||||||||||||
| | Average | | | Average |
| |||||||||
Amount | Percent | Rate | Amount | Percent | Rate |
| |||||||||
(Dollars in thousands) |
| ||||||||||||||
Non-interest bearing demand accounts | $ | 7,346 |
| 5.9 | % | — | % | $ | 7,540 |
| 6.2 | % | — | % | |
Interest bearing demand accounts |
| 24,311 |
| 19.5 |
| 0.02 |
| 30,487 |
| 25.3 |
| 0.02 | |||
Savings accounts |
| 21,974 |
| 17.7 |
| 0.57 |
| 21,027 |
| 17.4 |
| 0.35 | |||
Money market accounts |
| 29,575 |
| 23.7 |
| 2.16 |
| 27,837 |
| 23.1 |
| 1.68 | |||
Certificates of deposit |
| 41,344 |
| 33.2 |
| 3.55 |
| 33,773 |
| 28.0 |
| 3.87 | |||
Total | $ | 124,550 |
| 100.0 | % |
| $ | 120,664 |
| 100.0 | % | | |||
At March 31, 2026 and March 31, 2025, the aggregate amount of all uninsured deposits (deposits in excess of the Federal Deposit Insurance limit of $250,000) was $40.9 million and $43.3 million, respectively.
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At March 31, 2026 and March 31, 2025, the aggregate amount of all uninsured certificates of deposit (certificates of deposit in excess of the Federal Deposit Insurance limit of $250,000) was $7.6 million and $6.7 million, respectively.
At March 31, 2026 and March 31, 2025, we had no deposits that were uninsured for any reason other than being in excess of the FDIC limit.
The following table sets forth, by time remaining until maturity, our uninsured certificates of deposit at the date indicated.
| At March 31, 2026 | ||
(In thousands) | |||
Maturity Period: |
| | |
Three months or less | $ | 2,719 | |
Over three months through 6 months |
| 1,811 | |
Over 6 months through 12 months |
| 1,828 | |
Over 12 months |
| 1,285 | |
Total | $ | 7,643 | |
Borrowings. We may obtain advances from the Federal Home Loan Bank of Cincinnati upon the security of our capital stock in it and our one- to four-family residential real estate portfolio. We may utilize these advances for asset/liability management purposes and for additional funding for our operations. These advances may be made under several different credit programs, each of which has its own interest rate and range of maturities. At March 31, 2026, we had the ability to borrow up to $47.4 million from the Federal Home Loan Bank of Cincinnati under a collateral pledge facility. At March 31, 2026, we had $3.8 million of outstanding advances under this facility. In addition, at March 31, 2026, we had the capacity to borrow up to $5.7 million from the Federal Reserve Bank of Cleveland and up to $5.0 million from a correspondent bank, with no outstanding balance under either facility.
Human Capital Resources
As of March 31, 2026, we had 23 full-time employees and 3 part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good working relations with our employees.
The success of our business depends highly on our employees, who provide value to our customers and communities through their dedication to our business. We encourage and support the growth and development of our employees and, wherever possible, seek to fill open positions by promotion and transfer from within the organization. Continual learning and career development are advanced through internally developed training programs. We believe our ability to attract and retain employees is a key to our success and strive to offer competitive salaries and employee benefits to all employees and monitor salaries in our market areas.
Subsidiary Activities
Monroe Federal is the sole and wholly-owned subsidiary of Monroe Federal Bancorp. Monroe Federal has no subsidiaries.
Regulation and Supervision
General
As a federal savings association, Monroe Federal is subject to examination and regulation by the OCC, and is also subject to examination by the FDIC. This regulation and supervision establishes a comprehensive framework of
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activities in which an institution may engage and is intended primarily for the protection of the FDIC’s deposit insurance fund and depositors, and not for the protection of security holders. Monroe Federal also is a member of and owns stock in the Federal Home Loan Bank of Cincinnati, which is one of the 11 regional banks in the Federal Home Loan Bank System.
Under this system of regulation, the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination activities and policies, including rules or policies that: establish minimum capital levels; restrict the timing and amount of dividend payments; govern the classification of assets; determine the adequacy of loan loss reserves for regulatory purposes; and establish the timing and amounts of assessments and fees. Moreover, as part of their examination authority, the banking regulators assign numerical ratings to banks and savings institutions relating to capital, asset quality, management, liquidity, earnings and other factors. The receipt of a less than satisfactory rating in one or more categories may result in enforcement action by the banking regulators against a financial institution. A less than satisfactory rating may also prevent a financial institution, such as Monroe Federal or its holding company, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.
In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations. Government agencies have the authority to impose monetary penalties and other sanctions on institutions that fail to comply with these laws and regulations, which could significantly affect our business activities, including our ability to acquire other financial institutions or expand our branch network.
Monroe Federal Bancorp is a savings and loan holding company and is required to comply with the rules and regulations of the Federal Reserve Board. It is required to file certain reports with the Federal Reserve Board and is subject to examination by the enforcement authority of the Federal Reserve Board. It is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.
Any change in applicable laws or regulations, whether by the OCC, the FDIC, the Federal Reserve Board, the Securities and Exchange Commission or Congress, could have a material adverse impact on the operations and financial performance of Monroe Federal Bancorp and Monroe Federal.
Set forth below is a brief description of material regulatory requirements that are applicable to Monroe Federal and Monroe Federal Bancorp. The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Monroe Federal and Monroe Federal Bancorp.
Federal Banking Regulation
Business Activities. A federal association derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and applicable federal regulations. Under these laws and regulations, Monroe Federal may invest in mortgage loans secured by residential and commercial real estate, commercial business and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits. Monroe Federal may also establish subsidiaries that may engage in certain activities not otherwise permissible for Monroe Federal to engage in directly, including real estate investment and securities and insurance brokerage.
Capital Requirements. Federal regulations require federally insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-weighted assets ratio of 4.5%, a Tier 1 capital to risk-weighted assets ratio of 6.0%, a total capital to risk-weighted assets of 8.0%, and a 4.0% Tier 1 capital to adjusted average total assets leverage ratio.
Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1
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capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (Loss) (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). Monroe Federal exercised its AOCI opt-out election. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential real estate loans, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.
In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented at 2.5% of risk-weighted assets on January 1, 2019.
The federal banking agencies have developed a “Community Bank Leverage Ratio (CBLR)” (the ratio of Tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion that meet certain qualifying criteria. A “qualifying community bank” that exceeds this ratio will be deemed compliant with all other capital requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum CBLR at not less than 8% and not more than 10%, and as of January 1, 2022, it is set at 9%. At March 31, 2026, Monroe Federal was subject to the CBLR framework and had a CBLR of 9.6%.
Loans-to-One Borrower. Generally, a federal savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. At March 31, 2026, Monroe Federal complied with the loans-to-one borrower limitations.
Qualified Thrift Lender Test. As a federal savings association, Monroe Federal must satisfy the qualified thrift lender, or “QTL,” test. Under the QTL test, it must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of the most recent 12-month period. “Portfolio assets” generally means total assets of a savings association, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings association’s business.
Monroe Federal also may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code of 1986, as amended. This test generally requires a savings association to have at least 75% of its deposits held by the public and earn at least 25% of its income from loans and U.S. government obligations. Alternatively, a savings association can satisfy this test by maintaining at least 60% of its assets in cash, real estate loans and U.S. Government or state obligations.
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A savings association that fails the qualified thrift lender test must operate under specified restrictions set forth in the Home Owners’ Loan Act. The Dodd-Frank Act made noncompliance with the QTL test subject to agency enforcement action for a violation of law. At March 31, 2026, Monroe Federal complied with the qualified thrift lender test, with a percentage of qualified thrift investments to total assets of approximately 82.75%.
Capital Distributions. Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to its capital account. A federal savings association must file an application with the OCC for approval of a capital distribution if:
| ● | the total capital distributions for the applicable calendar year exceed the sum of the savings association’s net income for that year to date plus its retained net income for the preceding two years; |
| ● | the savings association would not be at least adequately capitalized following the distribution; |
| ● | the distribution would violate any applicable statute, regulation, agreement or regulatory condition; or |
| ● | the savings association is not eligible for expedited treatment of its filings, generally due to an unsatisfactory CAMELS rating or being subject to a cease-and-desist order or formal written agreement that requires action to improve the institution’s financial condition. |
Even if an application is not otherwise required, every savings association that is a subsidiary of a savings and loan holding company, such as Monroe Federal, must still file a notice with the Federal Reserve Board at least 30 days before the board of directors declares a dividend or approves a capital distribution.
A notice or application related to a capital distribution may be disapproved if:
| ● | the savings association would be undercapitalized following the distribution; |
| ● | the proposed capital distribution raises safety and soundness concerns; or |
| ● | the capital distribution would violate a prohibition contained in any statute, regulation or agreement. |
In addition, an insured depository institution may not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital requirement. A federal savings association also may not make a capital distribution that would reduce its regulatory capital below the amount required for the liquidation account established in connection with its conversion to stock form.
Community Reinvestment Act and Fair Lending Laws. All federal savings associations have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. In connection with its examination of a federal savings association, the OCC is required to assess the federal savings association’s record of compliance with the Community Reinvestment Act. A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice.
The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. Monroe Federal received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination.
Transactions with Related Parties. A federal savings association’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulations. An affiliate is
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generally a company that controls, or is under common control with, an insured depository institution such as Monroe Federal. Monroe Federal Bancorp is an affiliate of Monroe Federal because it controls Monroe Federal. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements. In addition, federal regulations prohibit a savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.
Monroe Federal’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions generally require that extensions of credit to insiders:
| ● | be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and |
| ● | not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Monroe Federal’s capital. |
In addition, extensions of credit in excess of certain limits must be approved by Monroe Federal’s board of directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.
Enforcement. The OCC has primary enforcement responsibility over federal savings associations and has authority to bring enforcement action against all “institution-affiliated parties,” including directors, officers, stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings association. Formal enforcement action by the OCC may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution and the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1 million per day. The FDIC also has the authority to terminate deposit insurance or recommend to the OCC that enforcement action be taken with respect to a particular savings association. If such action is not taken, the FDIC has authority to take the action under specified circumstances.
Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease-and-desist order or the imposition of civil money penalties.
Interstate Banking and Branching. Federal law permits well capitalized and well managed holding companies to acquire banks in any state, subject to Federal Reserve Board approval, certain concentration limits and other specified conditions. Interstate mergers of banks are also authorized, subject to regulatory approval and other specified conditions. In addition, among other things, amendments made by the Dodd-Frank Act permit banks to establish de novo branches on an interstate basis provided that branching is authorized by the law of the host state for the banks chartered by that state.
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Prompt Corrective Action. Federal law requires, among other things, that federal bank regulators take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For this purpose, the law establishes five capital categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Under the regulations, as amended effective January 1, 2015 to incorporate the previously mentioned amendments to the regulatory capital requirements, an institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.
Federal law and regulations also specify circumstances under which a federal banking agency may reclassify a well-capitalized institution as adequately capitalized and may require an institution classified as less than well-capitalized to comply with supervisory actions as if it were in the next lower category.
The OCC may order savings associations that have insufficient capital to take corrective actions. For example, a savings association that is categorized as “undercapitalized” is subject to growth limitations and is required to submit a capital restoration plan, and a holding company that controls such a savings association is required to guarantee that the savings association complies with the restoration plan. A “significantly undercapitalized” savings association may be subject to additional restrictions. Savings associations deemed by the OCC to be “critically undercapitalized” would be subject to the appointment of a receiver or conservator.
At March 31, 2026, Monroe Federal met the criteria for being considered “well capitalized.” For further information, see note 9 to the notes to consolidated financial statements.
Insurance of Deposit Accounts. Monroe Federal is a member of the Deposit Insurance Fund, which is administered by the FDIC. Its deposit accounts are insured by the FDIC, generally up to a maximum of $250,000 per depositor.
The FDIC imposes deposit insurance assessments against all insured depository institutions. An institution’s assessment rate depends upon the perceived risk of the institution to the Deposit Insurance Fund, with institutions deemed less risky paying lower rates. Currently, assessments for institutions of less than $10 billion of total assets are based on financial measures and supervisory ratings derived from statistical models estimating the probability of failure within three years. That system was effective July 1, 2016 and replaced a system under which each institution was assigned to a risk category. Assessment rates (inclusive of possible adjustments) currently range from 1.5 to 30 basis points of each institution’s total assets less tangible capital. The current scale, also effective July 1, 2016, is a reduction from the previous range of 2.5 to 45 basis points. The FDIC may increase or decrease the range of assessments uniformly, except that no adjustment can deviate more than two basis points from the base assessment rate without notice and comment rulemaking. The existing system represents a change, required by the Dodd-Frank Act, from the FDIC’s prior practice of basing the assessment on an institution’s aggregate deposits.
The FDIC has the authority to increase insurance assessments. A significant increase in insurance premiums would have an adverse effect on the operating expenses and results of operations of Monroe Federal. We cannot predict what deposit insurance assessment rates will be in the future.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that might lead to termination of deposit insurance for Monroe Federal.
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Privacy Regulations. Federal regulations generally require that Monroe Federal disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter. In addition, Monroe Federal is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes to non-affiliated third parties for marketing purposes. Monroe Federal has a privacy protection policy in place and believes that such policy is in compliance with the regulations.
USA Patriot Act. Monroe Federal is subject to the USA PATRIOT Act, which gives federal agencies additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. The USA PATRIOT Act contains provisions intended to encourage information sharing among bank regulatory agencies and law enforcement bodies and imposes affirmative obligations on financial institutions, such as enhanced recordkeeping and customer identification requirements.
Prohibitions Against Tying Arrangements. Federal savings associations are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.
Other Regulations
Interest and other charges collected or contracted for by Monroe Federal are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to state and federal laws applicable to credit transactions, such as the:
| ● | Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; |
| ● | Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; |
| ● | Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; and |
| ● | Rules and regulations of the various federal and state agencies charged with the responsibility of implementing such federal and state laws. |
The deposit operations of Monroe Federal also are subject to, among others, the:
| ● | Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; |
| ● | Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and |
| ● | Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services. |
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Federal Home Loan Bank System
Monroe Federal is a member of the Federal Home Loan Bank of Cincinnati, which is one of 11 regional Federal Home Loan Banks in the Federal Home Loan Bank System. The Federal Home Loan Bank of Cincinnati provides a central credit facility primarily for its member institutions. Members of the Federal Home Loan Bank of Cincinnati are required to acquire and hold shares of capital stock in the Federal Home Loan Bank of Cincinnati. Monroe Federal complied with this requirement at March 31, 2026. Based on redemption provisions of the Federal Home Loan Bank of Cincinnati, the stock has no quoted market value and is carried at cost. Monroe Federal reviews for impairment, based on the ultimate recoverability, the cost basis of the Federal Home Loan Bank of Cincinnati stock. At March 31, 2026, no impairment was recognized.
Holding Company Regulation
Monroe Federal Bancorp is a unitary savings and loan holding company subject to regulation and supervision by the Federal Reserve Board. The Federal Reserve Board has enforcement authority over Monroe Federal Bancorp and its non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a risk to Monroe Federal.
As a savings and loan holding company, Monroe Federal Bancorp’s activities are limited to those activities permissible by law for financial holding companies (if Monroe Federal Bancorp makes an election to be treated as a financial holding company and meets the other requirements to be a financial holding company) or multiple savings and loan holding companies. Monroe Federal Bancorp does not intend to make an election to be treated as a financial holding company. A financial holding company may engage in activities that are financial in nature, incidental to financial activities or complementary to a financial activity. Such activities include lending and other activities permitted for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, insurance and underwriting equity securities. Multiple savings and loan holding companies are authorized to engage in activities specified by federal regulation, including activities permitted for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act.
Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or savings and loan holding company without prior written approval of the Federal Reserve Board, and from acquiring or retaining control of any depository institution not insured by the FDIC. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider such things as the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on and the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors. A savings and loan holding company may not acquire a savings institution in another state and hold the target institution as a separate subsidiary unless it is a supervisory acquisition under Section 13(k) of the Federal Deposit Insurance Act or the law of the state in which the target is located authorizes such acquisitions by out-of-state companies.
Savings and loan holding companies historically have not been subject to consolidated regulatory capital requirements. The Dodd-Frank Act requires the Federal Reserve Board to establish minimum consolidated capital requirements for all depository institution holding companies that are as stringent as those required for the insured depository subsidiaries. However, legislation was enacted in May 2018 that required the Federal Reserve Board to amend its “Small Bank Holding Company” exemption from consolidated holding company capital requirements to generally extend its applicability to bank and savings and loan holding companies of up to $3.0 billion in assets. Regulations implementing this amendment were effective in August 2018. Consequently, savings and loan holding companies of under $3.0 billion in consolidated assets remain exempt from consolidated regulatory capital requirements, unless the Federal Reserve determines otherwise in particular cases.
The Dodd-Frank Act extended the “source of strength” doctrine to savings and loan holding companies. The Federal Reserve Board has promulgated regulations implementing the “source of strength” policy that require holding companies to act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.
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The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies and savings and loan holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. The policy statement also states that a holding company should inform the Federal Reserve Board supervisory staff before redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies may affect the ability of Monroe Federal Bancorp to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.
For Monroe Federal Bancorp to be regulated by the Federal Reserve Board as a savings and loan holding company rather than as a bank holding company, Monroe Federal must qualify as a “qualified thrift lender” under federal regulations or satisfy the “domestic building and loan association” test under the Internal Revenue Code. Under the qualified thrift lender test, a savings institution is required to maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangible assets, including goodwill; and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed and related securities) in at least nine out of each 12 month period. At March 31, 2026, Monroe Federal maintained approximately 82.75% of its portfolio assets in qualified thrift investments and complied with the qualified thrift lender requirement.
Federal Securities Laws
Monroe Federal Bancorp common stock is registered with the Securities and Exchange Commission. Monroe Federal Bancorp is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934, as amended.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures required under the federal securities laws. We have policies, procedures and systems designed to comply with these regulations, and we review and document such policies, procedures and systems to ensure continued compliance with these regulations.
Change in Control Regulations
Under the Change in Bank Control Act, a federal statute, no person may acquire control of a savings and loan holding company such as Monroe Federal Bancorp unless the Federal Reserve Board has been given 60 days prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the regulator that the acquiror has the power, directly or indirectly, to exercise a controlling influence over the management or policies of the institution. Acquisition of more than 10% of any class of a savings and loan holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, as is the case with Monroe Federal Bancorp, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
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In addition, federal regulations provide that no company may acquire control of a savings and loan holding company without the prior approval of the Federal Reserve Board. Any company that acquires such control becomes a “savings and loan holding company” subject to registration, examination and regulation by the Federal Reserve Board
Emerging Growth Company Status
Monroe Federal Bancorp is an emerging growth company. For as long as it continues to be an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to public companies. These exemptions include, but are not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company, Monroe Federal Bancorp also is not subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require our independent auditors to audit our internal control over financial reporting. In addition, as an emerging growth company, we have elected to take advantage of the extended transition periods for adopting new or revised financial accounting standards until the date they are required to be adopted by private companies (however, if any new or revised financial accounting standards would not apply to private companies, we would not be able to delay their adoption). Accordingly, our consolidated financial statements may not be comparable to those of public companies that adopt new or revised financial accounting standards as of an earlier date.
Monroe Federal Bancorp will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the completion of the Conversion (i.e., on March 31, 2030); (ii) the first fiscal year after our annual gross revenues are $1.07 billion (adjusted for inflation) or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year.
Taxation
Federal Taxation
General. Monroe Federal Bancorp and Monroe Federal are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to Monroe Federal Bancorp and Monroe Federal.
Method of Accounting. For federal income tax purposes, Monroe Federal currently reports its income and expenses on the cash basis of accounting and uses a tax year ending March 31 for filing its federal income tax returns. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for bad debt reserves by savings institutions, effective for taxable years beginning after 1995.
Alternative Minimum Tax. The alternative minimum tax (“AMT”) for corporations has been repealed for tax years beginning after December 31, 2017. Any unused minimum tax credit of a corporation may be used to offset regular tax liability for any tax year. In addition, a portion of unused minimum tax credit was refundable in 2018 through 2021. The refundable portion is 50% (100% in 2021) of the excess of the minimum tax credit for the year over any credit allowable against regular tax for that year. At March 31, 2026, Monroe Federal had no minimum tax credit carryforward.
Net Operating Loss Carryovers. Generally, a corporation may carry forward net operating losses generated in tax years beginning after December 31, 2017 indefinitely and can offset up to 80% of taxable income. At March 31, 2026, Monroe Federal had approximately $2.4 million of net operating loss carryforwards.
Capital Loss Carryovers. Generally, a corporation may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. Any capital loss carryback or carryover is treated as a short-term capital loss for the year to which it is carried. As such, it is grouped with any other capital losses for the year to which it
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is carried and is used to offset any capital gains. Any undeducted loss remaining after the five-year carryover period is not deductible. At March 31, 2026, Monroe Federal had no capital loss carryovers.
Corporate Dividends. Monroe Federal Bancorp may generally exclude from our income 100% of dividends received from Monroe Federal as a member of the same affiliated group of corporations.
Audit of Tax Returns. Monroe Federal’s federal income tax returns have not been audited in the most recent five-year period.
State Taxation
Ohio. Monroe Federal is subject to Ohio taxation in the same general manner as other financial institutions. Monroe Federal files a consolidated Ohio Financial Institutions Tax (“FIT”) return. The FIT is based upon the net worth of the consolidated group. For Ohio FIT purposes, savings institutions are currently taxed at a rate equal to 0.8% of taxable net worth, capped at 14% of the institution’s total assets.
Maryland. As a Maryland business corporation, Monroe Federal Bancorp is required to file an annual report with and pay personal property taxes to the State of Maryland.
Item 1A. Risk Factors
Not applicable, as Monroe Federal Bancorp is a “smaller reporting company”.
Item 1B. Unresolved Staff Comments
None
Item 1C. Cybersecurity
We face significant operational risks because of our reliance on technology. Our information technology systems may be subject to failure, interruption or security breaches.
Information technology systems are critical to our business.
If there is a breakdown in our internal control systems, improper operation of systems or improper employee actions, or a breach of our security systems, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, loss of customers and damage to our reputation, and face regulatory action or civil
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litigation. Any of these events could have a material adverse effect on our financial condition and results of operations. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits.
In addition,
Our
Item 2. Properties
At March 31, 2026, the net book value of our properties (including land, buildings and improvements, and furniture and fixtures) was $5.0 million. The following table sets forth information regarding our offices at March 31, 2026.
| | Year | | Approximate | ||
Location | Leased/Owned | Opened/Acquired | Square Footage | |||
Main Office: |
|
| ||||
24 East Main Street | ||||||
Tipp City, OH 45371 | ||||||
Miami County | Owned | 1963 |
| 4,000 | ||
Branch Offices: |
|
| ||||
985 West Main Street | ||||||
Tipp City, OH 45371 | ||||||
Miami County | Owned | 2023 |
| 6,600 | ||
8512 North Dixie Drive |
|
| ||||
Dayton, OH 45414 | ||||||
Montgomery County | Leased | 2007 |
| 1,500 | ||
264 East National Road |
|
| ||||
Vandalia, OH 45377 | ||||||
Montgomery County | Owned | 1958 |
| 2,700 |
We also own property at 25 East Dow Street in Tipp City, located directly behind our main office. We use the parking lot on the property for employee parking. The property also includes a house which we rent to a residential tenant.
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Item 3. Legal Proceedings
In addition to routine legal proceedings occurring in the ordinary course of business, at March 31, 2026 we were involved in legal proceedings seeking reimbursement for approximately $120,000 in real estate taxes paid on behalf of a former borrower. We are confident of a favorable outcome in the recovery of these tax reimbursements.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Monroe Federal Bancorp’s common stock is quoted on the OTCQB Market under the symbol “MFBI.” As of March 31, 2026, we had 162 stockholders of record (excluding persons or entities holding stock in street name through various brokerage firms), and 541,434 shares of common stock outstanding. Prices quoted on the OTCQB market reflect inter-dealer prices, without retail mark-up, mark-down, or commissions and not necessarily represent actual transactions.
To date, Monroe Federal Bancorp has not paid any cash dividends to our stockholders. The payment and amount of any dividend payments is subject to statutory and regulatory limitations, and depends upon a number of factors, including the following: regulatory capital requirements; our financial condition and results of operations; tax considerations; and general economic conditions.
There were no sales of unregistered equity securities during the year-ended March 31, 2026.
The Company did not repurchase any shares of its common stock during the year-ended March 31, 2026.
Item 6. (Reserved)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the financial statements, which appear elsewhere in this annual report. You should read the information in this section in conjunction with the other business and financial information provided in this annual report.
Overview
Our business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations, in residential real estate loans and, to a lesser extent, commercial real estate loans. To a significantly lesser extent, we also originate multi-family mortgage loans, construction and land development loans, commercial and industrial loans, home equity loans and lines of credit, and consumer loans. We also invest in securities, which have historically consisted primarily of U.S. government and agency securities, mortgage-backed securities and obligations issued by U.S. government sponsored enterprises, and state and municipal securities. We offer a variety of deposit accounts including checking accounts, savings accounts and certificate of deposit accounts.
Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for loan losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of service charges on deposit accounts, other service charges and fees, and income from bank owned life insurance. Non-interest expense currently consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, contract services, director fees, FDIC deposit insurance premiums, and other expenses.
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We invest in bank owned life insurance to provide us with a funding source to offset some costs of our benefit plan obligations. Bank owned life insurance provides us with non-interest income that is nontaxable. Federal regulations generally limit our investment in bank owned life insurance to 25% of our Tier 1 capital plus our allowance for credit losses. At March 31, 2026, our investment in bank owned life insurance was $3.7 million, which was inside this investment limit.
Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities
Business Strategy
Our principal objective is to build long-term value for our stockholders by operating a profitable community-oriented financial institution dedicated to meeting the banking needs of our customers by emphasizing personalized and efficient customer service. Highlights of our current business strategy include:
| ● | Continue to focus on originating one- to four-family residential mortgage loans. We are primarily a one- to four-family residential mortgage loan lender for borrowers in our primary market area. At March 31, 2026, $68.0 million, or 60.9% of our total loan portfolio, consisted of residential mortgage loans. We expect that residential mortgage lending will remain our primary lending activity. Historically, we have not sold loans we have originated. We have developed the infrastructure necessary to sell one- to four-family residential mortgage loans, particularly longer term one- to four-family residential mortgage loans, to help mitigate our interest rate risk exposure to the secondary market. Sales are expected to begin early in fiscal year 2027. |
| ● | Grow and diversify our loan portfolio prudently by increasing originations of commercial real estate loans and commercial and industrial loans. Although we intend to continue our historical focus on the origination of residential mortgage loans, we intend to prudently increase our originations of commercial real estate loans and commercial and industrial loans to diversify our loan portfolio and increase yield. At March 31, 2026, commercial real estate loans amounted to $27.3 million, or 24.5% of total loans, and commercial and industrial loans amounted to $6.3 million, or 5.7% of total loans. |
| ● | Maintain our strong asset quality through conservative loan underwriting. We intend to maintain strong asset quality through what we believe are our conservative underwriting standards and credit monitoring processes. At March 31, 2026, nonperforming assets totaled $250,000 or 0.2% of total assets. At March 31, 2025, nonperforming assets totaled $629,000, or 0.4% of total assets. |
| ● | Continue efforts to grow low-cost “core” deposits. We consider our core deposits to include all deposits other than certificates of deposit. We will continue our efforts to increase our core deposits to provide a stable source of funds to support loan growth at costs consistent with improving our interest rate spread and net interest margin. Core deposits totaled $83.2 million, or 66.8% of total deposits, at March 31, 2026. |
| ● | Remain a community-oriented institution and rely on high quality service to maintain and build a loyal local customer base. We were originally chartered in 1875. Through the goodwill we have developed over years of providing timely, efficient banking services, we believe that we have been able to attract a loyal base of local retail customers on which we hope to continue to build our banking business. |
| ● | Grow organically and through opportunistic branching. We intend to grow our balance sheet organically on a managed basis, and the capital we raised in the conversion and stock offering enabled us to increase our lending and investment capacity. In addition to organic growth, we may also consider expansion opportunities in our market area or in contiguous markets that we believe would enhance both our franchise value and stockholder returns. These opportunities may include establishing loan production offices, establishing new, or de novo, branch offices and/or acquiring |
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| branch offices. The capital we raised in the stock offering will help us fund any such opportunities that may arise. We have no current plans or intentions regarding any such expansion activities. |
Critical Accounting Policies and Use of Critical Accounting Estimates
The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with generally accepted accounting principles used in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.
The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.
The following represent our critical accounting policies:
Allowance for Credit Losses. The allowance for credit losses is the estimated amount considered necessary to cover inherent, but unconfirmed, credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for credit losses which is charged against income. In determining the allowance for credit losses, management makes significant estimates and has identified this policy as one of our most critical accounting policies.
Management performs a quarterly evaluation of the allowance for credit losses on loans and unfunded commitments. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.
The allowance for credit losses is evaluated following the accounting guidance in Accounting Standards Update (ASU) No. 2016-13 Financial Instruments – Credit Losses (Topic 326) for the fiscal year ended March 31, 2026. ASC 326 replaced the incurred loss impairment methodology with a new CECL methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broader range of information to estimate credit losses. ASC 326 requires an estimate of all expected credit losses for loans based on historical experience, current conditions, and reasonable and supportable forecasts.
Actual loan losses may be significantly more than the allowances we have established which could result in a material negative effect on our financial results.
Deferred Tax Assets. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Determining the proper valuation allowance for deferred taxes is critical in properly valuing the deferred tax
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asset and the related recognition of income tax expense or benefit. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets.
Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We estimate the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. These estimates are subjective in nature and imprecision in estimating these factors can impact the amount of gain or loss recorded. For further information, see note 13 to the notes to financial statements.
Selected Consolidated Financial Data
The following tables set forth selected historical financial and other data of the Company at the dates and for the years indicated. The data at and for the years ended March 31, 2026 and 2025 is derived, in part, from, and should be read together with, the audited consolidated financial statements and related notes appearing elsewhere in this annual report.
At March 31, | ||||||
| 2026 | | 2025 | |||
(In thousands) | ||||||
Selected Consolidated Financial Condition Data: | ||||||
Total assets | $ | 142,429 | $ | 144,329 | ||
Cash and cash equivalents | 1,455 | 2,078 | ||||
Available-for-sale securities | 18,446 | 23,143 | ||||
Loans, net | 110,529 | 106,996 | ||||
Premises and equipment, net | 5,031 | 5,125 | ||||
Restricted stock | 728 | 837 | ||||
Bank-owned life insurance | 3,734 | 3,605 | ||||
Total deposits | 124,550 | 120,664 | ||||
Borrowings | 3,834 | 9,972 | ||||
Total stockholder's equity |
| 12,401 |
| 12,069 | ||
For the Years Ended March 31, | ||||||
| 2026 | | 2025 | |||
(In thousands) | ||||||
Selected Consolidated Operating Data: | ||||||
Total interest income | $ | 6,186 | $ | 5,901 | ||
Total interest expense | 2,443 | 2,229 | ||||
Net interest income | 3,743 | 3,672 | ||||
(Recovery of) provision for credit losses | (57) | 15 | ||||
Net interest income after (recovery of) provision for credit losses | 3,800 | 3,657 | ||||
Total noninterest income | 439 | 354 | ||||
Total noninterest expense | 4,938 | 4,471 | ||||
Loss before income taxes | (699) | (460) | ||||
Benefit for income taxes | (184) | (133) | ||||
Net loss | $ | (515) | $ | (327) | ||
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At or For the Years Ended March 31, | ||||||
| 2026 | | 2025 | |||
Performance Ratios: | ||||||
Return on average assets | (0.35) | % |
| (0.22) | % | |
Return on average equity | (4.18) | (3.33) | ||||
Interest rate spread (1) | 2.48 | 2.41 | ||||
Net interest margin (2) | 2.69 | 2.59 | ||||
Noninterest expense as a percentage of average assets | 3.37 | 3.03 | ||||
Efficiency ratio (3) | 118.07 | 111.04 | ||||
Average interest-earning assets as a percentage of average interest-bearing liabilities | 112.01 | 111.36 | ||||
Capital Ratios: | ||||||
Average equity as a percentage of average assets | 8.40 | % | 6.66 | % | ||
Total capital as a percentage of risk-weighted assets | — | — | ||||
Tier 1 capital as a percentage of risk-weighted assets | — | — | ||||
Common equity Tier 1 capital as a percentage of risk-weighted assets | — | — | ||||
Tier 1 capital as a percentage of average assets | 9.60 | 10.00 | ||||
Asset Quality Ratios: | ||||||
Allowance for credit losses on loans as a percentage of total loans | 0.72 | % | 0.79 | % | ||
Allowance for credit losses on loans as a percentage of non-performing loans | 319.60 | 135.45 | ||||
Allowance for credit losses on loans as a percentage of non-accrual loans | 319.60 | 135.45 | ||||
Non-accrual loans as a percentage of total loans | 0.22 | 0.58 | ||||
Net recoveries (charge-offs) as a percentage of average outstanding loans | 0.00 | 0.00 | ||||
Non-performing loans as a percentage of total loans | 0.22 | 0.58 | ||||
Non-performing loans as a percentage of total assets | 0.18 | 0.44 | ||||
Total non-performing assets as a percentage of total assets | 0.18 | 0.44 | ||||
Other Data: | ||||||
Number of offices | 4 | 4 | ||||
Number of full-time employees | 23 | 23 | ||||
Number of part-time employees | 3 | 4 | ||||
_______________
| (1) | Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. |
| (2) | Represents net interest income as a percentage of average interest-earning assets. |
| (3) | Represents noninterest expenses divided by the sum of net interest income and noninterest income. |
Comparison of Financial Condition at March 31, 2026 and March 31, 2025
Total Assets. Total assets were $142.4 million at March 31, 2026, a decrease of $1.9 million, or 1.3%, from $144.3 at March 31, 2025. The decrease was primarily comprised of a decrease in available for sale investment securities of $4.7 million and a decrease in cash and cash equivalents of $623,000, which was partially offset by an increase in net loans of $3.5 million.
Cash and Cash Equivalents. Cash and cash equivalents decreased $623,000, or 30.0%, to $1.5 million at March 31, 2026 from $2.1 million at March 31, 2025. The decrease was due primarily to a decrease in cash and due from banks of $357,000, or 21.4%, from $1.7 million at March 31, 2025 to $1.3 million at March 31, 2026 and a decrease in interest-bearing deposits held in other financial institutions of $307,000, or 75.6%, from $406,000 at March 31, 2025 to $99,000 at March 31, 2026. This was partially offset by an increase in federal funds sold to $41,000 at March 31, 2026 from no federal funds sold at March 31, 2025.
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Investment Securities. Investment securities available for sale decreased $4.7 million, or 20.3%, to $18.4 million at March 31, 2026, from $23.1 million at March 31, 2025. The decrease was primarily attributable to the sale of $4.2 million of securities during the fiscal year ended March 31, 2026. The Company sold the securities to fund 1-4 family residential, commercial residential and commercial and industrial loan demand. The loss recognized on the sale of the loans was $261,000. The unrealized loss on securities totaled $4.1 million at March 31, 2026.
Net Loans. Net loans increased $3.5 million, or 3.3%, to $110.5 million at March 31, 2026 from $107.0 million at March 31, 2025. During the fiscal year ended March 31, 2026, loan originations totaled $24.8 million, comprised of $7.3 million of loans secured by one- to four-family residential real estate, $5.9 million of commercial real estate loans, $4.2 million of construction and land loans, $4.1 million of home equity loans, $2.2 million of commercial and industrial loans, $600,000 of multi-family loans and $400,000 of consumer loans. The majority of the consumer loans originated were auto loans.
During the fiscal year ended March 31, 2026, commercial real estate loans increased $3.1 million, or 12.8%, to $27.3 million at March 31, 2026, commercial and industrial loans increased $2.0 million, or 46.5%, to $6.3 million at March 31, 2026, home equity lines of credit increased $500,000, or 11.4%, to $4.9 million at March 31, 2026 and multifamily loans increased $200,000, or 12.5%, to $1.8 million at March 31, 2026. These increases were partially offset by a decrease in one-to-four family residential loans of $1.9 million, or 2.7%, to $68.0 million at March 31, 2026, a decrease in construction and land development loans of $400,000, or 16.0%, to $2.1 million at March 31, 2026, and a decrease in consumer loans of $200,000, or 15.4%, to $1.1 million at March 31, 2026.
The increase in the Company’s loan portfolio has been due to increased loan demand, primarily in commercial mortgage and commercial and industrial loans. The Company also increased its participation loans purchased during the year ended March 31, 2026.
The Company’s strategy includes growing the loan portfolio, focusing on commercial real estate loans and home equity lines of credit.
Deposits. Deposits increased by $3.8 million, or 3.1%, to $124.5 million at March 31, 2026 from $120.7 million at March 31, 2025. Core deposits decreased $3.7 million, or 4.3%, to $83.2 million at March 31, 2026 from $86.9 million at March 31, 2025. Certificates of deposit increased $7.5 million, or 22.2%, to $41.3 million at March 31, 2026 from $33.8 million at March 31, 2025. The decrease in core deposits was due primarily to a $5.5 million decrease in the account held by a significant commercial customer whose account balance fluctuates routinely in the normal course of its business, which was partially offset by an increase in savings and money market accounts of $2.7 million. The increase in certificates of deposit was due primarily to certificate of deposit specials offered to offset the decrease in core deposits and to fund increased loan demand during the year-ended March 31, 2026.
During the fiscal year ended March 31, 2026, management continued its strategy of pursuing growth in demand accounts and other lower cost core deposits, in part by enhancing products and services offered and increased marketing. Management intends to continue its efforts to increase core deposits, with an emphasis on growth in consumer and business demand deposits.
Advances from the Federal Home Loan Bank. Advances from the Federal Home Loan Bank totaled $3.8 million at March 31, 2026, a decrease of $6.2 million, or 62.0%, from the $10.0 million balance at March 31, 2025. The decrease in advances was primarily due to the increase in deposits and the use of investment sale proceeds to pay down outstanding advances.
Stockholders’ Equity. Stockholders’ equity increased $332,000, or 2.8%, to $12.4 million at March 31, 2026, from $12.1 million at March 31, 2025. The increase was primarily from a $806,000 decrease in the unrealized loss on available for sale securities, which was partially offset by a decrease in retained earnings of $515,000 as a result of the Company’s net operating loss for fiscal year 2026.
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Average Balances and Yields. The following table sets forth average balance sheets, average yields and rates, and other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects are immaterial. Average balances are calculated using daily average balances. Non-accrual loans are included in average balances only. The average balance of available-for-sale securities does not include unrealized losses during the periods. Average yields include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Net deferred loan fees/costs are immaterial.
|
|
| |||||||||||||||||
| For the Year Ended March 31, |
| |||||||||||||||||
| 2026 | 2025 |
| ||||||||||||||||
| | Average | | | | Average | | |
| ||||||||||
| Outstanding | Average | Outstanding | Average |
| ||||||||||||||
| Balance | Interest | Yield/Rate | Balance | Interest | Yield/Rate |
| ||||||||||||
Interest-earning assets: |
| ||||||||||||||||||
Interest-bearing deposits and other |
|
| $ | 1,790 | $ | 98 |
| 5.47 | % | $ | 2,860 |
| $ | 171 |
| 5.98 | % | ||
Available-for-sale securities |
|
| 27,521 |
| 470 |
| 1.71 |
| 29,470 |
| 492 |
| 1.67 | ||||||
Loans |
|
| 109,964 |
| 5,618 |
| 5.11 |
| 108,821 |
| 5,216 |
| 4.79 | ||||||
Total interest-earning assets |
|
| 139,275 |
| 6,186 |
| 4.44 |
| 141,151 |
| 5,879 |
| 4.17 | ||||||
Noninterest earning assets |
| 8,128 |
| |
| |
| 7,261 |
| |
| | |||||||
Allowance for credit losses |
| (908) |
| |
| |
| (879) |
| |
| | |||||||
Total assets | $ | 146,495 |
| |
| | $ | 147,533 |
| |
| | |||||||
Interest-bearing liabilities: |
| |
| |
| |
| |
| |
| | |||||||
Interest-bearing demand accounts |
| $ | 27,234 |
| 7 |
| 0.03 | % | $ | 34,797 |
| 7 |
| 0.02 | % | ||||
Savings accounts |
|
| 21,623 |
| 113 |
| 0.52 |
| 19,509 |
| 35 |
| 0.18 | ||||||
Money market accounts |
|
| 30,079 |
| 583 |
| 1.94 |
| 29,213 |
| 429 |
| 1.47 | ||||||
Certificates of deposit |
|
| 36,878 |
| 1,368 |
| 3.71 |
| 35,749 |
| 1,386 |
| 3.88 | ||||||
Total interest-bearing deposits |
|
| 115,814 |
| 2,071 |
| 1.79 |
| 119,268 |
| 1,857 |
| 1.56 | ||||||
Federal Home Loan Bank advances |
|
| 8,417 |
| 366 |
| 4.35 |
| 7,423 |
| 368 |
| 4.96 |
| |||||
Federal Funds purchased |
|
| 116 |
| 6 |
| 5.17 |
| 66 |
| 4 |
| 6.06 | ||||||
Total interest-bearing liabilities |
|
| 124,347 |
| 2,443 |
| 1.96 |
| 126,757 |
| 2,229 |
| 1.76 | ||||||
Noninterest-bearing demand deposits |
|
| 8,042 |
|
| 8,248 |
| ||||||||||||
Other noninterest-bearing liabilities |
| 1,800 |
| 2,700 | |||||||||||||||
Total liabilities |
| 134,189 |
| 137,705 | |||||||||||||||
Total stockholders' equity |
| 12,306 |
| 9,828 | |||||||||||||||
Total liabilities and stockholders' equity |
| 146,495 |
| 147,533 | |||||||||||||||
Net interest income | $ | 3,743 | $ | 3,650 | |||||||||||||||
Net interest rate spread (1) |
|
| 2.48 | % |
| 2.41 | % | ||||||||||||
Net interest-earning assets (2) | $ | 14,928 | $ | 14,394 | |||||||||||||||
Net interest margin (3) |
| 2.69 | % |
| 2.59 | % | |||||||||||||
Average interest-earning assets to interest-bearing liabilities |
| 112.01 | % |
| 111.36 | % | |||||||||||||
(1)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(2)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3)Net interest margin represents net interest income divided by average total interest-earning assets.
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Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. Changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.
| Years Ended March 31, 2026 vs. | ||||||||
2025 | |||||||||
Increase (Decrease) | Total | ||||||||
Due to: | Increase | ||||||||
Volume | | Rate | | (Decrease) | |||||
(In thousands) | |||||||||
Interest-earning assets: |
| |
| |
| | |||
Loans, net | $ | 55 | $ | 347 | $ | 402 | |||
Available-for-sale securities |
| (33) |
| 11 |
| (22) | |||
Other interest-earning assets |
| (64) |
| (9) |
| (73) | |||
Total interest-earning assets |
| (42) |
| 349 |
| 307 | |||
Interest-bearing liabilities: |
| |
| |
| | |||
Interest-bearing demand accounts |
| (2) |
| 2 |
| — | |||
Savings accounts |
| 4 | 74 |
| 78 | ||||
Money market accounts |
| 13 |
| 141 |
| 154 | |||
Certificates of deposit |
| 44 |
| (62) |
| (18) | |||
Total deposits |
| 59 |
| 155 |
| 214 | |||
Federal Home Loan Bank advances |
| 49 | -51 | (2) | |||||
Federal funds purchased |
| 3 | (1) |
| 2 | ||||
Total interest-bearing liabilities |
| 111 |
| 103 |
| 214 | |||
Change in net interest income | $ | (153) | $ | 246 | $ | 93 | |||
Comparison of Operating Results for the Fiscal Years Ended March 31, 2026 and 2025
General. Net loss for the fiscal year ended March 31, 2026, was $515,000, a decrease in earnings of $188,000 or 57.5%, compared to a net loss of $327,000 for the fiscal year ended March 31, 2025. The decrease in earnings was primarily due to an increase in noninterest expense of $467,000, or 10.4%, which was partially offset by an increase in noninterest income of $63,000, or 16.8%, a decrease in the provision for credit losses of $72,000, or 372.5%, an increase in net interest income of $93,000, or 2.5%, and an increase in the benefit for income taxes of $51,000, or 38.3%.
Interest Income. Interest income increased $307,000, or 5.2%, to $6.2 million for the fiscal year ended March 31, 2026, compared to $5.9 million for the fiscal year ended March 31, 2025. This increase was attributable to a $402,000, or 7.7%, increase in interest on loans receivable, which was partially offset by a $73,000, or 42.9%, decrease in interest-bearing deposits and other and a $22,000, or 4.5%, decrease in interest on investment securities.
The average yield on loans increased by 32 basis points to 5.11% for the fiscal year ended March 31, 2026 from 4.79% for the fiscal year ended March 31, 2025, while the average balance of loans increased by $1.1 million, or 1.1%, during the fiscal year ended March 31, 2026 compared to the average balance for the fiscal year ended March 31, 2025. The increase in average yield on loans reflects the increase in the Company’s commercial real estate and commercial and industrial loan portfolios. These loans typically have a higher interest rate than 1-4 family residential loans. To a lesser degree, the Company’s adjustable-rate loans that have the five-year treasury as the index, adjusted upward during the year.
The average balance of investment securities decreased $2.0 million, or 6.8%, to $27.5 million for the fiscal year ended March 31, 2026 from $29.5 million for the fiscal year ended March 31, 2025, while the average yield on
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investment securities increased by four basis points to 1.71% for the fiscal year ended March 31, 2026 from 1.67% for the fiscal year ended March 31, 2025. The increase in the average yield on investment securities was primarily due to the sale of $4.2 million of lower-yielding securities during the fiscal year ended March 31, 2026.
Interest income on other interest-bearing deposits, comprised primarily of overnight deposits and stock in the Federal Home Loan Bank, decreased $73,000, or 42.7%, for the fiscal year ended March 31, 2026, due to a decrease in the average balance of $1.1 million, or 37.9%, to $1.8 million for the fiscal year ended March 31, 2026 from $2.9 million for the fiscal year ended March 31, 2025 and a decrease in the yield of 51 basis points, to 5.47% for the fiscal year ended March 31, 2026 from 5.98% for the fiscal year ended March 31, 2025. The decrease in the average yield was due to the decrease in market interest rates period-to-period.
Interest Expense. Total interest expense increased $214,000, or 9.6%, to $2.4 million for the fiscal year ended March 31, 2026 from $2.2 million for the fiscal year ended March 31, 2025. Interest expense on deposits increased $214,000, or 11.5%, due primarily to an increase of 23 basis points in the average cost of deposits to 1.79% for the fiscal year ended March 31, 2026 from 1.56% for the fiscal year ended March 31, 2025, which was partially offset by a decrease of $3.4 million, or 2.9%, in the average balance of interest-bearing deposits to $115.8 million for the fiscal year ended March 31, 2026 from $119.2 million for the fiscal year ended March 31, 2025.
Interest expense on borrowings was $372,000 for both fiscal years ended March 31, 2026 and 2025. The weighted-average rate on borrowings decreased by 61 basis points, to 4.36%, for the fiscal year ended March 31, 2026 compared to 4.97% for the fiscal year ended March 31, 2025, which was partially offset by a $1 million, or 13.3%, increase in the average balance outstanding to $8.5 million for the fiscal year ended March 31, 2026 from $7.5 million for the fiscal year ended March 31, 2025.
Net Interest Income. Net interest income increased $93,000, or 2.5%, and was $3.7 million for both fiscal years ended March 31, 2026 and 2025. The increase in net interest income was from an increase in the interest rate spread to 2.48% for the fiscal year ended March 31, 2026 from 2.41% for the fiscal year ended March 31, 2025, as well as an increase in the average net interest earning assets of $534,000 period-to-period. The net interest margin increased to 2.69% for the fiscal year ended March 31, 2026 from 2.59% for the fiscal year ended March 31, 2025.
Provision for Credit Losses. The Company recorded a decrease in the provision for credit losses of $72,000, or 480.0%, for the fiscal year ended March 31, 2026 to a recovery for credit losses of $57,000 compared to a provision for credit losses of $15,000 recorded for the fiscal year ended March 31, 2025. The allowance for credit losses on loans was $799,000 at March 31, 2026, a decrease of $54,000, or 6.3%, compared to $853,000 at March 31, 2025. The allowance for credit losses on off-balance sheet commitments was $72,000 at March 31, 2026, a decrease of $4,000, or 5.3%, over the $76,000 total at March 31, 2025. The allowance for credit losses on loans represented 0.72% of total loans at March 31, 2026, and 0.79% of total loans at March 31, 2025.
The determination of the adequacy of the allowance for credit losses included consideration of the balances of nonperforming loans, delinquent loans and net charge-offs in both periods. The Company had nonperforming loans of $250,000 at March 31, 2026 compared to nonperforming loans of $629,000 at March 31, 2025. Classified loans totaled $1.6 million at March 31, 2026, compared to $128,000 at March 31, 2025. The increase in classified loans was primarily due to the addition of a $1.4 million commercial residential loan to substandard assets. At March 31, 2026, the loan was performing. Total loans past due greater than 30 days totaled $601,000 at March 31, 2026 compared to no total loans past due greater than 30 days at March 31, 2025.
The allowance for credit losses reflects the estimate management believes to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at March 31, 2026 and 2025. While management believes the estimates and assumptions used in the determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact the Company’s financial condition and results of operations. In addition, bank regulatory agencies periodically review the allowance for credit losses and may require an increase in the provision for credit losses or the recognition of loan charge-offs, based on judgments different than those of management.
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Non-Interest Income. Noninterest income increased $63,000, or 16.8%, to $439,000 for the fiscal year ended March 31, 2026 from $376,000 for the fiscal year ended March 31, 2025. The other income increase of $56,000, or 150.4%, and the cash surrender value of bank owned live insurance (BOLI) increase of $14,000, or 12.3%, were partially offset by a $4,000, or 22.2%, decrease in loan servicing fees and a $4,000, or 2.0%, decrease in service fees on deposits. The annualized net yield on BOLI was 3.55% as of 3/31/26, compared to 3.45% as of 3/31/25.
The other income increase was primarily from the recoupment of legal fees and other fees expensed in prior fiscal years from the borrower of a charged off loan.
Noninterest Expense. Noninterest expense increased $467,000, or 10.4%, to $4.9 million for the fiscal year ended March 31, 2026, compared to $4.5 million for the fiscal year ended March 31, 2025. The increase was due primarily to a $261,000 loss on the sale of investment securities, a $45,000 or 2.0%, increase in salaries and employee benefits, a $68,000, or 12.5%, increase in data processing fees, a $69,000, or 15.6%, increase in other noninterest expenses, and a $31,000, or 7.9%, increase in professional services. This was partially offset by an $11,000 or 12.5%, decrease in FDIC insurance premiums, a $7,000, or 5.7%, decrease in directors’ fees, and a $7,000, or 8.4%, decrease in advertising.
The increase in salaries and employee benefits was due primarily to the hiring of a new employee to help with servicing loans sold to the secondary market, the grant of stock awards and options to the Company’s directors and officers and normal merit increases year over year. The increase in other noninterest expenses was primarily related to the Company’s 150th anniversary celebration, an increase in licensing fees, and an increase in the financial institution tax paid year-to-year. The increase in professional services was primarily due to the payment to outside firms for the Company’s CECL model validation and computer network intrusion audit. The decrease in directors’ fees was from the retirement of board member William Hibner in December, 2025. The Company chose not to replace Mr. Hibner after he retired, consequently reducing the number of board members to six from seven.
Benefit for Income Taxes. The Company’s income tax benefit provision increased by $51,000, or 38.3%, to a total of $184,000 for the fiscal year ended March 31, 2026, compared to a benefit provision of $133,000 during the fiscal year ended March 31, 2025. The increase in the income tax benefit provision was due primarily to a $188,000 increase in pretax loss. The tax benefit provision and effective tax rates reflect the Company’s nontaxable interest income in each period.
Management of Market Risk
General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. The board of directors establishes policies and guidelines for managing interest rate risk. All directors participate in discussions during the regular board meetings evaluating the interest rate risk inherent in our assets and liabilities, and the level of risk that is appropriate. These discussions take into consideration our business strategy, operating environment, capital, liquidity and performance objectives consistent with the policy and guidelines approved by them.
The board of directors delegates the responsibility for interest rate risk management to the asset/liability management committee consisting of the Company’s executive officers. The asset/liability management committee provides quarterly reports to the board of directors. If an exception to the interest rate risk policy tolerance limits arise, the asset/liability management committee documents and communicates it to the board of directors at its next scheduled meeting along with a recommended course of action to address the exception consistent with established policy and guidelines.
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Our asset/liability management strategy attempts to manage the impact of changes in interest rates on net interest income, our primary source of earnings. Among the techniques we are using to manage interest rate risk are:
| ● | maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations; |
| ● | maintaining a high level of liquidity; |
| ● | growing our core deposit accounts; |
| ● | managing our investment securities portfolio so as to reduce the average maturity and effective life of the portfolio; and |
| ● | continuing to diversify our loan portfolio by adding more commercial real estate loans and commercial and industrial loans, which typically have shorter maturities and/or balloon payments. |
By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates.
We maintain a significant deposit account with a commercial customer. The asset/liability management committee monitors the status of the account at its monthly meeting and the account is segregated as a separate line item on the deposit reports reviewed by the committee. Furthermore, there is regular verbal communication between senior management and the depositor regarding any expected changes in the depositor’s business that could result in material inflows and outflows from the account in the short-term so that we may proactively manage any risks due to expected fluctuations in the account balance.
We maintain uninsured deposits that exceed the Federal Deposit Insurance Corporation insurance limit. Senior management reviews uninsured deposit balances monthly to manage any risks due to fluctuations in the balances of uninsured deposits. We do not maintain any internal policy limits on concentrations in uninsured deposits in total or by type of depositor. We may accept brokered deposits up to an internal policy limit of less than 15.0% of total assets from brokers approved by the board of directors. Before a broker is approved by the board of directors, we conduct financial analysis and due diligence on the broker. We had brokered deposits of $3.1 million at March 31, 2026.
Historically, we have not sold loans we have originated. We recently developed the infrastructure necessary to sell one- to four-family residential mortgage loans, particularly longer term one- to four-family residential mortgage loans, to the secondary market to further help mitigate our interest rate risk exposure.
We have not engaged in hedging activities, such as engaging in futures or options. We do not anticipate entering into similar transactions in the future.
Economic Value of Equity. We compute amounts by which the net present value of our assets and liabilities (economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases instantaneously by 100, 200 and 300 basis point increments or decreases instantaneously by 100, 200 and 300 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.
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The following table sets forth, as of March 31 2026, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve. The estimated changes presented in the table exceeded the policy limits established by our board of directors in an increased rate scenario of 200 and 300 basis points.
At March 31, 2026 | ||||||||||||
EVE as a Percentage of | ||||||||||||
Present | ||||||||||||
Value of Assets (3) | ||||||||||||
Estimated Increase | ||||||||||||
(Decrease) in | Increase | |||||||||||
EVE | (Decrease) | |||||||||||
Change in Interest | | Estimated | | | | | (basis | |||||
Rates (basis points) (1) | EVE (2) | Amount | Percent | EVE Ratio (4) | points) | |||||||
| (Dollars in thousands) | |||||||||||
300 | $ | 13,756 | $ | (5,727) |
| (29.39) | % | 10.91 | % | (307) | ||
200 | $ | 15,748 | $ | (3,735) |
| (19.17) | % | 12.08 | % | (190) | ||
100 | $ | 18,267 | $ | (1,216) |
| (6.24) | % | 13.55 | % | (43) | ||
Level | $ | 19,483 |
| — |
| — | % | 13.98 | % | — | ||
(100) | $ | 19,996 | $ | 513 |
| 2.63 | % | 13.93 | % | (5) | ||
(200) | $ | 20,054 | $ | 571 |
| 2.93 | % | 13.60 | % | (38) | ||
(300) | $ | 19,338 | $ | (145) |
| (0.74) | % | 12.82 | % | (116) | ||
| (1) | Assumes an immediate uniform change in interest rates at all maturities. One basis point equals 0.01%. |
| (2) | EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. |
| (3) | Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets. |
| (4) | EVE Ratio represents EVE divided by the present value of assets. |
The table above indicates that at March 31, 2026, we would have experienced a 6.24% decrease in EVE in the event of an instantaneous parallel 100 basis point increase in market interest rates and a 2.63% increase in EVE in the event of an instantaneous 100 basis point decrease in market interest rates.
Change in Net Interest Income. The table sets forth, as of March 31, 2026, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve. All estimated changes presented in the table are within the policy limits established by the Company’s board of directors.
At March 31, 2026 |
| |||||
Change in Interest Rates | | Net Interest Income Year 1 | |
| ||
(basis points) (1) | Forecast | Year 1 Change from Level |
| |||
| (Dollars in thousands) | |||||
300 | $ | 3,465 |
| (10.86) | % | |
200 | $ | 3,647 |
| (6.20) | % | |
100 | $ | 3,863 |
| (0.63) | % | |
Level | $ | 3,888 |
| — | ||
(100) | $ | 3,824 |
| (1.64) | % | |
(200) | $ | 3,699 |
| (4.86) | % | |
(300) | $ | 3,494 |
| (10.13) | % | |
| (1) | Assumes an immediate uniform change in interest rates at all maturities. One basis point equals 0.01%. |
The table above indicates that as of March 31, 2026, we would have experienced a 0.63% decrease in net interest income in the event of an instantaneous parallel 100 basis point increase in market interest rates and a 1.64% decrease in net interest income in the event of an instantaneous 100 basis point decrease in market interest rate.
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurement. Modeling changes in EVE and NII require making certain assumptions that may or may not reflect the manner in which
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actual yields and costs respond to changes in market interest rates. For instance, the EVE and NII tables presented above assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. However, the shape of the yield curve changes constantly and the value and pricing of our assets and liabilities, including our deposits, may not closely correlate with changes in market interest rates. Accordingly, although the EVE and NII tables may provide an indication of our interest rate risk exposure at a particular point in time and in the context of a particular yield curve, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and NII and will differ from actual results.
EVE and net interest NII calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.
Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures.
Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Cincinnati, the Federal Reserve Bank of Cleveland and a correspondent bank. At March 31, 2026, we had the ability to borrow up to $47.4 million from the Federal Home Loan Bank of Cincinnati under a collateral pledge facility. At March 31, 2026, we had $3.1 million of outstanding advances under this facility. At March 31, 2026, we had no outstanding borrowings from the Federal Reserve Bank of Cleveland, but had the capacity to borrow up to $5.7 million. At March 31, 2026, we had no outstanding borrowings from the correspondent bank, but had the capacity to borrow up to $5.0 million.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets depend on our operating, financing, lending, and investing activities during any given period.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. For the fiscal year ended March 31, 2026, cash flows from operating, investing, and financing activities resulted in a net decrease in cash and cash equivalents of $622,000. Net cash provided by investing activities amounted to $1.9 million, net cash used in financing activities amounted to $2.2 million, and net cash used in operating activities amounted to $318,000.
We believe we maintain a strong liquidity position, and are committed to maintaining it. 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 and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.
Monroe Federal Bancorp is a separate legal entity from Monroe Federal Savings and Loan Association Bank and must provide for its own liquidity to fund its operating expenses and other financial obligations. Its primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to Monroe Federal Bancorp is governed by applicable regulations. At March 31, 2026, Monroe Federal Bancorp (on an unconsolidated basis) had liquid assets of $1.5 million.
At March 31, 2026, the Bank was categorized as well-capitalized under regulatory capital guidelines. Management is not aware of any conditions or events since the most recent notification that would change our category. For further information, see note 9 to the notes to consolidated financial statements.
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Off-Balance Sheet Arrangements. At March 31, 2026, we had $19.3 million of outstanding commitments, consisting of $3.9 million in commitments to originate loans and $15.4 million of undisbursed funds on previously originated loans. At March 31, 2026, certificates of deposit that are scheduled to mature on or before March 31, 2027, totaled $29.7 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank of Cincinnati advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.
Impact of Inflation and Changing Prices
The financial statements and related data presented in this prospectus have been prepared according to GAAP which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increasing operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information regarding this item is contained in Item 7 under the heading “Management of Market Risk.”
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Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Page | ||
(PCAOB ID No. | ||
Consolidated Balance Sheets | 47 | |
Consolidated Statements of Operations | 48 | |
Consolidated Statements of Comprehensive Income (Loss) | 49 | |
Consolidated Statements of Changes in Stockholders’ Equity | 50 | |
Consolidated Statements of Cash Flows | 51 | |
Notes to Consolidated Financial Statements | 52 |
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| 4890 Owen Ayres Ct. Suite 200 Eau Claire, WI 54701 | 715 832 3407 wipfli.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Monroe Federal Bancorp, Inc. and Subsidiary
Tipp City, Ohio
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Monroe Federal Bancorp, Inc. and Subsidiary (the “Company”) as of March 31, 2026 and 2025, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the years then ended and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2026 and 2025, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2024.
June 25, 2026
"Wipfli" is the brand name under which Wipfli LLP and Wipfli Advisory LLC and its respective subsidiary entities provide professional services. Wipfli LLP and Wipfli Advisory LLC (and its respective subsidiary entities) practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. Wipfli LLP is a licensed independent CPA firm that provides attest services to its clients, and Wipfli Advisory LLC provides tax and business consulting services to its clients. Wipfli Advisory LLC and its subsidiary entities are not licensed CPA firms.
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MONROE FEDERAL BANCORP, INC.
Consolidated Balance Sheets
March 31, 2026 and 2025
| March 31, | |||||
| 2026 | | 2025 | |||
Assets | |
| | |||
Cash and due from banks | $ | | $ | | ||
Interest-bearing deposits in other financial institutions |
| |
| | ||
Federal funds sold |
| |
| — | ||
Cash and cash equivalents |
| |
| | ||
Available-for-sale securities |
| |
| | ||
Loans receivable |
| |
| | ||
Allowance for credit losses |
| ( |
| ( | ||
Net loans |
| |
| | ||
Premises and equipment |
| |
| | ||
Restricted stock |
| |
| | ||
Bank owned life insurance |
| |
| | ||
Accrued interest receivable |
| |
| | ||
Net deferred federal income taxes |
| |
| | ||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities and Stockholders' Equity |
| |
| | ||
Liabilities |
| |
| | ||
Deposits |
| |
| | ||
Demand | $ | | $ | | ||
Savings and money market |
| |
| | ||
Time |
| |
| | ||
Total deposits |
| |
| | ||
Advances from the Federal Home Loan Bank |
| |
| | ||
Advances by borrowers for taxes and insurance |
| |
| | ||
Directors plan liability |
| |
| | ||
Accrued interest payable and other liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Stockholders' Equity |
| |
| | ||
Preferred stock - $ | ||||||
Common stock - $ |
| |
| | ||
Additional paid in capital | | | ||||
Unallocated common stock of ESOP | ( | ( | ||||
Retained earnings |
| |
| | ||
Treasury stock - |
| ( |
| ( | ||
Deferred compensation plan - Rabbi Trust - | | | ||||
Accumulated other comprehensive loss | ( | ( | ||||
Total stockholders' equity | | | ||||
Total liabilities and stockholders' equity | $ | | $ | | ||
See Notes to Consolidated Financial Statements
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MONROE FEDERAL BANCORP, INC.
Consolidated Statements of Operations
Years Ended March 31, 2026 and 2025
| Year Ended | |||||
March 31, | ||||||
2026 | | 2025 | ||||
Interest income |
| |
| | ||
Loans | $ | | $ | | ||
Investment securities |
| |
| | ||
Interest-bearing deposits and other |
| |
| | ||
Total interest income |
| |
| | ||
Interest expense |
| |
| | ||
Deposits |
| |
| | ||
Borrowings |
| |
| | ||
Total interest expense |
| |
| | ||
Net interest income |
| |
| | ||
(Recovery of) provision for credit losses |
| ( |
| | ||
Net interest income after (recovery of) provision for credit losses |
| |
| | ||
Noninterest income |
| |
| | ||
Service fees on deposits |
| |
| | ||
Late charges and fees on loans |
| |
| | ||
Loan servicing fees |
| |
| | ||
Increase in cash surrender value of bank owned life insurance |
| |
| | ||
Other income |
| |
| | ||
Total noninterest income |
| |
| | ||
Noninterest expense |
| |
| | ||
Salaries and employee benefits |
| |
| | ||
Directors fees |
| |
| | ||
Occupancy and equipment |
| |
| | ||
Data processing fees |
| |
| | ||
Franchise taxes |
| |
| | ||
FDIC insurance premiums |
| |
| | ||
Professional services |
| |
| | ||
Advertising |
| |
| | ||
Loss on sale of available-for-sale investments | | — | ||||
Other |
| |
| | ||
Total noninterest expense |
| |
| | ||
Loss before income taxes |
| ( |
| ( | ||
Benefit for income taxes |
| ( |
| ( | ||
Net loss | $ | ( | $ | ( | ||
Loss per share - basic and diluted | $ | ( | $ | ( | ||
See Notes to Consolidated Financial Statements
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MONROE FEDERAL BANCORP, INC.
Consolidated Statements of Comprehensive Income (Loss)
Years Ended March 31, 2026 and 2025
| Year Ended | |||||
March 31, | ||||||
2026 | | 2025 | ||||
Net loss | $ | ( | $ | ( | ||
Other comprehensive income: |
| |
| | ||
Net unrealized gains on available-for-sale securities |
| |
| | ||
Tax benefit |
| ( |
| ( | ||
Other comprehensive income |
| |
| | ||
Comprehensive income (loss) | $ | | $ | ( | ||
See Notes to Consolidated Financial Statements
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MONROE FEDERAL BANCORP, INC.
Consolidated Statements of Changes in Stockholders’ Equity
Years Ended March 31, 2026 and 2025
Accumulated |
|
| ||||||||||||||||||||||
| Unallocated | Other |
| Deferred |
| |||||||||||||||||||
| Common | Additional | Common Stock | Retained | Comprehensive | Treasury | Compensation Plan | |||||||||||||||||
| | Stock | | Paid-in-Capital | | of ESOP | | Earnings | | Income (Loss) | | Stock | | Rabbi Trust | | Total | ||||||||
Balance at April 1, 2024 | $ | — | $ | — | $ | — | $ | | $ | ( | $ | — | $ | — | $ | | ||||||||
| ||||||||||||||||||||||||
Proceeds from issuance of shares of common stock, net of stock offering costs | | | — | — | — | — | — | | ||||||||||||||||
Purchase of ESOP shares | — | — | ( | — | — | — | — | ( | ||||||||||||||||
Release of ESOP shares | — | | | — | — | — | — | | ||||||||||||||||
Shares purchased by trust (deferred compensation plans) | — | — | — | — | — | ( | — | ( | ||||||||||||||||
|
|
|
|
| ||||||||||||||||||||
Treasury stock held (deferred compensation plans) | — | — | — | — | — | — | | | ||||||||||||||||
Net loss | — |
| — | — | ( | — | — | — | ( | |||||||||||||||
|
|
| — |
|
| |||||||||||||||||||
Other comprehensive income | — | — | — | — |
| |
| — | — | | ||||||||||||||
| ||||||||||||||||||||||||
Balance at March 31, 2025 | $ | | $ | | $ | ( | $ | | $ | ( | $ | ( | $ | | $ | | ||||||||
| ||||||||||||||||||||||||
Net loss | — | — | — | ( |
| — |
| — | — | ( | ||||||||||||||
Release of ESOP shares | — | | | — | — | — | — | | ||||||||||||||||
Stock-based compensation expense | — | | — | — | — | — | — | | ||||||||||||||||
Other comprehensive income | — | — | — | — |
| |
| — | — | | ||||||||||||||
| ||||||||||||||||||||||||
Balance at March 31, 2026 | $ | | $ | | $ | ( | $ | | $ | ( | $ | ( | $ | | $ | | ||||||||
See Notes to Consolidated Financial Statements
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MONROE FEDERAL BANCORP, INC.
Consolidated Statements of Cash Flows
Years Ended March 31, 2026 and 2025
| Year Ended | |||||
| March 31, | |||||
| 2026 | | 2025 | |||
Operating Activities | ||||||
Net loss | $ | ( | $ | ( | ||
Items not requiring (providing) cash: |
| |
| | ||
Depreciation and amortization |
| |
| | ||
Amortization of premiums and discounts |
| |
| | ||
Accretion of deferred loan fees |
| ( |
| ( | ||
Benefit for deferred income taxes |
| ( |
| ( | ||
(Recovery of) provision for credit losses |
| ( |
| | ||
Increase in cash surrender value of bank owned life insurance |
| ( |
| ( | ||
Stock awards and options compensation expense | | — | ||||
Release of ESOP shares | | | ||||
Loss on sale of available-for-sale securities | | — | ||||
Changes in: |
| |
| | ||
Accrued interest receivable |
| ( |
| | ||
Other assets |
| |
| ( | ||
Accrued interest payable and other liabilities |
| ( |
| | ||
Net cash used in operating activities |
| ( |
| ( | ||
Investing Activities |
| |
| | ||
Proceeds from calls, maturities and paydowns of available-for-sale securities |
| |
| | ||
Proceeds from sale of available-for-sale securities | | — | ||||
Net change in loans |
| ( |
| | ||
Purchase of premises and equipment |
| ( |
| ( | ||
Purchase of restricted stock | ( | ( | ||||
Proceeds from redemption of restricted stock | | | ||||
Net cash provided by investing activities |
| |
| | ||
Financing Activities |
| ` |
| | ||
Net increase (decrease) in deposit accounts |
| |
| ( | ||
Proceeds from Federal Home Loan Bank advances |
| |
| | ||
Repayment of Federal Home Loan Bank advances |
| ( |
| ( | ||
Increase (decrease) in advances from borrowers for taxes and insurance |
| |
| ( | ||
Gross proceeds from stock offering | — | | ||||
Stock offering costs | — | ( | ||||
Purchase of ESOP shares | — | ( | ||||
Purchase of treasury stock (deferred compensation plans) | — | ( | ||||
Net cash used in financing activities |
| ( |
| ( | ||
Decrease in Cash and Cash Equivalents |
| ( |
| ( | ||
Cash and Cash Equivalents, Beginning of Period |
| |
| | ||
Cash and Cash Equivalents, End of Period | $ | | $ | | ||
Supplemental Disclosure of Cash Flow Information |
| |
| | ||
Cash paid (refunded) during the period for: |
| |
| | ||
Interest on deposits and borrowings | $ | | $ | | ||
Income taxes refunded |
| — |
| ( | ||
See Notes to Consolidated Financial Statements
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Note 1:Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations and Basis of Presentation
Monroe Federal Bancorp, Inc. (“Monroe Federal Bancorp” or the “Company”) is a Maryland corporation incorporated on May 21, 2024 to serve as the savings and loan holding company for Monroe Federal Savings and Loan Association (the “Bank”) in connection with the Bank’s conversion from the mutual form of organization to the stock form of organization (the “Conversion”). The Conversion was completed on October 23, 2024. In connection with the Conversion, Monroe Federal Bancorp acquired
Monroe Federal Savings and Loan Association, a wholly owned subsidiary, is engaged primarily in the business of providing a variety of deposit and lending services to individual customers in western Ohio. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential and commercial mortgages, commercial, home equity lines of credit and installment loans. Its operations are conducted through its
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and the Bank. All intercompany transactions and balances have been eliminated in consolidation.
Jumpstart Our Business Startups Act
The Jumpstart Our Business Act (the JOBS Act), which was signed into law on April 5, 2012, has made numerous changes to the federal securities laws to facilitate access to the capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.0 billion during the most recently completed fiscal year qualifies as an “emerging growth company”. The Company qualifies as an “emerging growth company” and believes that it will continue to qualify as an “emerging growth company” until the end of its fiscal year following the fifth anniversary of the completion of the stock offering.
As an “emerging growth company”, the Company has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, the Company’s consolidated financial statements may not be comparable to the financial statements of companies that comply with such new or revised accounting standards.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the 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 relate to the determination of the allowance for credit losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, valuation of deferred tax assets and fair values of financial instruments.
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Cash Equivalents
The Company considers all liquid investments with original maturities of three months or less to be
cash equivalents. At March 31, 2026, the Company had
In March 2020, the Federal Reserve's board of directors approved reducing the required reserve requirement ratios to zero percent, effectively eliminating the requirement to maintain reserve balances in cash or on deposit with the Federal Reserve Bank. This reduction in the required reserves does not have a defined timeframe and may be revised by the Federal Reserve Board in the future.
Investment Securities
Investment securities are classified upon acquisition into one of three categories: held-to-maturity, available-for-sale or trading. Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in other income. Securities not classified as held to maturity or trading are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss).
Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities, identified as the call date as to premiums and maturity date as to discounts. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances, adjusted for unearned income, charge-offs, the allowance for credit losses and any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.
For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan. For all loan portfolio segments except residential and consumer loans, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For collateral dependent loans, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.
The Company records a charge-off of loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to delinquency thresholds established by applicable regulatory guidance to determine the charge-off timeframe for these loans. Loans at these delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.
Loans are placed on nonaccrual status when past due 90 days, or earlier when management considers collection of principal and interest is unlikely. For all classes, all interest accrued but not collected for loans that are placed on nonaccrual status or charged off is reversed against interest income. The interest on these loans is accounted for on a cash basis or cost recovery method, until qualifying for return to accrual.
Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely
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collection of interest or principal. The Company requires a period of satisfactory performance of not less than six consecutive months before returning a nonaccrual loan to accrual status.
When cash payments are received on collateral dependent loans, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Loans modified due to financial difficulties of the borrower recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least six months.
Allowance for Credit Losses
The allowance for credit losses (ACL) is a valuation allowance for expected credit losses. The allowance for credit losses is established through a provision for credit losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
The company uses a “current expected credit loss” (CECL) methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broader range of information to estimate credit losses. ASC 326 “CECL” requires an estimate of all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts.
Available-for-sale securities
For available for sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. Accrued interest receivable on securities totaled $
For securities available for sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss), net of tax. The Company elected to use zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses.
Loans
The ACL is a valuation allowance that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Management’s determination of the adequacy of the ACL is based on the assessment of the expected credit losses on loans over the expected life of the loan. The ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged off and expected to be charged off. Accrued interest receivable on loans totaled $
Management estimates the ACL balance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience of the Company is paired with economic forecasts to provide the basis for the quantitatively modeled estimates of expected
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credit losses. The Company adjusts its quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are commonly known as the qualitative factors.
The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Company uses publicly available data, based on regulatory filings of larger banks, to derive initial proxy expected lifetime loss rates. Reasonable and supportable forecasts are incorporated into the development of these proxy loss rates, which generally revert back to historical and qualitative loss considerations after 12-24 months. The loss rates are adjusted, if necessary, based on management’s assessment of certain criteria, including economic and business conditions, that may affect the Company’s loan portfolio, to arrive at factors that best represent the estimated credit risk in the loan portfolio.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a loan modification will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
A loan for which the terms have been modified, resulting in a concession and for which the borrower is experiencing financial difficulties, is considered within the determination of the ACL using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.
Unfunded Commitments
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on unfunded commitments is adjusted through the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the related ACL methodology. The ACL on unfunded commitments totaled $
Premises and Equipment
Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of depreciable assets are as follows: building and improvements are
Restricted Stock
Restricted stock includes stock investments in the Federal Home Loan Bank (“FHLB”), United Bankers Bank (“UBB”) and Connecticut On-Line Computer Center, Inc. (“COCC”). FHLB stock is a required investment for institutions that are members of the FHLB system and the transfer of the stock is substantially restricted. The required investment in the common stock is based on a predetermined formula. FHLB stock is carried at cost. The UBB stock is a required investment for banks doing business with UBB and is carried at cost. COCC is the Company’s external data processing provider. The COCC stock is a required investment for clients of COCC and is carried at cost. The Company’s restricted stock investments are evaluated for impairment on an annual basis. The Company’s investments in restricted stock were not impaired at March 31, 2026 and 2025.
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Bank Owned Life Insurance
The Company has purchased life insurance on certain management personnel. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Leases
The Company determines if a contract is a lease or contains a lease at its inception. A liability to make lease payments ("the lease liability") and a right-of-use asset representing the right to use the underlying asset for the lease term, initially measured at the present value of the lease payments, are recorded in the consolidated balance sheets. The lease right-of-use asset is included with and the lease liability is included in . The discount rate is the Company's incremental borrowing rate for periods similar to the respective lease terms. The Company's management is not reasonably certain that it will exercise the renewal options contained within the contract for its leased office and this additional term has not been included in the calculation of the right-of-use asset and the lease liability
A lease is classified as a finance lease if it meets any of five designated criteria. If the lease does not meet any of the five criteria, the lease is classified as an operating lease. All leases entered into by the Company through March 31, 2026 are classified as operating leases. Lease expense is recognized on a straight-line basis over the lease term for operating leases. The Company has adopted an accounting policy election to not recognize lease assets and lease liabilities for leases with a term of twelve months or less. Lease expense for such leases is generally recognized on a straight-line basis over the lease term.
Foreclosed Assets Held for Sale
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value, less estimated cost to sell, at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated costs to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets.
At March 31, 2026 and 2025, the Company had
At March 31, 2026, the Company had
At March 31, 2025, the Company had
Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance (Accounting Standards Codification (“ASC”) 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
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Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more likely- than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.
If necessary, the Company recognizes interest and penalties on income taxes as a component of income tax expense.
With a few exceptions, the Company is no longer subject to examination by tax authorities for fiscal years before 2023. As of March 31, 2026 and 2025, the Company had no material uncertain income tax positions.
Advertising
Advertising costs are expensed as incurred
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities.
Accumulated other comprehensive income (loss) consists solely of the cumulative unrealized gains and losses on available-for-sale securities, net of tax.
Revenue Recognition
The Company accounts for certain revenues in accordance with Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC 606) and all subsequent ASUs that modified ASC 606. ASC 606 provides that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Interest income, net securities gains (losses) and income from bank owned life insurance are not included within the scope of ASC 606. For the revenue streams in the scope of ASC 606, service charges on deposits and electronic banking fees, there are no significant judgments related to the amount and timing of revenue recognition. All of the Company’s in-scope revenue from contracts with customers is recognized within other noninterest income.
Deposit Services. The Company generates revenues through fees charged to depositors related to deposit account maintenance fees, overdrafts, ATM fees, wire transfers and additional miscellaneous services provided at the request of the depositor.
For deposit-related services, revenue is recognized when performance obligations are satisfied, which is, generally, at a point in time.
Earnings per Common Share
Basic earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of outstanding common stock awards unless the impact is anti-dilutive, by application of the treasury stock
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Stock-based Compensation
Stock-based payments to employees, including grants of restricted stock or stock options, are valued at fair value of the award on the date of grant and expensed on a straight-line basis as compensation expense over the applicable vesting period. A Black-Scholes model is utilized to estimate the fair value of stock options and the quoted market price of the Company’s stock at the date of grant is used to estimate the fair value of restricted stock awards.
Future Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740) - Improvements to Income Tax Disclosures." The amendments in this update require that on an annual basis, public business entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate. Furthermore, amendments require disclosure of income taxes paid, net of refunds received, disaggregated by federal and state jurisdictions. For public business entities, these amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. For the Company, this update will become effective with our filing for March 31, 2027
Prior-period Reclassifications
Certain prior-period amounts have been reclassified to conform to the current-period presentation. During the period, the Company reclassified the following items:
| ● | $ |
| ● | $ |
| ● | $ |
These changes are immaterial to the financial statements as a whole.
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Note 2:Investment Securities
The amortized cost and fair values, together with gross unrealized gains and losses on securities are as follows:
Gross | Gross |
| ||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
| Cost | | Gains | | Losses | | Value | |||||
Available-for-sale Securities: |
| |
| |
| |
| | ||||
March 31, 2026 |
| |
| |
| |
| | ||||
U.S. Government agencies | $ | |
| $ | — |
| $ | ( |
| $ | | |
Mortgage-backed Government Sponsored Enterprises (GSEs) |
| |
| — |
| ( |
| | ||||
State and political subdivisions |
| |
| — |
| ( |
| | ||||
Time deposits |
| |
| — |
| ( |
| | ||||
$ | | $ | — | $ | ( | $ | | |||||
| | Gross | | Gross | |
| ||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
Cost | Gains | Losses | Value | |||||||||
Available-for-sale Securities: |
| |
| |
| |
| | ||||
March 31, 2025 |
| |
| |
| |
| | ||||
U.S. Government agencies |
| $ | |
| $ | — |
| $ | ( |
| $ | |
Mortgage-backed Government Sponsored Enterprises (GSEs) |
| |
| — |
| ( |
| | ||||
State and political subdivisions |
| |
| — |
| ( |
| | ||||
Time deposits |
| |
| — |
| ( |
| | ||||
$ | | $ | — | $ | ( | $ | | |||||
The amortized cost and fair value of available-for-sale securities at March 31, 2026, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties:
Amortized | Fair | |||||
| Cost | | Value | |||
March 31, 2026 |
| |
| | ||
Within one year | $ | | $ | | ||
One to five years |
| |
| | ||
Five to ten years |
| |
| | ||
After ten years |
| |
| | ||
| |
| | |||
Mortgage-backed GSEs |
| |
| | ||
Totals | $ | | $ | | ||
The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was approximately $
Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Based on evaluation of available evidence, including recent changes in market interest rates and information obtained from regulatory filings, management believes the declines in fair value for these securities are not credit related.
Should the fair value decline of any of these securities be attributed to credit-related reasons, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period identified.
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The following table shows the number of securities and aggregate fair value depreciation at March 31, 2026.
| March 31, 2026 | |||||
Number of | | Aggregate |
| | ||
Description of Securities | securities | Depreciation |
| |||
Available for sale |
| |
| |
| |
U.S. Government agencies |
| |
| ( | % |
|
Mortgage-backed Government Sponsored Enterprises (GSEs) |
| |
| ( | % |
|
State and political subdivisions |
| |
| ( | % |
|
Time deposits |
| |
| ( | % |
|
Total portfolio |
| |
| ( | % |
|
The following tables show the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2026 and 2025.
March 31, 2026 | ||||||||||||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||
| Fair | | Unrealized | | Fair | | Unrealized | | Fair | | Unrealized | |||||||
Description of Securities | Value | Losses | Value | Losses | Value | Losses | ||||||||||||
Available for sale |
| |
| |
| |
| |
| |
| | ||||||
U.S. Government agencies | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
Mortgage-backed Government Sponsored Enterprises (GSEs) |
| — |
| — |
| |
| ( |
| |
| ( | ||||||
State and political subdivisions |
| — |
| — |
| |
| ( |
| |
| ( | ||||||
Time deposits |
| — |
| — |
| |
| ( |
| |
| ( | ||||||
| ||||||||||||||||||
Total portfolio | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
March 31, 2025 | ||||||||||||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||
| Fair | | Unrealized | | Fair | | Unrealized | | Fair | | Unrealized | |||||||
Description of Securities | Value | Losses | Value | Losses | Value | Losses | ||||||||||||
Available for sale |
| |
| |
| |
| |
| |
| | ||||||
U.S. Government agencies | $ | — | $ | — | $ | | $ | ( | $ | | $ | ( | ||||||
Mortgage-backed Government Sponsored Enterprises (GSEs) |
| — |
| — |
| |
| ( |
| |
| ( | ||||||
State and political subdivisions |
| — |
| — |
| |
| ( |
| |
| ( | ||||||
Time deposits |
| — |
| — |
| |
| ( |
| |
| ( | ||||||
| ||||||||||||||||||
Total portfolio | $ | — | $ | — | $ | | $ | ( | $ | | $ | ( | ||||||
U.S. Government Agencies and State and Political Subdivisions
Unrealized losses on these securities have not been recognized because the issuers’ bonds are of high credit quality, values have only been impacted by changes in interest rates since the securities were purchased, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date. Because the decline in market value was attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company determined that
60
Table of Contents
Mortgage-backed GSEs
The unrealized losses on the Company’s investment in residential mortgage-backed government sponsored enterprises were caused primarily by changes in interest rates. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company determined that
Time Deposits
The unrealized losses on the Company’s investment in time deposits were caused primarily by changes in interest rates. The Company expects to recover the amortized cost basis over the term of the deposits. Because the decline in market value is attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the deposits and it is not more likely than not the Company will be required to sell the deposits before recovery of their amortized cost basis, which may be maturity, the Company determined that
The Company sold investment securities at a loss during the fiscal year ended March 31, 2026. There were no investment sales during the fiscal year ended March 31, 2025. The table below shows the realized loss and proceeds from the sale.
Year Ended March 31, | ||||||
2026 | 2025 | |||||
Gross realized gains on sales of available for sale investment securities | $ | — | $ | — | ||
Gross realized losses on sales of available for sale investment securities | ( | — | ||||
Proceeds from sales of available for sale investment securities | $ | $ | — | |||
Note 3:Loans and Allowance for Credit Losses
Categories of loans were as follows:
March 31, | ||||||
| 2026 | | 2025 | |||
Real estate loans: |
| |
| | ||
Residential | $ | | $ | | ||
Multi-family |
| |
| | ||
Commercial |
| |
| | ||
Construction and land |
| |
| | ||
Home equity line of credit (HELOC) |
| |
| | ||
Commercial and industrial |
| |
| | ||
Consumer |
| |
| | ||
Total loans |
| |
| | ||
Less: |
| |
| | ||
Net deferred loan fees |
| |
| | ||
Allowance for credit losses |
| |
| | ||
Net loans | $ | | $ | | ||
61
Table of Contents
Loan participations where the Company serves as lead lender and services the participation interests for other participating lenders are not included in the accompanying balance sheets. The unpaid principal balances of these loans were approximately $
Risk characteristics of each loan portfolio segment are described as follows:
Residential Real Estate
These loans include first liens and junior liens on 1-4 family residential real estate and are generally owner-owner occupied. The Company generally establishes a maximum loan-to-value and requires private mortgage insurance if that ratio is exceeded. The main risks for these loans are changes in the value of the collateral and stability of the local economic environment and its impact on the borrowers’ employment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.
Multi-family Real Estate
These loans include loans on residential real estate secured by property with five or more units. The main risks are changes in the value of the collateral, ability of borrowers to collect rents, vacancy and changes in the tenants’ employment status. Management specifically considers unemployment and changes in real estate values in the Company’s market area.
Commercial Real Estate
These loans are secured by both owner-occupied and non-owner-occupied commercial real estate with diverse characteristics and geographic location almost entirely in the Company’s market area. The main risks are changes in the value of the collateral and ability of borrowers to successfully conduct their business operations. Management generally avoids financing single purpose projects unless other underwriting factors are present to mitigate risks. Management specifically considers unemployment and changes in real estate values in the Company’s market area.
Construction and Land Real Estate
These loans include construction loans for 1-4 family residential and commercial properties (both owner and non-owner occupied) and first liens on land. The main risks for construction loans include uncertainties in estimating costs of construction and in estimating the market value of the completed project. The main risks for land loans are changes in the value of the collateral and stability of the local economic environment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.
HELOC
These loans are generally secured by subordinate interests in owner-occupied 1-4 family residences. The main risks for these loans are changes in the value of the collateral and stability of the local economic environment and its impact on the borrowers’ employment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.
Commercial and Industrial
The commercial and industrial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of the borrower and the economic conditions that impact the cash flow stability from business operations.
62
Table of Contents
Consumer Loans
These loans include vehicle loans, share loans and unsecured loans. The main risks for these loans are the depreciation of the collateral values (vehicles) and the financial condition of the borrowers. Major employment changes are specifically considered by management.
The following tables present the activity in the allowance for credit losses based on portfolio segment for the fiscal year ended March 31, 2026 and 2025:
Year Ended March 31, 2026 | |||||||||||||||
Provision | |||||||||||||||
for | |||||||||||||||
Balance | (recovery of) | Balance | |||||||||||||
| March 31, 2025 | | credit losses | | Charge-offs | | Recoveries | | March 31, 2026 | ||||||
Loans: |
| |
| |
| |
| |
| | |||||
Real estate loans: |
| |
| |
| |
| |
| | |||||
Residential | $ | | $ | ( | $ | — | $ | — | $ | | |||||
Multi-family |
| |
| |
| — |
| — |
| | |||||
Commercial |
| |
| ( |
| — |
| — |
| | |||||
Construction and land |
| |
| ( |
| — |
| — |
| | |||||
Home equity line of credit (HELOC) |
| |
| |
| — |
| |
| | |||||
Commercial and industrial |
| |
| |
| — |
| — |
|
| | ||||
Consumer |
| |
| ( |
| ( |
| — |
| | |||||
Total loans |
| |
| ( |
| ( |
| |
| | |||||
Off-balance sheet commitments |
| |
| ( |
| — |
| — |
| | |||||
Total allowance for credit losses | $ | | $ | ( | $ | ( | $ | | $ | | |||||
Year Ended March 31, 2025 | |||||||||||||||
Provision | |||||||||||||||
for | |||||||||||||||
(recovery | |||||||||||||||
Balance | of) | Balance | |||||||||||||
| March 31, 2024 | | credit losses | | Charge-offs | | Recoveries | | March 31, 2025 | ||||||
Real estate loans: |
| |
| |
| |
| |
| | |||||
Residential | $ | | $ | ( | $ | — | $ | — | $ | | |||||
Multi-family |
| — |
| |
| — |
| — |
| | |||||
Commercial |
| |
| |
| — |
| — |
| | |||||
Construction and land |
| |
| ( |
| — |
| — |
| | |||||
Home equity line of credit (HELOC) |
| — |
| |
| — |
| — |
| | |||||
Commercial and industrial |
| |
| ( |
| — |
| |
|
| | ||||
Consumer |
| |
| ( |
| — |
| |
| | |||||
Total loans | |
| ( |
| — |
| |
| | ||||||
Off-balance sheet commitments | |
| |
| — |
| — |
| | ||||||
Total allowance for credit losses | $ | | $ | | $ | — | $ | | $ | | |||||
63
Table of Contents
The Company has adopted a standard loan grading system for all loans, as follows:
Pass. Loans of sufficient quality, which generally are protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral.
Special Mention. Loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.
Substandard. Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Usually, this classification includes all 90 days or more, non-accrual, and past due loans.
Doubtful. Loans which 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 currently existing facts, conditions, and values, highly questionable and improbable.
Loss Loans considered uncollectible and of such little value that continuance as an asset without the establishment of a specific reserve is not warranted.
64
Table of Contents
Information regarding the credit quality indicators most closely monitored for other than residential real estate loans and consumer loans, by class as of March 31, 2026 and 2025, follows:
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||
For the Year Ended March 31, 2026 | |||||||||||||||||||||
| 2026 | | 2025 | | 2024 | | 2023 | | 2022 | | Prior | | Total | ||||||||
Multi-family |
| |
| |
| |
| |
| |
| |
| | |||||||
Risk rating: |
| |
| |
| |
| |
| |
| |
| | |||||||
Pass | $ | | $ | | $ | — | $ | — | $ | — | $ | | $ | | |||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Doubtful |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | | $ | | $ | — | $ | — | $ | — | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Commercial real estate |
| |
| |
| |
| |
| |
| |
| | |||||||
Risk rating: |
| |
|
|
|
|
| |
| |
| |
| | |||||||
Pass | $ | | $ | | $ | | $ | | $ | |
| $ | | $ | | ||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||||
Doubtful |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Construction and land |
| |
| |
| |
| |
| |
| |
| | |||||||
Risk rating: |
| |
| |
| |
| |
| |
| |
| | |||||||
Pass | $ | |
| — |
| | $ | | $ | — | $ | — | $ | | |||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Doubtful |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | | $ | — | $ | | $ | | $ | — | $ | — | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Commercial and industrial |
| |
| |
| |
| |
| |
| |
| | |||||||
Risk rating: |
| |
| |
| |
| |
| |
| |
| | |||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Substandard |
| — |
| — |
| — |
| |
| — |
| — |
| | |||||||
Doubtful |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
65
Table of Contents
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||
For the Year-Ended March 31, 2025 | |||||||||||||||||||||
| 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | Prior | | Total | ||||||||
Multi-family |
| |
| |
| |
| |
| |
| |
| | |||||||
Risk rating: |
| |
| |
| |
| |
| |
| |
| | |||||||
Pass | $ | | $ | — | $ | — | $ | — | $ | | $ | | $ | | |||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Doubtful |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | | $ | — | $ | — | $ | — | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Commercial real estate |
| |
| |
| |
| |
| |
| |
| | |||||||
Risk rating: |
| |
|
|
|
|
| |
| |
| |
| | |||||||
Pass | $ | | $ | | $ | | $ | | $ | |
| $ | | $ | | ||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Doubtful |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Construction and land |
| |
| |
| |
| |
| |
| |
| | |||||||
Risk rating: |
| |
| |
| |
| |
| |
| |
| | |||||||
Pass | $ | |
| | $ | | $ | — | $ | — | $ | — | $ | | |||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Doubtful |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | | $ | | $ | | $ | — | $ | — | $ | — | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Commercial and industrial |
| |
| |
| |
| |
| |
| |
| | |||||||
Risk rating: |
| |
| |
| |
| |
| |
| |
| | |||||||
Pass | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Special Mention |
| |
| — |
| |
| — |
| — |
| |
| | |||||||
Substandard |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Doubtful |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
66
Table of Contents
The Company monitors the credit risk profile by payment activity for residential, home equity and consumer loan classes. Loans past due 90 days or more and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly. The following table presents the amortized cost in residential, home equity and consumer loans based on payment activity:
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||
For the Year Ended March 31, 2026 | |||||||||||||||||||||
| 2026 | | 2025 | | 2024 | | 2023 | | 2022 | | Prior | | Total | ||||||||
Residential real estate |
| |
| |
| |
| |
| |
| |
| | |||||||
Payment performance |
| |
|
| |
| |
| |
| |
| |
| | ||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Nonperforming |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Home Equity |
| |
| |
| |
| |
| |
| |
| | |||||||
Payment performance |
| |
| |
| |
| |
| |
| |
| | |||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Nonperforming |
| — |
| — |
| |
| |
| — |
| — |
| | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
| |||||||||||||||||||||
Consumer |
| |
| |
| |
| |
| |
| |
| | |||||||
Payment performance |
| |
| |
| |
| |
| |
| |
| | |||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Nonperforming |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | | $ | — | $ | — | $ | | |||||||
67
Table of Contents
Term Loans Amortized Cost Basis by Origination Year | |||||||||||||||||||||
For the Year Ended March 31, 2025 | |||||||||||||||||||||
| 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | Prior | | Total | ||||||||
Residential real estate |
| |
| |
| |
| |
| |
| |
| | |||||||
Payment performance |
| |
| |
| |
| |
| |
| |
| | |||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Nonperforming |
| — |
| — |
| |
| — |
| |
| — |
| | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Home Equity |
| |
| |
| |
| |
| |
| |
| | |||||||
Payment performance |
| |
| |
| |
| |
| |
| |
| | |||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Nonperforming |
| — |
| |
| — |
| — |
| |
| — |
| | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
| |||||||||||||||||||||
Consumer |
| |
| |
| |
| |
| |
| |
| | |||||||
Payment performance |
| |
| |
| |
| |
| |
| |
| | |||||||
Performing | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Nonperforming |
| — |
| |
| — |
| — |
| — |
| — |
| | |||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
The Company evaluates the loan risk grading system definitions on an ongoing basis. No significant changes were made during the fiscal year ended March 31, 2026 and 2025.
68
Table of Contents
The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of March 31, 2026 and 2025:
March 31, 2026 | |||||||||||||||||||||
90 Days | Total Loans > | ||||||||||||||||||||
30-59 Days | 60-89 Days | or Greater | Total | Total Loans | 90 Days & | ||||||||||||||||
| Past Due | | Past Due | | Past Due | | Past Due | | Current | | Receivable | | Accruing | ||||||||
Real estate loans: |
| |
| |
| |
| |
| |
| |
| | |||||||
Residential | $ | | $ | — | $ | | $ | | $ | | $ | | $ | — | |||||||
Multi-family |
| — |
| — |
| — |
| — |
| |
| |
| — | |||||||
Commercial |
| |
| — |
| — |
| |
| |
| |
| — | |||||||
Construction and land |
| — |
| — |
| — |
| — |
| |
| |
| — | |||||||
Home equity line of credit (HELOC) |
| — | — |
| |
| |
| |
| |
| — | ||||||||
Commercial and industrial |
| — |
| — |
| — |
| — |
| |
| |
| — | |||||||
Consumer |
| — |
| — |
| — |
| — |
| |
| |
| — | |||||||
| |||||||||||||||||||||
Total | $ | | $ | — | $ | | $ | | $ | | $ | | $ | — | |||||||
| March 31, 2025 | ||||||||||||||||||||
| 90 Days | | | | Total Loans > | ||||||||||||||||
30-59 Days | 60-89 Days | or Greater | Total | Total Loans | 90 Days & | ||||||||||||||||
| Past Due | | Past Due | | Past Due | | Past Due | | Current | | Receivable | | Accruing | ||||||||
Real estate loans: |
| |
| |
| |
| |
| |
| |
| | |||||||
Residential | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | |||||||
Multi-family |
| — |
| — |
| — |
| — |
| |
| |
| — | |||||||
Commercial |
| — |
| — |
| — |
| — |
| |
| |
| — | |||||||
Construction and land |
| — |
| — |
| — |
| — |
| |
| |
| — | |||||||
Home equity line of credit (HELOC) |
| — | — |
| — |
| — |
| |
| |
| — | ||||||||
Commercial and industrial |
| — |
| — |
| — |
| — |
| |
| |
| — | |||||||
Consumer |
| — |
| — |
| — |
| — |
| |
| |
| — | |||||||
| |||||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | | $ | | $ | — | |||||||
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The following table presents the amortized cost basis and collateral type of collateral dependent loans by class as of March 31, 2026 and 2025:
Real | Business | | |||||||
March 31, 2026 | | estate | | assets | | Total | |||
Real estate loans: |
| |
| |
| | |||
Residential | $ | | $ | — | $ | | |||
Multi-family |
| — |
| — |
| — | |||
Commercial |
| |
| — |
| | |||
Construction and land |
| — |
| — |
| — | |||
Home equity line of credit (HELOC) |
| |
| — |
| | |||
Commercial and industrial |
| — |
| |
| | |||
Consumer |
| — |
| — |
| — | |||
$ | | $ | | $ | | ||||
Real | Business | | |||||||
March 31, 2025 | | estate | | assets | | Total | |||
Real estate loans: |
| |
| |
| | |||
Residential | $ | — | $ | — | $ | — | |||
Multi-family |
| — |
| — |
| — | |||
Commercial |
| |
| — |
| | |||
Construction and land |
| — |
| — |
| — | |||
Home equity line of credit (HELOC) |
| — |
| — |
| — | |||
Commercial and industrial |
| — |
| |
| | |||
Consumer |
| — |
| — |
| — | |||
$ | | $ | | $ | | ||||
Nonaccrual loans were as follows at March 31, 2026:
Nonaccrual Loans | Nonaccrual Loans | |||||||
Without an | With an | Total | ||||||
| Allowance | | Allowance | | Nonaccrual Loans | |||
Real estate loans |
| |||||||
Residential | $ | | — | $ | | |||
Home equity line of credit (HELOC) |
| | | | ||||
Commercial and industrial | | — | | |||||
Consumer | — | — | — | |||||
Total nonaccrual loans | $ | | | $ | | |||
Nonaccrual loans were as follows at March 31, 2025:
Nonaccrual Loans |
| Nonaccrual Loans |
|
| |||||
Without an |
| With an | Total | ||||||
Allowance |
| Allowance | Nonaccrual Loans | ||||||
Real estate loans | |||||||||
Residential | $ | | — | $ | | ||||
Home equity line of credit (HELOC) |
| | — | | |||||
Commercial and industrial | | — | | ||||||
Consumer | | — | | ||||||
Total nonaccrual loans | $ | | — | $ | | ||||
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There were
Note 4: Premises and Equipment
Major classifications of premises and equipment, stated at cost, at March 31, 2026 and March 31, 2025 are as follows:
March 31, | ||||||
| 2026 | | 2025 | |||
Land | $ | | $ | | ||
Buildings and improvements |
| |
| | ||
Furniture and equipment |
| |
| | ||
Total |
| |
| | ||
Less accumulated depreciation |
| ( |
| ( | ||
Net premises and equipment | $ | | $ | | ||
Depreciation expense was $
Note 5: Leases
During the year ended March 31, 2026, the Company leased facilities for a branch office. The agreement requires monthly rentals totaling approximately $
The Company accounts for leases in accordance with ASC 842 Leases and carries on the consolidated balance sheets a right-of-use asset (“ROU”) included in other assets and lease liability included in accrued interest payable and other liabilities. The Company did not include optional lease term extensions in the ROU assets and lease liabilities, as it is not reasonably certain that the term extensions will be exercised. To calculate the present value of lease payments not yet paid, the Company used the
At March 31, 2026 and March 31, 2025, the Company’s consolidated balance sheet included a $
Total lease expense incurred under terms of this lease amounted to $
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The minimum basic undiscounted rental commitment under the previously described lease arrangement in years after March 31, 2026 and March 31, 2025 is presented below.
Year Ending March 31, | ||||
| 2026 | 2025 | ||
2026 | $ | — | | |
2027 | |
| | |
2028 | | | ||
2029 | | | ||
2030 | | | ||
Total minimum lease payments | | | ||
Less amount representing interest | | | ||
Present value of net minimum lease payments | $ | | | |
Note 6:Time Deposits
Time deposits in denominations of $250,000 or more were approximately $
At March 31, 2026, the scheduled maturities of time deposits were as follows:
March 31, | |||
| 2026 | ||
Within one year | $ | | |
One year to two years |
| | |
Two years to three years |
| | |
Three years to four years |
| | |
Four years to five years |
| | |
Thereafter |
| | |
$ | | ||
At March 31, 2026 and 2025, the Company had
Note 7:Borrowings
Federal Home Loan Bank (FHLB) advances consisted of the following as of March 31, 2026 and March 31, 2025:
March 31, 2026 | March 31, 2025 | |||||||||
Interest | Interest | |||||||||
| Rate | | Amount | | Rate | | Amount | |||
Scheduled to mature year ending March 31, |
| |||||||||
2026 |
|
|
|
| % | $ | | |||
2026 |
|
| |
|
| | ||||
2027 | % | $ | |
|
|
|
| |||
$ | | $ | | |||||||
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The Company has made a collateral pledge to the FHLB consisting of all shares of FHLB stock owned by the Company and a blanket pledge of approximately $
Maturities of FHLB advances were as follows at March 31, 2026:
| March 31, | ||
2026 | |||
Within one year | $ | | |
The Company had an available line of credit with the Federal Reserve Bank totaling $
The Company also has an available line of credit with United Bankers Bank totaling $
Note 8: Income Taxes
The provision for income taxes (benefit) for the years ended March 31, 2026 and 2025, includes these components:
| For the Year Ended | |||||
March 31, | ||||||
2026 | | 2025 | ||||
Taxes currently payable | $ | | $ | ( | ||
Deferred income taxes |
| ( |
| ( | ||
Income tax expense (benefit) | $ | ( | $ | ( | ||
A reconciliation of the federal income tax expense (benefit) expense at the statutory rate to the Company’s actual income tax expense (benefit) is shown below:
| For the Year Ended March 31, |
| |||||||||
2026 | | 2025 |
| ||||||||
Computed at statutory rate ( | $ | ( | | ( | % | $ | ( | | ( | % | |
Increase (decrease) resulting from: |
| |
| |
| |
| | |||
Bank owned life insurance |
| ( |
| ( | % |
| ( |
| ( | % | |
Nontaxable interest income on municipal securities |
| ( |
| ( | % |
| ( |
| ( | % | |
Other |
| |
| | % |
| |
| | % | |
Actual income tax expense (benefit) | $ | ( |
| ( | % | $ | ( |
| ( | % | |
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The composition of the Company’s net deferred tax asset at March 31, 2026 and 2025, is as follows:
| March 31, | |||||
2026 | | 2025 | ||||
Deferred tax assets |
| |
| | ||
Allowance for credit losses | $ | | $ | | ||
Deferred loan origination fees |
| |
| | ||
Deferred compensation |
| |
| | ||
Stock compensation | | — | ||||
Net operating loss carryforward |
| |
| | ||
Charitable contribution carryforward |
| |
| | ||
Unrealized losses on available-for-sale securities |
| |
| | ||
Deferred tax assets |
| |
| | ||
Deferred tax liabilities |
| |
| | ||
Depreciation |
| ( |
| ( | ||
Other |
| ( |
| — | ||
Accrual to cash adjustments |
| ( |
| ( | ||
Deferred tax liabilities |
| ( |
| ( | ||
Net deferred tax asset | $ | | $ | | ||
Retained earnings at March 31, 2026 and 2025, includes approximately $
At March 31, 2026 and 2025, the Company had available unused federal net operating loss carryforwards totaling approximately $
Note 9:Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under U.S. GAAP reporting requirements and regulatory capital standards. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.
Quantitative measures established by regulatory reporting standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined) to risk-weighted assets (as defined), common equity Tier I capital (as defined) to total risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined).
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Federal regulators finalized and adopted a regulatory capital rule in 2019 establishing a new community bank leverage ratio (CBLR), which became effective on January 1, 2020. The intent of the CBLR is to provide a simple alternative measure of capital adequacy for electing qualifying depository institutions and depository institution holding companies, as directed under the Economic Growth, Regulatory Relief, and Consumer Protection Act.
If a qualifying depository institution, or depository institution holding company, elects to use such measure, such institution or holding company will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e., leverage ratio) exceeds 9.0%, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios.
The Bank elected to begin using the CBLR during the year ended March 31, 2025. The Bank’s CBLR was
Management believes, as of March 31, 2026 and 2025, that the Bank met all capital adequacy requirements to which it is subject.
As of March 31, 2026, the most recent notification from the regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.
Note 10: Related Party Transactions
The Company had loans outstanding to certain of its executive officers, directors, and their related interests. Activity in these loans for the years ended March 31, 2026 and 2025 is presented in the following table.
| For the Year Ended | |||||
March 31, | ||||||
2026 | | 2025 | ||||
Balance at beginning of year | $ | | $ | | ||
New borrowings |
| |
| | ||
Repayments |
| ( |
| ( | ||
Change in related party | ( | ( | ||||
Balance at end of year | $ | | $ | | ||
In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management’s opinions, these loans did not involve more than normal risk of collectability or present other unfavorable features.
Deposits from related parties of the Company at March 31, 2026 and 2025 totaled approximately $
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Table of Contents
Note 11: Benefit Plans
Profit Sharing Plan
The Company has a contributory profit-sharing plan covering substantially all employees. Employees may contribute up to
Directors Retirement Plan
The Company maintains an unfunded nonqualified director’s retirement plan. The plan provides for payment of benefits to each director upon termination of service with the Company. Participants vest
For the years ended March 31, | | | |
2027 | $ | | |
2028 |
| | |
2029 |
| | |
2030 |
| | |
2031 |
| | |
Thereafter | | ||
$ | |
The Company also maintains a deferred compensation plan for directors. The related accrued liability as of March 31, 2026 and 2025 was $
The Company purchased life insurance policies to use as an informal funding vehicle for the expected future payments under the director’s retirement plan. The cash surrender value of these policies is reflected on the Company’s balance sheet.
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Table of Contents
Note 12: Employee Stock Ownership Plan (ESOP)
In connection with the Conversion, the Company established an Employee Stock Ownership Plan (“ESOP”) for the exclusive benefit of eligible employees. It is expected that the Bank will make annual contributions to the ESOP in amounts as defined by the ESOP loan documents. The contributions will be used to repay the ESOP loan. Certain ESOP shares are pledged as collateral for the ESOP loan. As the ESOP loan is repaid, shares are released from collateral and allocated to eligible participants, based on the proportion of loan repayments paid in the year. Shares allocated to eligible participants will become 100% vested upon completion of
In connection with the Company’s Conversion, the ESOP borrowed $
The annual contribution to the ESOP was made during the year ended March 31, 2026, as loan payments are made annually on December 31 of each year. Compensation expense is recognized over the service period based on the average fair value of the shares and totaled $
At March 31, 2026, there were
Note 13: Stock-Based Compensation
Under its equity incentive plan, the Company may grant stock options and restricted stock awards to certain officers, employees, and directors. This plan is administered by a committee of the Board of Directors. At March 31, 2026, approximately
For the Year Ended March 31, 2026 | |||||||||
Dividend Yield | % | ||||||||
Expected Volatility | % | ||||||||
Risk-free interest rate | % | ||||||||
Expected average life (in years) | |||||||||
Weighted average per share fair value of options | $ | ||||||||
The Company’s restricted stock activity as of March 31, 2026 is summarized below:
Weighted Average Grant | Restricted Shares | |||||
Restricted Stock | Date Fair Value | Outstanding | ||||
| ||||||
Outstanding March 31, 2025 | $ | |
| | ||
Granted | ||||||
Forfeited | — | — | ||||
Outstanding March 31, 2026 | $ | |||||
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Table of Contents
The Company amortizes the expense related to restricted stock awards as compensation expense over the vesting period. The Company recognized $
The Company’s stock option activity as of March 31, 2026 is summarized below:
Option | Weighted Average | |||||||||||
Shares | Weighted-Average | Remaining | Aggregate | |||||||||
Stock Options | Outstanding | Exercise Price | Life (Years) | Intrinsic Value | ||||||||
Outstanding - March 31, 2025 | ||||||||||||
Granted | $ | | ||||||||||
Exercised | — | — | — | — | ||||||||
Forfeited | — | — | — | — | ||||||||
Vested | — | — | — | — | ||||||||
Outstanding - March 31, 2026 | $ | $ | | |||||||||
Exercisable - March 31, 2026 | — | — | — | — | ||||||||
The Company amortizes the expense related to stock options as compensation expense over the vesting period. The Company recognized $
Note 14: Disclosures about Fair Value of Assets and Liabilities
Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:
Level 1 | Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
Level 2 | Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
Level 3 | Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
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Table of Contents
Recurring Measurements
The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2026 and 2025:
| Fair Value Measurements Using | |||||||||||
| Quoted Prices in | | | Significant | ||||||||
Active Markets for | Significant Other | Unobservable | ||||||||||
Fair | Identical Assets | Observable Inputs | Inputs | |||||||||
Value | (Level 1) | (Level 2) | (Level 3) | |||||||||
March 31, 2026 |
| |
| |
| |
| | ||||
U.S. Government agencies | $ | | $ | — | $ | | $ | — | ||||
Mortgage-backed Government Sponsored Enterprises (GSEs) |
| |
| — |
| |
| — | ||||
State and political subdivisions |
| |
| — |
| |
| — | ||||
Time deposits |
| |
| — |
| |
| — | ||||
| ||||||||||||
March 31, 2025 |
| |
| |
| |
| | ||||
U.S. Government agencies | $ | | $ | — | $ | | $ | — | ||||
Mortgage-backed Government Sponsored Enterprises (GSEs) |
| |
| — |
| |
| — | ||||
State and political subdivisions |
| |
| — |
| |
| — | ||||
Time deposits |
| |
| — |
| |
| — | ||||
Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There are
Available-for-sale Securities
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 are not available, securities are classified within Level 3 of the hierarchy. The Company had
Nonrecurring Measurements
The following table presents the fair value measurements of assets recognized in the accompanying balance sheet measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2026 and 2025.
| Fair Value Measurements Using | |||||||||||
| Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | |||||
March 31, 2026 |
| |
| |
| |
| | ||||
Collateral dependent loans | $ | | $ | — | $ | — | $ | | ||||
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Table of Contents
| Fair Value | | Valuation Technique | | Unobservable Inputs | | Range (Weighted-average) | ||
March 31, 2026 |
| |
| |
| |
| | |
Collateral dependent loans | $ | | Estimated sales price | Adjustments for discounts to reflect current market conditions |
| ||||
The collateral dependent loans had a carrying value of $
| Fair Value Measurements Using | |||||||||||
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
March 31, 2025 |
| |
| |
| |
| | ||||
Collateral dependent loans | $ | | $ | — | $ | — | $ | | ||||
|
|
| | | | ||||
| Fair Value | Valuation Technique | Unobservable Inputs | Range (Weighted-average) | |||||
March 31, 2025 |
| |
|
| | ||||
Collateral dependent loans | $ | |
| Estimated sales price |
| Adjustments for discounts to reflect current market conditions |
|
The collateral dependent loan had a carrying value of $
The Company used the following methods and assumptions to estimate fair value of financial instruments not carried at fair value on the balance sheet:
| ● | Cash and cash equivalents – Fair value approximates the carrying value. |
| ● | Loans, net – Fair value of variable rate loans that reprice frequently is based on carrying values. Fair value of other loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings. Fair value of individual analyzed and other non-performing loans is estimated using discounted expected cash flows or fair value of the underlying collateral, if applicable. |
| ● | Restricted Stock – Fair value is the redeemable (carrying) value based on the redemption provisions of the Federal Home Loan Bank. |
| ● | Accrued interest receivable and payable – Fair value approximates carrying value. |
| ● | Bank-owned life insurance – Fair value is based on reported values of the assets. |
| ● | Deposits- Fair value of deposits with no stated maturity, such as demand deposits, savings, and money market accounts, by definition, is the amount payable on demand on the reporting date. Fair value of fixed rate time deposits is estimated using discounted cash flows applying interest rates currently being offered on similar time deposits. |
| ● | FHLB Advances – Fair value is based on the present value of cash flows given the current yield curve. |
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The estimated fair values of the Company’s financial instruments not carried at fair value on the balance sheets as of March 31, 2026 and 2025 are as follows:
| Carrying | Fair | Fair Value Measurements Using | ||||||||||||
Value | | Value | | Level 1 | | Level 2 | | Level 3 | |||||||
March 31, 2026 | |||||||||||||||
Financial assets: |
| |
| |
| |
| |
| | |||||
Cash and cash equivalents | $ | | $ | | | $ | — | $ | — | ||||||
Loans, net |
| |
| |
| — |
| — |
| | |||||
Restricted stock |
| |
| |
| — |
| |
| — | |||||
Bank owned life insurance |
| |
| |
| |
| — |
| — | |||||
Accrued interest receivable |
| |
| |
| |
| — |
| — | |||||
Financial liabilities: |
| |
| |
| |
| |
| | |||||
Deposits |
| |
| |
| |
| — |
| | |||||
FHLB advances |
| |
| |
| — |
| — |
| | |||||
Accrued interest payable |
| |
| |
| |
| — |
| — | |||||
| Carrying | Fair | Fair Value Measurements Using | ||||||||||||
Value | | Value | | Level 1 | | Level 2 | | Level 3 | |||||||
March 31, 2025 |
| |
| |
| |
| |
| | |||||
Financial assets: |
| |
| |
| |
| |
| | |||||
Cash and cash equivalents | $ | | $ | | | $ | — | $ | — | ||||||
Loans, net |
| |
| |
| — |
| — |
| | |||||
Restricted stock |
| |
| |
| — |
| |
| — | |||||
Bank owned life insurance |
| |
| |
| |
| — |
| — | |||||
Accrued interest receivable |
| |
| |
| |
| — |
| — | |||||
Financial liabilities: |
| |
| |
| |
| |
| | |||||
Deposits |
| |
| |
| |
| — |
| | |||||
FHLB advances |
| |
| |
| — |
| — |
| | |||||
Accrued interest payable |
| |
| |
| |
| — |
| — | |||||
Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Fair value estimates may not be realizable in an immediate settlement of the instrument. In some instances, there are no quoted market prices for the Company’s various financial instruments, in which case fair values may be based on estimates using present value or other valuation techniques, or based on judgments regarding future expected loss experience, current economic conditions, risk characteristic of the financial instruments, or other factors.
Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Subsequent changes in assumptions could significantly affect the estimates.
Note 15: Commitments and Credit Risks
Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.
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Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, plant and equipment, commercial real estate and residential real estate.
Management uses the same credit policies in granting lines of credit as it does for on-balance sheet instruments.
Commitments outstanding at March 31, 2026 and 2025 were as follows:
| March 31, | |||||
2026 | | 2025 | ||||
Commitments to originate loans | $ | | $ | | ||
Undisbursed balance of loans closed |
| |
| | ||
Total | $ | | $ | | ||
Note 16: Accumulated Other Comprehensive Loss
The components of other accumulated comprehensive loss, included in stockholders’ equity, are as follows at March 31, 2026 and 2025:
| |||||||||
| Unrealized Gains | |
| | Unrealized Gains | ||||
and Losses on |
| and Losses on | |||||||
Available-for-Sale |
| Available-for-Sale | |||||||
Securities |
| Tax | Securities | ||||||
(Gross) |
| Effect | (Net) | ||||||
Accumulated other comprehensive loss at April 1, 2024 | $ | ( | $ | ( | $ | ( | |||
Other comprehensive income |
| |
| |
| | |||
Accumulated other comprehensive loss at March 31, 2025 | $ | ( | $ | ( | $ | ( | |||
Accumulated other comprehensive loss at March 31, 2025 | $ | ( | $ | ( | $ | ( | |||
Other comprehensive income |
| |
| |
| | |||
Accumulated other comprehensive loss at March 31, 2026 | $ | ( | $ | ( | $ | ( | |||
Note 17: Earnings (Loss) Per Share
Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equity and are excluded from weighted-average common shares outstanding for both basic and diluted earnings per share calculations until they are committed to be released. Dilutive earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of shares adjusted for the dilutive effect of common stock awards (outstanding stock options and unvested restricted stock), using the treasury stock method. Stock options and stock awards were evaluated and were excluded from diluted EPS calculations for the fiscal year ended March 31, 2026 as they were anti-dilutive. The Company had no dilutive or potentially dilutive securities during the fiscal year ended March 31, 2025. Presented below are the calculations for basic and diluted earnings per common share.
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| For the year ended | |||||
March 31, | ||||||
2026 | | 2025 | ||||
Net Loss | $ | ( | $ | ( | ||
| ||||||
Weighted-average shares issued | |
| | |||
Less weighted-average unearned ESOP shares | $ | | $ | | ||
Weighted-average shares outstanding | | | ||||
Loss per share - basic and diluted | $ | ( | $ | ( | ||
Note 18: Condensed Parent Company Only Financial Information
Parent Only Condensed Balance Sheet
| March 31, | March 31, | ||||
2026 | 2025 | |||||
(Unaudited) | (Unaudited) | |||||
Assets |
| | ||||
Cash in bank subsidiary | $ | | $ | | ||
Investment in subsidiary, at underlying equity |
| | | |||
Loan receivable - ESOP |
| | | |||
Other assets |
| | | |||
Total assets |
| | | |||
Liabilities and Stockholders' Equity |
| | | |||
Liabilities |
| | | |||
Other liabilities |
| | | |||
Total liabilities | $ | | $ | | ||
|
|
|
| |||
Stockholders' Equity |
| | | |||
Common stock - $ | | | ||||
Additional paid in capital | | | ||||
Unallocated common stock of ESOP | ( | ( | ||||
Retained earnings |
| | | |||
Treasury stock - | ( | ( | ||||
Deferred compensation plan - Rabbi Trust - | | | ||||
Accumulated other comprehensive loss | ( | ( | ||||
Total stockholders' equity | | | ||||
Total liabilities and stockholders' equity | $ | | $ | | ||
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Parent Only Condensed Statement of Operations
| ||||||
| Year Ended | Year Ended | ||||
March 31, | March 31, | |||||
2026 | 2025 | |||||
Interest income |
| | | |||
Income on ESOP loan | $ | | $ | | ||
Total interest income |
| | | |||
Noninterest expense |
| | | |||
Other noninterest expense |
| | | |||
Total noninterest expense |
| | | |||
Loss before income taxes and equity in net loss of Bank |
| ( | ( | |||
Benefit for income taxes |
| ( | ( | |||
Net loss before equity in net loss of Bank |
| ( | ( | |||
Equity in net loss of Bank |
| ( | ( | |||
Net loss | $ | ( | $ | ( | ||
Parent Only Statement of Cash Flows
| Year Ended | Year Ended | ||||
| March 31, | March 31, | ||||
| 2026 | | 2025 | |||
Operating Activities | ||||||
Net loss | $ | ( | $ | ( | ||
Items not requiring (providing) cash: |
| | | |||
Undistributed loss of bank |
| |||||
Net change in other assets | ( | ( | ||||
Net change in other liabilities | ||||||
Net cash used in operating activities | ( |
| ( | |||
Investing Activities |
|
|
| |||
Capital contribution in the Bank |
| ( | ||||
Payment received on ESOP note | ||||||
Net cash used in investing activities |
| ( | ||||
Financing Activities |
| | | |||
Gross proceeds from stock offering |
| |||||
Stock offering costs, net |
| ( | ||||
Purchase of ESOP shares |
| ( | ||||
Net cash provided by financing activities |
| |||||
Increase in Cash and Cash Equivalents |
| |||||
Cash and Cash Equivalents, Beginning of Period |
| |||||
Cash and Cash Equivalents, End of Period | $ | $ | ||||
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Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Disclosure Controls and Procedures. An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2026. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.
Internal Control over Financial Reporting. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
The system of internal control over financial reporting as it relates to the consolidated financial statements is evaluated for effectiveness by management. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management assessed the Company’s system of internal control over financial reporting as of March 31, 2026, in relation to criteria for effective internal control over financial reporting as described in the 2013 “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As a result of this assessment, management concluded that, as of March 31, 2026, the Company’s system of internal control over financial reporting was effective and met the criteria of the “Internal Control Integrated Framework.”
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Not applicable.
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Part III
Item 10. Directors, Executive Officers and Corporate Governance
The information relating to the directors and officers of the Company, information regarding compliance with Section 16(a) of the Exchange Act and information regarding the audit committee and audit committee financial expert is incorporated herein by reference to the Company’s Definitive Proxy Statement for the 2026 Annual Meeting of Stockholders (the “Proxy Statement”) under the captions “Proposal 1—Election of Directors,” “Executive Officers Who Do Not Serve as Directors,” “Other Information Relating to Directors and Executive Officers – Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance – Nominating Committee Procedures—Procedures to be Followed by Stockholders,” “Corporate Governance—Committees of the Board of Directors” and “—Audit Committee.”
The Company has adopted a code of ethics that applies to its principal executive officer, the principal financial officer and principal accounting officer. The Code of Ethics is posted on the Investors section of the Bank’s Internet Web site (www.monroefederal.com).
The Company has
Item 11. Executive Compensation
The information regarding executive compensation, compensation committee interlocks and insider participation is incorporated herein by reference to the Proxy Statement under the captions “Directors’ Compensation” and “Executive Compensation.”
Item 12. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters
Securities Authorized for Issuance under Stock-Based Compensation Plans
The following information is presented as of March 31, 2026 for the Monroe Federal Bancorp, Inc. 2025 Equity Incentive Plan:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (Column A) | Weighted-average exercise price of outstanding options, warrants and rights (Column B) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column A) |
68,436 | $11.46 | 3,432 | |
N/A | N/A | N/A | |
68,436 | $11.46 | 3,432 |
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Security Ownership of Certain Beneficial Owners and Management
Information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in the Proxy Statement.
Changes in Control
Management of the Company knows of no arrangements, including any pledge by an person or securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.
Item 13. Certain Relationships and Related Transactions, And Director Independence
The information relating to certain relationships and related transactions and director independence is incorporated herein by reference to the Proxy Statement under the captions “Other Information Relating to Directors and Executive Officers – Transactions with Related Persons” and “Business Items to be Voted on by Stockholders – Item 1 – Election of Directors.”
Item 14. Principal Account Fees and Services
The information relating to the principal accounting fees and expenses is incorporated herein by reference to the Proxy Statement under the captions “Business Items to be Voted on by Stockholders – Item 2 – Ratification of Appointment of Independent Registered Public Accounting Firm – Audit Fees” and “-Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm.”
PART IV
Item 15. Exhibits And Financial Statement Schedules
3.1 | Articles of Incorporation of Monroe Federal Bancorp, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-280165), as filed on June 13, 2024) |
3.2 | Bylaws of Monroe Federal Bancorp, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-280165), as filed on June 13, 2024) |
4.1 | Form of Common Stock Certificate of Monroe Federal Bancorp, Inc. (incorporated by reference to Exhibit 4 the Company’s Registration Statement on Form S-1, as (Commission File No. 333-280165), as filed on June 13, 2024) |
4.2 | Description of Registrant’s Securities (incorporated by reference to the Company’s Registration Statement on Form 8-A (Commission File No. 001-56702), as filed on October 23, 2024) |
10.1 | Employment Agreement between Monroe Federal Savings and Loan Association and Lewis R. Renollet †(incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2025 (Commission File No. 001-56702), as filed on July 3, 2025) |
10.2 | Form of Change in Control Agreement between Monroe Federal Savings and Loan Association and certain executive officers (incorporated by reference to Exhibit 10.2 the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-280165), as filed on June 13, 2024) † |
10.3 | Monroe Federal Savings and Loan Association Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-280165), as filed on June 13, 2024) † |
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10.4 | Monroe Federal Savings and Loan Association Amended and Restated Director Retirement Plan (incorporated by reference to Exhibit 10.4 the Company’s Registration Statement on Form S-1, as amended (Commission File 202No. 333-280165), as filed on June 13, 2024) † |
19 | Policy Regarding Insider Trading (incorporated by reference to Exhibit 19 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2025 (commission File No. 001-56702) as filed on July 3, 2025) |
21 | Subsidiaries of Registrant (incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2025 (Commission File No. 001-56702), as filed on July 3, 2025) |
23.1 | Consent of Independent Registered Public Accounting Firm |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101 | The following materials from the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements. |
104 | The cover page from this Annual Report on Form 10-K formatted in Inline XBRL |
† | Denotes a management contract or compensation plan or arrangement. |
Item 16. Form 10-K Summary
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MONROE FEDERAL BANCORP, INC. | ||
| ||
/s/ Lewis R. Renollet | ||
Date: June 25, 2026 | Lewis R. Renollet | |
President and Chief Executive Officer (Duly Authorized Representative and Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures | Title | Date | ||
/s/ Lewis R. Renollet | President, Chief Executive | June 25, 2026 | ||
Lewis R. Renollet | Officer and a Director (Principal Executive Officer) | |||
/s/ Lisa M. Bird | Chief Financial Officer and | June 25, 2026 | ||
Lisa M. Bird | Treasurer (Principal Financial and Accounting Officer) | |||
/s/ Julie M. Broerman-Daniels | Director | June 25, 2026 | ||
Julie M. Broerman-Daniels | ||||
/s/ Andrew L. Davidson | Director (Chairman of the Board) | June 25, 2026 | ||
Andrew L. Davidson | ||||
/s/ Anthony H. Heinl | Director | June 25, 2026 | ||
Anthony H. Heinl | ||||
/s/ Jonathan J. Steinke | Director | June 25, 2026 | ||
Jonathan J. Steinke | ||||
/s/ Sarah G. Worley | Director | June 25, 2026 | ||
Sarah G. Worley | ||||
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