10-Q - MBBC - Equibles

Table of Contents Dee

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 000-56269

MARATHON BANCORP, INC. ****
(Exact name of registrant as specified in its charter)

Maryland	86-2191258
(State or other jurisdiction of<br>incorporation or organization)	(I.R.S. Employer<br>Identification No.)

500 Scott Street , Wausau , Wisconsin ****	54403
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: ( 715 ) 845-7331

Securities registered pursuant to Section 12(b) of the Act:

	<br><br>
Title of each class	Trading<br><br>Symbol(s)	Name of each exchange on which registered
None	None	None

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 filing requirements for the past 90 days.

Yes ⌧ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ⌧ 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 definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-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 7(a)(2)(B) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

As of May 11, 2023, there were 2,153,156 shares of the registrant’s common stock issued and outstanding.

Table of Contents MARATHON BANCORP, INC.

INDEX

		PAGE NO.
PART I - FINANCIAL INFORMATION		2
Item 1.	Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and June 30, 2022	2
	Consolidated Statements of Income for the Three and Nine months ended March 31, 2023 and 2022 (Unaudited)	3
	Consolidated Statements of Comprehensive Income for the Three and Nine months ended March 31, 2023 and 2022 (Unaudited)	4-5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine months ended March 31, 2023 and 2022 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Nine months ended March 31, 2023 and 2022 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46
PART II - OTHER INFORMATION		48
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other information	48
Item 6.	Exhibits	49
SIGNATURES		50

Table of Contents PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MARATHON BANCORP, INC.

CONSOLIDATED BALANCE SHEETS


	****	Unaudited		****	June 30,
		March 31, 2023			2022
Assets
Cash and due from banks		$	2,605,055		$	2,418,041
Federal funds sold			6,831,000			6,010,000
Cash and cash equivalents			9,436,055			8,428,041
Interest bearing deposits held in other financial institutions			3,778,805			1,945,073
Debt securities available for sale			9,237,899			10,617,238
Debt securities held to maturity, at amortized cost (fair value $392,049 and $419,000)			517,035			532,363
Loans, net of allowance of $2,060,089 and $2,195,050, respectively			202,061,101			185,629,872
Interest receivable			588,419			565,929
Investment in restricted stock, at cost			770,273			323,000
Cash surrender value life insurance			8,666,987			9,193,315
Premises and equipment, net			2,207,015			1,676,060
Other assets			1,027,381			1,107,689
Total assets		$	238,290,970		$	220,018,580
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing		$	25,681,875		$	23,698,115
Interest bearing			175,391,003			164,402,333
Total deposits			201,072,878			188,100,448
Federal Home Loan Bank (FHLB) advances			5,000,000			—
Other liabilities			1,835,887			1,175,565
Total liabilities			207,908,765			189,276,013
Stockholders' Equity
Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued			—			—
Common stock, $.01 par value, 20,000,000 shares authorized, 2,153,156 and 2,269,700 shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively			21,160			22,295
Additional paid-in capital			7,251,278			8,487,400
Retained earnings			24,601,681			23,423,432
Unearned ESOP shares, at cost			(795,312)			(821,531)
Accumulated other comprehensive loss			(696,602)			(369,029)
Total stockholders' equity			30,382,205			30,742,567
Total liabilities and stockholders' equity		$	238,290,970		$	220,018,580

See accompanying notes to the consolidated financial statements.

Table of Contents MARATHON BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited



	****	Three Months		****	Three Months		****	Nine Months		****	Nine Months		****
		Ended March 31,			Ended March 31,			Ended March 31,			Ended March 31,
		2023			2022		****	2023		****	2022		****
Interest Income
Loans, including fees		$	2,065,387		$	1,659,581		$	5,998,925		$	5,082,382
Debt securities			60,172			86,779			190,261			250,197
Other			161,225			9,667			370,203			29,182
Total interest income			2,286,784			1,756,027			6,559,389			5,361,761
Interest Expense
Deposits			630,640			222,381			1,461,648			679,137
Borrowings and other			6,187			426			45,038			6,814
Total interest expense			636,827			222,807			1,506,686			685,951
Net Interest Income			1,649,957			1,533,220			5,052,703			4,675,810
Provision for Loan Losses			—			—			—			—
Net Interest Income After Provision for Loan Losses			1,649,957			1,533,220			5,052,703			4,675,810
Non-Interest Income
Service charges on deposit accounts			32,744			35,351			117,692			118,648
Mortgage banking income			72,285			89,501			208,528			447,567
Increase in cash value of life insurance			59,792			57,817			179,208			164,447
Gain on proceeds from life insurance death benefit			88,029			—			261,297			—
Net gain on securities transactions			—			—			24,000			14,000
Other income			6,646			10,508			22,437			18,877
Total non-interest income			259,496			193,177			813,162			763,539
Non-Interest Expenses
Salaries and employee benefits			832,532			806,036			2,496,076			2,372,386
Occupancy and equipment expenses			208,147			170,300			556,848			531,350
Data processing and office			110,656			102,886			297,190			304,190
Professional fees			159,867			163,873			533,775			493,407
Marketing expenses			18,445			22,199			69,800			64,861
Other expenses			155,882			138,002			467,533			414,989
Total non-interest expenses			1,485,529			1,403,296			4,421,222			4,181,183
Income Before Income Taxes			423,924			323,101			1,444,643			1,258,166
Provision for Income Taxes			58,228			74,275			266,394			307,384
Net Income		$	365,696		$	248,826		$	1,178,249		$	950,782

Net income per common shares-basic and diluted			$0.17			$0.12			$0.55			$0.44
Weighted average number of common shares outstanding-basic			2,100,058			2,144,785			2,132,381			2,146,033
Weighted average number of common shares outstanding-diluted			2,105,104			2,144,785			2,135,043			2,146,033

See accompanying notes to the consolidated financial statements.

Table of Contents MARATHON BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited


	****	Three Months Ended
		March 31,
	****	2023		****	2022
Net Income		$	365,696		$	248,826
Other comprehensive income (loss)
Unrealized gains (losses) on available for sale debt securities
Unrealized holding gain (loss) arising during the period			19,644			(395,736)
Tax effect			(5,351)			107,802
Net amount			14,293			(287,934)
Amortization of unrealized losses on debt securities transferred from available for sale to held to maturity (a)			1,528			4,628
Other comprehensive income (loss)			15,821			(283,306)
Comprehensive Income		$	381,517		$	(34,480)

(a) The reclassification adjustment is reflected in the Consolidated Statement of Income as Interest Income - Debt Securities.

See accompanying notes to the consolidated financial statements.

Table of Contents MARATHON BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited


	****	Nine Months Ended
		March 31,
	****	2023		****	2022
Net Income		$	1,178,249		$	950,782
Other comprehensive loss
Unrealized losses on available for sale debt securities
Unrealized holding loss arising during the period			(432,993)			(466,385)
Tax effect			118,548			127,025
Net amount			(314,445)			(339,360)

Reclassification adjustment for gains included in net income (a)			(24,000)			(14,000)
Tax effect			6,538			3,815
Net amount			(17,462)			(10,185)
Amortization of unrealized losses on debt securities transferred from available for sale to held to maturity (b)			4,334			13,964
Other comprehensive loss			(327,573)			(335,581)
Comprehensive Income		$	850,676		$	615,201

(a)The reclassification adjustment is included in the Consolidated Statement of Income as Net Gain on Securities Transactions.

(b) The reclassification adjustment is reflected in the Consolidated Statement of Income as Interest Income - Debt Securities.

See accompanying notes to the consolidated financial statements.

Table of Contents MARATHON BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Unaudited


																	Accumulated
								Additional						Unearned			Other
		Preferred			Common			Paid-in			Retained			ESOP			Comprehensive
	****	Stock		****	Stock		****	Capital		****	Earnings		****	Shares		****	Income (Loss)		****	Total
Balance, July 1, 2022		$	—		$	22,295		$	8,487,400		$	23,423,432		$	(821,531)		$	(369,029)		$	30,742,567
Net income			—			—			—			511,153			—			—			511,153
Other comprehensive loss			—			—			—			—			—			(127,810)			(127,810)
ESOP shares committed to be released (874 shares)			—			—			874			—			8,740			—			9,614
Stock based compensation			—			—			34,620			—			—			—			34,620
Balance, September 30, 2022			—			22,295			8,522,894			23,934,585			(812,791)			(496,839)			31,170,144
Net income			—			—			—			301,400			—			—			301,400
Other comprehensive loss			—			—			—			—			—			(215,584)			(215,584)
ESOP shares committed to be released (874 shares)			—			—			798			—			8,740			—			9,538
Stock based compensation			—			—			30,727			—			—			—			30,727
Purchase and retirement of common stock (6,781 shares)			—			(68)			(76,557)			—			—			—			(76,625)
Balance, December 31, 2022			—			22,227			8,477,862			24,235,985			(804,051)			(712,423)			31,219,600
Net income			—			—			—			365,696			—			—			365,696
Other comprehensive income			—			—			—			—			—			15,821			15,821
ESOP shares committed to be released (874 shares)			—			—			1,748			—			8,739			—			10,487
Stock based compensation			—			—			29,573			—			—			—			29,573
Purchase and retirement of common stock (106,704 shares)			—			(1,067)			(1,257,905)			—			—			—			(1,258,972)
Balance, March 31, 2023		$	—		$	21,160		$	7,251,278		$	24,601,681		$	(795,312)		$	(696,602)		$	30,382,205


																		Accumulated
									Additional						Unearned			Other
			Preferred			Common			Paid-in			Retained			ESOP			Comprehensive
			Stock		****	Stock		****	Capital		****	Earnings		****	Shares		****	Income (Loss)		****	Total
Balance, July 1, 2021		$	—		$	22,295		$	8,484,019		$	22,088,669		$	(866,499)		$	120,667		$	29,849,151
Net income			—			—			—			417,091			—			—			417,091
Other comprehensive income			—			—			—			—			—			933			933
ESOP shares committed to be released (1,379 shares)			—			—			1,190			—			13,792			—			14,982
Balance, September 30, 2021						22,295			8,485,209			22,505,760			(852,707)			121,600			30,282,157
Net income			—			—			—			284,865			—			—			284,865
Other comprehensive loss			—			—			—			—			—			(53,208)			(53,208)
ESOP shares committed to be released (1,370 shares)			—			—			444			—			13,697			—			14,141
Balance, December 31, 2021			—			22,295			8,485,653			22,790,625			(839,010)			68,392			30,527,955
Net income			—			—			—			248,826			—			—			248,826
Other comprehensive loss			—			—			—			—			—			(283,306)			(283,306)
ESOP shares committed to be released (874 shares)			—			—			873			—			8,740			—			9,613
Balance, March 31, 2022		$	—		$	22,295		$	8,486,526		$	23,039,451		$	(830,270)		$	(214,914)		$	30,503,088

See accompanying notes to the consolidated financial statements.

Table of Contents MARATHON BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


		Nine Months Ended
		March 31,
****	****	2023		****	2022
Operating Activities
Net income		$	1,178,249		$	950,782
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization			153,411			153,227
Stock based compensation			94,920			—
ESOP expense			29,639			38,736
Net amortization of discounts and premiums on debt securities			77,524			92,766
Amortization of deferred loan fees, net			(36,542)			(528,901)
Net gain on sale of loans			(85,853)			(260,775)
Realized gain on available for sale debt securities			(24,000)			(14,000)
Net change in deferred taxes			201,683			259,413
Gain on proceeds from life insurance death benefit			(261,297)			—
Earnings on cash value of life insurance			(179,208)			(164,447)
(Increase) decrease in interest receivable			(22,490)			46,779
Originations of loans held for sale			(2,143,200)			(14,480,692)
Proceeds from loans held for sale			2,229,053			14,741,467
Net amortization of operating lease right of use assets			79,835			—
Net change in operating lease liabilities			(87,377)			—
Net change in other assets			2,892			(63,598)
Net change in other liabilities			48,862			(181,385)
Net Cash from Operating Activities			1,256,101			589,372
Investing Activities
Net change in interest-bearing deposits in other financial institutions			(1,833,732)			729,259
Purchase of debt securities available for sale			—			(3,500,000)
Proceeds from life insurance death benefit			966,833			—
Proceeds from sales, maturities, and repayments of debt securities available for sale			869,164			2,631,411
Proceeds from maturities and calls of debt securities held to maturity			20,139			173,235
Purchase of bank owned life insurance			—			(3,000,000)
Net increase in restricted stock			(447,273)			—
Net increase in loans			(16,394,687)			(19,111,523)
Purchases of property and equipment			(65,364)			(25,064)
Net Cash used in Investing Activities			(16,884,920)			(22,102,682)
Financing Activities
Net change in deposits			12,972,430			17,035,492
Proceeds from FHLB advances			5,000,000			—
Repayments of PPPLF funding, net			—			(10,372,148)
Purchase and retirement of common stock			(1,335,597)			—
Net Cash from Financing Activities			16,636,833			6,663,344
Net Change in Cash and Cash Equivalents			1,008,014			(14,849,966)
Cash and Cash Equivalents, Beginning of Year			8,428,041			46,048,643
Cash and Cash Equivalents, End of Year		$	9,436,055		$	31,198,677
Supplemental Disclosure of Cash Flow Information
Cash payments for
Interest		$	1,505,171		$	687,430
Taxes			98,000			72,000

Supplemental Schedule of Noncash Investing and Financing Activities
Lease liabilities arising from using right-of-use assets		$	698,837		$	—

See accompanying notes to the consolidated financial statements.

Table of Contents MARATHON BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1- Basis of Presentation

Marathon Bancorp, Inc. (the “Company”) is a Maryland chartered mid-tier stock holding company and was formed in connection with the conversion of Marathon Bank (the “Bank”) from a mutual to the mutual holding company form of organization in April 2021, and it is a subsidiary of Marathon MHC (the “Mutual Holding Company”), a Wisconsin chartered mutual holding company. The Mutual Holding Company received 1,226,223 shares, or 55.0%, of the Company’s issued stock at the time of the reorganization. In connection with the reorganization, Marathon Bancorp, Inc. sold 1,003,274 shares of common stock to the public at $10.00 per share, representing 45.0% of its outstanding shares of common stock at the time of the reorganization. The stock offering resulted in gross proceeds of $10.0 million, net of offering expenses of $1.4 million, resulting in net proceeds of $8.5 million. The Mutual Holding Company activity is not included in the accompanying consolidated financial statements. Marathon Bank is a wholly owned subsidiary of the Company. The same directors and officers, who manage the Bank, also manage the Company and the Mutual Holding Company.

The Bank is a Wisconsin stock savings bank, which conducts its business through four facilities. The Bank operates as a full-service financial institution with a primary market area including, but not limited to, Marathon County and Ozaukee County, Wisconsin. Its primary deposit products are demand deposits, savings, and certificates of deposits; and its primary lending products are commercial real estate, commercial and industrial, construction, one-to-four-family residential, multi-family real estate and consumer loans.

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences could be material to the financial statements. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses, valuation of deferred tax assets, other than temporary impairment of debt securities and fair value of financial assets and liabilities.

In the opinion of management, all adjustments considered necessary for fair presentation have been included. Operating results for the three and nine month periods ended March 31, 2023 are not necessarily indicative of the results for the year ending June 30, 2023 or any other period. For further information, refer to the consolidated financial statements and notes thereto for the years ended June 30, 2022 and 2021 contained in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on September 28, 2022.

Recent Accounting Pronouncements

This section provides a summary description of recent ASUs issued by the FASB to the ASC that had or that management expects may have an impact on the consolidated financial statements issued upon adoption. The Company is classified as an emerging growth company and has elected 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. Effective dates reflect this election.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Topic 842 was subsequently amended by ASU 2018-10, “Codification Improvements to Topic 842, Leases” and ASU 2018-11, “Leases (Topic 842)”. The amendments in this update increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. For leases with a term of 12 months or less, the amendments permit lessees to make an accounting policy election by class of underlying assets 8

Table of Contents not to recognize lease assets and lease liabilities. For finance leases, the amendments in this update require a lessee to (1) recognize a right-of-use asset and lease liability, initially measured at the present value of the lease payments, on the balance sheet; (2) recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of operations; (3) classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases, the amendments in this update require a lessee to (1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, on the balance sheet; (2) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; (3) classify all cash payments within operating activities in the statement of cash flows. On October 16, 2019, the FASB approved the proposal to delay the effective date for this standard for private and all other entities. Due to the Company’s extended transition period election, the amendments are effective for fiscal years beginning after December 15, 2020. In June 2020, the FASB issued ASU No. 2020-05, Coronavirus Disease 2019 (“COVID-19”) in response to the pandemic which has adversely affected the global economy and caused significant and widespread business and capital market disruptions. The FASB issued ASU 2020-05 as a limited deferral of the effective dates of certain ASUs, including ASU 2016-02 (including amendments issued after the issuance of the original) to provide immediate, near-term relief for certain entities for whom these ASUs are either currently effective or imminently effective. The Company adopted ASU 2016-02 on July 1, 2022 using the optional transition method. The Company also elected the following practical expedients: the package of practical expedients, combining lease and nonlease components by class of underlying asset, and using hindsight in determining the lease terms. The adoption of this standard resulted in the recording of a ROU asset and lease liability of $698,837 as of July 1, 2022 for the Company’s five operating lease obligations. The adoption of this standard did not have a material impact on the Company’s operations, cash flows or capital ratios, nor did it cause the Company to no longer be well capitalized.

Recently Issued, But Not Yet Effective Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments.” Topic 326 was subsequently amended by ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses; ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses”; and ASU 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief.” This ASU replaces the current incurred loss impairment methodology with a methodology that reflected expected credit losses measured at amortized cost and certain other instruments, including loans, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures. On October 16, 2019, the FASB approved the proposal to delay the effective date for this standard for private and all other entities. Due to the Company’s extended transition period election, the update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company will adopt this pronouncement beginning July 1, 2023. Management is currently evaluating the potential impact on its results of operations, financial position, and cash flows; however, due to the significant differences in the revised guidance from existing U.S. GAAP, the implementation of this guidance may result in material changes in the Company’s accounting for credit losses on financial instruments.

In March 2022, the FASB issued ASU 2022-02, "Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02"). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings ("TDRs") in ASC 310-40, "Receivables - Troubled Debt Restructurings by Creditors" for entities that have adopted the current expected credit loss ("CECL") model introduced by ASU 2016-13. ASU 2022-02 also requires that public business entities disclose current-period gross charge-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, "Financial Instruments—Credit Losses—Measured at Amortized Cost". ASU 2022-02 is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the effect that ASU 2022-02 will have on its consolidated financial statements and related disclosures and has selected a third party vendor solution to assist with the application of ASU 2016-13. The loss estimation models are expected to be completed during the fourth quarter. 9

Table of Contents Note 2- Earnings Per Share

Basic net income per common 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 not included in the weighted-average number of common shares outstanding for purposes of calculating earnings per common share until they are committed to be released. Diluted earnings per share is adjusted for the dilutive effects of stock based compensation and is calculated using the treasury stock method. There were no anti-dilutive effects for the three and nine months ended March 31, 2023 or 2022. Set forth below is the calculation of earnings per share.


	For the Three Months						For the Nine Months
	Ended March 31,						Ended March 31,
	2023		****	2022		2023		2022

Net income applicable to common stock	$	365,696		$	248,826	$	1,178,249	$	950,782

Average number of shares outstanding		2,180,026			2,229,497		2,213,223		2,229,497
Less: Average unallocated ESOP shares		79,968			84,712		80,842		83,464

Average number of common shares outstanding used to calculate basic earnings per share		2,100,058			2,144,785		2,132,381		2,146,033
Effect of dilutive restricted stock awards		5,046			—		2,662		—
Average number of common shares outstanding used to calculate diluted earnings per share		2,105,104			2,144,785		2,135,043		2,146,033

Earnings per common share:
Basic	$	0.17		$	0.12	$	0.55	$	0.44
Diluted		0.17			0.12		0.55		0.44

Note 3- Debt Securities

Debt securities have been classified in the consolidated balance sheet according to management’s intent. The carrying value of securities as of March 31, 2023 and June 30, 2022, consists of the following:


			Unaudited
	****	March 31, 2023		****	June 30, 2022		****
Available for sale debt securities, at fair value		$	9,237,899		$	10,617,238
Held to maturity debt securities, at amortized cost			517,035			532,363
		$	9,754,934		$	11,149,601

The amortized cost and fair value of debt securities, with gross unrealized gains and losses, are as follows:


	****			****	Gross		****	Gross		****	****
		Amortized			Unrealized			Unrealized
	****	Cost		****	Gains		****	Losses		****	Fair Value
March 31, 2023
Available for sale debt securities
States and municipalities		$	904,237		$	800		$	(7,737)		$	897,300
Mortgage-backed			2,108,192			24,202			(104,650)			2,027,744
Corporate bonds			7,119,172			—			(806,317)			6,312,855
		$	10,131,601		$	25,002		$	(918,704)		$	9,237,899
Held to maturity debt securities
Mortgage-backed		$	517,035		$	—		$	(124,986)		$	392,049

Table of Contents


	****			****	Gross		****	Gross		****		****
	****	Amortized		****	Unrealized		****	Unrealized
	****	Cost		****	Gains		****	Losses		****	Fair Value
June 30, 2022
Available for sale debt securities
States and municipalities		$	1,050,034		$	25,395		$	(7,523)		$	1,067,906
Mortgage-backed			2,825,546			27,189			(113,681)			2,739,054
Corporate bonds			7,178,367			—			(368,089)			6,810,278
		$	11,053,947		$	52,584		$	(489,293)		$	10,617,238
Held to maturity debt securities
Mortgage-backed		$	532,363		$	—		$	(113,363)		$	419,000

Securities with a carrying value of approximately $473,000 and $667,000 as of March 31, 2023 and June 30, 2022, were pledged to secure public deposits and debt.

The amortized cost and fair value of debt securities by contractual maturity at March 31, 2023, follows:


	Available for Sale Debt Securities				Held to Maturity Debt Securities
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
March 31, 2023
Due in one year or less	$	508,004	$	480,048	$	—	$	—
Due from more than one to five years		2,871,858		2,776,526		—		—
Due from more than five to ten years		4,643,547		3,953,581		—		—
		8,023,409		7,210,155		—		—
Mortgage-backed securities		2,108,192		2,027,744		517,035		392,049
	$	10,131,601	$	9,237,899	$	517,035	$	392,049

There were no sales of available for sale debt securities during the three and nine month periods ended March 31, 2023 and 2022. The Company did recognize gains of $24,000 and $14,000, respectively, on bonds that matured during the nine months ended March 31, 2023 and 2022 related to previous other than temporary impairment charges taken on these securities.

The following table shows the gross unrealized losses and fair value of the Company’s securities with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2023 and June 30, 2022:


	Less than 12 Months				12 Months or More				Total
	Gross				Gross				Gross
	Unrealized				Unrealized				Unrealized
	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
March 31, 2023
Available for sale debt securities
States and municipalities	$	(7,737)	$	777,017	$	—	$	—	$	(7,737)	$	777,017
Mortgage-backed		(6,748)		288,988		(97,902)		1,610,697		(104,650)		1,899,685
Corporate bonds		(85,000)		415,000		(721,317)		5,897,855		(806,317)		6,312,855
	$	(99,485)	$	1,481,005	$	(819,219)	$	7,508,552	$	(918,704)	$	8,989,557
Held to maturity debt securities
Mortgage-backed securities	$	—	$	—	$	(124,986)	$	392,049	$	(124,986)	$	392,049

Table of Contents


	Less than 12 Months				12 Months or More				Total
	Gross				Gross				Gross
	Unrealized				Unrealized				Unrealized
	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
June 30, 2022
Available for sale debt securities
States and municipalities	$	(6,144)	$	688,504	$	(1,379)	$	58,621	$	(7,523)	$	747,125
Mortgage-backed		(98,106)		2,421,426		(15,575)		101,977		(113,681)		2,523,403
Corporate bonds		(302,991)		5,791,516		(65,098)		1,018,762		(368,089)		6,810,278
	$	(407,241)	$	8,901,446	$	(82,052)	$	1,179,360	$	(489,293)	$	10,080,806
Held to maturity debt securities
Mortgage-backed securities	$	(113,363)	$	419,000	$	—	$	—	$	(113,363)	$	419,000

There were 29 securities in an unrealized loss position in the less than 12 months category and 38 securities in the 12 months or more category at March 31, 2023. There were 58 securities in an unrealized loss position in the less than 12 months category and six securities in the 12 months or more category at June 30, 2022. All of these unrealized losses were caused by interest rate changes. The contractual terms of the securities do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investment. Because the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company does not consider the securities to be other-than-temporarily impaired.

Note 4- Loans

A summary of loans by major category follows:


	Unaudited
	March 31, 2023		June 30, 2022
Commercial real estate	$	84,944,122	$	80,603,153
Commercial and industrial		7,210,087		8,778,723
Construction		7,520,505		10,582,488
One-to-four-family residential		60,572,746		51,890,948
Multi-family real estate		40,805,841		33,944,903
Consumer		3,143,433		2,100,259
Total loans		204,196,734		187,900,474
Deferred loan fees		(75,544)		(75,552)
Allowance for loan losses		(2,060,089)		(2,195,050)
Loans, net	$	202,061,101	$	185,629,872

The Company maintains a collateral pledge agreement with the FHLB covering secured advances whereby the Company has agreed to retain, free of all other pledges, liens, and encumbrances, commercial and industrial, commercial real estate, and one-to-four family residential loans. The pledged loans are discounted at a factor of 22% to 37% when aggregating the amount of loans required by the pledge agreement. The amount of eligible collateral was $39,037,282 and $37,536,318 as of March 31, 2023 and June 30, 2022, respectively. There was also FHLB stock of $770,273 and $323,000 pledged as of March 31, 2023 and June 30, 2022. 12

Table of Contents The following tables present the activity in the allowance for loan losses by portfolio segment for the three and nine months ended March 31, 2023 and 2022, and the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of March 31, 2023 and June 30, 2022:


	Commercial		Commercial				One-to-Four		MultiFamily
	Real Estate		and Industrial		Construction		Residential		Real Estate		Consumer		Unallocated		Total
March 31, 2023
Allowance for credit losses
Balance at beginning of year	$	1,591,644	$	32,701	$	55,029	$	263,951	$	233,371	$	601	$	17,753	$	2,195,050
Charge-offs		(136,753)		—		—		—		—		—		—		(136,753)
Recoveries		—		—		—		—		—		572		—		572
Provisions		109,130		(5,303)		(30,238)		(41,667)		(17,238)		(553)		(14,131)		—
Balance at September 30, 2022		1,564,021		27,398		24,791		222,284		216,133		620		3,622		2,058,869
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		602		—		602
Provisions		(279,012)		(6,060)		(7,185)		(13,998)		(20,376)		(619)		327,250		—
Balance at December 31, 2022		1,285,009		21,338		17,606		208,286		195,757		603		330,872		2,059,471
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		618		—		618
Provisions		(48,960)		(2,772)		(3,430)		1,822		62,340		(506)		(8,494)		—
Balance at end of period	$	1,236,049	$	18,566	$	14,176	$	210,108	$	258,097	$	715	$	322,378	$	2,060,089


Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,236,049		18,566		14,176		210,108		258,097		715		322,378		2,060,089
Balance at end of period	$	1,236,049	$	18,566	$	14,176	$	210,108	$	258,097	$	715	$	322,378	$	2,060,089

Loans
Individually evaluated for impairment	$	—	$	—	$	—	$	119,883	$	—	$	—	$	—	$	119,883
Collectively evaluated for impairment		84,944,122		7,210,087		7,520,505		60,452,863		40,805,841		3,143,433		—		204,076,851
	$	84,944,122	$	7,210,087	$	7,520,505	$	60,572,746	$	40,805,841	$	3,143,433	$	—	$	204,196,734


	Commercial		Commercial				One-to-Four		MultiFamily
	Real Estate		and Industrial		Construction		Residential		Real Estate		Consumer		Unallocated		Total
June 30, 2022
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,591,644		32,701		55,029		263,951		233,371		601		17,753		2,195,050
Balance at end of period	$	1,591,644	$	32,701	$	55,029	$	263,951	$	233,371	$	601	$	17,753	$	2,195,050
Loans
Individually evaluated for impairment	$	—	$	—	$	—	$	193,385	$	—	$	—	$	—	$	193,385
Collectively evaluated for impairment		80,603,153		8,778,723		10,582,488		51,697,563		33,944,903		2,100,259				187,707,089
Balance at end of period	$	80,603,153	$	8,778,723	$	10,582,488	$	51,890,948	$	33,944,903	$	2,100,259	$	—	$	187,900,474

Table of Contents


	Commercial		Commercial				One-to-Four		MultiFamily
March 31, 2022	Real Estate		and Industrial		Construction		Residential		Real Estate		Consumer		Unallocated		Total
Allowance for credit losses
Balance at beginning of period	$	1,036,301	$	157,533	$	59,649	$	409,395	$	134,216	$	4,896	$	384,192	$	2,186,182
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		1,124		—		1,124
Provisions		187,549		(89,036)		(9,003)		(53,138)		(47,734)		(102)		11,464		—
Balance at September 30, 2021		1,223,850		68,497		50,646		356,257		86,482		5,918		395,656		2,187,306
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		1,337		—		1,337
Provisions		64,577		(19,488)		(2,866)		(14,346)		34,871		(1,723)		(61,025)		—
Balance at December 31, 2021		1,288,427		49,009		47,780		341,911		121,353		5,532		334,631		2,188,643
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		5,591		—		5,591
Provisions		29,398		(16,894)		(11,075)		(74,281)		93,651		(10,533)		(10,266)		—
Balance at end of period	$	1,317,825	$	32,115	$	36,705	$	267,630	$	215,004	$	590	$	324,365	$	2,194,234

Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,317,825		32,115		36,705		267,630		215,004		590		324,365		2,194,234
Balance at end of period	$	1,317,825	$	32,115	$	36,705	$	267,630	$	215,004	$	590	$	324,365	$	2,194,234
Loans
Individually evaluated for impairment	$	—	$	—	$	—	$	195,186	$	—	$	—	$	—	$	195,186
Collectively evaluated for impairment		65,470,584		8,507,155		8,586,041		52,026,209		29,153,034		2,104,856		—		165,847,879
Balance at end of period	$	65,470,584	$	8,507,155	$	8,586,041	$	52,221,395	$	29,153,034	$	2,104,856	$	—	$	166,043,065

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, collateral adequacy, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as commercial and industrial and commercial real estate loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:

Pass – Loans classified as pass represent loans that are evaluated and are performing under the stated terms. Pass rated assets are analyzed by the paying capacity, the current net worth, and the value of the loan collateral of the obligor.

Special Mention/Watch – Loans classified as watch possess potential weaknesses that require management attention but do not yet warrant adverse classification. While the status of a loan put on this list may not technically trigger their classification as substandard or doubtful, it is considered a proactive way to identify potential issues and address them before the situation deteriorates further and does result in a loss for the Company.

Substandard – Loans classified as substandard are inadequately protected by the current net worth, paying capacity of the obligor, or by the collateral pledged. Substandard loans must have a well-defined weakness or weaknesses that jeopardize the repayment of the debt as originally contracted. They are characterized by the distinct possibility that the Company will sustain a loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have the weaknesses of those classified as 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. Loans in this category are allocated a specific reserve based on the estimated discounted cash flows from the loan (or collateral value less cost to sell for collateral dependent loans) or are charged-off if deemed uncollectible. 14

Table of Contents Based on the most recent analysis performed, the risk category of loans by class of loans as of March 31, 2023 and June 30, 2022, is as follows:


			Special Mention/
	Pass		Watch		Substandard		Doubtful		****	Total
March 31, 2023
Commercial real estate	$	84,944,122	$	—	$	—	$	—		$	84,944,122
Commercial and industrial		7,210,087		—		—		—			7,210,087
Construction		7,520,505		—		—		—			7,520,505
	$	99,674,714	$	—	$	—	$	—		$	99,674,714


			Special Mention/
	Pass		Watch		Substandard		Doubtful		****	Total
June 30, 2022
Commercial real estate	$	79,214,378	$	1,388,775	$	—	$	—		$	80,603,153
Commercial and industrial		8,778,723		—		—		—			8,778,723
Construction		10,582,488		—		—		—			10,582,488
	$	98,575,589	$	1,388,775	$	—	$	—		$	99,964,364

Residential real estate and consumer loans are managed on a pool basis due to their homogeneous nature. Loans that are 90 days or more delinquent or are not accruing interest are considered nonperforming. The following table presents the recorded investments in residential real estate and consumer loans by class based on payment activity as of March 31, 2023 and June 30, 2022:


	Performing		Nonperforming		****	Total
March 31, 2023
One-to-four-family residential	$	60,572,746	$	—		$	60,572,746
Multi-family real estate		40,805,841		—			40,805,841
Consumer		3,143,433		—			3,143,433
	$	104,522,020	$	—		$	104,522,020


	Performing		Nonperforming		****	Total
June 30, 2022
One-to-four-family residential	$	51,827,163	$	63,785		$	51,890,948
Multi-family real estate		33,944,903		—			33,944,903
Consumer		2,100,259		—			2,100,259
	$	87,872,325	$	63,785		$	87,936,110

The following tables summarize the aging of the past due loans by loan class within the portfolio segments as of March 31, 2023 and June 30, 2022:


	Still Accruing
	30-59 Days		60-89 Days		Over 90 Days		Nonaccrual
	Past Due		Past Due		Past Due		Balance
March 31, 2023
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial		—		—		—		—
Construction		—		—		—		—
One-to-four-family residential		28,574		—		—		—
Multi-family real estate		—		—		—		—
Consumer		—		—		—		—
Total	$	28,574	$	—	$	—	$	—

Table of Contents


	Still Accruing
	30-59 Days		60-89 Days		Over 90 Days		Nonaccrual
	Past Due		Past Due		Past Due		Balance
June 30, 2022
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial		—		—		—		—
Construction		—		—		—		—
One-to-four-family residential		70,485		—		50,818		63,785
Multi-family real estate		—		—		—		—
Consumer		—		—		—		—
Total	$	70,485	$	—	$	50,818	$	63,785

Impaired Loans

A loan is considered impaired when based on current information and events, it is probable that the Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.

The following tables summarize individually impaired loans by class of loans as of March 31, 2023 and June 30, 2022 and for the nine months and year ended March 31, 2023 and June 30, 2022, respectively:


							For the Nine Months Ended
							March 31, 2023
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance (1)		Allowance		Investment		Recognized
March 31, 2023
With no related allowance recorded
One-to-four-family residential		119,883		119,883		—		124,742		5,327
	$	119,883	$	119,883	$	—	$	124,742	$	5,327


							For the Nine Months Ended
							March 31, 2023
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance (1)		Allowance		Investment		Recognized
With an allowance recorded
Commercial and industrial	$	—	$	—	$	—	$	—	$	—
One-to-four-family residential		—		—		—		—		—
Consumer		—		—		—		—		—
	$	—	$	—	$	—	$	—	$	—

(1) Represents the borrower's loan obligation, gross of any previously charged-off amounts.


							For the Year Ended
							June 30, 2022
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance (1)		Allowance		Investment		Recognized
June 30, 2022
With no related allowance recorded
One-to-four-family residential	$	193,385	$	193,385	$	—	$	199,080	$	13,428
	$	193,385	$	193,385	$	—	$	199,080	$	13,428

Table of Contents


							For the Year Ended
							June 30, 2022
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance (1)		Allowance		Investment		Recognized
With an allowance recorded
Commercial and industrial	$	—	$	—	$	—	$	—	$	—
One-to-four-family residential		—		—		—		—		—
Consumer		—		—		—		—		—
	$	—	$	—	$	—	$	—	$	—

(1) Represents the borrower's loan obligation, gross of any previously charged-off amounts.

Impaired loans include loans modified in troubled debt restructurings (TDR) where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.

There were no loans modified as TDRs during the three and nine months ended March 31, 2023 and 2022. The Company has made no commitments to lend additional funds on restructured loans.

Note 5 - Leases

On July 1, 2022, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842. The Company elected the prospective application approach provided by ASU 2018-11 and did not adjust prior periods for ASC 842. The Company also elected certain practical expedients within the standard and consistent with such elections did not reassess whether any expired or existing contracts are or contain leases, did not reassess the lease classification for any expired or existing leases, and did not reassess any initial direct costs for existing leases. The implementation of the new standard resulted in recognition of right-of-use assets and lease liabilities totaling $698,837 at the date of adoption, which are related to the Company’s lease of premises and equipment used in operations.

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable prepaid rent, initial direct costs and any incentives received from the lessor.

The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations. 17

Table of Contents

The following tables present information about the Company’s leases as of and for the three and nine months ended March 31, 2023:


	As of
	March 31, 2023

Right-to-use assets	$	619,002
Lease liability		611,460
Weighted average remaining lease term		7.04 years
Weighted average discount rate		3.24%

	Three Months		Nine Months
	Ended March 31,		Ended March 31,
	2023		2023
Operating lease costs	$	31,929	$	95,788
Short-term lease costs		9,570		28,710
Total lease costs	$	41,499	$	124,498

Cash paid for amounts included in measurement of lease liabilities	$	30,999	$	92,997

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows:


	As of March 31,
	2023
Lease payments due

Three months ending June 30, 2023	$	20,760
Year ending June 30, 2024		125,220
Year ending June 30, 2025		105,013
Year ending June 30, 2026		103,622
Year ending June 30, 2027		99,575
Thereafter		233,999
Total		688,189
Discount		76,729
Lease liability	$	611,460

Note 6 - Deposits

Major classifications of deposits are as follows as of March 31, 2023 and June 30, 2022.


		Unaudited
	****	At March 31, 2023				****	At June 30, 2022
	****	Amount		****	Percent	****	Amount		****	Percent	****
Non-interest-bearing demand accounts		$	25,681,875		12.77	%	$	23,698,115		12.60	%
Demand, NOW, money market accounts			47,734,885		23.74	%		57,797,635		30.73	%
Savings accounts			44,067,749		21.92	%		46,601,748		24.77	%
Certificates of deposit			83,588,369		41.57	%		60,002,950		31.90	%
Total		$	201,072,878		100.00	%	$	188,100,448		100.00	%

Table of Contents Note 7- Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component for the nine months ended March 31, 2023 and 2022, follows:


	Unrealized
	Gains and		Unrealized
	Losses on		Losses on
	Available		Held to
	for Sale Debt		Maturity Debt
	Securities		Securities		Total
Nine Months Ended March 31, 2023
Balance, beginning of period	$	(318,344)	$	(50,685)	$	(369,029)
Other comprehensive loss before reclassifications (net of tax)		(129,271)		—		(129,271)
Amortization of amounts transferred from debt securities available for sale to held to maturity (a)		—		1,461		1,461
Balance, September 30, 2022		(447,615)		(49,224)		(496,839)
Other comprehensive loss before reclassifications (net of tax)		(199,467)		—		(199,467)
Amortization of amounts transferred from debt securities available for sale to held to maturity (a)		—		1,345		1,345
Amounts reclassified from accumulated other comprehensive loss, (net of tax) (b)		(17,462)		—		(17,462)
Balance, December 31, 2022		(664,544)		(47,879)		(712,423)
Other comprehensive income before reclassifications (net of tax)		14,293		—		14,293
Amortization of amounts transferred from debt securities available for sale to held to maturity (a)		—		1,528		1,528
Balance, end of period	$	(650,251)	$	(46,351)	$	(696,602)

(a)	The reclassification adjustment is reflected in the Consolidated Statements of Income as Interest Income-Debt Securities.

(b)	The reclassification adjustment is reflected in the Consolidated Statements of Income as Net Gain on Securities Transactions ($24,000) and Provision for Income Taxes ($6,538).

Table of Contents


		Unrealized
		Gains and		Unrealized
		Losses on		Losses on
		Available		Held to
		for Sale Debt		Maturity Debt
		Securities		Securities		Total
Nine Months Ended March 31, 2022
Balance, beginning of period		$	188,558	$	(67,891)	$	120,667
Other comprehensive loss before reclassifications (net of tax)			(4,186)		—		(4,186)
Amortization of amounts transferred from debt securities available for sale to held to maturity (a)			—		5,119		5,119
Balance, September 30, 2021			184,372		(62,772)		121,600
Other comprehensive loss before reclassifications (net of tax)			(47,240)		—		(47,240)
Amounts reclassified from accumulated other comprehensive income, (net of tax) (b)			(10,185)		—		(10,185)
Amortization of amounts transferred from debt securities available for sale to held to maturity (a)			—		4,217		4,217
Balance, December 31, 2021			126,947		(58,555)		68,392
Other comprehensive loss before reclassifications (net of tax)			(287,934)		—		(287,934)
Amortization of amounts transferred from debt securities available for sale to held to maturity (a)			—		4,628		4,628
Balance, end of period		$	(160,987)	$	(53,927)	$	(214,914)

(a)	The reclassification adjustment is reflected in the Consolidated Statements of Income as Interest Income-Debt Securities.
---	---
(b)	The reclassification adjustment is reflected in the Consolidated Statements of Income as Net Gain on Securities Transactions ($14,000) and Provision for Income Taxes of ($3,815).
---	---

Note 8- Minimum Regulatory Capital Requirements

Bank regulatory authorities in the United States issue risk-based capital standards. These capital standards relate a banking company’s capital to the risk profile of its assets and provide the basis by which all banking companies and banks are evaluated in terms of capital adequacy.

The risk-based capital standards require financial institutions to maintain: (a) a minimum ratio of common equity tier 1 (“CET1”) to risk weighted assets of at least 4.5%, (b) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%; (c) a minimum ratio of total (that is, tier 1 plus tier 2) capital to risk-weighted assets of at least 8.0%; and (d) a minimum leverage ratio of 3.0%, calculated as the ratio of tier 1 capital balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter). In addition, the rules also limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” of 2.5% above the minimum standards stated in (a) - (c) above.

In September 2019, the FDIC finalized a rule to simplify the capital calculation for qualifying community banking organizations (i.e., the community bank leverage ratio (“CBLR framework”)), as required by the Economic Growth, Regulatory Relief and Consumer Protection Act. The CBLR framework is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. A qualifying community bank may elect to utilize the CBLR in lieu of the general capital requirements and will be considered well capitalized if it exceeds the minimum CBLR of 9.0%. The CBLR framework also provides a two-quarter grace period for qualifying banks whose leverage ratio falls no more than 20

Table of Contents 1.00% below the required ratio for that reporting quarter. The Bank opted into the CBLR framework as of March 31, 2023 and June 30, 2022.

As of March 31, 2023 and June 30, 2022, management believes the Bank has met all capital adequacy requirements to which it is subject. As of March 31, 2023 and June 30, 2022, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios are presented in the following table (dollars in thousands):


										Minimum To Be Well
										Capitalized Under
					Minimum Capital					Prompt Corrective
	Actual				Requirements					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio
March 31, 2023	(Dollars in thousands)
Tier I Capital to Average Assets	$	28,470	12.02	%	$	18,956	>	8.0	%	$	21,325	>	9.0	%


										Minimum To Be Well
										Capitalized Under
					Minimum Capital					Prompt Corrective
	Actual				Requirements					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio
June 30, 2022	(Dollars in thousands)
Tier I Capital to Average Assets	$	27,152	12.17	%	$	17,848	>	8.0	%	$	20,080	>	9.0	%

A Wisconsin state-chartered savings bank is required by state law to maintain minimum net worth, as defined, in an amount equal to at least 6.0% of its total assets. At March 31, 2023, the Bank’s net worth was $27,773,058 and general loan loss reserve was $2,060,089, totaling 12.44% of total assets, which meets the state of Wisconsin’s minimum net worth requirements. At June 30, 2022, the Bank’s net worth was $26,783,484 and general loan loss reserve was $2,195,050, totaling 13.17% of total assets, which meets the state of Wisconsin’s minimum net worth requirements.

Note 9 - Employee Benefit Plans

The Company provides a 401(k) salary deferral plan to substantially all employees. Employees are allowed to make voluntary contributions to the plan up to 15% of their compensation. In addition, the Company provides discretionary matching and profit-sharing contributions as well as a safe harbor contribution.

Effective upon the completion of the Company’s initial public stock offering in April 2021, the Company established an Employee Stock Ownership Plan (“ESOP”) for all eligible employees. The ESOP used $873,970 in proceeds from a term loan obtained from the Company to purchase 87,397 shares of common stock in the initial public offering at a price of $10.00 per share. The ESOP loan will be repaid principally from the Company’s contribution to the ESOP in annual payments through 2045 at a fixed interest rate per annum at 3.25%. Shares are released to participants on a straight-line basis over the loan term and allocated based on participant compensation. The Company recognizes compensation benefit expense as shares are committed for release at their current market price. The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital. Dividends on allocated shares, if applicable, are recorded as a reduction of retained earnings and dividends on unallocated shares are recorded as a reduction of debt. The Company recognized $29,639 (upon the release of 2,622 shares) and $38,736 (upon the release of 3,623 shares) of compensation expense related to this plan for the nine months ended March 31, 2023 and 2022, respectively. At March 31, 2023, there were 79,531 shares not yet released having an aggregate market value of approximately $862,911. Participants will become fully vested upon completion of three years of credited service. Eligible employees who were employed with the Company shall receive credit for vesting purposes for each year of continuous employment prior to adoption of the ESOP. 21

Table of Contents Note 10 - Stock Based Compensation

On May 24, 2022, the stockholders of Marathon Bancorp, Inc. approved the Company’s 2022 Equity Incentive Plan (the “Plan”), which provides for the grant of stock-based awards to officers, employees and directors of the Company and Marathon Bank. Under provisions of the Plan, while active, awards may consist of grants of incentive stock options, nonqualified stock options, restricted stock and restricted stock units. Stock options totaling 109,245 and restricted stock awards totaling 43,698 were authorized for award under the Plan.

Stock Options

On June 28, 2022, the Compensation Committee of the board of directors of the Company approved the grant of stock option awards to its directors, executive officers, senior officers and other officers under the Plan.

A total of 73,194 stock option awards were granted to its directors, executive officers, senior officers and other officers (18,572 and 54,622 options were awarded to directors and employees, respectively). Director awards are considered non-qualified stock options while employee awards are considered incentive stock options. During the nine months ended March 31, 2023, a director and employee retired resulting in the forfeiture of 7,647 options. The awards vest ratably over five years (20% per year for each year of the participant’s service with the Company) and will expire ten years from the date of the grant, or June 2032. The fair value of each option grant was established at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model used the following weighted average assumptions: risk-free interest rate of 3.27%; volatility factors of the expected market price of the Company's common stock of 20.76%; weighted average expected lives of the options of 6.5 years; cash dividend yield of 0%. Based upon these assumptions, the weighted average fair value of options granted was $3.33. The total expense of $218,272 (adjusted for forfeited options) will be amortized to expense over a period of 60 months commencing July 1, 2022. Expense amortized during the nine months ended March 31, 2023 totaled $32,741. There are no options available for exercise as of March 31, 2023 or June 30, 2022.

The aggregate intrinsic value of a stock option represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options prior to the expiration date. The intrinsic value can change based on fluctuations in the market value of the Company’s stock. At March 31, 2023, the stock options had no intrinsic value. The stock options had no intrinsic value as of June 30, 2022.

At March 31, 2023, the average remaining contractual life of outstanding options and shares exercisable was 9.25 years.

Restricted Stock

On June 28, 2022, the Compensation Committee of the board of directors of the Company approved the grant of restricted stock awards to its directors, executive officers, senior officers and other officers under the Plan. A total of 40,203 restricted stock awards were granted to its directors, executive officers, senior officers and other officers under the Plan (9,614 and 30,589 awards were granted to directors and employees, respectively). During the nine months ended March 31, 2023, a director and employee retired resulting in the forfeiture of 3,059 awards. The restricted stock awards vest ratably over five years (20% per year for each year of the participant’s service with the Company). The total expense of $414,527 (adjusted for forfeited awards) will be amortized to expense over a period of 60 months commencing July 1, 2022. Expense amortized during the nine months ended March 31, 2023 totaled $62,179.

Note 11- Commitments and Contingencies

The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss is represented by the contractual amount of these 22

Table of Contents commitments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

As of March 31, 2023 and June 30, 2022, the following financial instruments were outstanding where contract amounts represent credit risk:


	March 31, 2023		June 30, 2022
Commitments to grant loans	$	652,250	$	4,025,000
Unused commitments under lines of credit		5,570,028		6,707,000
MPF credit enhancements		616,884		838,277

Commitments to grant 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. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

Mortgage Partnership Finance (MPF) credit enhancements allow the Company to share the credit risk associated with home mortgage finance with Federal Home Loan Bank (FHLB). MPF provides the Company the ability to originate, sell, and service fixed-rate, residential mortgage loans, and receive a Credit Enhancement Fee based on the performance of the loans. FHLB manages the liquidity, interest rate, and prepayment risks of the loans while the Company manages the credit risk of the loans. The Company will incur an obligation on a foreclosure loss only after a foreclosure loss exceeds the borrower’s equity, any private mortgage insurance, and the funded first loss account. Based on the delinquency results for states where properties are located and the Company’s historical loss experience, the estimated foreclosure losses are immaterial.

The Company, from time to time, may be a defendant in legal proceedings relating to the conduct of its banking business. Most of such legal proceedings are a normal part of the banking business and, in management’s opinion as of March 31, 2023, the financial condition and results of operations of the Company would not be materially affected by the outcome of such legal proceedings.

Note 12- Fair Value of Assets and Liabilities

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value accounting guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. 23

Table of Contents In accordance with this guidance, the Company groups its financial assets and liabilities generally measured at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on 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 for substantially the full term of the asset or liability.

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

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following table sets forth assets and liabilities measured at fair value on a recurring basis at March 31, 2023 and June 30, 2022:


			Quoted Prices in		Other Observable		Unobservable
			Active Markets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
March 31, 2023
Available for sale debt securities
States and municipalities	$	897,300	$	—	$	897,300	$	—
Mortgage-backed		2,027,744		—		2,027,744		—
Corporate bonds		6,312,855		—		4,692,855		1,620,000
Total assets	$	9,237,899	$	—	$	7,617,899	$	1,620,000


			Quoted Prices in		Other Observable		Unobservable
			Active Markets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
June 30, 2022
Available for sale debt securities
States and municipalities	$	1,067,906	$	—	$	1,067,906	$	—
Mortgage-backed		2,739,054		—		2,739,054		—
Corporate bonds		6,810,278		—		4,910,278		1,900,000
Total assets	$	10,617,238	$	—	$	8,717,238	$	1,900,000

For those available for sale debt securities where quoted prices are unavailable, fair values are calculated based on market prices of similar securities and, therefore, are classified as Level 2 within the valuation hierarchy.

The following table represents changes in the Company’s available for sale debt securities measured at fair value on a recurring basis using unobservable inputs (Level 3). The Company had one investment security measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at March 31, 2023 and June 30, 2022. This security was purchased during the three months ended September 30, 2021 and was reclassified to Level 3 during the three months ended December 31, 2021 because of the lack of observable market data for this investment. The 24

Table of Contents investment is valued on a quarterly basis by a third-party valuation expert. The Level 3 valuation is based on the 5/30 swap curve, floated at 1%, which is considered a significant unobservable input.


		Nine Months			Nine Months
		Ended March 31,			Ended March 31,
		2023			2022


Balance at June 30,	$		1,900,000	$		—

Unrealized losses included in other comprehensive income (loss)			(60,000)			—

Balance at September 30,			1,840,000			—

Unrealized losses included in other comprehensive income (loss)			(240,000)

Transfer of security from Level 2 to Level 3			—			2,000,000

Balance at December 31,			1,600,000			2,000,000

Unrealized gains (losses) included in other comprehensive income (loss)			20,000			(100,000)

Balance at March 31,	$		1,620,000	$		1,900,000

Under certain circumstances the Company may make adjustments to fair value for assets and liabilities although they are not measured at fair value on an ongoing basis. The Company had no Level 3 financial assets measured at fair value on a nonrecurring basis.

Financial Disclosures about Fair Value of Financial Instruments

Accounting guidance requires disclosures of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate their fair values. Certain financial instruments and all non-financial instruments are excluded from the scope of the guidance.

The estimated fair values of financial instruments are as follows:


		March 31, 2023						June 30, 2022
	****	Carrying Value		****	Fair Value		****	Carrying Value		****	Fair Value
Financial Assets
Cash and due from banks		$	2,605,055		$	2,605,055		$	2,418,041		$	2,418,041
Federal funds sold			6,831,000			6,831,000			6,010,000			6,010,000
Interest bearing deposits in other financial institutions			3,778,805			3,778,805			1,945,073			1,945,073
Available for sale debt securities			9,237,899			9,237,899			10,617,238			10,617,238
Held to maturity debt securities			517,035			392,049			532,363			419,000
Loans, net			202,061,101			181,363,000			185,629,872			178,080,000
Investment in restricted stock			770,273			770,273			323,000			323,000
Interest receivable			588,419			588,419			565,929			565,929
Financial Liabilities
Deposits		$	201,072,878		$	183,355,000		$	188,100,448		$	172,922,000
Federal Home Loan Bank (FHLB) advances			5,000,000			5,000,000			—			—
Accrued interest payable			32,586			32,586			31,071			31,071

The methods and assumptions that were used to estimate the fair value of financial assets and financial liabilities that are measured at fair value on a recurring and non-recurring basis have been previously disclosed. A 25

Table of Contents description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below:

Cash and due from banks – Due to their short -term nature, the carrying amount of cash and due from banks approximates fair value and is categorized in level 1 of the fair value hierarchy.

Federal funds sold – Due to their short-term nature, the carrying amount of federal funds sold approximates the fair value and is categorized in level 1 of the fair value hierarchy.

Interest bearing deposits in other financial institutions- Due to their short -term nature, the carrying amount of interest- bearing deposits in other financial institutions approximates fair value and is categorized in level 1 of the fair value hierarchy.

Available for sale securities – For those available for sale debt securities where quoted prices are unavailable, fair values are calculated based on market prices of similar securities and, therefore, are classified as level 2 within the valuation hierarchy. For those available for sale debt securities where market prices of similar securities are not available because of the lack of observable market data, they are valued on a quarterly basis by a third-party valuation expert and, therefore, are classified as level 3 within the valuation hierarchy.

Held to maturity debt securities-The fair value is estimated using quoted market prices or by pricing models and is categorized as level 2 of the fair value hierarchy.

Loans– The fair value of variable rate loans that reprice frequently are based on carrying values. The 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 and is categorized in level 3 of the fair value hierarchy. Loans held for sale are included with loans, net above, with fair value based on commitments on hand from investors or prevailing market prices and is categorized in level 3 of the fair value hierarchy.

Investments in restricted stock – No secondary market exists for FHLB stock. The stock is bought and sold at par by the FHLB and management believes the carrying amount approximates fair value and is categorized in level 2 of the fair value hierarchy.

Interest receivable – Due to their short -term nature, the carrying amount approximates fair value and is categorized in level 1 of the fair value hierarchy.

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 offered on similar time deposits. Deposits are categorized in level 2 of the fair value hierarchy.

Federal Home Loan Bank (FHLB) advances – The carrying amount approximates fair value and is categorized in level 2 of the fair value hierarchy.

Accrued interest payable – Due to their short-term nature, the carrying amount approximates fair value and is categorized in level 1 of the fair value hierarchy.

The estimated fair value of fee income on letters of credit at March 31, 2023 and June 30, 2022 is insignificant. Loan commitments on which the committed interest rate is less than the current market rate are also insignificant at March 31, 2023 and June 30, 2022.

Note 13- Revenue Recognition

In accordance with FASB Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606) and all subsequent amendments, the Company’s services that fall within the scope of Topic 606 26

Table of Contents are presented within non-interest income and are recognized as revenue as the Company satisfies its obligation to the customer. All of the Company’s revenue from contracts with customers in the scope of Topic 606 is recognized within non-interest income which includes service charges on deposit accounts and the sale of foreclosed assets.

A description of the Company’s revenue streams accounted for under Topic 606 follows:

Service Charges on Deposit Accounts: Service charges on deposit accounts relate to fees generated from a variety of deposit products and services rendered to customers. Charges include, but are not limited to, overdraft fees, non-sufficient fund fees, dormant fees, and monthly service charges. Such fees are recognized concurrent with the event on a daily basis or on a monthly basis depending upon the customer’s cycle date.

Gains (Losses) on Sales of Foreclosed Assets: The Company records a gain or loss from a sale of foreclosed assets when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. If the Company finances the sale of foreclosed asset to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the foreclosed asset is derecognized, and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the accompanying consolidated financial statements. You should read the information in this section in conjunction with the business and financial information regarding Marathon Bancorp, Inc. provided in this Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended June 30, 2022 as filed with the Securities and Exchange Commission on September 28, 2022.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains certain forward-looking statements, which are included pursuant to the “safeharbor” provisions of the Private Securities Litigation Reform Act of 1995, and reflect management’s beliefs and expectations based on information currently available. These forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “potential,” “target” and words of similar meaning. 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 quality of our loan and investment portfolios; and
---	---
●	estimates of our risks and future costs and benefits.
---	---

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

●	inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;
●	general economic conditions, either nationally or in our market areas, that are worse than expected;
---	---
●	events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock;
---	---
●	changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;
---	---
●	our ability to access cost-effective funding;
---	---
●	fluctuations in real estate values and both residential and commercial real estate market conditions;
---	---
●	demand for loans and deposits in our market area;
---	---

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●	our ability to implement and change our business strategies;
●	competition among depository and other financial institutions;
---	---
●	adverse changes in the securities or secondary mortgage markets, including our ability to sell loans in the secondary market;
---	---
●	changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;
---	---
●	changes in the quality or composition of our loan or investment portfolios;
---	---
●	technological changes that may be more difficult or expensive than expected;
---	---
●	the inability of third-party providers to perform as expected;
---	---
●	a failure or breach of our operational or security systems or infrastructure, including cyberattacks;
---	---
●	our ability to manage market risk, credit risk and operational risk in the current economic environment;
---	---
●	our ability to enter new markets successfully and capitalize on growth opportunities;
---	---
●	our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;
---	---
●	changes in consumer spending, borrowing and savings habits;
---	---
●	changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
---	---
●	our ability to retain key employees;
---	---
●	any future FDIC insurance premium increases or special assessments may adversely affect our earnings;
---	---
●	our ability to control operating costs and expenses, including compensation expense associated with equity allocated or awarded to our employees; and
---	---
●	changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
---	---

Overview

Net Interest Income. Our primary source of income is net interest income. Net interest income is the difference between interest income, which is the income we earn on our loans and investments, and interest expense, which is the interest we pay on our deposits and borrowings.

Provision for Loan Losses. The allowance for loan losses is a valuation allowance for probable incurred credit losses. The allowance for loan losses is increased through charges to the provision for loan losses. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged-off, if any, are credited to the allowance for loan losses when realized.

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Non-interest Income. Our primary sources of non-interest income are mortgage banking income, service charges on deposit accounts and net gains in the cash surrender value of bank owned life insurance and gain on proceeds from life insurance. Other sources of non-interest income include net gain or losses on sales and calls of securities, net gain or loss on disposal of foreclosed assets and other income.

Non-Interest Expenses. Our non-interest expenses consist of salaries and employee benefits, net occupancy and equipment, data processing and office, professional fees, marketing expenses and other general and administrative expenses, including premium payments we make to the FDIC for insurance of our deposits.

Provision for Income Taxes. Our income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized.

Summary of Significant Accounting Policies and Estimates

The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be significant accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

In 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

The following represent our significant accounting policies and estimates:

Allowance for Loan Losses. The allowance for loan losses established as losses is estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

Table of Contents changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; changes in the value of the underlying collateral for collateral-dependent loans; concentrations of credit; and the effect of other external factors such as competition and legal and regulatory requirements. At March 31, 2023 and June 30, 2022, the qualitative loan portfolio risk factors were slightly reduced in all loan categories except commercial and multi-family real estate which we believe exhibits the most credit risk related to local and national economic conditions as well as industry conditions and concentrations.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reason for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and commercial real estate loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.

As an integral part of their examination process, various regulatory agencies review the allowance for loan losses as well. Such agencies may require that changes in the allowance for loan losses be recognized when such regulatory credit evaluations differ from those of management based on information available to the regulators at the time of their examinations.

Provision for Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

We recognize the tax effects from an uncertain tax position in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized, upon ultimate settlement with the relevant tax authority. We recognize interest and penalties accrued or released related to uncertain tax positions in current income tax expense or benefit.

Debt Securities. Available-for-sale and held-to-maturity debt securities are reviewed by management on a quarterly basis, and more frequently when economic or market conditions warrant, for possible other-than-temporary impairment. In determining other-than-temporary impairment, management considers many factors, including the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospectus of the issuer, whether the market decline was affected by macroeconomic conditions and whether the bank has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. A decline in value that is considered to be other-than-temporary is recorded as a loss within non-interest income in the statement of income. The assessment of whether other-than-temporary impairment exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time. In order to determine other-than-temporary impairment for mortgage-backed securities, asset-backed securities and collateralized mortgage obligations, we compare the present value of the remaining cash flows as estimated at the preceding evaluation date to the current expected remaining cash flows. Other-than-temporary impairment is deemed to have occurred if there has been an adverse change in the remaining expected future cash flows.

Table of Contents Comparison of Financial Condition at March 31, 2023 and June 30, 2022

Total Assets. Total assets increased $18.3 million, or 8.3%, to $238.3 million at March 31, 2023 from $220.0 million at June 30, 2022. The increase was primarily due to an increase of $16.4 million, or 8.9%, in loans, net of the allowance for loan losses.

Cash and Cash Equivalents. Total cash and cash equivalents increased $1.0 million, or 12.0%, to $9.4 million at March 31, 2023 from $8.4 million at June 30, 2022, primarily due to an increase in deposits and FHLB borrowings of $13.0 million and $5.0 million, respectively, offset by an increase in cash used to fund new loan originations of $16.4 million.

Debt Securities Available for Sale. Total debt securities available for sale decreased $1.4 million, or 13.0%, to $9.2 million at March 31, 2023 from $10.6 million at June 30, 2022. The decrease was primarily due to paydowns and maturities and a decrease in the fair value of a corporate bond. Debt securities available for sale are carried at fair value with the unrealized gain or loss reflected in accumulated other comprehensive income (loss).

Net Loans. Net loans increased $16.4 million, or 8.9%, to $202.1 million at March 31, 2023 from $185.7 million at June 30, 2022. The increase was primarily due to a $4.3 million, or 5.4%, increase in commercial real estate loans to $84.9 million at March 31, 2023 from $80.6 million at June 30, 2022, an increase in one- to four-family residential loans of $8.7 million, or 16.7%, to $60.6 million at March 31, 2023 from $51.9 million at June 30, 2022 and an increase in multi-family real estate loans of $6.9 million, or 20.2%, to $40.8 million at March 31, 2023 from $33.9 million at June 30, 2022. Commercial and industrial loans decreased by $1.6 million, or 17.9%, to $7.2 million at March 31, 2023 from $8.8 million at June 30, 2022. Construction loans decreased by $3.1 million, or 28.9%, to $7.5 million at March 31, 2023 from $10.6 million at June 30, 2022. The increase in commercial and multi-family real estate loans was primarily due to our strategy to enhance our commercial and multi-family real estate lending in Southeastern Wisconsin. One- to four-family residential loans increased due to additional growth with respect to adjustable-rate one- to four-family residential loans. The decrease in commercial and industrial loans was due to the payoff of a $1.1 million participation loan. The decrease in construction loans was primarily related to a $3.5 million construction loan that was moved to permanent financing in September 2022.

Deposits. Total deposits increased $13.0 million, or 6.9%, to $201.1 million at March 31, 2023 from $188.1 million at June 30, 2022. Non-interest-bearing demand accounts increased $2.0 million, or 8.4%, to $25.7 million at March 31, 2023 from $23.7 million at June 30, 2022. Certificates of deposit increased $23.6 million, or 39.3%, to $83.6 million at March 31, 2023 from $60.0 million at June 30, 2022. Offsetting these increases, was a decrease in demand, NOW and money market accounts of $10.1 million, or 17.4%, to $47.7 million at March 31, 2023 from $57.8 million at June 30, 2022. Savings deposits decreased $2.5 million, or 5.4%, to $44.1 million at March 31, 2023 from $46.6 million at June 30, 2022. The increase in certificates of deposit was due to the purchase of brokered certificates of deposit of $4.5 million during the nine months ended March 31, 2023 and the offering of higher rate certificate of deposit products to keep rates in line with competitors and to attract new funds to the Bank. The decrease in demand, NOW and money market accounts was due to one depositor withdrawing approximately $9.0 million in money market funds in September 2022.

Federal Home Loan Bank (FHLB) Advances. Federal Home Loan Bank (FHLB) advances increased $5.0 million to $5.0 million at March 31, 2023 compared to no borrowings at June 30, 2022 to provide additional funding for new loan originations.

Stockholders’ Equity. Total stockholders’ equity decreased by $360,000, or 1.2%, to $30.4 million at March 31, 2023 from $30.7 million at June 30, 2022. The decrease was primarily due to the repurchase and retirement of common stock of $1.3 million during the nine months ended March 31, 2023 and an increase in accumulated other comprehensive loss, net of tax of $328,000 which was primarily related to the decrease in fair value of a corporate bond as a result of the increase in interest rates. These decreases were offset by net income of $1.2 million for the nine months ended March 31, 2023.

Table of Contents Average Balance Sheets

The following tables set forth average balances, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable. Loan balances include loans held for sale.


		For the Three Months Ended March 31,
		2023								2022
		Average						Average		Average						Average
		Outstanding						Yield/Rate		Outstanding						Yield/Rate
	****	Balance		****	Interest		****	(1)	****	Balance		****	Interest		****	(1)
		(Dollars in thousands)
Interest-earning assets:
Loans (excluding PPP loans)		$	197,128		$	2,066		4.32	%	$	158,529		$	1,649		4.29	%
PPP loans			—			—		—	%		7			11		4,507.71	%
Debt securities			9,982			60		2.46	%		12,633			87		2.82	%
Cash and cash equivalents			13,733			152		4.57	%		28,682			8		0.11	%
Other			770			9		4.83	%		262			1		1.56	%
Total interest-earning assets			221,613			2,287		4.25	%		200,113			1,756		3.61	%
Noninterest-earning assets			15,259								14,466
Total assets		$	236,872							$	214,579
Interest-bearing liabilities:
Demand, NOW and money market deposits		$	51,599			126		0.99	%	$	57,231			53		0.38	%
Savings deposits			44,453			15		0.14	%		46,139			17		0.15	%
Certificates of deposit			84,436			490		2.37	%		58,450			153		1.07	%
Total interest-bearing deposits			180,488			631		1.42	%		161,820			223		0.56	%
FHLB advances and other borrowings			807			6		3.05	%		—			—		—	%
PPP Liquidity Facility borrowings			—			—		—	%		13			—		—	%
Total interest-bearing liabilities			181,295			637		1.43	%		161,833			223		0.56	%
Non-interest bearing demand deposits			25,366								24,135
Other non-interest bearing liabilities			1,757								1,125
Total liabilities			208,418								187,093
Total stockholders' equity			28,454								27,486
Total liabilities and stockholders' equity		$	236,872							$	214,579
Net interest income					$	1,650							$	1,533
Net interest rate spread (2)								2.82	%							3.05	%
Net interest-earning assets (3)		$	40,318							$	38,280
Net interest margin (4)								3.06	%							3.14	%
Average interest-earning assets to interest-bearing liabilities			122.24	%							123.65	%

(1)	Annualized.
---	---
(2)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
---	---
(3)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
---	---
(4)	Net interest margin represents net interest income divided by average total interest-earning assets.
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		For the Nine Months Ended March 31,
		2023								2022
		Average						Average		Average						Average
		Outstanding						Yield/Rate		Outstanding						Yield/Rate
	****	Balance		****	Interest		****	(1)	****	Balance		****	Interest		****	(1)
		(Dollars in thousands)
Interest-earning assets:
Loans (excluding PPP loans)		$	193,740		$	5,999		4.15	%	$	149,045		$	4,589		4.12	%
PPP loans			—			—		—	%		1,277			494		54.90	%
Debt securities			10,427			190		2.43	%		12,656			250		2.64	%
Cash and cash equivalents			13,755			354		3.44	%		35,030			25		0.10	%
Other			632			16		3.39	%		262			4		2.04	%
Total interest-earning assets			218,554			6,559		4.02	%		198,270			5,362		3.62	%
Noninterest-earning assets			14,815								13,870
Total assets		$	233,369							$	212,140
Interest-bearing liabilities:
Demand, NOW and money market deposits		$	55,500			360		0.87	%	$	53,919			142		0.35	%
Savings deposits			44,931			46		0.14	%		45,871			50		0.15	%
Certificates of deposit			75,349			1,055		1.87	%		58,872			487		1.10	%
Total interest-bearing deposits			175,780			1,461		1.11	%		158,662			679		0.57	%
FHLB advances and other borrowings			1,808			45		3.33	%		—			—		—	%
PPP Liquidity Facility borrowings			—			—		—	%		1,696			7		0.55	%
Total interest-bearing liabilities			177,588			1,506		1.13	%		160,358			686		0.57	%
Non-interest-bearing demand deposits			25,918								23,378
Other non-interest-bearing liabilities			1,709								1,149
Total liabilities			205,215								184,885
Total stockholders' equity			28,154								27,255
Total liabilities and stockholders' equity		$	233,369							$	212,140
Net interest income					$	5,053							$	4,676
Net interest rate spread (2)								2.89	%							3.05	%
Net interest-earning assets (3)		$	40,966							$	37,912
Net interest margin (4)								3.09	%							3.18	%
Average interest-earning assets to interest-bearing liabilities			123.07	%							123.64	%

(1)	Annualized.
(2)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
---	---
(3)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
---	---
(4)	Net interest margin represents net interest income divided by average total interest-earning assets.
---	---

Table of Contents The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.


		Three Months Ended March 31,									Nine Months Ended March 31,
		2023 vs. 2022									2023 vs. 2022
		Increase (Decrease) Due to						Total			Increase (Decrease) Due to						Total
								Increase									Increase
	****	Volume		****	Rate		****	(Decrease)		****	Volume		****	Rate		****	(Decrease)
			(In thousands)									(In thousands)
Interest-earning assets:
Loans (excluding PPP loans)		$	413		$	4		$	417		$	1,382		$	28		$	1,410
PPP loans			(79)			68			(11)			(523)			29			(494)
Debt securities			(19)			(8)			(27)			(44)			(16)			(60)
Cash and cash equivalents			(4)			148			144			(15)			344			329
Other			2			6			8			6			6			12
Total interest-earning assets			313			218			531			806			391			1,197
Interest-bearing liabilities:
Demand, NOW and money market deposits			(5)			78			73			5			213			218
Savings deposits			(1)			(1)			(2)			(1)			(3)			(4)
Certificates of deposit			69			268			337			136			432			568
Total interest-bearing deposits			63			345			408			140			642			782
FHLB advances and other borrowings			—			6			6			—			45			45
PPP Liquidity Facility borrowings			—			—			—			(7)			—			(7)
Total interest-bearing liabilities			63			351			414			133			687			820
Change in net interest income		$	250		$	(133)		$	117		$	673		$	(296)		$	377

Comparison of Operating Results for the Three Months Ended March 31, 2023 and 2022

General. Net income was $366,000 for the three months ended March 31, 2023, an increase of $117,000, or 47.0%, from net income of $249,000 for the three months ended March 31, 2022. The increase in net income for the three months ended March 31, 2023 was primarily attributable to an increase of $118,000 in net-interest income and an increase in non-interest income of $66,000, offset by an $82,000 increase in non-interest expenses.

Interest Income. Interest income increased by $531,000, or 30.2%, to $2.3 million for the three months ended March 31, 2023 compared to $1.8 million for the three months ended March 31, 2022 primarily due to increases in loan interest income of $406,000 and other interest income (cash and cash equivalents and other) of $152,000. The increase in other interest income was primarily due to an increase in the average yield of 446 basis points to 4.57% on our cash and cash equivalents investments due to the recent increases in the federal funds rate. These increases were offset by a small decrease in debt securities interest income of $27,000 due to paydowns on securities.

Loan interest income increased by $406,000, or 24.5%, to $2.1 million for the three months ended March 31, 2023 from $1.6 million for the three months ended March 31, 2022, due to an increase in the average balance of the loan portfolio and a slight increase in the average yield on loans (excluding PPP loans). The average balance of the loan portfolio (excluding PPP loans) increased by $38.6 million, or 24.3%, from $158.5 million for the three months ended March 31, 2022 to $197.1 million for the three months ended March 31, 2023. The increase in the average balance of loans was due to our continued efforts to increase commercial and multi-family real estate loans in Southeastern Wisconsin. The average balance of one-to-four family residential loans also increased. The increase was due to additional growth with respect to adjustable-rate one-to four-family residential loans. The average yield on the loan portfolio (excluding PPP loans) increased by three basis points from 4.29% for the three months ended March 31, 2022 to 4.32% for the three months ended March 31, 2023. Loan interest income on PPP loans was positively impacted by 35

Table of Contents the recognition of deferred fee income of $11,000 during the three months ended March 31, 2022 on the forgiven PPP loans repaid by the SBA compared to $0 for the three months ended March 31, 2023.

Debt securities interest income decreased by $27,000, or 31.0%, to $60,000 for the three months ended March 31, 2023 from $87,000 for the three months ended March 31, 2022 due to a $2.7 million decrease in the average balance of debt securities associated with securities paydowns. This was in addition to a decrease of 36 basis points in the average yield on the debt securities portfolio to 2.46% for the three months ended March 31, 2023 from 2.82% for the three months ended March 31, 2022. The decrease in the average yield was related to paydowns on securities bearing higher interest rates and the decrease in the average yield of our collateralized mortgage obligations with inverse floating rates.

Interest Expense. Interest expense increased $414,000, or 185.8%, to $637,000 for the three months ended March 31, 2023 from $223,000 for the three months ended March 31, 2022, due to an increase of $408,000 in interest paid on deposits and an increase of $6,000 in interest paid on borrowings.

Interest expense on deposits increased $408,000, or 183.6%, to $631,000 for the three months ended March 31, 2023 from $223,000 for the three months ended March 31, 2022 due to an increase in the average rate paid on all deposit categories excluding savings deposits and an increase in the average balance of certificates of deposit which increased by $26.0 million, to $84.4 million as compared to $58.5 million when comparing the three months ended March 31, 2023 to the three months ended March 31, 2022. The increase in the average rate paid on all deposit categories excluding savings deposits was due to the Bank raising the interest rates on these deposit categories to maintain customers and keep the rates in line with those competitors are offering. The increase in the average balance of certificates of deposit was due to the purchase of brokered certificates of deposit of $4.5 million and the offering of higher rate certificate of deposit products to attract new funds to the Bank during the three months ended March 31, 2023.

Net Interest Income. Net interest income increased by $117,000, or 7.6%, to $1.7 million for the three months ended March 31, 2023 from $1.5 million for the three months ended March 31, 2022. Also included in net interest income for the three months ended March 31, 2022 was the recognition of deferred fee income of $11,000 on the forgiven PPP loans repaid by the SBA compared to $0 for the three months ended March 31, 2023. Net interest-earning assets increased by $2.0 million, or 5.3%, to $40.3 million for the three months ended March 31, 2023 from $38.3 million for the three months ended March 31, 2022. Net interest rate spread decreased by 23 basis points to 2.82% for the three months ended March 31, 2023 from 3.05% for the three months ended March 31, 2022, reflecting an 87 basis points increase in the average rate paid on interest-bearing liabilities which was offset by a 64 basis points increase in the average yield on interest-earning assets. The net interest margin decreased by eight basis points to 3.06% for the three months ended March 31, 2023 from 3.14% for the three months ended March 31, 2022. The increase in the average yield on interest earning assets for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to an increase in the average yield of 446 basis points on our cash and cash equivalents investments due to the recent increases in the federal funds rate. The increase in the average interest rate paid on interest-bearing liabilities was due to the Bank raising the interest rates on all deposit categories excluding savings accounts to maintain customers and keep the rates in line with what the competitors were offering and to attract new funds to the Bank.

Provision for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, changes in the nature, volume and terms of loans, the fair value of underlying collateral, changes in lending personnel, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. At March 31, 2023, the qualitative loan portfolio risk factors were slightly reduced in all loan categories except for commercial and multi-family real estate loans as compared to June 30, 2022. However, due to the economic and social impacts of the Pandemic being significantly reduced from prior periods, at March 31, 2023, further reduction of the COVID factor was applied to all loan categories except for multi-family real estate loans. See “Management’s Discussion and Analysis of

Table of Contents Financial Condition and Results of Operations of Marathon Bancorp. Inc.—Summary of Significant Accounting Policies and Estimates” for additional information.

After an evaluation of these factors, we recorded no provision for loan losses for the three months ended March 31, 2023 or 2022. Our allowance for loan losses was $2.1 million and $2.2 million at March 31, 2023 and 2022, respectively. The allowance for loan losses to total loans was 1.01% at March 31, 2023 and 1.32% at March 31, 2022. We recorded $1,000 in net recoveries for the three months ended March 31, 2023 compared to net recoveries of $6,000 for the three months ended March 31, 2022. We had no non-performing assets at March 31, 2023, compared to $115,000, or 0.05% of total assets, at June 30, 2022.

To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate at March 31, 2023. However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the WDFI and the FDIC, as an integral part of their examination process, will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses.

Non-interest Income. Non-interest income information is as follows.


		Three Months Ended										****
		March 31,						Change				****
	****	2023		****	2022		****	Amount		****	Percent	****
		(Dollars in thousands)										****
Service charges on deposit accounts		$	33		$	35		$	(2)		(5.7)	%
Mortgage banking			72			89			(17)		(19.1)	%
Increase in cash surrender value of BOLI			60			58			2		3.4	%
Gain on proceeds from life insurance death benefit			88			—			88		100.0	%
Other			6			11			(5)		(45.5)	%
Total non-interest income		$	259		$	193		$	66		34.2	%

Non-interest income increased by $66,000 to $259,000 for the three months ended March 31, 2023 from $193,000 for the three months ended March 31, 2022 due primarily to a gain on proceeds from a life insurance death benefit.

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


		Three Months Ended										****
		March 31,						Change				****
	****	2023		****	2022		****	Amount		****	Percent	****
		(Dollars in thousands)										****
Salaries and employee benefits		$	833		$	806		$	27		3.3	%
Occupancy and equipment			208			170			38		22.4	%
Data processing and office			111			103			8		7.8	%
Professional fees			160			164			(4)		(2.4)	%
Marketing expenses			18			22			(4)		(18.2)	%
Other			155			138			17		12.3	%
Total non-interest expenses		$	1,485		$	1,403		$	82		5.8	%

Non-interest expenses were $1.5 million for the three months ended March 31, 2023 compared to $1.4 million for the three months ended March 31, 2022. The increase was primarily due to an increase in occupancy and equipment expenses of $38,000 due to an increase in expense associated with service contracts and additional snow removal expense. The increase in salaries and employee benefits was primarily due to the new stock compensation plan implemented by the Company on June 28, 2022. 37

Table of Contents Provision for Income Taxes. Income tax expense was $58,000 for the three months ended March 31, 2023, a decrease of $16,000, as compared to income tax expense of $74,000 for the three months ended March 31, 2022. The decrease in income tax expense was primarily due to a change in the Company’s effective tax rate. The effective tax rate for the three months ended March 31, 2023 and 2022 was 13.7% and 23.0%, respectively. The effective tax rate declined during the three months ended March 31, 2023 as compared to the prior year period because the gain on life insurance proceeds was not subject to income taxes.

Comparison of Operating Results for the Nine months Ended March 31, 2023 and 2022

General. Net income was $1.2 million for the nine months ended March 31, 2023, an increase of $227,000, or 23.9%, from net income of $951,000 for the nine months ended March 31, 2022. The increase in net income for the nine months ended March 31, 2023 was primarily attributable to an increase of $377,000 in net-interest income and a gain on proceeds from life insurance of $261,000, offset by a $240,000 increase in non-interest expenses. Mortgage banking income also declined by $239,000.

Interest Income. Interest income increased by $1.2 million, or 22.3%, to $6.6 million for the nine months ended March 31, 2023 compared to $5.4 million for the nine months ended March 31, 2022 primarily due to increases in loan interest income and other interest income (cash and cash equivalents and other). The increase in other interest income was primarily due to an increase in the average yield of 334 basis points on our cash and cash equivalents investments to 3.44% due to the recent increases in the federal funds rate.

Loan interest income increased by $917,000, or 18.0%, to $6.0 million for the nine months ended March 31, 2023 from $5.1 million for the nine months ended March 31, 2022, due to an increase in the average balance of the loan portfolio and a slight increase in the average yield on loans (excluding PPP loans). The average balance of the loan portfolio (excluding PPP loans) increased by $44.7 million, or 30.0%, from $149.0 million for the nine months ended March 31, 2022 to $193.7 million for the nine months ended March 31, 2023. The increase in the average balance of loans was due to our continued efforts to increase commercial and multi-family real estate loans in Southeastern Wisconsin. The average balance of one-to-four family residential loans also increased. The increase was due to additional growth with respect to adjustable-rate one-to four-family residential loans. The average yield on the loan portfolio (excluding PPP loans) increased by three basis points from 4.12% for the nine months ended March 31, 2022 to 4.15% for the nine months ended March 31, 2023. Loan interest income from PPP loans was positively impacted by the recognition of deferred fee income of $483,000 during the nine months ended March 31, 2022 on the forgiven PPP loans repaid by the SBA compared to $0 for the nine months ended March 31, 2023.

Debt securities interest income decreased $60,000, or 24.0%, to $190,000 for the nine months ended March 31, 2023 from $250,000 for the nine months ended March 31, 2022 due to a $2.2 million decrease in the average balance of debt securities due to securities paydowns and a 21 basis points decrease in the average yield on the debt securities portfolio to 2.43% for the nine months ended March 31, 2023 from 2.64% for the nine months ended March 31, 2022. The decrease in the average yield was related to paydowns on securities bearing higher interest rates and the decrease in the average yield of our collateralized mortgage obligations with inverse floating rates.

Interest Expense. Interest expense increased $821,000, or 119.6%, to $1.5 million for the nine months ended March 31, 2023 from $686,000 for the nine months ended March 31, 2022, due to an increase of $783,000 in interest paid on deposits and an increase of $38,000 in interest paid on borrowings.

Interest expense on deposits increased $783,000, or 115.2%, to $1.5 million for the nine months ended March 31, 2023 from $679,000 for the nine months ended March 31, 2022 due to an increase in interest expense on all deposit categories excluding savings deposits. The average balance of interest-bearing demand, NOW and money market accounts and certificates of deposit increased with the average balance of demand, NOW and money market accounts increasing $1.6 million, or 2.9%, and the average balance of certificates of deposit increasing $16.5 million, or 28.0%. The increase in the average balance of certificates of deposit was partly due to the purchase of brokered certificates of deposit of $4.5 million with the remaining increase in the average balance of certificates of deposit and demand, NOW and money market accounts being due to offering higher rate deposit products during the nine months ended March 31, 2023. The average rate paid on demand, NOW and money market accounts and certificates of deposit also increased 38

Table of Contents with the average rate paid on demand, NOW and money market accounts increasing by 52 basis points and the average rate paid on certificates of deposit increasing 77 basis points. The increase in the average rate paid on all deposit categories excluding savings deposits was due to the Bank raising the interest rates on these deposit categories to maintain customers and keep the rates in line with what our competitors were offering and to attract new funds to the Bank.

Net Interest Income. Net interest income increased by $377,000, or 8.1%, to $5.1 million for the nine months ended March 31, 2023 from $4.7 million for the nine months ended March 31, 2022. Also included in net interest income for the nine months ended March 31, 2022 was the recognition of deferred fee income of $483,000 on the forgiven PPP loans repaid by the SBA compared to $0 for the nine months ended March 31, 2023. Net interest-earning assets increased by $3.1 million, or 8.1%, to $41.0 million for the nine months ended March 31, 2023 from $37.9 million for the nine months ended March 31, 2022. Net interest rate spread decreased by 16 basis points to 2.89% for the nine months ended March 31, 2023 from 3.05% for the nine months ended March 31, 2022, reflecting a 56 basis points increase in the average rate paid on interest-bearing liabilities offset by a 40 basis points increase in the average yield on interest-earning assets. The net interest margin decreased nine basis points to 3.09% for the nine months ended March 31, 2023 from 3.18% for the nine months ended March 31, 2022. The increase in the average yield on interest earning assets for the nine months ended March 31, 2023 compared to the nine months ended March 31, 2022 was primarily due to an increase in the average yield of 334 basis points on our cash and cash equivalents investments due to the recent increases in the federal funds rate. The increase in the average interest rate paid on interest-bearing liabilities was due to the Bank raising the interest rates on all deposit categories excluding savings accounts to maintain customers and keep the rates in line with what our competitors were offering and to attract new funds to the Bank.

Provision for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, changes in the nature, volume and terms of loans, the fair value of underlying collateral, changes in lending personnel, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. At March 31, 2023, the qualitative loan portfolio risk factors were slightly reduced in all loan categories except for multi-family real estate loans as compared to March 31, 2022. However, due to the economic and social impacts of the Pandemic being significantly reduced from prior periods, at March 31, 2023, further reduction of the COVID factor was applied to all loan categories except multi-family real estate loans. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Marathon Bancorp. Inc.—Summary of Significant Accounting Policies and Estimates” for additional information.

After an evaluation of these factors, we recorded no provision for loan losses for the nine months ended March 31, 2023 or 2022. Our allowance for loan losses was $2.1 million and $2.2 million at March 31, 2023 and 2022, respectively. The allowance for loan losses to total loans was 1.01% at March 31, 2023 and 1.32% at March 31, 2022. We recorded net charge-offs of $135,000 for the nine months ended March 31, 2023 compared to net recoveries of $8,000 for the nine months ended March 31, 2022. The current period charge-off was related to a participation loan with another financial institution. There were no non-performing assets at March 31, 2023, compared to $115,000, or 0.05% of total assets, at June 30, 2022.

Table of Contents

Non-interest Income. Non-interest income information is as follows.


	****	Nine Months Ended					****	****		****	****	****
		March 31,						Change				****
	****	2023		****	2022		****	Amount		****	Percent	****
	****	(Dollars in thousands)
Service charges on deposit accounts		$	118		$	119		$	(1)		(0.8)	%
Mortgage banking			209			448			(239)		(53.3)	%
Increase in cash surrender value of BOLI			179			164			15		9.1	%
Net gain on securities transactions			24			14			10		71.43	%
Gain on proceeds from life insurance death benefit			261			—			261		100.00	%
Other			22			19			3		15.79	%
Total non-interest income		$	813		$	764		$	49		6.41	%

Non-interest income increased by $49,000 to $813,000 for the nine months ended March 31, 2023 from $764,000 for the nine months ended March 31, 2022 due to a gain on proceeds from a life insurance death benefit. This increase of $261,000 was offset by a decrease in mortgage banking income (consisting primarily of sales of fixed-rate one- to four-family residential real estate loans) which decreased by $239,000 as we sold $2.1 million of mortgage loans into the secondary market during the nine months ended March 31, 2023 compared to $14.5 million of such sales during the nine months ended March 31, 2022 due to an increase in market interest rates, which resulted in decreased demand for mortgage loan refinancing.

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


	****	Nine Months Ended					****	****		****	****	****
		March 31,						Change				****
	****	2023		****	2022		****	Amount		****	Percent	****
	****	(Dollars in thousands)
Salaries and employee benefits		$	2,496		$	2,372		$	124		5.2	%
Occupancy and equipment			557			531			26		4.9	%
Data processing and office			297			304			(7)		(2.3)	%
Professional fees			534			494			40		8.1	%
Marketing expenses			70			65			5		7.7	%
Other			468			415			53		12.8	%
Total non-interest expenses		$	4,422		$	4,181		$	241		5.8	%

Non-interest expenses were $4.4 million and $4.2 million for the nine months ended March 31, 2023 and 2022, respectively. The increase was primarily due to an increase in salaries and employee benefits related to the new stock compensation plan implemented by the Company on June 28, 2022.

Provision for Income Taxes. Income tax expense was $266,000 for the nine months ended March 31, 2023, a decrease of $41,000, as compared to income tax expense of $307,000 for the nine months ended March 31, 2022. The decrease in income tax expense was primarily due to a change in the Company’s effective tax rate. The effective tax rate for the nine months ended March 31, 2023 and 2022 was 18.4% and 24.4%, respectively. The effective tax rate declined during the nine months ended March 31, 2023 as compared to the prior year period because the gain on life insurance proceeds was not subject to income taxes.

Asset Quality

Loans Past Due and Non-Performing Assets. Loans are reviewed on a regular basis. Management determines that a loan is impaired or non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent. When a loan is determined to be impaired, the measurement of the loan in the allowance for loan losses is based on present value of expected future cash flows, except that all

Table of Contents collateral-dependent loans are measured for impairment based on the fair value of the collateral. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property. Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for loan losses, or, if the existing allowance is inadequate, charged to expense of the current period. After acquisition, all costs incurred in maintaining the property are expensed. 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.

A loan is classified as a troubled debt restructuring if, for economic or legal reasons related to the borrower’s financial difficulties, we grant a concession to the borrower that we would not otherwise consider. This usually includes a modification of loan terms, such as a reduction of the interest rate to below market terms, capitalizing past due interest or extending the maturity date and possibly a partial forgiveness of the principal amount due. Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months.

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, 2023									At June 30, 2022
	****	30-59		****	60-89		****	90 Days		****	30-59		****	60-89		****	90 Days
		Days			Days			or More			Days			Days			or More
	****	Past Due		****	Past Due		****	Past Due		****	Past Due		****	Past Due		****	Past Due
		(In thousands)
Real estate loans:
One- to- four-family residential		$	29		$	—		$	—		$	70		$	—		$	115
Multifamily			—			—			—			—			—			—
Commercial			—			—			—			—			—			—
Construction			—			—			—			—			—			—
Commercial and industrial			—			—			—			—			—			—
Consumer			—			—			—			—			—			—
Total		$	29		$	—		$	—		$	70		$	—		$	115

Table of Contents

Non-Performing Assets. The following table sets forth information regarding our non-performing assets. Troubled debt restructurings include loans for which either a portion of interest or principal has been forgiven, or loans modified at interest rates materially less than current market rates. There were no non-accruing TDRs as of March 31, 2023 or June 30, 2022.


		At March 31,			At June 30,
	****	2023		****	2022
		(Dollars in thousands)
Non-accrual loans:
Real estate loans:
One- to four-family residential		$	—		$	64
Multifamily			—			—
Commercial			—			—
Construction			—			—
Commercial and industrial			—			—
Consumer			—			—
Total non-accrual loans			—			64
Accruing loans past due 90 days or more			—			51
Real estate owned:
One- to four-family residential			—			—
Multifamily			—			—
Commercial			—			—
Construction			—			—
Commercial and industrial			—			—
Consumer			—			—
Total real estate owned			—			—
Total non-performing assets		$	—		$	115
Total accruing troubled debt restructured loans		$	120		$	130
Total non-performing loans to total loans			—	%		0.06	%
Total non-performing loans to total assets			—	%		0.05	%
Total non-performing assets to total assets			—	%		0.05	%

Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss allowance is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” or “Watch” by our management.

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 probable accrued losses. General allowances represent loss allowances which have been established to cover probable accrued losses associated with lending activities, 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 loss allowances. 42

Table of Contents On the basis of our review of our loans our classified and special mention or watch loans at the dates indicated were as follows:


	****	At March 31,			At June 30,
	****	2023		****	2022
		(In thousands)

Classification of Loans:
Substandard		$	—		$	—
Doubtful			—			—
Loss			—			—
Total Classified Loans		$	—		$	—
Special Mention		$	—		$	1,389

Allowance for Loan Losses

The allowance for loan losses established as losses is estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. General components cover non-impaired loans and are based on historical loss rates for each portfolio segment, adjusted for the effects of qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment’s historical loss experience. Qualitative factors include consideration of the following: changes in lending policies and procedures; changes in economic conditions, changes in the nature and volume of the portfolio; changes in the experience, ability, and depth of lending management and other relevant staff; changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; changes in the value of the underlying collateral for collateral-dependent loans; concentrations of credit; and the effect of other external factors such as competition and legal and regulatory requirements. At March 31, 2023 and June 30, 2022, the qualitative loan portfolio risk factors were slightly reduced in all loan categories except commercial and multi-family real estate which we believe exhibits the most credit risk related to local and national economic conditions as well as industry conditions and concentrations. However, due to the economic and social impacts of the Pandemic being significantly reduced from prior periods, at March 31, 2023, further reduction of the COVID factor was applied to all loan categories. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Marathon Bancorp. Inc.—Summary of Significant Accounting Policies and Estimates” for additional information.

Table of Contents flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.

In addition, the WDFI and the FDIC periodically review our allowance for loan losses and as a result of such reviews, we may have to adjust our allowance for loan losses or recognize further loan charge-offs.

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


	For the Three Months Ended						For the Nine Months Ended
	March 31,						March 31,
	2023			2022			2023			2022
	(Dollars in thousands)						(Dollars in thousands)
Allowance at beginning of period	$	2,059		$	2,188		$	2,195		$	2,186
Provision for loan losses		—			—			—			—
Charge offs:
Real estate loans:
One- to four-family residential		—			—			—			—
Multifamily		—			—			—			—
Commercial		—			—			(137)			—
Construction		—			—			—			—
Commercial loans and industrial		—			—			—			—
Consumer		—			—			—			—
Total charge-offs		—			—			(137)			—
Recoveries:
Real estate loans:								—			—
One- to four-family residential		—			—			—			—
Multifamily		—			—			—			—
Commercial		—			—			—			—
Construction		—			—			—			—
Commercial and industrial		—			—			—			—
Consumer		1			6			2			8
Total recoveries		1			6			2			8
Net (charge-offs) recoveries		1			6			(135)			8
Allowance at end of period	$	2,060		$	2,194		$	2,060		$	2,194
Allowance to non-performing loans		—	%		3,428.13	%		—	%		3,428.13	%
Allowance to total loans outstanding at the end of the period		1.01	%		1.32	%		1.01	%		1.32	%
Net (charge-offs) recoveries to average loans outstanding during the period		0.00	%		0.00	%		(0.07)	%		0.01	%

Net (charge-offs) recoveries to average loans outstanding during the period

Real estate loans:
One- to four-family residential		—	%		—	%		—	%		—	%
Multifamily		—	%		—	%		—	%		—	%
Commercial		—	%		—	%		(0.07)	%		—	%
Construction		—	%		—	%		—	%		—	%
Commercial and industrial		—	%		—	%		—	%		0.01	%
Consumer		—	%		—	%		—	%		—	%
Net (charge-offs) recoveries to average loans outstanding during the period		0.00	%		0.00	%		(0.07)	%		0.01	%

Table of Contents

Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.


	****	At March 31, 2023						****	At June 30, 2022
													****
					Percent of		Percent of Loans					Percent of		Percent of Loans
					Allowance to		In Category to Total					Allowance to		In Category to Total
	****	Amount		****	Total Allowance	****	Loans	****	Amount		****	Total Allowance	****	Loans
		(Dollars in thousands)
Commercial real estate		$	1,236,049		60.0	%	41.6	%	$	1,591,644		72.5	%	42.9	%
Commercial and industrial			18,566		0.9	%	3.5	%		32,701		1.5	%	4.7	%
Construction			14,176		0.7	%	3.7	%		55,029		2.5	%	5.6	%
One-to-four-family residential			210,108		10.2	%	29.7	%		263,951		12.0	%	27.6	%
Multi-family real estate			258,097		12.5	%	20.0	%		233,371		10.6	%	18.1	%
Consumer			715		0.0	%	1.5	%		601		0.0	%	1.1	%
Unallocated			322,378		15.6	%	—			17,753		0.8	%	—	%
Total		$	2,060,089		100	%	100	%	$	2,195,050		100.0	%	100.0	%

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Chicago. At March 31, 2023, we had a $82.8 million line of credit with the Federal Home Loan Bank of Chicago, which had $5.0 million in borrowings outstanding as of that date. The Bank also has $25.0 million available to borrow from the Federal Reserve Bank when pledging acceptable assets and an unsecured Federal Funds purchasing limit of $5.0 million with the Bank’s correspondent bank.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $1.3 million as compared to $589,000 of cash provided by operating activities for the nine months ended March 31, 2023 and 2022, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $16.9 million and $22.1 million for the nine months ended March 31, 2023 and 2022, respectively. Net cash provided by financing activities, consisting of activity in deposit accounts and borrowings, was $16.6 million compared to $6.7 million being provided by financing activities for the nine months ended March 31, 2023 and 2022, respectively.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience, current pricing strategy and regulatory restrictions, we anticipate that a substantial portion of maturing time deposits will be retained, and that we can supplement our funding with borrowings in the event that we allow these deposits to run off at maturity.

At March 31, 2023, Marathon Bank was classified as “well capitalized” for regulatory capital purposes. See Note 8-Minimum Regulatory Capital Requirements in the accompanying consolidated financial statements for additional information. 45

Table of Contents Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At March 31, 2023, we had outstanding commitments to originate loans of $6.2 million, and $291,000 in outstanding commitments to sell loans. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in one year or less from March 31, 2023 totaled $50.8 million, which include $8.7 million in brokered certificates of deposit. Management expects that a substantial portion of the maturing time deposits will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize additional Federal Home Loan Bank advances or other borrowings, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

Recent Accounting Pronouncements

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

Impact of Inflation and Changing Price

The financial statements and related data presented herein have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

A smaller reporting company is not required to provide the information related to this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) were effective as of the end of the period covered by this Form 10-Q.

Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2023 46

Table of Contents that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As of March 31, 2023, the Company is not currently a named party in a legal proceeding, the outcome of which would have a material effect on the financial condition or results of operations of the Company.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information related to this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 16, 2022, the Company announced it had adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to 113,485 shares of its common stock, or approximately 5.0% of the then outstanding shares. Shares may be repurchased in open market or private transactions, through block trades, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The repurchase program has no expiration date. Set forth below is the share repurchase activity for the three months ended March 31, 2023. All shares of common stock repurchased will be retired. As of March 31, 2023, the stock repurchase program was completed. The average price paid per share under the stock repurchase program was $11.769.


							Approximate Number
					Total Number of Shares		of Shares That
					Repurchased as Part of		May Yet Be Purchased
	Total Number of Shares		Average Price Paid		Publicly Announced Plans		Under the Plans or
Period	Repurchased		Per Share		Or Programs		Programs
							-
January 1-31, 2023		-	$	-		-	6,781
February 1-28, 2023		86,208	$	11.839		92,989	20,496
March 1-31, 2023		20,496	$	11.580		113,485	-

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Table of Contents Item 6. Exhibits

Exhibit No.		Description
31.1		Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive Officer
31.2		Rule 13a-14(a) / 15d-14(a) Certification of the Chief Financial Officer
32.1		Section 1350 Certification of the Chief Executive Officer
32.2		Section 1350-Certification of the Chief Financial Officer
101		The following materials from Marathon Bancorp, Inc. Form 10-Q for the three and nine months ended March 31, 2023 and 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows, and (iv) related notes
104		Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

Table of Contents 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.


	Marathon Bancorp, Inc.

Date: May 12, 2023	By:	/s/ Nicholas W. Zillges
		Nicholas W. Zillges
		President and Chief Executive
		Officer (Principal Executive Officer)

Date: May 12, 2023	By:	/s/ Joy Selting-Buchberger
		Joy Selting-Buchberger
		Senior Vice President and Chief
		Financial Officer (Principal
		Financial and Accounting Officer)

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nicholas W. Zillges, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Marathon Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 12, 2023		By:	/s/ Nicholas W. Zillges
			Nicholas W. Zillges
			President and Chief Executive Officer
			(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joy Selting-Buchberger , certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Marathon Bancorp, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: May 12, 2023	By:	/s/ Joy Selting-Buchberger
		Joy Selting-Buchberger
		Senior Vice President and Chief
		Financial Officer (Principal
		Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Marathon Bancorp, Inc. (the “Company”) for the quarter ended March 31, 2023 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
---	---


Date: May 12, 2023	By:	/s/ Nicholas W. Zillges
		Nicholas W. Zillges
		President and Chief Executive Officer
		(Principal Executive Officer)

**** Exhibit 32.2

****

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
---	---


Date: May 12, 2023	By:	/s/ Joy Selting-Buchberger
		Joy Selting-Buchberger
		Senior Vice President and Chief
		Financial Officer (Principal Financial
		and Accounting Officer)